SuperSoda is a top-three beverage producer in the United States and has approached McKinsey for help in designing a product-launch strategy. As an integrated beverage company, SuperSoda leads its own brand design, marketing, and sales efforts. In addition, the company owns the entire beverage supply chain, including production of concentrates, bottling and packaging, and distribution to retail outlets. SuperSoda has a considerable number of brands across carbonated and non-carbonated drinks, five large bottling plants throughout the country, and distribution agreements with most major retailers. SuperSoda is evaluating the launch of a new product, a flavored sports drink called Electro-Light. Sports drinks are usually designed to replenish both energy (sugars) and electrolytes (salts) in the body. However, Electro-Light has been formulated to focus more on the replenishment of electrolytes, and has reduced sugar content compared to most other sports drinks. The company expects this new beverage to capitalize on the recent trend away from sugar-rich products. SuperSoda's vice president of marketing has asked McKinsey to help analyze the major factors surrounding the launch of Electro-Light and its own internal capabilities to support the effort.
1. Which factors should SuperSoda consider and act on before launching Electro-Light into the US beverage market? OR What key factors should SuperSoda consider in deciding whether or not to launch Electro-Light?
2. After reviewing the key factors SuperSoda should consider in deciding whether to launch Electro-Light, your team wants to understand the beverage market and consumer preferences to gauge potential success of Electro-Light.
Based on the target price and up-front fixed costs, what share of the electrolyte drink market would Electro-Light need to capture in order to break even? Here is some additional information for you to consider as you form your response:
- Electro-Light would launch in a 16-ounce presentation (one-eighth of a gallon) with a price of $2.00 to retailers.
- In order to launch Electro-Light, SuperSoda would need to incur $40 million as total fixed costs, including marketing expenses as well as increased costs across the production and distribution network.
- The vice president of operations estimates that each bottle would cost $1.90 to produce and deliver in the newly established process.
3. SuperSoda executives believe that the company's position as a top three beverage company gives them strategic strengths toward achieving the desired market share. However, they ask the team to outline what would be needed to achieve the target of 12.5% share of the electrolyte-drinks market. What would SuperSoda need to do to gain the required market share for Electro-Light following its launch?