Case 1: DR PEPPER SNAPPLE GROUP, INC. ENERGY BEVERAGES
The Dr Pepper Snapple Group, Inc. (DPS) was incorporate in Delaware in 2007. The company was spun-off from Cadbury Schweppes, the British company and public on May, 2008. Being one of big beverage companies, DPS is major integrated brand owner, bottler, and distribution of nonalcoholic beverage in the United State, Canada and Mexico and the Caribbean In the United State, the company’s net sales is 89%. The company participates in both the flavored carbonated soft drink (CSD) and non-CSD market segment. The CSD’s key brands are Dr Pepper, 7UP, Sunkist, A&W. The non-CSD’s key brands are Snapple, Mott’s, Hawaiin Punch, Clamato. In Canada, the net sales is 4%. The firm participates in both CSD and non-CSD market segment as the United State market. In Mexico and Caribben, the net sales is 7%. The company participates in carbonated mineral water, flavored CSD, bottled water, and vegetable juice categories. Some key brands include Penafiel, Clamato, and Agufiel. SWOT analysis:
1. Internal factors:
Strengths: DPS holds the outstanding strengths more than other competitors in the beverage market about management, marketing, manufacturing and finance. Management:
Experienced executive management team: the company is managed by the diverse skills management team with more than 20 years of experiences in food and beverage industry, so thus can support operating strategies. Marketing: 4P-1C
Products- Strong portfolio of leading, consumer-preference brands: the company owns a diverse portfolio of well-known CSD and non-CSD brands. According to ACNielsen, the company is the #1 flavored CSD, Dr Pepper is #2 and Snapple is a leading ready-to-drink tea in the United State market. Place (Distribution) – Integrated business model: the company’s integration of brand ownership, bottling and distribution gives the company inherently more control over the value chain and therefore make a competitive advantage. Promotion- Attractive positioning within a large, growing, and profitable market: the company holds the #3 position in each of the United State, Canada, and Mexico beverage market, is well positioned is health and wellness products for customers. Customer service- Strong customer relationship: DPS has established long standing relationships with its top customer including bottlers, distributors to national retailers, large foodservices and convenience store customers. Manufacturing:
Broad Geographic manufacturing and distribution Coverage: with 21 manufacturing facilities, 200 distribution centers and 4 manufacturing processes, the company’s supply chain covers the broad geography strategically, so thus reduce transportation cost and meet customers’ demand in time. Finance:
Strong operating margins and significant, stable cash flow: the company’s cash flow is stable, so able to reinvest in its business, reducing debt and returning capital to its stockholders. Weaknesses: besides the strengths, DPS has weakness need to be improved. Lack of international exposure: in the present, the company’s products are just in three markets including the United State, Canada and Mexico while other companies such as Red Bull, Coca-Cola or Pepsi is reaching to the global market. This could limit the brand identity in the customers’ mind. Minor compared to larger peers: comparing to many global brands such as Red Bull, Monster, Pepsi, Coca-Cola, or Rockstar, DPS has quite small volume market share. This could make company meet difficulties in competition. Depending on third-party firm: the firm relies on some third-party bottlers such as Coke and Pepsi affiliated bottlers for packing and distribution. This could cause costs to increase in the future. Lack of exposure to some fast growing segments: while the energy beverage market is growing fast, DPS has very little or no foothold in this segments such as energy drink, sports drink, and enhanced water. 2. External factors: (Adrian)
Opportunities: DPS can benefit from opportunities developed in the environment that are favorable for growth. Economic: Energy drink sales reached $6.2 Billion in 2006 and sales grew 42.5% from 2001 to 2006. In 2006, consumer spending was strong and they had expendable incomes. Competition: There are five major competitors: Red Bull, Hansen Natural Corp, Pepsi-Cola, Rockstar, and Coca-Cola. Red Bull, the pioneer for the energy drink, has had its dollar market share decline from 82% to 43% from 2000 to 2006. Red Bull currently has the majority market share, however this decline shows that consumers are looking else where. Consumer: Mostly males, ages 12 to 34 who will consume at home, car or work. Drinks are used for energy boost, mental alertness and refreshment. Consumers desire to only use one energy drink.
Technology: The primary consumer is technology savvy and advertisement via internet, mobile phone and other electronic means is a good idea. Industry/Market Structure: New packaging techniques can help to differentiate or position the product. No brand has positioned itself as an “Adult” energy drink. Threats: Specific threats that pose dangers to the organization Economic: By 2007, the economy begins to feel the housing bubble pop and consumer incomes plummet. Suppliers may also begin feeling the strain from the market and that may affect costs of supplies. Competition: Top competitors Red Bull, Hansen Natural Corp, Pepsi-Cola, Rockstar, and Coca-Cola. All major competitors are gaining large amounts of market share and saturating the markets. Competitors are targeting segments now. Also competitors are positioning products in order to differentiate them from competition. Consumer: Consumers are brand loyal and making them change could be hard. Expendable incomes are beginning to decline by 2007. Technology: Acquisitions by competitors such as Coca-Cola have given them the technology to produce different types of energy drinks. Legal/Regulatory: Certain local governments could limit/regulate how the product is produced.