Crescent Pure Case Analysis
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Transcript of Crescent Pure Case Analysis
Grade ID 41311
MBA 6623
Crescent Pure
Case Analysis
Overview
Sarah Ryan, VP of marketing for Portland Drake Beverages (PDB) has a few options on
how to market the new beverage product they acquired, Crescent Pure. With a $750,000 budget
she can position Crescent Pure as an energy drink, sports drink or with a broader view and
position it organically. Since Crescent Pure will be a new product they are wanting to move and
penetrate the market first. With a soft launch looming at the beginning of 2015, Sarah only has 6
weeks to decide how to position the product. Since she has a limited budget, PDB will need to
allocate their resources wisely.
Options
Portland Drake Beverages can position Crescent Pure three ways. The first option they
have is to position Crescent Pure as an energy drink. The second option they have is to position it
as a sports drink. The third option they have is to position it as an organic beverage product. As
with any decision there are many advantages and disadvantages to each option.
Option 1
Crescent Pure Energy Drink, already has the caffeine equivalent of one cup of coffee so
there would be no need to modify the product. With the energy drink market gradually increasing
and projected to hit $13.5 billion by 2018 and already boasting a 34% of the market population
Crescent Pure could have a competitive advantage coming into it now and commanding a spot
early. However, with news stories highlighting health risks they are a position to fail if they don’t
hit the market right. Another concern they may have trying to position into the energy drink
market is that young consumers believed it had less energy then they had hoped.
Option 2
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The second option that PDB has is to position Crescent Pure as a Sports Drink. The
market for sports drinks has only increased 9% in the past years and currently commands a $6.3
billion market. Although, by entering the market as a sports drink, Crescent Pure would need to
modify their product to accommodate the typical price of other sports drinks (see Exhibit 3)
which could cause some strife to current consumers. PDB also needs to keep in mind the
governmental guidelines that have removed many sports drinks from school and since sports
drinks appeal to the younger consumer ages 12 – 17 this could be a cause for concern.
Option 3
The final option that PDB has for Crescent Pure is to position it as an Organic Energy
Drink. The advantages and disadvantages to this is very similar to the Energy drink option 1 and
will have the same Gross Margin (see Exhibit 2). However, by marketing it as an organic option
they’d be able to hit a whole new market population. Crescent Pure is already made up of all
natural, organic ingredients and has much less sugar then other energy drinks such as Monster or
Red Bull. This option they have an overwhelming response from people who described Crescent
Pure as Functional and Natural (see Exhibit 4), as opposed to the descriptors of energy or sports
drinks (see Exhibit 5).
Competitors
In both the energy drink and sport drink options, Crescent Pure would face great
competition. Competition for the energy drink market is dominated by four major producers that
account for 85%. The other 15% being split between 30 other producers. If PDB positioned
Crescent Pure as an energy drink, then they’d have to penetrate the market hard to try and find
their niche. In the sport drink category, the market is mainly controlled by two producers that
account for 94%. The other 6% is split evenly between 20 producers in which each holds about
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$18.9 million market share. If PDB positioned Crescent Pure as a sport drink they could come in
and appeal to the health-conscious consumers due to their low sugar content and all natural
ingredients. If they decided to stick with a broader view of Crescent Pure and position their
product as an organic energy drink they might have a harder time successfully implementing
their position. However, with energy drinks getting a bad rep, PDB could use it towards
positively enhancing their brand, and brand their product as a healthy alternative to their
competitors.
Recommendation
Sarah Ryan should recommend that PDB take the third option and to position Crescent
Pure as an all-natural organic energy drink. They can launch Crescent Pure as a healthier
alternative to energy drinks, but still at a very affordable price of $2.75. With a cost to
wholesalers at $29.76 per case, they will be able to initially gain a greater market share and
create more demand for their product. With an advertising budget of $750,000 the break even
point will have to be 142,046 cases. Since they already have a capacity to produce 144,000 cases
annually then their profit over breakeven is $10,320.02 (see Exhibit 1). Sarah should go ahead
with a soft launch in California, Oregon and Washington and see how they react to the
positioning of Crescent Pure, if the soft launch fails then PDB can take organic off the label and
market it as an energy drink with less sugar. When PDB is ready for a hard launch they will be
able to provide a larger distribution capacity and in return be provided with a higher gross profit.
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Exhibit 1: Crescent Pure First Year Marketing Budget
Advertising Budget $750,000
Cases sold per month 12,000
Cases sold Annually 144,000
Drinks per case 24
Manufacturer's wholesale price to Distributors $29.76
Variable cost to manufacturer per case $24.48
Manufacture Margin $5.28
Manufacture Margin % 18%
Breakeven Cases 142,045.45
Capacity Overage 1,954.55
Profit from Capacity $10,320
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Exhibit 2: Crescent Pure Energy Drink
Sale Price Var. Cost Gross Margin
Manufacture $1.24 $1.02 18%
Distribution $1.65 $1.24 25%
Retail $2.75 $1.65 40%
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Exhibit 3: Crescent Pure Sports Drink
Sale Price Var. Cost Gross Margin
Manufacture $0.90 $0.85 6%
Distribution $1.20 $0.90 25%
Retail $2.00 $1.20 40%
*Sales Price & Variable Cost lowered due to product modification to make MSRP $2.00
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Refreshing Health Afordable Functional Too Sweet Suitable for Teens
Fun Natural Hydrating0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
35%
22%
29%
47%
9% 8%
19%
38%
29%
Exhibit 4: % of respondents who described Crescent
Refreshing Healthy Affordable Functional Too Sweet Suitable for teens
Fun Natural Hydrating None of these
0%
10%
20%
30%
40%
50%
60%
12%
6% 5%
22%
9%7%
9%
4%
11%
52%
34%
16%
11%
28%
8%
22%
11%
6%
49%
27%
Exhbit 5: Respondents % of word association with energy or sport drinks
Energy Drink Sports Drinks
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