Monster Energy Drink in Russia - Essay Example

International Marketing Plan for Monster Energy Drink in Russia Introduction As the international business environment becomes more dynamic because of advances in technology and globalization, more companies are pushing to enter some international markets that were for a long time considered underdeveloped. With countries seeking more cooperation, abolishing restrictive trade laws and regulations, and as trade barriers recede. World economies are becoming more interdependent (Packaged Facts, 2013). Moreover, because of saturation and stiff competition in local domestic markets, companies in developed economies have to actively pursue newer markets to improve their revenues and profit margins. Today, countries in the BRICS block of countries, i.e. Brazil, India, China, South Africa, and Russia are increasingly attractive to companies seeking to expand their revenue streams and gain competitive advantages over their competitors (Onkvisit & Shaw, 2012). This paper will evaluate the attractiveness of the Russian market to Monster Energy, an energy drink company based in the US. Such a move would be seen as taking advantage of an increasingly liberalized Russian economy since the country became a member of the WTO, as well as the largely untapped non-alcoholic beverages market in the country. Situational Analysis A situation analysis seeks to identify micro-environmental factors that influence a firm, as well as macro-environmental factors that influence the firm’s environment. This analysis indicates to a firm about the product and organizational position, along with the overall business’ survival in the identified environment (Zou & Fu, 2011). In order to understand capabilities of the firm within the identified market, the firms should be able to identify problems and opportunities in their external and internal environment. Company Background Monster Beverages was founded in April of 2002 as an energy drinks company by Hansen Natural Corporation, becoming the first energy drink marketed in 16-ounce cans and rising to become the second most successful energy drinks company in the world after the Austria-based Red Bull GmBH (monsterbevcorp.com, 2015). Previously selling natural soda and fresh fruit juices, Monster Beverage revamped its product in 2002 by launching its Monster Energy drink line by increasing its caffeine and sugar content. This also prompted its change of name to Monster Beverage from Hansen Natural, reflecting a more aggressive image compared to the previous subtle impression as a fresh juice manufacturer. With energy drinks accounting for 92.7% of the company’s net sales in 2013, while juice-based beverages and carbonated drinks accounting for 5.3% and 2% of net sales over the same period, the energy drinks market has become the most critical for Monster beverages (Datamonitor, 2013). The Monster Energy brand, therefore, is the company’s most profitable brand. The regular Monster Energy flavor is packaged in a black can with an M logo shaped as a green tear. The company supports numerous extreme sports events, including skateboarding, motocross, BMX, and snowboarding. Other brands under Monster Beverages include Punch, Muscle, Zero Ultra, Monster Rehab, and Java Monster beverages (Forbes, 2014). Competitor Analysis A competitor analysis considers the position of competitors within the industry, as well as the threat potentially posed by these competitors to the business, in turn enabling the company to prepare for the competition (Zou & Fu, 2011). The biggest competitors for Monster Energy in Russia will be Tornado Energy, Red Bull, Rockstar, Full Throttle, and energy drinks from Pepsi and Coca-Cola (hoovers.com, 2015). Monster Energy will also face completion from other companies outside the energy drink market, such as bottled water and soda beverages sold by Pepsi and Coca-Cola. Red Bull, Full Throttle, and Rockstar all have similar positioning in the European market as Monster Energy, especially with regards to attracting consumers. Full Throttle and Rockstar are closely related to Monster Energy in using size and price to create competitive advantage, i.e. by selling more volume of energy drink than at the same price. However, Red Bull’s advantage lies in its higher pricing for smaller cans that weigh at 8.3 oz. compared to 16 oz. for the rest. Red Bull is the market leader, accounting for 80% of total sales, while Rockstar and Full Throttle make up the rest of the market (Gayot, 2014). Customer Analysis Unlike most industries, the energy drink industry is still in its growth stage with the target markets being distinctive and different as well. Younger, sport oriented males aged between 18 and 30 are the biggest target for Monster Energy and this group is viewed as mature enough to pick the product and identify differences with competitors (mintel.com, 2015). Decisions to buy the product are influenced mainly by their peers, celebrity