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Monster Energy Drink - Market Plan for Entry in India
 

Monster Energy Drink - Market Plan for Entry in India

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This paper evaluates the attractiveness of Indian market energy drink market for one of the biggest energy drinks makers in the world called "Monster Energy Drink." In order to find new markets for its product and to counter competition, India with its huge customer base and a friendly investor environment is suggested to be an ideal destination for Monster. The structure of this paper can be mainly divided into four parts. The first part briefly talks about the Energy drinks market in India and its growth prospects. It also gives an overview of Monster Energy Drinks Company and its operations. A SWOT analysis is undertaken to evaluate its position as far its foray in India is concerned The second part of the paper is mainly concerned with assessing Indian market through application of PESTEL framework. This part gives an overview of the existing players in India and the extent of competition in the energy drinks market. After reviewing facts about Indian market, in the third part, the suggested entry mode in the Indian energy drinks market is discussed along with the correct marketing mix strategy for Monster. This part also talks about the proposed organizational structure and issues like logistics and supply chain establishment for reaching the target segment. The paper concludes by summarizing the key findings and by providing recommendations for Monster to establish its presence in India.

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Monster Energy Drink - Market Plan for Entry in India Monster Energy Drink - Market Plan for Entry in India Document Transcript

  • Monster Energy Drink Market Entry Plan for India
  • Monster Energy Drink Market Entry Plan for India1 Contents 1. Introduction.......................................................................................................................... 2 1.1. Brief overview of Indian Energy drinks market............................................................... 3 1.2. Competitor Analysis in the Indian Energy drinks market................................................ 5 1.3. Overview of Monster Energy Drink Company................................................................ 7 2. PESTLE analysis of the Indian Energy drinks market ...................................................... 11 3. Strategic options for Indian Energy drinks market............................................................ 14 4. Marketing Strategy & Distribution Strategy for Monster in India .................................... 17 5. Recommendations & Conclusion ...................................................................................... 19 6. References.......................................................................................................................... 20
  • Monster Energy Drink Market Entry Plan for India2 1. Introduction With the changing dynamics in the global business environment due to the advent of globalization and technological advances more firms are becoming international by entering new markets considered to be underdeveloped sometime back. There is a growing interdependence among the world economies as boundaries of trade are diminished, unfair trade laws are being abolished and more cooperation is sought for. As Richard Whitley suggests in one of his studies, that there are 3 aspects of this international change that are quite visible: increased importance of global system of interdependence and coordination, denationalization of large firms and finally the changing organization structures and standardization of organizational practices (Whitley, 1994). Moreover, due to the saturation in their own domestic markets and/or markets of operation and to match with their competitors, companies today actively hunt for newer markets where they can sell their products or services. This trend has given rise and attached a considerable significance to the “emerging markets” that tend to offer high growth coupled with high volumes. Today, China and India are two of the biggest emerging markets in the world that have open doors for the companies from the developed markets and offer huge business potential but with a downside of little risk (HARRINGTON, 2011). This paper evaluates the attractiveness of Indian market energy drink market for one of the biggest energy drinks makers in the world called “Monster Energy Drink”. This company is based out of United States and is currently behind Red Bull energy drink in the world energy market. In order to find new markets for its product and to counter competition, India with its huge customer base and a friendly investor environment is suggested to be an ideal destination for Monster.The structure of this paper can be mainly divided into four parts. The first part briefly talks about the Energy drinks market in India and its growth prospects. It also gives an
  • Monster Energy Drink Market Entry Plan for India3 overview of Monster Energy Drinks Company and its operations. A SWOT analysis is undertaken to evaluate its position as far its foray in India is concerned The second part of the paper is mainly concerned with assessing Indian market through application of PESTEL framework. This part gives an overview of the existing players in India and the extent of competition in the energy drinks market. After reviewing facts about Indian market, in the third part, the suggested entry mode in the Indian energy drinks market is discussed along with the correct marketing mix strategy for Monster. This part also talks about the proposed organizational structure and issues like logistics and supply chain establishment for reaching the target segment. The paper concludes by summarizing the key findings and by providing recommendations for Monster to establish its presence in India. 1.1.Brief overview of Indian Energy drinks market The Indian energy drinks market although smaller in size as compared to its aerated drink market offers prospects of high voluminous growth. It is estimated to be in the excess of $30 Million and has grown by over 40% year on year in the last 4 to 5 years (Theresearchpedia.com, 2010). The scope for the ready to drink segment can be understood by the fact that Indian consumers drink an estimated 120 billion litres of beverages, of which only 4% are ready-to-drink packaged ones(Shah & Chandran, 2010). Traditionally, Lemon water and Glucose drinks have been the primary thirst quenchers of the Indian population as far as the energy drinks segment is concerned. Due, to their affordability and accessibility they have a wide reach and hence many local FMCG companies like Dabur, Parle and international companies like Coca-Cola & Pepsi have come up with their low cost
