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Crescent Pure's path to profit as an organic energy drink
- 1. A CASE STUDY ON CRESCENT PURE
- 2. Which are the companies involved? Crescent Pure & Portland Drake Beverages How? Crescent Pure was acquired by PDB in 2013. Why? The CEO of PDB felt it important to expand PDB’s trusted and popular suite of organic products.
- 3. A Brief History of ‘their’ Time Crescent Pure Founder: Peter Hooper in 2008 • Saw market opportunity for a healthy, energizing drink. • Crafted an organic, all-natural beverage lightly infused with organic juices, herbal stimulants, and electrolytes. Portland Drake Beverages CEO: Michael Booth Vice President of Marketing: Sarah Ryan Director of Market Research: Matt Levor
- 4. We got a situation!
- 5. • They’ve got an impending launch of Crescent Pure in 3 U.S. markets, California, Oregon, and Washington • Production capacity constraints limit PDB to produce only 12000 cases/month. • A benchmark earning goal of $750000, the budget for advertising during 2014, is expected. • Ryan has only 6 weeks to finalize a product position strategy.
- 7. Product Position Strategy Energy Drink? Sports Drink? Or Organic Beverage?
- 8. Crescent Pure as an Energy Drink Yay! • 34% of the population regularly consume Energy Drinks. • The market size grew by 40% during the periods 2010-12 and is expected to grow by 59% during 2013-18. • Competitors were not being viewed as providing significant benefit to consumers. • Consumers demand for healthier foods and beverage options were on the rise, meaning those having lesser amount caffeine like Crescent could get advantage. • Average price of Energy drinks were $2.99, higher than the $2.75 set by Crescent.
- 9. Crescent Pure as an Energy Drink Meh! • News stories highlighted drinks’ alleged health risks. • Top brands accommodated 85% of market share. • Only 32% of consumers over 18 indicated they drank energy drinks in the last six months. • 11% of consumers had fewer drinks in the last year due to health concerns and safety. • Children were more inclined to drink sports drinks.
- 10. Crescent Pure as a Sports Drink Yay! • Sports drink appealed to younger consumers aged 12-17 and 18-24 who are larger in number. • Diet and low-sugar sports beverages, which did not exist before 2009, had grown by 33% between 2010 and 2012, taking market share from traditional Sports Drinks. • Consumer perceptions of what they could potentially get from a sports drink was higher than that from an energy drink. • Attracted a wider consumer range than Energy Drinks.
- 11. Crescent Pure as a Sports Drink Meh! • Average price of a sports drink was between $1 & $2, whereas that of Crescent was set to be $2.75. • Their demography included lesser market appeal for women for the type of drink. • Concern regarding rising childhood obesity rates resulted in government-mandated guidelines • to remove high-calorie sugary drinks. • Only 6% of market share was available to dominate when taking into account current top brands. • Market increased by only 9% during the period 2007-12 and was expected to increase by only 52% • as opposed to 59% for Energy Drinks.
- 12. But Wait…….!
- 13. Perception of Energy Drink & Sports Drink Perception of Crescent Pure Among Consumers Among chosen online respondents
- 14. Consumers’ Perception of an Energy Drink is a low hydration, high energy mix while that of a Sports Drink is a low energy drink providing hydration benefits.
- 15. Consumers’ Perception of an Energy Drink is a tasty, low nutrient mix while that of a Sports Drink is a tasty as well as a provider of nutritive benefits.
- 16. What about as an Organic Beverage?
- 17. It would suit very well, But Crescent Pure already has a reputation as an energy enhancing drink providing hydrating effect with all-organic ingredients, So They won’t need to establish Brand Position IF………..!
- 18. They choose to be An Energy Drink!
- 19. Being an Energy Drink, Crescent Pure, • Can tap into the market being occupied by Energy Drinks • Can differentiate itself by claiming to be derived from organic roots being all-organic. • Use media influence regarding health to advantage. • Be a cheaper alternative of Energy Drinks.
- 20. Wait a minute! What about the Earning Goal of $750,000?
- 21. How about some, not Geography, Math?
- 22. Break-Even Analysis • PDB’s wholesale price to distributors: $29.76 per case (or $1.24 per can ) • Cans per case: 29.76/1.24 = 24 cans • Variable costs per can: $1.02 • Profits per can: $0.22 • Number of cases planned to be sold in a month: 12,000 (12,000 X 12 in a year) • Number of cans planned to be sold in a year: 12,000 X 12 X 24 = 3,456,000 cans • Profits from sales in a year: 3,456,000 X $0.22 = $760,320 So who was talking about Earning Goals again?
- 23. Earnings in a Year: $760,320 Advertisement Budget: $750,000 Net Profit: $760,320 - $750,000 = $10,320 So, Yes, the firm Breaks Even before a year is completed!
- 24. THANK YOU!
- 25. DISCLAIMER This presentation was created by Sai Srinath Rajendran of TKMCE, during a Marketing Internship under the guidance of Prof. Sameer Mathur of IIM, Lucknow.