Crescent Pure
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Crescent Pure Case
A. Key Success Factors
PDB is considering its first entry in the U.S. sports and/or energy beverage markets. The two options are energy drink and sports drink positioning. In order to have a good positioning, PDB should first do a market research to determine which market (sports or energy) has the most potential. The most important factors for PDB to consider are consumer needs, the market itself, and the competitive pressure. Currently, most of the existing energy drinks by leading brands contain artificial sweeteners and excessive levels of stimulants which are prompting consumers to switch to better alternative where the trend is towards the “locavore” movement; that is more organic and healthier choices. Furthermore, market research showed that a healthy alternative for energy drink is not currently available. Unlike the major leading brands, Crescent pure meet the criteria for a healthier energy drink, been organic, and low sugar. PDB target market should be those between ages 18 and 34. These consumers are young, health conscious and active. They exhibited the need for a product that replenishes energy, reduces exhaustion and provide continuous hydration. The market research also showed that the market for energy drinks is growing much faster than sports drink, lower than the average retail price for energy drinks ($2.75 vs. $2.99), and Crescent will be a much healthier option at a lower cost. Crescent will face 4 major competitors in the energy drinks business; however, a different marketing of healthier drink will substantiate its positioning.
B. Positioning
Consumers’ perception of quality is influenced by the product’s intrinsic attributes as well as extrinsic attributes provided by the seller of the product. Upon investigating the perceptual maps, sport drinks were ranked high on the hydration level but low on energy while the energy drinks were ranked high on energy and low on hydration. As for nutrition and taste, sports drinks were rated high on both attributes while energy drinks were ranked low in nutrition and about 50/50 split for taste. After reviewing the perceptual maps, it seemed to be that competition is limited in the high hydration, mid-high energy quadrant for energy drinks. Also, there is low competition in the high nutrition, high taste quadrant for energy drink. Therefore, Crescent would fall in the high hydration – mid to high quadrant and high-taste, high-high nutrition on the perceptual maps.
Crescent Pure have significant advantages that are unique in its positioning that would ultimately set them apart from its competitors. The first advantage is that Crescent Pure is organic. Since consumers are looking for healthier choice, PDB should choose to place significant emphasis on the health advantages of consuming an organic beverage versus non-organic. Second, Crescent pure contains 70% less sugar quotient than the other leading energy and sports drinks. An emphasis on lower sugar content will be critical, as consumers are becoming increasingly more health conscious and are seeking healthier alternatives. Finally, Crescent products contain 80 milligrams of caffeine which is equivalent to one cup of coffee. With advantages, there are always known disadvantages. For one, the market is competitive with big players dominating 85% and 94% market share for energy drinks and sports drinks, respectively. With limited to no brand awareness for Crescent’s product, consumers can get drawn away by the more established brands. Additionally, the lack of differentiation between sports and energy drink can be disadvantageous for Crescent’s products. Therefore, PDB will need to provide enough information to the consumers through advertising to differentiate.
C. Contribution Margin
At a retail price of $2.75 per can, PDB’s contribution margin in dollars and percentage would be $5.28 and 17.7%, respectively for each case of Crescent. These values were obtained by subtracting the retail margin (40%) from the retail price to obtain the retailer’s cost/distributors price. The distributor margin (25%) is then subtracted from the retailers cost to obtain PDB’s selling price of $1.24 per can. The distributor’s variable cost per is then subtracted from the selling price to yield a contribution margin of $0.22 per can. Thus, a case of 24 Crescent Pure would yield $5.28 ($0.22 x 24) per case and the contribution margin percentage would then be $5.28/$29.76 to yield 17.74%. See Appendix 1 showing the calculations.
D. Breakeven
In order for PDB to replicate the $750,000 in advertising spending for the product launch, the total level of advertising needed to match the national level would be $5 million. This was determined by dividing advertising spending ($750,000) by the 15% market share that PDB projected for the national functional demand. Better stated, PDB would require 6.66 times