Sport and Energy Drinks - Case Study Example

Marketing Research and Information Needs Keeping a close track of the marketing mix and making adjustments as and when required is vital for a company, regardless of the company size. Developing new, innovative products assigns a competitive edge to the company treading new waters first. The remaining competitors are forced into revising their marketing mix by the other company in order to keep up and retain market share in the product sector. In spite of this evident importance of new product development and market mix modification, very few companies have perfectly adopted the ability to exploit opportunities for innovation on a regular basis, and some thriving companies also occasionally fumble to make changes in time. Companies still mishandle 'line extension' projects that fail. It is imperative that new products for development be carefully chosen, "product strategy calls for complex decisions, among others, on product mix and product line" (Kotler and Armstrong, 1991, pp. 512-513). The Change: Sport and Energy Drinks There has been a continuous rise in the demand for healthy snacks all over the world. This trend was essentially started in the United States as a result of a new health craze and obesity scare due to rising number of weight levels. Consumers now want to minimize their fat intake as well as reduce ingestion of other potential damaging sugar - substitute substances. This tendency to buy only 'healthy' foods has extended to the snack - food and drink sector where consumers want to enjoy snacks but at the same time not feel guilty or worried about potential damage to their health. The new trend towards healthier choices in snack - food was revealed by the speedy swap from carbonated drinks and carbohydrate ridden foods to 'non- carbs', "But with worldwide sales growth of carbonated beverages slowing, the growth lately has been found in non-carbonated beverages such as bottled water, teas, sports drinks, energy and health drinks, and ready-to-drink coffee" (Ashton, 2000). Health snacks had resulted in an entirely new marketing; establishing a new healthy product, determine its price, using completely new, health-targeted strategies for its promotion. Fat- free, carbohydrate - free, caffeine - free snacks appeared rapidly. Carbonate- free drinks eventually led to a rise in the sports and energy drink sector. This market was originally dominated by PepsiCo's Gatorade and laid back SoBe. However, Coca Cola saw the potential in this sector and followed PepsiCo into energy drinks. Coca cola launched its original attempt in energy and sports drinks with PowerAde. PowerAde was declared a competitor to Gatorade and was marketed accordingly. Reaction to PowerAde in the market was feeble and Gatorade continued to lead. After several re - launches and alternations and modifications in the ingredients, PowerAde is now second runner up in the sports drink sector while Gatorade persists in remaining the first. Coca Cola started an energy drink brand, KMX, but still felt a gap in the market. Reactions to KMX were far from warm and Coca Cola required a product to fill up the space. In the first quarter of 2005, Coca Cola introduced Full Throttle, an energy drink. Full Throttle will compete with strong brands such as Red Bull as well as PepsiCo's SoBe range. External Pressures Leading to Change Requirement PepsiCo is swiftly gaining force in the international snack food market. Their success is credited largely to their lack of sentiment for their star performers, as Brady (2004) puts it, "What distinguishes PepsiCo from some competitors is an intense lack of sentimentality about its principal brands". PepsiCo asserts that it is keener to satisfying its customer's needs than preserving its existing product lines. New product introduction is PepsiCo's strategy of staying competitive, "By defining its mission as serving the customer rather than protecting its venerable brands, PepsiCo is hoping to stave off a stagnant middle age" (Brady, 2004). In order to continue to be innovative and to uphold a competitive edge, companies must pay close consideration to the trends and requirements developing within consumers. A good example is that of PepsiCo's carb - free snack food range. PepsiCo took huge gains from the Atkins Diet fad and promptly reduced the carbohydrates in its snack foods to less than half of that of the usual product while adding other ingredients to maintain the flavor. Frito-Lay, PepsiCo's snack food division, initiated products like Doritos Edge and Tostitos Edge containing soy beans and fibers as carbohydrate substitutes. Such innovation and attention to the customers needs is advantageous not only for the customer but also for the company. The introduction of healthy snack foods greatly increased PepsiCo's, and Frito-Lays in particular's, sales, "the 'better for you' range is likely to account for even more than 10 per cent of snack sales when the company's 2004 results are issued" (Beverage Daily, 2004). PepsiCo has been quick to take action and profit from this change in developments. During the 'fat- free' phase, Pepsi was quick to promote Diet Pepsi to the consumers, "Diet soft drinks grew 0.7%, while regular soft drinks grew 0.5%" (Hemphill, 2002). The company is now focusing on the energy drink segment. One of its most important actions in this sector was the purchase and introduction of the SoBe range of non- carbonated drinks as well as the acquisition of Gatorade, the sports drink. SoBe was acquired for 370 million dollars, approximately the same amount that Cadbury had paid for Schweppes (Khan, 2000). Gatorade has always been associated to sport drinks and even now, with the sports drink industry growing rapidly, continues