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Sample Marketing Plan: Chill Beverage Company

Executive Summary

The Chill Beverage Company is preparing to launch a new line of vitamin-enhanced water called NutriWater. Although the bottled water market is maturing, the vitamin-enhanced water category is still growing. NutriWater will be positioned by the slogan “Expect more”—indicating that the brand offers more in the way of desirable product features and benefits at a competitive price. Chill Beverage is taking advantage of its existing experience and brand equity among its loyal current customer base of Millennials who consume its Chill Soda soft drink. NutriWater will target similar Millennials who are maturing and looking for an alternative to soft drinks and high-calorie sugared beverages.

The primary marketing objective is to achieve first-year U.S. sales of $35 million, roughly 2 percent of the enhanced water market. Based on this market share goal, the company expects to sell more than 20 million units the first year and break even in the final period of the year.

Current Marketing Situation

Founded in 2005, the Chill Beverage Company found success primarily by distributing niche and emerging products in the beverage industry. Its Chill Soda soft drink brand hit the market with six unique flavors in glass bottles. A few years later, the Chill Soda brand introduced an energy drink as well as a line of natural juice drinks. The company now markets dozens of Chill Soda flavors, many unique to the brand. Chill Beverage has grown its business every year since it was founded. In the most recent year, it achieved $185 million in revenue and net profits of $14.5 million. As part of its future growth strategy, Chill Beverage is currently preparing to enter a new beverage category with a line of vitamin-enhanced waters.

As a beverage category, bottled water experienced tremendous growth during the 1990s and 2000s. Currently, the average person in the United States consumes more than 31 gallons of bottled water every year, a number that has increased 20-fold in just 30 years. Bottled water consumption is second only to soft drink consumption, ahead of milk, beer, and coffee. Although bottled water growth has tapered off somewhat in recent years, it is still moderately strong at 3 to 4 percent growth annually. Most other beverage categories have experienced declines. In the most recent year, 10.1 billion gallons of bottled water were sold in the United States with a value of approximately $12.3 billion.

Competition is more intense now than ever as demand slows, industry consolidation continues, and new types of bottled water emerge. The U.S. market is dominated by three global corporations. With a portfolio of 12 brands (including Poland Spring, Nestlé Pure Life, and Arrowhead), Nestlé leads the market for “plain” bottled water. However, when all subcategories of bottled water are included (enhanced water, flavored water, and so on), Coca-Cola leads the U.S. market with a 22.9 percent share. Nestlé markets only plain waters but is number two at 21.5 percent of the total bottled water market. PepsiCo is third with 16.2 percent of the market. To demonstrate the strength of the vitamin-enhanced water segment, Coca-Cola’s Vitaminwater is the fourth-largest bottled water brand, behind plain water brands Nestlé Pure Life, Coca-Cola’s Dasani, and Pepsi’s Aquafina.

To break into this market, dominated by huge global corporations and littered with dozens of other small players, Chill Beverage must carefully target specific segments with features and benefits valued by those segments.

Market Description

The bottled water market consists of many different types of water. Varieties of plain water include spring, purified, mineral, and distilled. Although these different types of water are sold as consumer products, they also serve as the core ingredient for other types of bottled waters including enhanced water, flavored water, sparkling water, or any combination of those categories.

Although some consumers may not perceive much of a difference between brands, others are drawn to specific product features and benefits provided by different brands. For example, some consumers may perceive spring water as healthier than other types of water. Some may look for water that is optimized for hydration. Others seek additional nutritional benefits claimed by bottlers that enhance their brands with vitamins, minerals, herbs, and other additives. Still other consumers make selections based on flavor. The industry as a whole has positioned bottled water of all kinds as a low-calorie, healthy alternative to soft drinks, sports drinks, energy drinks, and other types of beverages.

