Executive Summary
Currently, the Australian market for popular North American soft drink Dr. Pepper is virtually non-existent; a single store imports the product and sells it. Dr. Pepper is not bottled, manufactured nor distributed anywhere in Australia, leading the single store that does sell it to charge a high price, inhibiting its market growth and popularity. As a result, we are proposing that Dr. Pepper introduce their current product, a soft drink known for a bold flavor based off a secret recipe, into Australia as a new product. This is a plan regarding market development.
The current Australian soft drink market is quite large, so there is room for a new product to infiltrate. In fact, since 2010, the market size of the Australian soft-drink industry has increased over a billion dollars. Clearly, Australians are active consumers of sodas. This provides an opportunity for Dr. Pepper to enter the market. Dr. Pepper also has a lot of strengths that would help them become popular quickly in Australia. A major strength is the unique-ness of the beverage, which boasts “a signature blend of 23 flavors”. While Coca-Cola and Pepsi feature similar flavors that some consumers cannot differentiate, Dr. Pepper features a spicy, strong flavor. In addition, the soft drink market is quite developed in Australia. Thus, introducing a new soft drink option will be easier because of existing production facilities and logistic channels.
Dr. Pepper has the ability to succeed in a market full of competitors because of the uniqueness of its product, but its success is contingent on a competitive marketing strategy. In order to gain a strong competitive advantage, Dr. Pepper needs to implement a strong and effective targeting and positioning strategy to optimize its profitability. We segmented the Australian population by age, beginning with children aged five to seven years old, then adults aged nineteen to forty-five years. Due to the health concerns that sugary and caffeinated beverages pose to children, we decided to target adults aged nineteen to forty five. This segment is currently growing in Australia and are active consumers thanks to the country’s currently stable economic conditions. These consumers also often have large social groups, to which they can introduce Dr. Pepper by spreading word of mouth. In order to attract our target segment to our product, we developed a unique positioning plan. In addition to simply satisfying customer thirst by providing a refreshing beverage, Dr. Pepper offers healthier alternatives, such as diet sodas, customer loyalty, and alternative uses for the product such as in recipes. We also suggest Dr. Pepper invest heavily in ethical business practices, which is of huge importance for Australian consumers.
Market Description
Market Characteristics
The market the Dr. Pepper is interested in penetrating is the Australian soft-drink market. This market is steadily growing and has been, by an average of $226,000,000 a year, since 2010. This steady growth provides quite a great opportunity for Dr. Pepper to enter the market.
Market Potential
For 2017, the revenue, in million US Dollars, of the soft drink industry is projected to be $52,116. The 3-firm concentration ratio in Australia right now is 20.2%, meaning that $10,527,432,000 of the revenue in the Australian soft-drink industry this year will be taken up by Coca-Cola, Pepsi Max and Schweppes. As a new product, we would estimate that Dr. Pepper would begin with a small market share, perhaps only 1% its first year. If this were the case, Dr. Pepper can expect a revenue of $521,162,000. If Dr. Pepper implements a competitive pricing technique and charges $3, the low end of their competitor’s prices, they can expect to sell about 173,720,666 units. If, in the second year, where revenue of the soft drink industry is projected to be $55.834 million, Dr. Pepper is able to increase their market share to 1.5%, they will have revenue of $837,510,000 and sell about 279,170,000 units. In the third year, 2019, the Australian soft drink industry is projected to have revenues of $59,492 million. As Dr. Pepper’s word of mouth spreads, their market share may grow to 2% and in this case their revenue would be $1,189,840,000 and they’d sell 396,613,333 units. Most brand new companies have lower market shares when they first enter a new market, but as Dr. Pepper is a successful already existing company in other countries (boasting a 17.3% market share in the United States in 2015), we predict that their market share will start at 1% and continue to grow. The current penetration rate is close to 0 for Dr. Pepper because this product currently is rarely sold in Australia.
Customer Needs
Customer Needs
l · New, unique product different from what the market currently offers (Coca-Cola and Pepsi mostly)
l · Low price because of increasing price sensitivity for consumers
l · Refreshment due to hotter climates in Australia
l · Environment and labor regulations followed; consumers in Australia are becoming more ethics-conscious
l Easy access to products (convenience)
Company Review
Market Compatibility
At Dr. Pepper Snapple Group, our mission is to satisfy our customers thirst by providing beverages with the best taste and quality to our consumers, while satisfying our customers’ ethical standards by practicing fair, safe labor and environmental procedures.