appeal, and sponsors, while the purchasing decisions are mainly made on the basis of taste quality and brand image. When purchasing energy drinks, this target group is, however, more focused on the quick energy fix from the product than its taste quality and most of them will make repeated purchases based on brand loyalty (CSD, 2012). Seasonality issues are not important for this target customer as the sports associated with the drink are played across the year, while the customers are always in need of energy. Most of the customers buying Monster Energy do so because of its “hard core” or “bad ass” image, which is influenced by the lifestyles of the customers (Lukovitz, 2010). PESTLE Analysis In order to understand the business environment and climate, a company needs to understand the many factors within the external environment that may influence the business (Bennett & Blythe, 2013). The PESTLE analysis describes a specific market’s environment by defining the influence of political, environmental, technological, social, legal, and economic factors on the business. When applied to the Russian energy drinks market, the ecological and social factors are the factors with the highest impact. Social Factors The high rate of unemployment in Russia, as with the rest of Europe, will have a significant impact on Monster Energy because the workplace has become an important place for the consumption of energy drinks (euromonitor.com, 2015). The population of Russia is also ageing, which may mean that the target market for energy drinks is shrinking, while consumers also have health concerns about energy drinks with the Russian government recently banning the Burn energy drink from Lithuania for health concerns. Energy drink companies can take advantage of current consumption trends, such as the mixing of energy drinks with vodka. Ecological Factors There is an increasing trend in Europe towards healthy living, which has necessitated most food and beverage companies to prefer natural ingredients in their products. As more consumers become aware of the need to consume healthy products, this trend could influence Monster Energy by threatening the brand’s image as too much of an ‘industrial’ product (euromonitor.com, 2015). The political, legal, and economic environments, in turn, have a moderate impact on the energy drink market. Economic Factors The Russian economy has recently emerged from a recession in 2009 and is expected to enter a recession in the next two years as a result of US/EU sanctions, which has resulted in a decline of purchasing power. Moreover, the relatively high price associated with energy drinks compared to carbonated and fruit-based beverages make this industry sensitive to any changes in purchasing power (euromonitor.com, 2014). This may result in consumers switching to less expensive, traditional drinks. Political and Legal Environment There has been increased political pressure on energy drinks in the Russian market, especially with regards to caffeine levels with the government banning Burn energy drink for too much caffeine (euromonitor.com, 2014). In addition, the implementation of restrictive laws for energy drinks that require the caffeine level to be indicated on the can may impact on energy drink companies. Finally, recent retaliatory sanctions by the Russian government as a result of EU sanctions may harm companies from the US and the EU. However, energy drink companies like Monster Energy may take advantage of these factors to market their products as forbidden products, which are more attractive to the young target market. Technological factors The technological environment has the least impact on energy drink companies, although technological advances may influence distribution and production, while social media and the internet may influence the marketing aspect of the companies (reportlinker.com, 2015). SWOT Analysis Strengths Monster Energy has an attractive and innovative can design for a young target audience (Datamonitor, 2013). The company also has a huge audience online with its Monster Army social network. The company also has strong brand identity and a loyal customer base. The company is in a strong financial position. The company has a significant depth in the number of products. Finally, Monster Energy has a reasonable pricing strategy that is half of Red Bull’s. Weaknesses Recent occasions of fatality linked to Monster Energy may harm its brand image (Datamonitor, 2013). Monster Energy does not use mass media advertising. Monster Energy is mainly marketed at low-end income users. The company has a limited model of distribution. The aggressive can design may put off female consumers. The marketing audience is mainly limited to fans of aggressive music and extreme sports. Opportunities There is a significant opportunity for Monster Energy to enter and develop new markets like Russia (Datamonitor, 2013). The recent trend towards mixing energy drinks and vodka