  • Monster Energy Drink Market Entry Plan for India4 lemon based products. As far as the premium energy segment is concerned it’s still a niche market endorsed by very few. But, this trend is changing and the energy drink segment has found its followers in the form of young crowd who view this as an ideal drink for sports activities and party activities. There has been a shift in the mindset of the young crowd and the acceptance to “foreign brands” is increasing as this target segment likes to try new things and wants to standout in the crowd. Some of the customer trends in the Indian energy drinks market indicate that energy drinks with a strong taste are more famous in the male population with about 65% of the target segment consisting of males (Tyagi, 2012). To be more specific, teenagers and young adults (typically males in their teens and in their 20’s) are the favored target group. Some of the characteristics of the target group are outgoing, physically active, socially active, image conscious, status conscious etc. Also, energy drinks being non-alcoholic offer an alternative to the alcoholic drinks to the club going population and hence they are ready to try it out more frequently. Hence, the entire focus of the existing companies in India has been to showcase energy drinks not only as thirst quenchers but a drink that increases the “coolness” factor when consumed. The energy drink products in India have been positioned as premium products as compared to the soda based drinks offered by Pepsi and Coca cola. One can of energy drink product (normally 250 ml) ranges anywhere from Rs 75 to Rs 90 ($1.5 to $2) which is almost 5 times the cost of a soda beverage. Price innovation by reducing cost has been explored as one of the strategies by a brand called Hector beverages with their product Frissia(Theresearchpedia.com, 2010). Energy drinks can be described as an “urban phenomenon” as far as the Indian society is concerned and are being sold in supermarkets and various clubs and bars. Point of purchase is a parameter that is being explored by existing companies as they extend their customer reach by collaborating with
  • Monster Energy Drink Market Entry Plan for India5 clubs, cafes, fitness centers etc. for promotion and sales. The main players in the Indian energy drinks market and their ongoing activities have been discussed in the next section. 1.2.Competitor Analysis in the Indian Energy drinks market Redbull energy drink can be considered as the company that basically introduced the concept of “energy drinks” in India and developed this unexplored market category. Quite naturally, due to the first mover advantage, Redbull is by far the leader in the Indian energy drinks market with a share of more than 60% of the market (Marketing Practice, 2008). The founder of Red Bull Mr Mateschitz firmly believed that a product can be best marketed through word of mouth communication and peer recommendations. This thought formed the basic ideology of the Red Bull advertising campaigns and slowly the word spread around and created a “buzz” around the brand. Later, Red bull supplemented it with sports and event marketing, athlete endorsements, club tie-ups and point of purchase marketing(Marketing Practice, 2008). Some of the sports events that have found popularity among the Indian population are its Formula 1 campaigns and the performance in one of the aero shows in India where their team called“Flying Bulls”participated. In another event, Redbull organized stunts show across various cities in India by inviting Red Bull Athlete and current & 4-time motorbike stunt riding world champion, Chris Pfeiffer(Adgully.com, 2011) Some of the players in this category also include some Indian companies like the Mumbai based Goldwin (makers of Cloud9 energy drink) launched in 2009. It has about 23% market share and is the second largest in this market category. It comes in a number of variants like wild berry, red grapes and pomegranate that have found some acceptance in the Indian population.
  • Monster Energy Drink Market Entry Plan for India6 Another brand that has been doing well in the Indian market is called “Power Horse”launched by the Austrian company, Spitz KG in 2003. Power Horse is a non-alcoholic drink that contains Taurine and Glucuronolactone (amino acids), caffeine and vitamins. The company doesn’t have a manufacturing plant here and uses an Indian partner to import the beverage. They have been targeting the premium segment and have kept their prices at a high level (The Hindu, 2003). Due to the attractiveness of this category, cola giants such as Pepsi and Coca Cola have been rushing to get a pie with their own brands of energy drinks called SoBeAdrenaline rush (launched in 2008) and Burn(launched in 2010) respectively. . Burn is one of the highly successful energy drinks with presence in around 76 countries. It’s one of the highest selling drinks in many European Countries, USA, Australia and South Africa. The burn logo is very distinctive with its flame design and has a very catchy slogan “Can you take the heat?”(Faraz, 2010)Currently, both brands are suffering with low penetration levels and have about 1% market share in this category. Another player which is keen to increase its market share is the diversified Indian Conglomerate JMJ group with its brand called XXXwith around 3% market share. It go huge popularity by associating itself with one of the leading cricket clubs in India and has got a significant brand following. One of its variants is REJUVE that is customized for Indian taste buds and is positioned as a rejuvenating and immunity boosting drink. Another player called Calidris India Private Ltd (CIPL), a fully owned subsidiary Calidris, has launched natural energy drink 28Black(Theresearchpedia.com, 2010). Another significant player who has just entered the market is the UB group of India. It is the market leader in the alcoholic beverage segment. They have launched their energy drink in the name of “Romanov Red” a natural product made of a Brazilian herb, Guarana(MITRA, 2010).
