Expanding the Snapple Line of “Healthy” Beverages

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I. Executive Summary

In the world of business, it is true, needless to say, that even the largest of the big companies indeed can find areas in which they might improve, for particularly in the constantly changing day and age in which businesses currently find themselves, the need to progress and evolve never ceases. Though humans have always been deeply concerned with the area of their own health, of course simply as a matter of self-preservation if for no other reason, it seems that as time marches on, the interaction of physical well-being with marketing continues to weave a tighter and tighter net of convergence so that the reality is that no company producing merchandise that might impact a person’s health, be that product food, beverage, or medicine, can ignore this zeitgeist of the modern era. In the end, there is no dichotomy between manufacturing a profitable product and a healthy one, for in the age of increased accountability that has in fact been brought upon by the modern invention and subsequent prevalence of the internet, companies will discover that they must combine their prior emphases on price and the enjoyable nature of their products with a new, more health-centric focus. Nowhere is this more true than in the realm of the soft drink industry and manufacturing, for sugary, carbonated beverages have become the veritable bugaboo of this time and place, and so the only way forward, ultimately, in the long run, may be for such companies to diversify away from such beverages and into new ventures such as drinks that concentrate on delivering vitamins and other supplements to consumers. As it so happens, the Dr Pepper/Snapple group is in just such a position, so that though at first glance there may appear to be other, superior companies such as the Coca-Cola Company and PepsiCo, Inc., instead it is the case that the opportunities presented to Dr Pepper/Snapple place it in an ideal situation. Thus, moving forward, Dr Pepper/Snapple will do best to continue growing its Snapple line of products with a particular emphasis placed on those beverages most likely to be perceived as healthful by the average consumer in the target group to which the company aims to sell.

II. Statement of the Problem

To identify the main problem at hand, it can be exceedingly important to tease out the short-term concerns from the long-term concerns, and indeed this is the case for the Dr Pepper/Snapple company. It is clear, looking at recent balance sheets and their accompanying graphs of five-year trends, that the company would have done better to begin investing in longer-term ventures at a sooner date than that at which it did finally end up doing so, which in this case happened to be not until 2011 (Market Watch table 2). Indeed, perhaps the case was that the company felt it was still reeling from the outcomes caused by the extremely unfortunate economic downturn beginning in 2007 and still continuing to this day. This idea is supported by the evidence that shows that the company began to experience losses in 2008, around the time when the financial crisis that had begun the year before was commencing reaching a head (Harrison 228). Nonetheless, this fear of continued failure is no excuse for the subsequent complete failure to invest in new areas of growth for three years thereafter; if anything, it might be proposed that the company would have done better to take advantage of its competitors’ likely equal trepidation by forging ahead and taking a risk that could prove profitable and skyrocket Dr Pepper/Snapple to the forefront of the carbonated beverage industry.

At this point in time, though much has been lost due to the failure of Dr Pepper/Snapple to act quickly in the face of what appeared to be danger or threat but in reality was more in the nature of an opportunity according to the current business analysis model widely known as SWOT, much can still be done to remedy the situation, namely, to continue pushing the Snapple portion of the brand. This will help keep Dr Pepper/Snapple current in the face of a changing market and a constantly shifting economy, for indeed there are also actual threats posed by the dominance of the Coca-Cola Company and PepsiCo, Inc., as well as by any number of the numerous smaller rivals in the industry—by some counts numbering as many as three thousand even as of the year 2008 (Harrison 231). The fact that Dr Pepper/Snapple has already incorporated a whole non-carbonated line of beverages—namely, the Snapple half of the Dr Pepper/Snapple brand—gives the company a leg up in going forward with the tea-type beverages that are becoming so increasingly popular. Indeed, as it is often higher-class consumers who both have more disposable income for such luxuries as flavored beverages and who are more willing to invest a portion of their income in activities and products they perceive as healthy, Dr Pepper/Snapple effectively kills two birds with one stone by moving more firmly into this market. To wit, they gain a more affluent customer base even at the same time as they begin producing more of the kind of products consumers in general are looking to buy in this health-centric time. Thus there is a great opportunity for Dr Pepper/Snapple to capitalize upon an area in which they have long held a strength without the capacity to use it in the more external sense implied by the opportunities quadrant of the SWOT analysis.

