Analysis of Harvard brief case Crescent pure

1. CRESCENT PURE
BRIEF CASES
HARVARD BUSINESS SCHOOL

2. POPULAR
ENERGY
ENHANCING DRINKS
ARE
•Too sweet
•Unhealthy
•Artificial

3. PETER HOOPER WANTED
A drink thatwould
refresh,
enhanceand
energize

4. CRESCENT PURE
WAS
BORN!!!!

5. CRESCENT PURE
Non alcoholicfunctionalbeverage
Launchedin a regionwhichembracedthe “locavore”
movement
3.75 dollarsforan 8-ouncecan

6. How does Portland Drake Beverages fit in ?

7. PORTLAND DRAKE BEVERAGES
Manufacturerof organic
juicesand sparklingwater
AcquiredCrescentPurein
July 2013

8. WHO RUNS IT?

9. CEO: MICHAELBOOTH
PRESIDENTOF MARKETING: SARAHRYAN
MARKETINGRESEARCHDIRECTOR: MATT LEVOR

10. STRATEGY (1/2)

11. STRATEGY (2/2)
“Softlaunch”in 2014
Advertisingbudget: $750,000
Responsibility: SarahRyan
Deadline:6 weeks

12. OBJECTIVES:
(1)Industry specifics related to each of
the two positioning options
(2)The potential benefits and drawbacks of
each option
(3)Final recommendation by Sarah Ryan

13. U.S Beverageindustry
Estimatedto be $131 billionin 2013
Projectedto grow to $164 billionin 2018

14. LARGE DISTRIBUTIONS
Not Straightforward
Largestretailers – Big Box
Take careof distributionby themselves

15. SMALL DISTRIBUTIONS
They retaindistributors
Distributorsmaintaincloserelationships with retailors

16. PricingStrategy (expected)
Retailprice:$2.75 (27% belowmarket price)
Variablecosts:$1.02 percan
Wholesaleprice:$1.24 per can
Distributorsmonthlycosts: $34,000

17. Ingredients and Packaging
SleekSilver8-ouncecan
Clearcoloredliquid
80-calorieserving
Energysimulants- gaurana,
ginseng

18. PRODUCT POSITIONING(1/2): ENERGY DRINKS
WouldreinforceexistingperceptionsfromOregon
Informalsurvey-“energy”mostdescriptivecharacteristic
Projectedmarket: 8.5billionin 2013
Averageprice$2.99(aboveour2.75pricepoint)
Crescentisa healthieralternative

19. PRODUCT POSITIONING(2/2): SPORTS DRINKS
Widercustomerbase than energy drinks
Market : $6.3 billionin 2012
Crescent’s price will be significantly higher

20. MARKET RESEARCH

21. ENERGY DRINKS(1/5)
MARKET SIZE:
Growing
Grownby 40% (between2012and 2013)
Projected to reach 40% by 2018

22. ENERGY DRINKS(2/5)
Consumer Data:
Parents
Males between 18and 34
Householdincomebelow $25,000

23. ENERGY DRINKS(3/5)
Competition:
Fright
Razor
Torque and
Stellar

24. ENERGY DRINKS(4/5)
Opportunity:
Drinks with lower
levels of caffeine
and purer
ingredientsare
rising

25. ENERGY DRINKS(5/5)
Threats:
News stories
were
highlightingthe
health risks

26. SPORTS DRINKS (1/4) Consumer Data:
½ of men
1/3of women
Younger customers

27. SPORTS DRINKS (2/4) Competition:
Gleam72% of market,
Drip21% of market

28. SPORTS DRINKS (3/4) Threats:
High calorie and sugar
Childhoodobesity

29. SPORTS DRINKS (4/4) Opportunity:
Diet and low sugar drinks
growth areas
Expected increase from $1.4
billionto $2.97 billion

30. CONSUMER STUDIES(1/3):
Contrast betweenenergy
and sportsdrinksbased
on perceptionof
customers

31. CONSUMER STUDIES(2/3):
• 80% of customersb/w
18-34
• Appealedmoreto
youngsters
• Significantamountof
femalecustomers

32. CONSUMER STUDIES(3/3):
Moreemphasison
natural,functionaland
refreshing

33. PERCEPTION MAPS: HYDRATION AND ENERGY
Energy drinks have
high energy and low
hydration
Sports drinkshave low
energy and high
hydration

34. PERCEPTION MAPS: NUTRITION AND TASTE
Energy drinks have low
nutrition and half of the
brands have high taste
Sports drinkshave high
taste and high nutrition

35. RETAILER FEEDBACK
Higher percentageof womenpurchased crescent
Price can be increased
Younger men also
purchasedmore

36. FOCUS GROUP FEEDBACK
Tasteappealedto mostcustomers
Youngercustomersthoughtcrescent had lessenergy
Crescent was what they wanted in a beverage
Apprehensive aboutPDB’s ability to deliverat low price

37. BREAKEVEN
ANALYSIS

38. Capacityof production:12,000a monthor144,000annually
Advertisingbudget:$750,000sofor crescentto breakeven,it will be 142,045.45cases
Capacityoverageof 144,000-142,045.45=1,954.55
Amountof profitthatcanbe producedfrom casesis $10,320.02
Casesoverbreakevento capacity:1954.44
Profitper case x5.27
Profitof overbreakeven $10,320.02
Advertising budget:$750,000
Casefrom crescentto distributor:($1.02x24)=$24.48
$750,000/$24.48= 142,045.45cases

39. Manufacturersalesprice:$1.24
Costof goodssold: -$1.02
= 0.22
Grossmargin = 0.22/1.24 = 18%
Distributionsalesprice:$1.65
Costof goodssold: -$1.25
=$0.41
Grossmargin = 0.42/1.65= 25%(Distributorswill get 25%grossmargin)
Retailersalesprice:$2.75
Costof goodsold = -$1.65
Grossmargin: $1.10=1.10/2.75=40%(Retailerswill get 40%grossmargin)

40. ADVANTAGESOF CRESCENT AS AN ENERGY
DRINK!!!!
Wouldreinforce existing perceptionsfrom Oregon
Informal survey-“energy”mostdescriptive
characteristic
Projectedmarket: 8.5 billion in 2013
PDB canstick to its naturalpolicyof affordableprices

41. ADVANTAGESOF CRESCENT AS A SPORTS DRINK!!!!
•Females(who are an important segment of
Crescent users) will more likelybuy sports
Drinks
•Crescent has great taste and is also refreshingwhichare
important qualitiesof sports drinks
•Younger customers buy more sports drinks

42. FINAL
RECOMMENDATION

43. CRESCENT SHOULD BE
POSITIONED AS AN ORGANIC
BEVERAGE

44. WHY?
Crescent’s coretarget audience aredistributedamong
the 2 beveragetypesso choosinga “broadappeal”
optionwill help it to successfullycaterto the needs of
its customers.This optionwill allowCrescentto
capitalizeon the growingorganicfood and beverage
industry. It will helpcrescentto

45. DISCLAIMER
Createdby KamalaPrakash Bonam,VIT Vellore,duringa marketing
internshipundertheguidanceof prof.Sameer Mathur,IIM Lucknow