This mission statement fits in well with customer needs as they need to be refreshed and satisfied, but are becoming increasingly concerned with ethical business practices. The target market (adults aged 19-45) would respond well to this mission statement because it hits both of these criteria. Perhaps, since households and household income is currently growing amongst our target market, we should discuss how the beverage is family-friendly.
Product Review
Product
Features/Benefits
Corresponding Customer Need
Dr. Pepper (original)
l Well-known
Already has large fan base in other countries
l Strong, unique flavor
l Refreshment
l Satisfaction
Diet Dr. Pepper
l Same original flavor
l 0 calories
l Less sodium
l 0g sugar
l Health-conscious
Caffeine Free Dr. Pepper
l Original flavor
l Similar nutrition facts as original
l No caffeine
l COnsumers would be more likely to share this proudct with children
Dr. Pepper Cherry
l Alternative flavor
l Need for new products and unique flavors to stop boredom
In addition to these variations off the original Dr. Pepper soft drink shown above, Dr. Pepper has a lot of products that are surprising, such as 7up, Bai (a healthy juice drink), Country Time, Crush, Snapple and more. We propose that introducing these products into the Australian market should wait until after Dr. Pepper already has a strong market share.
Competitive Review for Dr.Pepper in Australia
Major Competitors and their Market Shares:
Coca-Cola: 9.2% market share
Pepsi Max: 5.8% market share
Schweppes: 5.2% market share
Coca-Cola Zero: 5.0% market share
Golden Circle: 4.5% market share
Three Key Competitors and their Market Positions, Product Offerings, and Market Shares
Coca-Cola:
Market Position: They have a “One Brand” global marketing approach; it focuses on the universal moments people experience when drinking Coca-Cola, its iconic name, and the consumer’s ability to choose whatever brand they want under the company umbrella.
Product Offering: The original Coca-Cola soft drink offers a uniform, classic taste for consumers.
Market Share: Classic Coca-Cola’s market share of 9.2% makes it the most dominant brand in the soft drink market.
Pepsi Max
Market Position: They promote PepsiMax as having a “max” taste, full of bold flavor. They aim to maximize this flavor without sugar.
Product Offering: The PepsiMax soft drink offers a sugar-free option to consumers.
Market Share: PepsiMax’s 5.8% market share makes it the 2nd most dominant brand.
Schweppes
Market Position: They take pride in being the first soft drink, their quality, and refinement process. They want to push the idea of a long heritage of quality beverages. (schweppes.com)
Product Offering: The Schweppes Ginger Ale soft drink is a product that comes in a variety of fruit flavors.
Market Share: Schweppes’ 5.2% market share makes it the 3rd most prominent brand in the market.
3 Firm Concentration Ratio:
2% (Coca-Cola, Pepsi Max, and Schweppes)
Sample Competitive Products and Pricing
Competitor
Model/Product
Features
Price
The Coca-Cola Co.
Coca-Cola
Consistent, classic taste
$3.07/1250ml
PepsiCo Inc
Pepsi Max
Bold flavors, no sugar
$2.41/1250ml
Asahi Group Holdings Ltd
Schweppes
Variety of fruity flavors
$4.84/750ml
The Coca-Cola Co.
Coca-Cola Zero
Consistent flavor, no sugar
$3.07/1250ml
Kraft Heinz Co
Golden Circle
Pineapple flavors in juices
$4.40/2000ml
Channels and Logistics Review
Channel
Strengths/weaknesses
Segment best served by channel
Wholesale
Strengths: potential to sell more product, cost effective because transportation, warehousing handled by others.
Weaknesses: no direct control over distribution to consumers.
Large-scale beverage suppliers (ex. Vending machines, hotels, movie theaters).
Retailers
Strengths: ability to directly control how the product will be viewed and purchased by the consumer.
Weaknesses: logistics are more costly.
General consumer base who shop at well known retail stores.
Direct
Strengths: direct relationship with the consumer.
Weaknesses: moves small amounts of product.
Brand-loyal individuals who know what they want to buy.
SWOT Analysis
Strengths Weaknesses
l Existing The Coca-Cola Co. presence in Australia
l “New” product for region, could be exciting for younger consumers.
l Unique tasting beverage from US
l Coca-Cola brand lead in market
l Similarities to competitor’s products
l Costly to promote new brand in new region
Opportunities Threats
l Consumers want less sugary drinks, Diet Dr. Pepper could be beneficial
l Decrease in Coca-Cola brand’s lead in market since 2011
l Revives consumer interest in current brands
l Large numbers of competitors in market
l Decreased consumer spending on soft drinks
l Competitors are considering introducing new brands into market.