III. Causes of the Problem

The causes of the problem are quite multifaceted and stem from a wide variety of variables, for in fact, many of the causes of the problem with which Dr Pepper/Snapple now finds itself facing are products of the financial crisis of the late 2000s, and that historical event itself is still poorly understood, and so in the end, the causes are quite intertwined to the point that it is often impossible to separate one from the other. First of all, however, it is necessary to consider the possibility that for all Dr Pepper/Snapple’s ability to expand above and beyond the capabilities of the two larger companies, the Coca-Cola Company and PepsiCo, Inc., the numerous smaller companies are indeed as well also potential competitors and even rivals of which Dr Pepper/Snapple must be constantly aware. As some put it, “While comparative technological advantage is not likely to challenge the international oligopoly in the short run, new entrants based on technical knowledge could contest specific markets of giant firms” (Rama 123). From this idea we see that Dr Pepper/Snapple’s own area of opportunity can be turned on its head and made into a threat in that other, smaller companies may continue to outpace Dr Pepper/Snapple, too, even as it intends to perform exactly that selfsame coup of innovation and mobility upon its larger competitors. Surely, this is something to be wary of, as it indeed is part of the root cause of the problem to begin with. Were Dr Pepper/Snapple as securely established as the Coca-Cola Company or as PepsiCo, Inc., or conversely if it were still as small, mobile, and agile as some of the lesser companies, the path forward to expansion would be significantly less fraught with peril. However, that is not the actual situation in which Dr Pepper/Snapple finds itself in this day and age.

In addition, most of the causes of the problem are in fact cultural rather than from the external competitors in the industry; the drive toward a more health-conscious lifestyle for consumers in the United States of America, in particular, can be seen as the most external source of motivation of all, for such factors are completely beyond the control of Dr Pepper/Snapple. It turns out to be the case that there is even some push for beverage manufacturers to self-regulate, thus putting the social responsibility on the shoulders of neither the consumer nor the legislator, but rather on the shoulders of the company itself: “The beverage industry’s recent adoption of voluntary guidelines, which call for the curtailment of sugar-sweetened beverage sales in schools, raises the question, Is further policy intervention in this area needed, and if so, what form should it take?” (Mello, Pomeranz, and Moran 595). However, it could be asked whether it is even reasonable for consumers to expect beverage companies to take over a role traditionally provided by the legislature, in its various forms, of regulating the production of products that could, in one sense, even be seen as being potentially toxic. Rather than expend such a great deal of energy on self-regulation, perhaps Dr Pepper/Snapple would do just as well if not better to branch out further into drinks more inherently healthful—at least when it comes to measuring the quantity of sugar present per ounce of beverage.

IV. Decision Criteria and Alternative Solutions

As far as decision criteria are concerned, the fact that the Snapple brand is already well-established does indeed contribute greatly to the degree to which Dr Pepper/Snapple is likely to succeed in putting more effort toward growing that portion of its product lines, particularly as “[B]rand loyalty is the most influential dimension of brand equity” (Atilgan, Aksoy, and Akinci 237). Seeing as brand loyalty can be demonstrated to be prime amongst related factors, Dr Pepper/Snapple’s primary competitors, the Coca-Cola Company and PepsiCo, Inc., will indeed have to struggle to catch up when building a whole new base of customers if they seek to in a sense follow in Dr Pepper/Snapple’s footsteps and explore the option of opening up their focus on carbonated, unhealthy beverages to include more health-oriented products. Of course, it is also of note that just because a product claims to contain, say, essential nutrients, does not mean it is necessarily a healthy option, but then, it is hard in any case to make an argument that a person improves that person’s own health by means of choosing to buy a flavored beverage over simply drinking water. What matters is not how healthy or not the actual beverage is; what matters is consumer perceptions.

