Dr. Pepper Snapple Group, Inc. Case

Alisha Pearcy

MSBA 5600-001

Case One: Dr Pepper Snapple Group, Inc.

        In late 2007, “Dr. Pepper Snapple Group, Inc. was the only major domestic nonalcoholic beverage company in the United States without a significant branded energy drink of its own” (Kerin & Peterson, 2013, p. 91). When beginning to think of how they could enter the energy beverage category, Dr. Pepper Snapple Group, Inc. must consider if there are any barriers to entry and how they could overcome them. To do this, they must look at the products already in the market that would be their competitors. They also need to do analysis to find out if the market is still growing enough to add another energy beverage to the market.

        The energy beverage market in late 2007 was dominated by only five companies. Those companies are Red Bull North America with their Red Bull brand, Hansen Natural Corporation with their Monster Energy brand, Pepsi-Cola with their AMP and SoBe Adrenaline Rush brands, Rockstar, Inc. with their Rockstar Energy brand, and Coca-Cola with its Full Throttle and Tab Energy brands. All of these brands entered the market between 2001 and 2003, with the exception of Red Bull which was the market pioneer in the United States. These five competitors have all but six percent of the current market dollar sales, with Red Bull having almost half of the market itself (Kerin & Peterson, 2013). This begs the question on whether or not consumers would be willing to switch to Dr. Pepper Snapple Group’s energy beverage or would they rather stick with what they know? It seems that energy beverage consumers are sticking to the original Red Bull, and while others are gaining market share, they are nowhere near the size that Red Bull is.

        Next, Dr. Pepper Snapple Group needs to look at the consumers in the market. The heaviest users of energy beverages in the United States are males age twelve to thirty-four. The consumption of energy beverages had increased from 2004 to 2006, but, in general, those consumer drinking energy beverages will only choose 1.4 different brands (Kerin & Peterson, 2013), this suggests that, while consumption rates are up, the willingness of consumers to try different brands is low. This is a bad sign for Dr. Pepper Snapple Group. Consumers are loyal to the brand they drink, so they would be less likely to stop drinking that brand in order to try a completely new brand on the market. There is the option to target a whole new group of consumers, but the chances of that working and giving them a large enough market share to substantiate the additional marketing needed are slim.

        When looking at which off-premise retail channel to use, there are really only two options for Dr. Pepper Snapple Group to consider, convenience stores or supermarkets. Dr. Pepper Snapple Group already has a broad product line that is sold in supermarkets as well as high turnover items in convenience stores, so they would just have to figure out how to incorporate their energy beverage into that product mix. Do they want to take away space from one of their products that is doing well in the supermarkets or do they want to try their hand in convenience stores first, and then branch out from there? My suggestion would be to first start out in convenience stores. The reason for this is that, “in 2006, convenience stores accounted for 74 percent of off-premise retail dollar sales” (Kerin & Peterson, 2013). If they can be successful in capturing market share in the convenience stores, then they can move on to the supermarkets with some consumers already on board.