Bottled water brands also distinguish themselves by size and type of container, multipacks, and refrigeration at point-of-sale. Chill Beverage’s market for NutriWater consists of consumers of single-serving-sized bottled beverages who are looking for a healthy yet flavorful alternative. “Healthy” in this context means both low-calorie and enhanced nutritional content. This market includes traditional soft drink consumers who want to improve their health as well as non-soft drink consumers who want an option other than plain bottled water. Specific segments that Chill Beverage will target during the first year include athletes, the health conscious, the socially responsible, and Millennials who favor independent corporations. The Chill Soda brand has established a strong base of loyal customers, primarily among Millennials. This generational segment is becoming a prime target as it matures and seeks alternatives to full-calorie soft drinks. Table A1.1 shows how NutriWater addresses the needs of targeted consumer segments.

Product Review

Chill Beverage’s new line of vitamin-enhanced water—called NutriWater—offers the following features:

· Six new-age flavors: Peach Mango, Berry Pomegranate, Kiwi Dragonfruit, Mandarin Orange, Blueberry Grape, and Key Lime.

· Single-serving size, 20-ounce, PET recyclable bottles.

· Formulated for wellness, replenishment, and optimum energy.

· Full Recommended Daily Allowance (RDA) of essential vitamins and minerals (including electrolytes).

· Higher vitamin concentration—vitamin levels are two to ten times higher than market-leading products, with more vitamins and minerals than any other brand.

· Additional vitamins—vitamins include A, E, and B2, as well as folic acid—none of which are contained in the market-leading products.

· All natural—no artificial flavors, colors, or preservatives.

· Sweetened with pure cane sugar and Stevia, a natural zero-calorie sweetener.

· Twenty-five cents from each purchase will be donated to Vitamin Angels, a nonprofit organization with a mission to prevent vitamin deficiency in at-risk children.

Competitive Review

As sales of bottled waters entered a strong growth phase in the 1990s, the category began to expand. In addition to the various types of plain water, new categories emerged. These included flavored waters—such as Aquafina’s Flavorsplash—as well as enhanced waters. Enhanced waters emerged to bridge the gap between soft drinks and waters, appealing to people who knew they should drink more water and less soft drinks but still wanted flavor. Development of brands for this product variation has occurred primarily in start-up and boutique beverage companies. In the 2000s, major beverage corporations acquired the most successful smaller brands, providing the bigger firms with a solid market position in this category and diversification in bottled waters in general. Currently, enhanced water sales account for approximately 18 percent of the total bottled water market.

Table A1.1 Segment Needs and Corresponding Features/Benefits of NutriWater

Targeted Segment

Customer Need

Corresponding Features/Benefits

Athletes

· Hydration and replenishment of essential minerals

· Energy to maximize performance

· Electrolytes and carbohydrates

· B vitamins, carbohydrates

Health conscious

· Maintain optimum weight

· Optimize nutrition levels

· Avoid harmful chemicals and additives

· Desire to consume a tastier beverage than water

· Half the calories of fully sugared beverages

· Higher levels of vitamins A, B, C, E, Zinc, chromium, and folic acid than other products; vitamins unavailable in other products

· All natural ingredients

· Six new-age flavors

Socially conscious

· Support causes that help solve world’s social problems

· 25 cent donation from each purchase to Vitamin Angels

Millennials

· Aversion to mass-media advertising/technologically savvy

· Counter-culture attitude

· Diet enhancement due to fast-paced lifestyle

· Less-invasive online and social networking promotional tactics

· Small, privately held company

· Full RDA levels of essential vitamins and minerals

The fragmentation of this category, combined with domination by the market leaders, has created a severely competitive environment. Although there is indirect competition posed by all types of bottled waters and even other types of beverages (soft drinks, energy drinks, juices, teas), this competitive analysis focuses on direct competition from enhanced water brands. For the purposes of this analysis, enhanced water is bottled water with additives that are intended to provide health and wellness benefits. The most common additives include vitamins, minerals (including electrolytes), and herbs. Most commonly, enhanced waters are sweetened, flavored, and colored. This definition distinguishes enhanced water from sports drinks that have the primary purpose of maximizing hydration by replenishing electrolytes.

Enhanced water brands are typically sweetened with a combination of some kind of sugar and a zero-calorie sweetener, resulting in about half the sugar content, carbohydrates, and calories of regular soft drinks and other sweetened beverages. The types of sweeteners used create a point of differentiation. Many brands, including the market leaders, sell both regular and zero-calorie varieties.