One way to alter consumer perceptions, of course, is to change advertising without expending the effort, both in terms of time invested and in terms of monetary resources, of creating whole new product lines. This could be one way in which Dr Pepper/Snapple might proceed without needing to work so solidly upon expanding the “healthier” Snapple line of beverages, though of course as with any advertising technique, the marketing must be carefully constructed so as not to appear too blatant or obvious and thus backfire, turning the customer off of the product instead of onto it by implying that the customer is stupid or gullible enough to simply make decisions based upon an ad without engaging in any critical thought whatsoever. In this particular case, Dr Pepper/Snapple could easily focus on making their already inherently less unhealthy Snapple line appear even healthier to consumers by featuring advertisements showing athletes using the product. Research backs up this approach: “[Food and beverage] companies are in the ‘calories in’ business and focusing on physical activity is increasingly seen as diverting attention from food” (Koplan and Brownell 1487). Indeed, “diverting attention” does seem to be a sound tactic for lulling consumers into a sense of virtuous complacency—e.g., a customer might think that the physical activity done normally as part of a routine “cancels out” the calories consumed in a beverage, particularly if there is also a rationalization available that involves the beverage being inherently perceived as healthful, such as the defense that it contains vital minerals and supplements. Such a route, though, is not the only alternative path available to Dr Pepper/Snapple.

In addition to the advertising angle, Dr Pepper/Snapple might also consider venturing further into developing markets around the world. From some of the data, it is immediately apparent that Dr Pepper/Snapple is woefully underrepresented in parts of the world outside the United States of America (Harrison 232). Such a path would actually be in the opposite direction of the idea of marketing mainly toward more affluent consumers, and yet it seems reasonable to assume that the trend of increasing health-consciousness will spread from more developed areas to lesser developed areas with time. Still, it could be said that where other companies already have a substantial share of the market, as indeed is the case with the Coca-Cola Company and PepsiCo, Inc., it would be best for Snapple to stay away and focus its energies elsewhere (Harrison 233). Indeed, this is exactly the final plan that must be recommended to Dr Pepper/Snapple

V. Recommended Solution, Implementation and Justification

It almost goes without saying that part of what draws consumers to unhealthy carbonated, flavored beverages is indeed the carbonation, and Dr Pepper/Snapple is now ideally poised to take the bold step of bringing the fizzy experience consumers crave together with a “healthier” alternative that is perhaps both lower in calories and also more prominently featured as including vitamin supplements and “healthy” minerals in its labeling and advertising. This combines the best of all worlds explored; Dr Pepper/Snapple can continue to manufacture the kind of product that creates a habit in the customer while still giving the consumer an experience that leaves that person with a sense of virtue for having done something perceived as healthy for the body. In the end, of course, it can be said that one of the first tasks toward which the average person devotes excess income is toward improving health, and so while the more affluent sectors of any given society by definition have at their fingertips more disposable income, the more developing nations and their citizens acquire greater financial means, the more they, too, will begin to demand such products. Marketing toward health is not just a problem and an opportunity for Dr Pepper/Snapple or for the United States of America; truly, it is a new venture for the entire world.

Works Cited

Atilgan, Eda, Aksoy, Safak, and Akinci, Serkan. “Determinants of the brand equity: A verification approach in the beverage industry in Turkey.” Marketing Intelligence & Planning 23.3 (2005): 237-248. Web. 15 Nov. 2013.

David, Fred R. Strategic Management Concepts and Cases: A Competitive Advantage Approach. 14th ed. Florence, SC: Pearson, 2012.

Koplan, Jeffrey P. and Brownell, Kelly D. “Response of the Food and Beverage Industry to the Obesity Threat.” JAMA 304.13 (2010): 1487-1488. Web. 15 Nov. 2013.

Market Watch. “Dr Pepper Snapple Group Inc.” FactSet Fundamentals (2013). Web. 15 Nov. 2013.

Mello, Michelle M., Pomeranz, Jennifer, and Moran, Patricia. “The Interplay of Public Health Law and Industry Self-Regulation: The Case of Sugar-Sweetened Beverage Sales in Schools.” American Journal of Public Health 95.4 (2008): 595-604. Web. 15 Nov. 2013.

Rama, Ruth. “Empirical Study on Sources of Innovation in International Food and Beverage Industry.” Agribusiness 12.2 (1998): 123-134. Web. 15 Nov. 2013.