Strengths
The Coca-Cola Co has an existing presence in market already, so introducing/producing/distribution a new product will be slightly easier because of existing logistics channels and production facilities.
It has a unique taste that many consumers can become passionate about because there’s no “middle ground” with the taste.
Pepper would be a new option in the market, therefore exciting and a “fresh” taste.
Weaknesses
The Coca-Cola soft drink, owned by Coca-Cola Co too, has highest market share and would be a main competitor for Dr. Pepper.
Pepper is similar to Coca-Cola and Pepsi Max in type of product (taste, carbonation, etc).
Large cost to promote new brand in Australia.
Opportunities
Coca-Cola brand’s market share has gone down 3.5% since 2011 (Brand Shares June 2016). Therefore, Dr. Pepper might have a better chance at getting a higher market share.
Consumers are looking for less sugary drinks, so Diet Dr. Pepper might be successful in this market.
New product could provide a resurgence of interest in Coca-Cola Co. because of their efforts to introduce new brands into their region.
Threats
Decrease in consumer spending on sweetened soft drinks (Whitehead, March 2017)
Large number of competitors in market
PepsiCo plans to introduce many new brands into the soft drink market (Rietbroek, September 2016)
Marketing Strategy: Dr. Pepper in AUSTRALIA
The company intends to operate in a competitive market. In essence, Dr. Pepper production and distribution already has competitors in the Australian market. The chief competition is anything that is consumed in liquid form. Nevertheless, there are keys to success. To successfully sell Dr. Pepper in this market, the company will explore various methods. To excel in this market, the company has identified the following as the key to its strategy in the production and sale of Dr. Pepper.
The first step is that the company is prepared with sufficient market knowledge through an exhaustive research of the nature of the market. It is important to have the ability to expand and meet demands of the consumers as soon as the product is launched into the market, so that the marketing campaign and the product availability are perfectly synchronized. The other tactic that ensures success is for the marketing process to communicate the appeal of Dr. Pepper. This keeps the customer interested through frequent updates and launches in the market. This is achieved through social media and other forms of communication that are effective in reaching the customers and by using appropriate market strategy to avoid overselling and underselling by properly segmenting the product markets and the product. An example of this idea are demonstrations and test marketing, which can give the new product its momentum in the market as the company management explores alternative marketing techniques.
Dr. Pepper’s product competitive advantage stems from a conglomeration of concept, infrastructure, consumer relation, the coordination of activities, and the company’s production personnel. One of the sources of competitive advantage include the fact that pepper product has a unique taste and flavor that sets it apart from other drink alternatives. Also, people in the company are innovative and are good at establishing relationships with customers and distributors. This ensures that the company gains a lot regarding competitive advantage. Another source of this benefit is the organizational structure and culture such as shared habits belief and norms which provide a common basis of operation among the product sellers and dealers. The other evident competitive advantage source is the superior methods of processing the drink that is unique to the company. To ensure stability, the Dr Pepper Manufacturer has an intellectually recognized property and brand. Lastly, competitive advantage will also come from the capital availability and the use of technology in all the aspects of the company operation at both the production and the distribution level.
The consumers in the market have various sources of influence, especially concerning what to consume in relation to the variety of drinks in the market. The basis of competition will be determined not only on price but other many points including: hygiene factors such as safety, the convenience of the product, promoting the product to a prestigious level, and by offering loyalty incentives. According to research, the price that the company is ready to offer in the market is already a fair price, and therefore the competition will be non-price based.
Lastly, Dr. Pepper product intends to supply what it communicates to the consumers. By ensuring consistency in production, all consumers will be able to experience the same unique Dr. Pepper taste. This means that all the consumers will get value for their money and that their choice of the product will be based on their previous experiences out of consuming the same product by ensuring consistency in the production.
Similarity to Domestic Market and the Required Changes
The Dr. Pepper drink production company employs three main strategies to ensure the standardization of products in production and the market. These strategies include: building the brand, executing with excellence, and continuous improvement. The first strategy is building the brand. In the Australian market, the pepper product company has a well-defined portfolio strategy through which to allocate its marketing and sales resources. It applies a continuous market and consumer analysis to track the major brands with the highest potential for sales and profit growth. It also invests heavily on new brands as well as focuses on new distributions and agreements for third party brands. The company provides all new products with the resources and capability to grow in the market (Malinauskas, Aeby, Overton, Carpenter-Aeby, & Barber-Heidal, 2007).