Pricing for this product is consistent across brands and varies by type of retail outlet, with convenience stores typically charging more than grocery stores. The price for a 20-ounce bottle ranges from $1.00 to $1.89, with some niche brands costing slightly more. Key competitors to Chill Beverage’s NutriWater line include the following:

· Vitaminwater. Created in 2000 as a new product for Energy Brands’ Glacéau, which was also the developer of Smartwater (distilled water with electrolytes). Coca-Cola purchased Energy Brands for $4.1 billion in 2007. Vitaminwater is sold in regular and zero-calorie versions. With 15 bottled varieties as well as availability in fountain form and drops, Vitaminwater offers more options than any brand on the market. Whereas Vitaminwater varieties are distinguished by flavor, they are named according to functional such as Stur-D (healthy bones), Defense (strengthens immune system), Focus (mental clarity), and Restore (post workout recovery). The brand’s current slogan is “Hydration for every occasion—morning, noon, and night.” Vitaminwater is vapor distilled, de-ionized, and/or filtered and is sweetened with crystalline fructose (corn syrup) and erythritol all-natural sweetener. Together with Smartwater, Vitaminwater exceeds $1.1 billion in annual sales and commands 61 percent of the enhanced waters market.

· SoBe Lifewater. PepsiCo bought SoBe in 2000. SoBe introduced Lifewater in 2008 with a hit Super Bowl ad as an answer to Coca-Cola’s Vitaminwater. The Lifewater line includes 15 regular and zero-calorie varieties. Each bottle of Lifewater is designated by flavor and one of six different functional categories: Electrolytes, Lean Machine, B-Energy, C-Boost, Antioxidants, and Pure. Each variety is infused with a formulation of vitamins, minerals, and herbs designed to provide the claimed benefit. The most recent line—Pure—contains only water, a hint of flavor, and electrolytes. Sweetened with a combination of sugar and erythritol, Lifewater makes the claim to be “all natural.” It contains no artificial flavors or colors. However, some analysts debate the “natural” designation for erythritol. Lifewater is sold in 20-ounce PET bottles and multipacks as well as 1-liter PET bottles. With more than $200 million in annual revenues, Lifewater is the number two enhanced water brand.

· Propel Zero. Gatorade created Propel in 2000, just one year prior to PepsiCo’s purchase of this leading sports drink marketer. Originally marketed and labeled as “fitness water,” it is now available only as Propel Zero. Although the fitness water designation has been dropped, Propel Zero still leans toward that positioning with the label stating “REPLENISH + ENERGIZE + PROTECT.” Propel Zero comes in seven flavors, each containing the same blend of B vitamins, vitamin C, vitamin E, antioxidants, and electrolytes. It is sweetened with sucralose. Propel Zero is available in a wider variety of sizes, with 16.9-, 20-, and 24-ounce PET bottles and multipacks. Propel Zero is also marketed in powder form and as a liquid enhancer to be added to bottled water. With $181 million in revenues, Propel Zero is the number three enhanced water brand with a 10 percent share of the enhanced waters market.

· RESCUE Water. The Arizona Beverage Company is best known as the number one producer of ready-to-drink bottled teas. However, it also bottles a variety of other beverages including smoothies, sports drinks, energy drinks, and juice blends. Its newest brand is RESCUE Water, introduced to the U.S. market in 2010. It sets itself apart from other enhanced waters with green tea extract added to a blend of vitamins and minerals. This provides a significant point of differentiation for those desiring green tea, but rules the brand out for the majority of customers who do not want it. It comes in five flavors, each with its own functional benefit. RESCUE Water touts other points of distinction as well, including branded Twinlab vitamins, all-natural ingredients, and a high-tech plastic bottle that resembles glass and maximizes freshness. Its Blueberry Coconut Hydrate variety contains real coconut water, an emerging alternative beverage category. Although RESCUE Water sales and market share figures are not yet known because of the product’s newness, the Arizona Beverage Company is a multibillion dollar corporation with a long history of successful new product introductions.

· Niche brands. The market for enhanced waters includes at least four companies that market their wares on a small scale through independent retailers: Assure, Ex Aqua Vitamins, Ayala Herbal Water, and Skinny Water. Some brands feature exotic additives and/or artistic glass bottles.