may be a lucrative opportunity in Russia. Monster Energy’s roots as Hansen Natural Corporation provide the company with the required knowledge and image to produce healthy and natural drinks. Monster Energy may also be the target of a buyout by companies like Coca-Cola, enabling it to take advantage of their existing distribution network. Threats Monster Energy faces a threat from increasing public awareness about the danger and harm posed by energy drinks (Datamonitor, 2013). The younger target audience may shift their values towards healthy consumption. The Russian market may prove very competitive, especially with several home-grown energy drink companies. Retaliatory sanctions by the Russian government against American companies may threaten Monster Energy’s attempts to enter the Russian market. Goals and Objectives The purpose of the marketing campaign in Russia is to ensure Monster Energy’s position in the market as the product delivering personality, image, value, taste, and effectiveness to the consumer. Monster Energy will create an attitude around its product that sets it apart from its competitors, especially Red Bull, in the consumers’ minds. The goal for Monster Energy will be to increase the sales of Monster Energy in Russia over that of Red Bull, which will be the key competitor in the Russian market. Objectives The key objective will be to create a product image that communicates an edgy and hip vibe, which will reflect Monster Energy’s “New Age” energy beverage image among males and females between the ages of 18 and 35. Achieve sales of 400,000 cans in the initial six months after market entry and sales of 1.4 million by the end of the first year. Achieve a 20% market share of the Russian energy drinks market by the end of the year and 30% by the end of the second year. Achieve a net profit of approximately 8% by the end of the first year. Target Market Segmentation Strategy In the Russian market, Monster Energy will use cognitive segmentation, which should be based on three major considerations. These are marketing to millennials who include people aged between 20 and 30, as well as appealing to various subcultures within this target segment (Trefis Team, 2014). Moreover, it should also include differentiation from Red Bull and other competitors in the energy drink sector. There are several segments that are currently not catered for by energy drink companies that have a high interest from millennials in Russia, which are mountain climbing and soccer, especially as the World Cup in 2018 approaches. These activities present an opportunity to appeal to young males and females aged between 1820 and 34 years, especially since they are associated with high-energy needs. Using cognitive segmentation, Monster Energy should target consumers by promoting the product as a safer alternative to carbonated drinks and other energy drinks, while also appealing as self-expression and lifestyle brand, particularly to the millennial generation (Trefis Team, 2014). Primary and Secondary Target Market Selection The primary target market for Monster Energy in Russia will be young, health-conscious students and professionals aged between 18 and 34 years, especially since they are the most likely to prefer a new age beverage with an edgy and hip vibe, which is reflective of their lifestyles and attitudes (marketresearch.com, 2011). Sports participants and professional athletes within this segment who use energy drinks for performance enhancement will also be targeted. For this primary segment, anyone requiring alertness while studying, taking part in sports, or partying will be considered a potential user of the energy drink. Young urban males who live constantly exerting, adventurous, and exciting lifestyles, therefore, should be the primary target for Monster Energy. The secondary target market for the energy drink will be older consumers ranging from 30 to 45 years who also require an energy boost because of their working lifestyle. These may include truck drivers embarking on long-haul journeys across Russia or business executives taking on their annual reports that may require working in to the night (mintel.com, 2014). This secondary target market includes males from all financial statuses, as well as walks of life. They also live in rural and suburban areas with varying education levels. Moreover, they share similar mental/physical exertion. References Bennett, R., & Blythe, J. (2013). International marketing. London: Kogan Page. CSD. (2012, March 13). Customers Energized About Energy Drinks. Retrieved March 22, 2015, from Convenience Store Decisions: http://www.cstoredecisions.com/2012/03/13/customers-energized-about-energy-drinks/ Datamonitor. (2013). Monster Energy case study: Building successful brands in the competitive US energy drinks market. London: Datamonitor. euromonitor.com. (2014, September). Sports and Energy Drinks in Russia. 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