to hold the first place in the sports drink sector, "The sports drink market continues to grow headed up by market leader, Gatorade" (Mintel International Group, 2005). The benefit from the concentration on non - carbonated drinks has paid of, and was echoed in the sales growth of the various beverage sectors, "Pepsi's non-carb business, for example, grew by 35%" (Hemphill, 2002). Pepsi has heavily promoted its SoBe range as a laid back, energy drink as a 'healthy refreshment' (SoBe Beverages). SoBe markets itself as a drink for the health conscious yet care free with its latest marketing technique of sponsoring extreme sports teams. While Coca Cola's main competitor in the sports drink arena is PepsiCo, not the same can be said in the energy drink sector where Coca Cola must compete with other brands such as Red Bull and Jolt as well as traditional energy drinks such as coffee and tea. However, Coca Cola's main pressure comes from PepsiCo. In order to maintain its market share in particular sectors, emerging sectors as well as traditional soft drink sectors, Coca Cola has had to act before PepsiCo and introduce new products and, if prior action is not possible, to, at least, mirror PepsiCo's offerings. Copying or answering PepsiCo's products in the energy and sports drink sector was of particular importance as this was one sector where Coke was lagging far behind. Information Required To compete in the Sports and Energy drink sector, an area in which Coca Cola is still a novice as compared to PepsiCo, dual information requirements are present: firstly, what do consumers want in their drinks and second, what the competitors are doing right to be leading in this sector. The line between sports drinks and energy drinks is a very thin one and the two are often confused for each other. Coca Cola must maintain the separate status of each and market both accordingly. Coca Cola needed the following information to launch a new product: 1. What do the consumers want What is the target market 2. Why do consumers want this product 3. Is the best way to compete by introducing a new brand or by extending an existing one, repackaging it or changing the promotion strategy 4. What should the new promotion strategy be In addition to consumer information, Coca Cola also needed to know what competitors were doing to promote their products. Specifically, 1. What is the competitive product 2. What promotional strategies are competitors using 3. Who are they targeting 4. What is the consumer's response to this product 5. Were there any aspects of the product the consumers did not like Any weak points Coca Cola also had a few questions it must its own product and marketing mix strategy. 1. Why have previous attempts not lived to expectations 2. Where were the problems In the product, its promotion or was the wrong market targeted Research Process As launching a new successful product in the sports and energy drink sector was of great importance, extensive information gathering was under taken. Qualitative and quantitative preliminary research was commenced to gather extensive information about consumer's present views about Coca Cola as well as expectations for future products. Coca Cola gathered its preliminary information from various agencies to gauge the importance of energy drinks and sports drinks. Often used interchangeably, studies showed that there is a great potential for a sports and energy drinks, particularly in the younger target market starting from university students and for sportspeople. Various marketing research companies were used for exploratory research. Preliminary external information revealed the main ingredients of energy drinks and sports drinks and the difference between them, how they are perceived, the concerns consumers have about the ingredients of energy and sports drinks and how and whom should be targeted. Focus groups and sample open ended surveys were taken to determine consumer preferences and experiences with previous Coca Cola Products. During product development, Coca Cola did some of its own in - house research including opinion surveys and taste tests. Packaging tests were done to determine what containers and bottles appealed to consumers the most. Extensive experiments were carried out in test marketing in certain areas through Coca Cola distributors and Full Throttle was finally launched in April of 2005. Marketing research is not, however, a one time effort and must regularly be conducted to determine the environment and scan for opportunities. Coca Cola is already extending Full Throttle into Sugar Free Full Throttle based on the rising concerns that sugar filled drinks are causing obesity in children and have passed white bread in carbohydrate content. Bibliography 1. Ashton, Z. 2000. Is Pepsi Beating Coke Available at: http://www.fool.com/portfolios/rulemaker/2000/rulemaker001215.htm 2. Brady, D 2004. A Thousand And One Noshes. Business Week, Issue June 2004. 3. Beverage Daily. 2004. 'Better for you' snacks boost PepsiCo in 2003. Available at: http://www.beveragedaily.com/news/news-ng.aspn=49799-better-for-you 4. Hemphill, G. 2002. US Soft Drink Sales Increased 0.5% in 2001. Available at: http://www.bevnet.com/news/2002/03-01-2002-softdrink.asp 5. Khan, K. 2000. Pepsi Gets the Lizard. Available at: http://money.cnn.com/2000/10/30/deals/sobe/ 6. Kotler, P. and Armstrong, G. 1991. Principles of Marketing. Prentice Hall, Englewood Cliffs, New Jersey. 7. Mintel International Group, 2005. Available at: http://www.marketresearch.com/product/display.aspproductid=1089398&xs=r 8. SoBe Beverages. Available at: http://www.sobebev.com/ 9. Using market research to develop a product range. Available at: http://www.thetimes100.co.uk/case_study.phpcID=3&csID=108&pID=6 Read More