Despite the strong competition, NutriWater believes it can create a relevant brand image and gain recognition among the targeted segments. The brand offers strong points of differentiation with higher and unique vitamin content, all-natural ingredients, and support for a relevant social cause. With other strategic assets, Chill Beverage is confident that it can establish a competitive advantage that will allow NutriWater to grow in the market. Table A1.2 shows a sample of competing products.

Channels and Logistics Review

The purchase of Vitaminwater by Coca-Cola left a huge hole in the independent distributor system. NutriWater will be distributed through an independent distributor to a network of retailers in the United States. This strategy will avoid some of the head-on competition for shelf space with the Coca-Cola and PepsiCo brands and will also directly target likely NutriWater customers. As with the rollout of the core Chill Soda brand, this strategy will focus on placing coolers in retail locations that will exclusively hold NutriWater. These retailers include:

Table A1.2 Sample of Competitive Products

Competitor

Brand

Features

Coca-Cola

Vitaminwater

Regular and zero-calorie versions; 15 varieties; each flavor provides a different function based on blend of vitamins and minerals; vapor distilled, de-ionized, and/or filtered; sweetened with crystalline fructose and erythritol; 20-ounce single-serve or multi-pack, fountain, and drops.

PepsiCo

SoBe Lifewater

Regular and zero-calorie versions; 15 varieties; six different functional categories; vitamins, minerals, and herbs; Pure—mildly flavored, unsweetened water; sweetened with sugar and erythritol; “all natural”; 20-ounce single-serve and multi-packs as well as 1-liter bottles.

PepsiCo

Propel Zero

Zero-calorie only; seven flavors; fitness positioning based on “REPLENISH + ENERGIZE + PROTECT”; B vitamins, vitamin C, vitamin E, antioxidants, and electrolytes; sweetened with sucralose; 16.9-ounce, 20-ounce, and 24-ounce PET bottles and multipacks; powdered packets; liquid enhancer.

Arizona Beverage

RESCUE Water

Full calorie only; five flavors, each with its own blend of vitamins and minerals; green tea extract (caffeine included); only brand with coconut water; Twinlab branded vitamins; high-tech plastic bottle.

· Grocery chains. Regional grocery chains such as HyVee in the Midwest, Wegman’s in the East, and WinCo in the West.

· Health and natural food stores. Chains such as Whole Foods, as well as local health food co-ops.

· Fitness centers. National fitness center chains such as 24 Hour Fitness, Gold’s Gym, and other regional chains.

As the brand gains acceptance, channels will expand into larger grocery chains, convenience stores, and unique locations relevant to the target customer segment.

Strengths, Weaknesses, Opportunities, and Threat Analysis

NutriWater has several powerful strengths on which to build, but its major weakness is lack of brand awareness and image. Major opportunities include a growing market and consumer trends targeted by NutriWater’s product traits. Threats include barriers to entry posed by limited retail space, as well as image issues for the bottled water industry. Table A1.3 summarizes NutriWater’s main strengths, weaknesses, opportunities, and threats.

Strengths Comment by Angela Hausman: I find students pay too much attention to the SWOT analysis and use it as a substitute for an environmental scan. I encourage you to either eliminate the SWOT in favor or a richer environmental scan or only use the table format of the SWOT. This plan uses a SWOT analysis incorrectly, although you can get some ideas of items that should have been a part of the environmental scan.

NutriWater can rely on the following important strengths:

1. Superior quality. NutriWater boasts the highest levels of added vitamins of any enhanced water, including full RDA levels of many vitamins. It is all natural with no artificial flavors, colors, or preservatives. It is sweetened with both pure cane sugar and the natural zero-calorie sweetener, Stevia.

2. Expertise in alternative beverage marketing. The Chill Soda brand went from nothing to a successful and rapidly growing soft drink brand with fiercely loyal customers in a matter of only one decade. This success was achieved by starting small and focusing on gaps in the marketplace.

3. Social responsibility. Every customer will have the added benefit of helping malnourished children throughout the world. Although the price of NutriWater is in line with other competitors, low promotional costs allow for the substantial charitable donation of 25 cents per bottle while maintaining profitability.