  • Monster Energy Drink Market Entry Plan for India7 Their focus is to promote it in sports related and music related activities. One of their biggest strengths is already established nationwide distribution network. Considering the above market structure it is evident that there are two big players with Redbull (> 60% market share) and Cloud 9 (with about 23% market share). Rest of the brands like Burn, SoBe, XXX, 28Black, Power horse and others have a combined market share of about 15%. In this situation “Monster energy drink”would be positioned in the “Question Mark” category of the BCG matrix given below – Figure: The BCG Matrix. Source (Value Management, 2010) The Question Mark category is characterized by high growth and low market share. At the entry level, Monster energy drink would have a huge potential to grow their market and eventually move into the “Stars” category in the medium to long term. 1.3.Overview of Monster Energy Drink Company Monster Beverage corporation, formerly known as Hansen Natural Corporation is a US based beverage manufacturing company ,present in the entire supply chain of beverage manufacturing
  • Monster Energy Drink Market Entry Plan for India8 viz. production, marketing, distribution and sales. Its product portfolio includes natural drinks soda, energy drink, fruit juices and others. Some of its major brands are Monster energy, Java Monster, Peace Tea, Hansen Natural soda, Junior Juice, Blue sky and others (Reuters, 2011)It has divided its entire operation in to two segments. The first one called “Direct Store Delivery (DSD)” which uses a distributor network for marketing and selling of product and consists mainly of energy drinks. The DSD segment was about 93% of the company’s net revenue in 2010.While the other one called “Warehouse segment” uses a retailer network for selling mainly juice based products and soda beverages (Reuters, 2011). It was about 7% of the company’s net revenue in 2010. Some of the latest products introduced by company in 2010 are “Blue sky shots” in the natural function shots category, “Blue Sky free blue energy drink” (zero calorie) and Worx energy in the energy shot and supplements category. However, its flagship brand “Monster Energy” launched in 2002, remains its highest selling product. Some of its product line under this brand name include lo-carb Monster Energy, Monster Energy Assault, Monster Rehab, Monster Energy Absolute zero and many others. The normal package size comes in serving of 8 ounces and 16 ounces. Per serving of Monster contains 100 Kcal, 27 grams of sugar and 80mg of caffeine (Roaring Haus Studio, 2011). Monster Beverage Company is the second largest manufacturer of energy drinks with about 23% market share behind Redbull who is the world market leader with 40% market share. In 2010, its annual sales were $1.5 billion as compared to Redbull annual sales of $2.2 billion (Energy Friend, 2010). Monster Energy has been performing exceptionally well in the US market with about sales growth of 22.3% in 2011 beating both Redbull (up 14.6%) and Rock Star (20.3%) as
  • Monster Energy Drink Market Entry Plan for India9 per the latest Nielsen data (Watson, 2011). During this period, there was a jump of 44.5% in net profit ($139 million) on net sales of $818.6 million (up by 35.6%) (Watson, 2011). A SWOT analysis of Monster Energy drink for its prospects in India is given below – Strengths  Monster energy is a highly known brand name in the United States and has gathered a lot of recognition through sponsoring sport events like motor cross, car racing, snowboarding etc.  It has several celebrity endorsements in United States. For e.g. Collaboration with the rapper “Snoop Dogg”  It has strong distribution channels and has collaborations with Anheuser-Busch in US and Grupo Jumex in Mexico  It has an ability to leverage its good financial strength for brand promotions  It’s brand personality is strong – Sporty, Masculine & Energetic  Attractive and eye catchy brand logo Weaknesses  Low brand recognition in India. Not a cult name as compared to Red bull  Low experience in terms of operations in an emerging market  Entry into a competitive Indian energy drinks market would be tough Opportunities  Energy drink market still unexplored in India  Mass Market Penetration through heavy advertising and positioning  Increase market reach -Sports events & discovering new mediums of promotion  Innovative cost effective product strategy
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