New Entry in the Market: Sabretooth - Case Study Example

New Entry in the Market of Table of Contents Introduction 3 Company Background 3 Market Scenario 3 Product Development 5 Market Development 6 Marketing Mix 7 Financial Requirement 7 Conclusion 7 References 9 Introduction Entering into a new market with a new product line requires extensive research of the market and its compatibility with the new product. The need based product development allows the company to successfully design its new products based on the consumer’s need (Forbes, 2011). As a result the new product eventually gains popularity among the consumers. The presence of competition in the industry should also be assessed before entering in the market along with the proper estimation of the financial figures like assets, liabilities, operational cost, revenue, etc. This paper is focused on new market entry in the Indian market with a new product line of energy drinks. It also discusses about the necessary activities like marketing, financing and other operational activities needed to enter in to the new market. Company Background Sabretooth is an Australian brewery company that sells alcoholic drinks like beers, whiskey, rum, etc. It was established in the 19th century and is a world renowned alcoholic beverage company. Sabretooth started with brewing beers and eventually diversified into other alcoholic drinks. According to the reports of WHO (2014) the global alcohol consumption has reached its saturation point and any further growth is not likely to occur. Thus in order to expand its business operations, the company has decided to make a horizontal diversification to non- alcoholic drinks industry. Sabretooth has decided to enter into the energy drinks industry, starting with the Indian market. Market Scenario The energy drinks market in India is at its early stage of growth and is predicted to grow in a fast pace in the coming years. The Indian energy drinks market constitutes only 5% of the total soft drinks industry, which makes it an attractive market for a new entrant (Mukherjee, 2013). Moreover, the market is characterized by a small number of players like Red Bull, Monster Energy, etc (Agarwal, 2014). Thus it will be easier for Sabretooth to face the existing competition as a new entrant. The barrier to entry in the market is high owing to the substantial capital investment of establishing a bottling plant and carrying out marketing activities like promotion, securing distribution channel, etc. However, Sabretooth has sufficient financial potential to enter in the Indian energy drinks market. The Ansoff matrix assesses an organizations product development and market entry strategy based on four quadrants or parameters, Market penetration, Market Development, Product Development and Diversification (Ansoff, 1957). Figure 1: Ansoff Matrix Source: (Kotler & Keller, 2011) Market Penetration strategy is characterized by further exploration of the existing market with the existing product line. This is usually accomplished by aggressive promotional activities and product push strategies by leveraging the brand image of the company. The company usually tries to rejuvenate its sales figures by discounts or offers. The Product development involves introducing a new product by the company in the existing market. The company generally utilizes its existing distribution channel and brand awareness in the market to push the new product line. Market development is characterized by expanding the existing business operations into a new market, mostly to a new geographic location. The business firm introduces its already existing products in the newly entered market. Finally, the diversification strategy involves introducing a new product to a new market, where the company has not yet operated (Kotler & Keller, 2011). Based on these parameters, it can be stated that Sabretooth is looking forwards to follow the Diversification Strategy, where it will enter into the Indian market with a newly developed product line of energy drinks. Product Development Sabretooth wants to diversify its business into a market where it can have access to a large customer base with sufficient affordability and social structure that complements the proposed product line. Currently the energy drinks market in India is quite unsaturated, which makes it perfect for the company to establish its foot hold. The company will launch two variants of energy drinks, Sabretooth Bolt and Sabretooth Magnum. The Bolt variant is caffeinated, whereas the Magnum Variation is non-caffeinated. The food regulation in India suggests that the caffeinated drinks are not recommended for the under aged consumers owing to the detrimental effects of caffeine (FSSAI, 2011). Thus the company has decided to introduce a non-caffeinated version, which will attract the young consumers. Both the variants will come in 250 ml cans and 500 ml PET bottles. The energy drinks will come in two different flavoured versions, one will be the regular that is without any added flavour, and the other will be fruit flavoured, with permitted sugar content. The regular version will have zero sugar content; whereas the flavoured version will be have the taste of lime. These variations will give the company a competitive edge over its rivals who does not offer flavour variation in the market. Moreover, the lime flavour will attract the consumers who are highly taste conscious and does not prefer the regular taste of energy drinks. The drinks will not contain any amount of guarana, which often causes side effects of insomnia in some drinks like the Rockstar. Moreover, both the caffeinated and non-caffeinated version will contain regulate amounts of taurine, which acts as an antioxidants which is good for health. The caffeinated version which is recommended only for adults will contain regulated amounts of caffeine and taurine (Caffeininformer, 2014). Thus the product composition will not create any controversies regarding health issues. Market Development The company will initially launch its products in the major parts of India, like Mumbai, Bangalore, Delhi, Goa, Ahmadabad, etc. Sabretooth will acquire a bottling plant called Lisa Bottlers in Gujarat and it will go into business collaboration with Coca Cola, India to leverage its wide distribution channel. The market development strategy can be devised with the help of STPD analysis (Kotler & Keller, 2011). The STPD analysis assesses the Segmentation, Targeting, Positioning and Differentiation