Table A1.3 NutriWater’s Strengths, Weaknesses, Opportunities, and Threats

Strengths

Weaknesses

· Superior quality

· Expertise in alternative beverage marketing

· Social responsibility

· Antiestablishment image

· Lack of brand awareness

· Limited budget

Opportunities

Threats

· Growing market

· Gap in the distribution network

· Health trends

· Antiestablishment image

· Limited shelf space

· Image of enhanced waters

· Environmental issues

4. Antiestablishment image. The big brands have decent products and strong distribution relationships. But they also carry the image of the large, corporate establishments. Chill Beverage has achieved success with an underdog image while remaining privately held. Vitaminwater and SoBe were built on this same image, but both are now owned by major multinational corporations.

Weaknesses

1. Lack of brand awareness. As an entirely new brand, NutriWater will enter the market with limited or no brand awareness. The affiliation with Chill Soda will be kept at a minimum in order to prevent associations between NutriWater and soft drinks. This issue will be addressed through promotion and distribution strategies.

2. Limited budget. As a smaller company, Chill Beverage has much smaller funds available for promotional and research activities.

Opportunities

1. Growing market. Although growth in the overall market for bottled water has slowed to some extent, its current rate of growth in the 3 percent range is relatively strong among beverage categories. Of the top six beverage categories, soft drinks, beer, milk, and fruit drinks experienced declines. The growth for coffee was less than 1 percent. More important than the growth of bottled waters in general, the enhanced water category is experiencing growth in the high single and low double digits.

2. Gap in the distribution network. The market leaders distribute directly to retailers. This gives them an advantage in large national chains. However, no major enhanced water brands are currently being sold through independent distributors.

3. Health trends. Weight and nutrition continue to be issues for consumers in the United States. The country has the highest obesity rate for developed countries at 34 percent, with well over 60 percent of the population officially “overweight.” Those numbers continue to rise. Additionally, Americans get 21 percent of their daily calories from beverages, a number that has tripled in the last three decades. Consumers still desire flavored beverages but look for lower calorie alternatives.

4. Antiestablishment image. Millennials (born between 1977 and 2000) maintain a higher aversion to mass marketing messages and global corporations than do Gen Xers and Baby Boomers.

Threats

1. Limited shelf space. Whereas competition is generally a threat for any type of product, competition in retail beverages is particularly high because of limited retail space. Carrying a new beverage product requires retailers to reduce shelf or cooler space already occupied by other brands.

2. Image of enhanced waters. The image of enhanced waters is currently in question as Coca-Cola recently fought a class-action lawsuit accusing it of violating FDA regulations by promoting the health benefits of Vitaminwater. The lawsuit exposed the number one bottled water brand as basically sugar water with minimal nutritional value.

3. Environmental issues. Environmental groups continue to educate the public on the environmental costs of bottled water, including landfill waste, carbon emissions from production and transportation, and harmful effects of chemicals in plastics.

Objectives and Issues Comment by Angela Hausman: Add SMART goals, which is important in the grading rubric.

Chill Beverage has set aggressive but achievable objectives for NutriWater for the first and second years of market entry.

First-Year Objectives

During the initial year on the market, Chill Beverage aims for NutriWater to achieve a 2 percent share of the enhanced water market, or approximately $35 million in sales, with break-even achieved in the final period of the year. With an average retail price of $1.69, that equates with a sales goal of 20,710,059 bottles.

Second-Year Objectives

During the second year, Chill Beverage will unveil additional NutriWater flavors, including zero-calorie varieties. The second-year objective is to double sales from the first year, to $70 million.

Issues

In launching this new brand, the main issue is the ability to establish brand awareness and a meaningful brand image based on positioning that is relevant to target customer segments. Chill Beverage will invest in nontraditional means of promotion to accomplish these goals and to spark word-of-mouth. Establishing distributor and retailer relationships will also be critical in order to make the product available and provide point-of-purchase communications. Brand awareness and knowledge will be measured in order to adjust marketing efforts as necessary.

