Crescent Pure case study
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PDB acquired Crescent Pure, an organic juice drink company, and wanted to position its brand to expand into the functional beverage market. Crescent Pure was currently seen as an energy drink by consumers due to its 80mg of caffeine. PDB analyzed positioning it as an energy drink, sports drink, or organic drink. Positioning as an organic energy drink was chosen to appeal to perceptions of it being healthy while capitalizing on the booming energy drink market. This positioning aimed to make inroads into the organic drink market through brand extension. However, break even analysis showed Crescent Pure would barely break even with its $750,000 advertising budget.
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Crescent Pure case study
- 1. Harvard business school case analysis – crescent pure
- 2. Crescent pure Peter Hooper founded Crescent Pure in 2008 All natural organic juice infused with herbal stimulants, delivered 80mg caffeine Sugar quotient was 70% lesser than sports and energy drinks on average Sold 1,000 cases per month. 8-ounce can retailed for $3.75 apiece Sold out before inventory was replenished, sold out even when retailers hiked prices by 25% High demand among men as well as women
- 3. Portland drake beverages(pdb) Manufacturer of organic juices and sparkling water Revenues hit $120.5 million in 2012 Part of the $131 billion beverage industry Wanted to expand into the functional beverage (sports and energy) sector through acquisition Acquired Crescent in July 2013 CEO of PDB, Michael Booth entrusted Sarah Ryan, VP of Marketing with the brand positioning of Crescent.
- 4. Production capacity constraints restricted them to a soft launch in 3 states in January 2014 Major beverage companies to launch organic energy drinks in 2nd half of 2015 PDB wanted to enter that market early Advertising budget - $750,000 Product positioning to be defined by 1st, October 2014. Important factors
- 5. Market positioning options Energy Drink Sports Drink Organic Drink
- 6. Energy drink market Pros Projected market -$8.5 billion, growing at 40%, to reach $13.5 billion by 2018 Avg price for 8 ounce can - $2.99 Enthusiastic consumers – Men of 18-24 years old Sales of energy drinks with lower levels of caffeine and purer ingredients rising due to demand for healthier drinks Cons Negative marketing – health risks Top 4 brands occupied 85% market share. Only 32% of consumers had an energy drink in past 6 months 11% of them decreased consumption due to health risks
- 7. Sports drink market Pros Market revenue -$7.5 billion Expected to grow to $9.58 billion in 2017 Attracted a wider consumer base than energy drinks Consumers – 62% aged b/w 18-24, 77% aged b/w 12-17 Increasing demand for diet and low sugar sports drinks. Market grew by 33% in 2yrs Market size for diet sports drinks expected to increase from $1.4 to $2.97 billion in 2017 Cons Negative marketing – Childhood obesity. Top 2 brands occupied 94% market share. Slowing market – increased only by 9% between 2007 and 2012 Avg $1 to $2 for 12 & 14 ounce containers respectively Only 27% of consumers are females
- 8. Perceptual map of sports and energy drinks w.r.t. hydration vs energy
- 9. Perceptual map of sports and energy drinks w.r.t. nutrition vs taste
- 10. organic drink market Pros Growing market for products with natural and organic ingredients Target a wider consumer base Command a premium pricing (25% more than conventional beverages) Focus is one quality ingredients. Hence target consumers who are willing to pay more for quality Cons Sole focus on health and quality - lose out on other important customer segments Appeal to wide range of customers not feasible on $750,000 budget More distributors and retailers to be evaluated – time won’t permit
- 11. SWOT Analysis
- 13. STRATEGIES • Usethird-partycelebrity endorsersforpositioningand appealingtothe younger generation • Engagemillennial through communityoutreachand universitycollaboration • Combine effortswith favorableglobal brandsto raiseawareness • Increaseexposureand establishaffiliationwith internationalsportingbrand throughsponsorship • Receive extensiveand favorablepresscoveragevia traditionalandsocial media • Numberof sales -before vs. After • Media coverage, placements and feedback -before vs. After • Communityoutreach: sports club, etc. -before vs. after • Awareness of CrescentPure as a brand and as a company • Changeof attitudes towards sports drinks • Customer satisfaction towards Crescent Purevia onlinesurveys and Facebook polls • Target audiencedistribution • Social media followers endorsers -before vs. after EVALUATION • Partnership with Michelle Obama’s ‘Let’s Move!’ initiative • Sponsorship of 2016Olympics in Brazil • Nationwide university initiative, distribution of Crescent Pure • Lululemon partnership targeting nicheyoga community:sponsorship byCrescent Pure, education on healthy diet and exercise, etc • Trial testing of products • Launchof additional flavors FUTURE CONSIDERATIONS
- 14. Demographics of Crescent online consumers Age ranges 18–24 44% 25–34 36% 35–44 15% 45–54 3% 55+ 2% Male 59% Female 41% College degree - 62% Household income (median) ~ $42,500 Percentage of respondents who described Crescent Descriptor Refreshing 35% Healthy 22% Affordable 29% Functional 47% Too sweet 9% Suitable for teens 8% Fun 19% Natural 38% Hydrating 29% Crescent – customer perception
- 15. Feedback on crescent Retailer Feedback Their inventory of Crescent depleted quickly Popular among customers aged 18 to 30 Higher percentage of women purchasers than anticipated Stocks got depleted even when prices where hike by 25% Customer Feedback Taste appeals to most consumers Only 25% remained concerned about lower amount of caffeine Perceived well as a healthy alternative to energy drinks Good taste, healthy ingredients and slight pick-me-up : consumer thumbs up.
- 17. Reasons for such positioning Consumers viewed “Energy” as Crescent’s most descriptive character Positioning Crescent as and energy drink would reinforce existing perceptions from Oregon Contains healthy ingredients, low sugar, yet packs a punch – 80mg caffeine Energy drinks contained artificial sweeteners and excessive levels of stimulants Crescent, as an organic energy drink can be a healthier alternative to these energy drinks
- 18. Advantages of such positioning Avg pricing of energy drinks are $2.99 per 8 ounce can. Crescent, at $2.75 is a cheaper and lucrative option Energy drink market is booming, growing at 40% and customers are already looking for healthier alternatives Interest in Crescent’s natural ingredients reflected focus on health and wellbeing, thus transcended age groups and demographic profile. Can make inroads into the organic drink market by brand extension
- 19. Cost Area Amount Wholesale price / can $1.24 Cost price / can $1.02 Profit / can $0.22 Number of cans / case 24 Profit / case $5.28 Production of number of cases / month 12,000 Profit / month $63,360 Profit / year $760,320 Advertising costs $750,000 Net Profit $10,320 BREAK EVEN? BREAK EVEN ANALYSIS
- 20. RECAP • Important factors • Market Positioning Options • Pros & Cons of Energy drinks/Sports drinks/Organic Drink positioning • Perceptual Maps • SWOT Analysis • Strategies, Evaluations and Future Considerations • Customer perception & Feedback • Reasons and Advantages of such positioning
- 21. Disclaimer Created by Vaidehi Mahajan, Indian Institute of Technology, Bombay during a marketing internship under Prof. Sameer Mathur, IIM – Lucknow.