strategies of a firm. Segmentation: The segmentation involves selecting the market segment (Kotler & Keller, 2011). In this case the Indian market is selected for the company’s expansion operations. Sabretooth has selected certain cities for its initial product launch based on their economic structure and social trends. Cities like Mumbai, Delhi, Bangalore, Ahmadabad are highly urbanized and the popularity of energy drinks are also quite high (Nath & Aggarwal, 2007). Keeping that in mind the company has decided to launch its products in these cities. Targeting: Targeting involves selecting the target customers. The Sabretooth energy drinks are targeted at the young and middle aged generations. The Sabretooth magnum is targeted at the age group of 15-30; where as the Sabretooth Bolt is aimed at the target group of over the age of 18 and up to the age of 45. Positioning: These products will be positioned as energiser drinks for the sports enthusiast and adventurers who needs to stay in their prime all the time. The company will position the products by creating a brand image of a sports drink for individuals who lives an active lifestyle. Differentiation: This is the distinguishing factor that separates the product from the rival brands. The distinguishing factors can act as unique selling propositions or its brand image (Kotler & Keller, 2011). In case of Sabretooth, the differentiation factor is the two distinct product variation based on caffeine content as well as the lime flavoured variations. These variations will allow the company to create a unique positioning in the market. Marketing Mix The marketing mix of a business firm discusses the four primary factors like Product, Price, Place and Promotion. These factors underpin the necessary activities of a particular business operation (Duncan and Everett, 2008). The product involves the product line offered to the customers; in this case it is the energy drinks offered in different variants and flavours. The price of the products will be kept slightly below the market leaders. The competitive pricing will allow the company to gain consumer preference among the consumers. The place of product launch will be in the Indian market through major retailers and standalone retail stores. The promotional activities will include television commercials in the popular Indian channels along with hoarding and billboards, teaser campaigns etc. Financial Requirement Sabretooth as of 2013 has made revenue of $22.60 million which is a 5.2% increase from the previous year and a gross profit of $8.80 billion. The company have also achieved a net profit margin of 7.10%. The liquid cash availability is 1.5 billion where as the total current assets and liabilities are $9.45 billion and $6.90 billion. The liquidity suggests that the company has sufficient financial strength to enter into the Indian market. The acquisition of Lisa Bottlers in Gujarat will cost around $1.2 million. The plant has the capacity to produce a thousand can per day. The company will invest another $ 1 million to invest in the product development based on the proposed variants. Since it is a new product the company needs to make aggressive promotional activities. It will advertise via television commercials in all the prime slots of the popular television channels. Furthermore, it will hire ad spaces to put up hoardings and invest in newspaper advertisements as well. The total promotional activities will cost around $ 2.5 million. The company will get into a business deal with Coca Cola for 3.2 million to leverage its distribution channels. Moreover, the long term expertise of Coca Cola will also help Sabretooth to eventually penetrate deeper into the Indian Market. Conclusion The market entry strategies followed by Sabretooth is in line with the current market trend of the Indian Market. The infancy stage of the energy drinks market of India will give the company a firm foundation in the industry. Moreover, the lack of market saturation will also help the company to face the existing competition easily. The selection of the target market is also a vital factor in the success of the company. Sabretooth energy drinks are aimed at the sports enthusiast and the active people. The two major variants of Sabretooth energy drinks based on caffeine content will help the company to target the under aged consumers, thereby increasing its customer base. Sabretooth has also decided to stay ahead of the competition by incorporating a competitive pricing, which will attract the budget conscious customers as well. The lime flavour variation will help the company to attract different consumer profiles, which will increase its customer base even further. Sabretooth has the sufficient financial potential required for the new market entry and launch its new product line. Thus it can be stated that Sabretooth has successfully recognized all the necessary elements of diversification, which will allow it to ensure long term sustainability and future growth in the Indian energy drinks market. References Agarwal, D. (2014). Top 10 Best Energy Drinks in India. Retrieved from http://www.medicalhealthtips.com/top/top-10-best-energy-drinks-in-india/ Ansoff, I. (1957). Strategies for Diversification, Harvard Business Review, 35(5), 113-124. Caffeininformer. (2014). Energy Drink Ingredients and What They Do. Retrieved from http://www.caffeineinformer.com/energy-drink-ingredients Duncan, T., and Everett, S. (2008). Client perceptions of integrated marketing communications. Journal of Advertising Research, 33(3), 30-39 Forbes. (2011). A 5 Step Primer for Entering an International Market. Retrieved from http://www.forbes.com/sites/yec/2011/09/22/a-5-step-primer-for-entering-an-international-market/ FSSAI. (2011). Food Safety and Standards Authority of India Proposes Regulation of Energy Drinks, and Caffeine (Revised). Retrieved from http://www.fssai.gov.in/portals/0/standards_of_energy_drinks_.pdf Kotler, P., & Keller, K.L. (2011). Marketing Management. (14th ed.). New Jersey: Prentice Hall. Mukherjee , A. (2013) Burst of Energy. Retrieved from http://businesstoday.intoday.in/story/challenges-ahead-for-newcomers-in-energy-drinks-market/1/199794.html Nath, V., & Aggarwal, S.K. (2007). Urbanization, Urban Development, and Metropolitan Cities in India. Concept Publishing Company. 89. WHO. (2014). Global status report on alcohol and health. Retrieved from http://www.who.int/substance_abuse/publications/global_alcohol_report/msb_gsr_2014_1.pdf Read More