The second strategy employed is excellently in executing all activities. This improves the product presence through increased selling activity; which enhances the demand for high margin product through increased in-store activity. Components of the last strategy are the manufacturing, brand ownership, and distribution models that enable increased margins in sales. The corporation uses Information Technology to strengthen the route market for distribution and makes use of third party bottles to deliver the brand, making Dr. Pepper a priority in distributor’s systems (Malinauskas et al., 2007). The company has also created manufacturing facilities which can process many products and serve a wide region, especially through the adoption of the Rapid Continuous Improvement (RCI). RCI helps to achieve net income growth and to increase the amount of cash returned to stockholders.
Strategy in the foreign and the domestic markets are closely related except for the difference in consumer profiles, which prompts the company to use different communication tools and channels. The potential implications of the company’s international and domestic tactics are that it will continue to realize increased market stability and long periods of market survival. As outlined above, there is not much difference regarding product quality and quantity. The commodities have been standardized, and the customer experience is universal with little customization for clients in the Australian market.
Market Segments
SEGMENT
CUSTOMER NEED
CORRESPONDING FEATURE/BENEFIT
Children
Age (5-17 years)
1. Refreshment
2. Fulfillment
3. Energy for growth and development
1. Cold refrigerated, carbonated drink
2. Sweet flavored Drink
3. Added energy to the sweet flavored drink
Income and user status
Adult
Age (19-45 years)
1. Environmentally aware
2. Price conscious and sensitive to price changes
3. Product quality
4. Multiple products uses
5. Rational value for money
6. Attracted to strong brands
7. Family focused
8. Health and diet conscious
9. Service/relationship focus
10. Variety Seekers
11. Benefit seekers
1. Biodegradable package material
2. Fair price
3. Offers the best quality that substitutes other competitive drink product.
4. Possible reuse of package materials for other creative purposes.
5. Give the value for the expected money
6. Create strong brands of drinks in the product line.
7. Create family consumable Dr Pepper drink.
8. Has got associated health benefits such as not contributing to increased case of diabetes
9. Strengthens the consumer’s relationship with the brand and the company
10. Avail variety of product brands
11. Provide associated benefits derived from the consumption of such product.
Target Segment
The target segment for Dr. Pepper’s Australian market are those individuals between the ages of 19 to 45 years with stable income. This is the most preferable group because they require a lot of refreshment during their working time and breaks to supplement their energy requirements. It is also an active population; it has increasing income and a significant portion of the general population. Moreover, many members of this segment have family members who could be from groups outside the target segment, who are also consumers of the drink. The similarity of needs in this category is that the majority of the income earners are adults and prefer to derive a lot of benefits from their beverages. Additionally, these users and the status user of the product have the potentially growing families, and they are most likely to increase their expenditure in order to fulfill the desires of the family members. The attractiveness of this category is that it also has the potential to include the young population who are also consumers of the same product by purchasing it for them. The company’s main objective is to make profit and to establish a long-term customer loyalty to the brand.
Positioning
Dr.Pepper is put in the premium segment of soft drink industry in Australia at first. It is one of the top famous soft drink brand in Australia. The company’s pepper product always strives to fulfill user’s preferences and desires. The product that will meet their demand is the most preferred, therefore Dr. Pepper must be favorite above the competition. The brand trust and fairness of the product’s price place the product a level of loyalty for the consumer.
The drink also provides a solution to thirst and accords the consumers great energy. In fact, this is a value dispensing product to all the consumer ranges as it grants all the clients the greatest fulfillment and the refreshment that they constantly desire. The uniqueness of the product makes it the best for a social gathering, especially among young people. Dr. Pepper gives consumers the value and the satisfaction that they require when they sacrifice other desires to obtain the product. In summary, Dr. Pepper offers drinks that perform the satisfying factions of: earning the consumers trust, giving the clients more than they expect, avoiding unrealistic pricing, providing buyers facts related to the benefits of the product, and offering companywide commitment to service and aftersales support.
Perceptual Positioning Map
The perceptual positioning map above shows the position of the Dr. Pepper brand relative to other major drinks in the Australian market. Major competitive brands for Dr. Pepper will be developed along with constant research so as to maintain the nature of the finished products and what sets it apart from other products. The major difference that may be witnessed will be in terms of variations in flavors that have been developed for the various product lines. Market share of the major competitive brands is relatively large since there are numerous drinks in the market.
