Tropical Delight Softdrinks

Problem Statement Tropical Delight Soft drinks is a small Canadian company that has a narrow line of drinks with only three flavours that was relatively unknown in the Canadian market but popular in markets of parts of Asia, South Asia and Tropical countries.

Situation Analysis
Strengths – The soft drinks were made with 30% real juice, which is more appealing to consumers who want natural flavours. The products were healthy and contain real fruit juices. Although the company had a small market share, their sales increased steadily over the years. Weaknesses – They had a narrow line of products with only three flavours, which were relatively unknown in Canada. Although sales increased steadily, they incurred some major costs in to import the fruit concentrates from foreign countries, costs for bottle and its label, labour and admin costs and also to distribute the drinks to local convenience stores and supermarket chains.

Opportunities – They have an opportunity to expand its operations to greater cities in Canada that have a larger minority population to attract new consumers. They can also increase market share by expanding operations, thus increasing sales. They will have a competitive edge due to its distinctive name and packaging in the markets. Threats – The costs associated with expanding can limit access to him entering these new markets. They may have issues with competitors who produce more tropical flavours known in Canada. There is also production capacity associated with expanding, where he would need to keep up production for current market as well as other markets that he is trying to get into.

Possible Alternatives Since these are tropical flavours, TDS need to first focus on the minority market which is a considerably large market in Canada. In doing that they should try to increase the number of flavours they make and import from Canadian farmers that produce these fruits.
His three options are: 1. Expand to other Canadian cities such as Toronto that has a large minority population, 2. Expand within Vancouver by attracting new consumers and 3. Expand to other parts of British Columbia that also has a large minority population.

Option 1 Breakeven Analysis Total FC - $310,000/0.60 contribution unit = 516,666.67 units

Option 2 Breakeven Analysis Total FC - $200,000/.050 contribution unit = 400,000 units
Option 3 Breakeven Analysis Total FC - $190,000/.55 contribution costs = 345,454.55 units

By using option 1 TDS will sell 116,666.67 units more in 2003 considering is they don’t make any changes, they are only expected to reach 400,000 bottles in sales, as a result they will break even in option 2 and make a loss of (54,545.45 units) for option 3.

Key Decision Criteria To evaluate the alternatives, the key factors would be costs of setting up in other cities within Canada and if it will generate more sales by setting up there. If by expanding, more sales, more market shares and profits are generated then it is better to expand in that specific city but if the costs of setting up there are more than the amount of sales you will make in that city then it is better not to set up there.

Implementation
The best alternative to take would be to expand in the city that has the majority minority population, which is to expand in other cities like Toronto. Due to the high demand for tropical food and drinks, there is a need and thus can create large sales. Because these products will be known to the minority market there, there may be a way to cut costs in importing the fruit concentrates.