Marketing Strategy

NutriWater’s marketing strategy will involve developing a “more for the same” positioning based on extra benefits for the price. The brand will also establish channel differentiation, as it will be available in locations where major competing brands are not. The primary target segment is Millennials. This segment is comprised of tweens (ages 10 to 12), teens (13 to 18), and young adults (19 to 33). NutriWater will focus specifically on the young adult market. Subsets of this generational segment include athletes, the health conscious, and the socially responsible.

Positioning

NutriWater will be positioned on an “Expect more” value proposition. This will allow for differentiating the brand based on product features (expect more vitamin content and all natural ingredients), desirable benefits (expect greater nutritional benefits), and values (do more for a social cause). Marketing will focus on conveying that NutriWater is more than just a beverage: It gives customers much more for their money in a variety of ways.

Product Strategy

NutriWater will be sold with all the features described in the Product Review section. As awareness takes hold and retail availability increases, more varieties will be made available. A zero-calorie version will be added to the product line, providing a solid fit with the health benefits sought by consumers. Chill Beverage’s considerable experience in brand-building will be applied as an integral part of the product strategy for NutriWater. All aspects of the marketing mix will be consistent with the brand.

Pricing

There is little price variation in the enhanced waters category, particularly among leading brands. For this reason, NutriWater will follow a competition-based pricing strategy. Given that NutriWater claims superior quality, it must be careful not to position itself as a lower-cost alternative. Manufacturers do not quote list prices on this type of beverage, and prices vary considerably based on type of retail outlet and whether or not the product is refrigerated. Regular prices for single 20-ounce bottles of competing products are as low as $1.00 in discount-retailer stores and as high as $1.89 in convenience stores. Because NutriWater will not be targeting discount retailers and convenience stores initially, this will allow Chill Beverage to set prices at the average to higher end of the range for similar products in the same outlets. For grocery chains, this should be approximately $1.49 per bottle, with that price rising to $1.89 at health food stores and fitness centers, where prices tend to be higher.

Distribution Strategy

Based on the information in the Channels and Logistics Review, NutriWater will employ a selective distribution strategy with well-known regional grocers, health and natural food stores, and fitness centers. This distribution strategy will be executed through a network of independent beverage distributors, as there are no other major brands of enhanced water following this strategy. Chill Beverage gained success for its core Chill Soda soft drink line using this method. It also placed coolers with the brand logo in truly unique venues such as skate, surf, and snowboarding shops; tattoo and piercing parlors; fashion stores; and music stores—places that would expose the brand to target customers. Then, the soft drink brand expanded by getting contracts with retailers such as Panera, Barnes & Noble, Target, and Starbucks. This same approach will be taken with NutriWater by starting small, then expanding into larger chains. NutriWater will not target all the same stores used originally by Chill Soda, as many of those outlets were unique to the positioning and target customer for the Chill Soda soft drink brand.

Marketing Communication Strategy

As with the core Chill Soda brand, the marketing communication strategy for NutriWater will not follow a strategy based on traditional mass-communication advertising. Initially, there will be no broadcast or print advertising. Promotional resources for NutriWater will focus on three areas:

· Online and mobile marketing. The typical target customer for NutriWater spends more time online than with traditional media channels. A core component for this strategy will be building Web and mobile brand sites and driving traffic to those sites by creating a presence on social networks, including Facebook, Google+, and Twitter. The NutriWater brand will also incorporate location-based services by Foursquare and Facebook to help drive traffic to retail locations. A mobile phone ad campaign will provide additional support to the online efforts.

· Trade promotions. Like the core Chill Soda brand, NutriWater’s success will rely on relationships with retailers to create product availability. Primary incentives to retailers will include point-of-purchase displays, branded coolers, and volume incentives and contests. This push marketing strategy will combine with the other pull strategies.

· Event marketing. NutriWater will deploy teams in brand-labeled RVs to distribute product samples at events such as skiing and snowboarding competitions, golf tournaments, and concerts.

Marketing Research

To remain consistent with the online promotional approach, as well as using research methods that will effectively reach target customers, Chill Beverage will monitor online discussions via services such as Radian6. In this manner, the company will gauge customer perceptions of the brand, the products, and general satisfaction. For future development of the product and new distribution outlets, crowdsourcing methods will be utilized.