Differentiation Strategy
The positioning approach undertaken in the marketing of Dr. Pepper eliminates competition on the basis of price and other features. The competitive advantage comes in the sense that the customer is not able to select based on the lowest price, but on how optimal benefits are achieved. Dr. Pepper can deliver this promise of quality and health benefits by having management ensure a commitment to the well-defined production formula along with other product lines. The unique packaging materials of this product also differentiates it from the rest.
The most important difference to promote on this market are the health benefits that are associated with Dr. Pepper products and the assurance that the product in question will continue to exist and be constantly available to the customer on a consistent basis. The reason why the health benefits are the most important derives from the fact that the target population is active and works consistently. Fatigue and lifestyle diseases are some of the problems that they constantly strive to reduce. By using this product during working hours and breaks, the degree of fatigue diminishes as the body is rejuvenated. Sucrose and color content cannot suffice if a significant population is required to consume the product. This is why energy supplementation and the health benefits are the most important factors to consider in the process of marketing the product.
Value Proposition
The low-cost differentiation strategy that the company employs as well as price discrimination tactics depend on the level of income for the people or the target population. The value proposition in terms of prices are fair, and the consumers will not feel as if they are being exploited by the company. The company does not thrive by charging exorbitant prices to various categories of people, so the value that they get is in line with their purchasing power. Additionally, consumers and the different populations in the segment will be able to derive many health benefits. Therefore, the product will contribute to the overall population’s health and safety.
Positioning Statement
Dr. Pepper provides the active and working population with additional health benefits of sweetened flavored drinks which are not available in the soft drinks business. The company does this by developing drinks with added energy elements, refreshing ability, and food additives of different categories. This is accomplished through constant innovation and research.
References
Australia, C. (2016, January 20). Coca-Cola Announces “One Brand” Global Marketing Approach. Retrieved March 17, 2017, from http://www.coca-colajourney.com.au/media-centre/coca-cola-announces-one-brand-global-marketing-approach
Australia, Non-Alcoholic Beverages. (2016, June). Retrieved March 17, 2017, from http://www.portal.euromonitor.com/portal/statistics/changemeasure
Brand Shares (Global- Historical Owner): Australia, Soft Drinks. (2016, June). Retrieved March 17, 2017, from http://www.portal.euromonitor.com/portal/statistics/changemeasure Pricing:
Consumer Lifestyles in Australia. (2016, January 11). Retrieved from http://www.portal.euromonitor.com/portal/analysis/tab
Dr Pepper Products. (2017). Retrieved from https://www.drpepper.com/en/products
Dr. Pepper Snapple Company’s Market Share in the United States from 2004 to 2015. (2016, March). Retrieved from https://www.statista.com/statistics/225426/us-market-share-of-the-dr-pepper-snapple-company-since-2004/
Malinauskas, B. M., Aeby, V. G., Overton, R. F., Carpenter-Aeby, T., & Barber-Heidal, K. (2007). A Survey of Energy Drink Consumption Patterns Among College Students.
Market Size of Soft Drinks in Australia from 2010 to 2014 (in million AUD). (2015, February). Retrieved from https://www.statista.com/statistics/422500/australia-soft-drink-market-size/
Rietbroek, R. (2016, September 5). Exclusive Interview – PepsiCo Australia & New Zealand CEO Robbert Rietbroek. Retrieved March 20, 2017, from http://blog.amcham.com.au/blog/exclusive-interview-pepsico-australia-new-zealand-ceo-robbert-rietbroek/
PepsiCo Corporate Site | PepsiCo.co.au. (n.d.). Retrieved March 17, 2017, from http://www.pepsico.com.au/brands/pepsico/
Soft Drinks. (2017). Retrieved from https://www.statista.com/outlook/20020000/104/soft-drinks/north-america#
Traditional Soft Drinks. (n.d.). Retrieved March 17, 2017, from http://www.schweppes.com.au/product-range/traditionals/
Wake Up to Golden Circle. (n.d.). Retrieved March 17, 2017, from http://www.goldencircle.com.au/
Whitehead, R. (2017, March 16). Turbulence at the top sees Coca-Cola Amatil shed Australian drinks MD. Retrieved March 17, 2017, from http://www.foodnavigator-asia.com/Business/Turbulence-at-the-top-sees-Coca-Cola-Amatil-shed-Australian-drinks-MD?utm_source=RSS_text_news&utm_medium=RSS_feed&utm_campaign=RSS_Text_News. Article found using Factiva
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