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A MARKETING PLAN PRESENTED TO THE VIRGIN GROUP

Bob Deck Angelike Gaunt Tracy Walker May 5, 2005

A Marketing Plan
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Section 1 Situation Analysis

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Market Analysis A. Industry Value and Volume Although they are a relatively small player in a large market, energy drinks are gaining ground against other non-alcoholic beverages. Energy drink sales in the United States currently account for less than 2 percent of the larger carbonated soft drink market, which is valued at $60 billion dollars (Roberts, 2004). Energy drink sales in the United States reached nearly $1 billion in 2003 (Coke Accelerates, 2004; Day, 2005) and account for approximately 20 percent of global energy drink sales, which currently exceed $5 billion (2004 State of the Industry). Energy drinks are often included within the functional drink category, which in 2004 was valued at $20.6 billion globally (2004 State of the Industry). According to Catherine Penn of Beverage Industry Magazine, Energy drinks represent the most aggressive new product development segment in the beverage industry (January, 2005). Indeed, the relatively new market segment appears to have potential: 2004 energy drink revenues were up 54.29 percent from 2003 (2004 State of the Industry). Unit sales increased 31 percent from 2003 (2004 State of the Industry). Top-selling Red Bulls sales increased approximately 60 percent from 2002 to 2003 (Hoovers, 2005). The number-two selling Rockstar Energy, boasted an increase of approximately 125 percent in sales from 2003 (2004 State of the Industry).

Because energy drinks are relatively new in the market, a clearly-defined classification has not yet been formed. Generally, energy drinks contain caffeine, sweeteners, various herbs (such as ginseng and kava), and nutrients (Kelly, 2004). The combined ingredients claim to increase physical, sexual or mental energy (Brandt, 2001). Red Bull in particular claims that it improves endurance, alertness, concentration and reaction speed (Todd, 2003). Although there are a variety of energy drinks available most will follow the trends noted below: The target market is generally males between the ages of 18 and 25 years old (Roberts, 2004). Drink containers revolve around imagery and size. For example, Red Bull is packaged in a slim, 8.3 ounce silver can which most competitors have copied (Todd, 2003).
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Energy drinks are marketed toward consumers through a variety of alternative mediums: o Sports - Red Bull is a sponsor in numerous extreme-sport events from skateboarding to surfing (Todd, 2003). o Video games Bawls Guarana sponsors gaming tournaments (Helm, 2005). o Music Rapper Nelly has his own signature energy drink called Pimp Juice (Helm, 2005). o Drugs There is a brand of energy drink called Bong Water (Helm, 2005).

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B. Revenue and Profit Patterns According to Sherri Day, in an article published in the business section of the New York Times, energy drinks are now the fastest-growing segment of the beverage industry, replacing bottled water (Day, 2004). The growth of the segment is indicated in the table below, which was created using data provided by Mintel (as cited by Roberts, 2004). As indicated in the table, U.S. energy drink sales have increased from $157.6 million in 1998 to $890.5 million in 2003, an increase of $732.9 million in only five years.
U.S. Energy Drink Sales 1998-2003 (in millions)
$890.50 $731.90

$545.49

$306.20 $157.60 $204.90

1998

1999

2000

2001

2002

2003

Since Red Bull was introduced in 1997, it has remained the leader in the energy drink market. The company controls more than 50 percent of the U.S. energy drink market and claims to hold 70 to 90 percent of the global market share (Day, 2004). Due to a shift towards a more health-conscious consumer base, sales of sugary, carbonated beverages have declined, while sales in categories such as energy drinks, sports drinks, and bottled water have increased (Coke Accelerates, 2004; Penn, 2005). In fact, of seven categories that experienced double-digit growth between July 2003 and July 2004, five claimed health or weight loss benefits (OLeary, 2005). The chart below shows sales for the top performers in each segment according to Beverage Industry information. As indicated below, sales of energy drinks are quickly outpacing those of other beverage segments including sports drinks which are often grouped with energy drinks in the functional drinks category.

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2003-2004 Sales Trends for Top Performers in Each Segment


55.10%

Increase

12.10% -0.50% Energy Drinks Sports Drinks Bottled Juices 5.34%

11.51% -2.27% Bottled Water Soft Drinks

Canned / Bottled Teas Segment

Source: Information Resources, Inc. Total food, drug and mass merchandise excluding (WalMart) for the 52 weeks ending June 13, 2004 as cited by 2004 State of the Industry.

In addition to increased sales, energy drink manufactures are also enjoying much higher profit margins than their soft drink competitors. Individual energy drinks are sold for around US $1.99 each at grocery stores (Sanger, 2005). According to John D. Sicher, editor and publisher of Beverage Digest, In convenience stores, a case of Red Bull sells for about six time the amount of a case of Coke or Pepsi (Day, 2004). In addition, bars and nightclubs may charge as much as $7 to $8 for an eight-ounce can of Red Bull (Day, 2004). According to Tom Fox, a partner with CM Profit Group (a category management consulting firm), energy drink users tend to be younger and may have more disposable income to spend on superfluous purchases (Mastroberte, 2005). While still increasing, the sales growth of energy drinks appear to be slowing as indicated in the table below, which is based on data provided by Mintel. Energy Drink Sales Projections
Year 2005 2006 2007 2008 Sales (current prices) Millions % Change $1,523.2 27.3% $1,833.4 20.4% $2,270.6 23.8% $2,764.3 21.7% Sales (2003 prices) Millions % Change $1,455.2 24.4% $1,711.9 17.6% $2,072.3 21.1% $2,465.9 19.0%

Source: Mintel, based on IRI Infoscan Reviews Information as cited by Roberts, 2004.

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C. Current and Future Products To understand the current state of the energy drink category, it may be helpful to note the evolution of energy drinks within the non-alcoholic drink category. The energy drink segment evolved from soft drinks, which were created during the mid-1880s. During its early years, soft drinks were only sold in stores with fountain service; however, the introduction of large-scale bottling machinery in 1895 dramatically increased the production and distribution of soft drinks (Bottled and Canned, 2004). During the twentieth century, soft drink sales rose along with the disposable incomes of industrialized nations (Soft Drinks, 2004). During the 1980s, consumers were demanding low-calorie alternatives, and began consuming more bottled water. This prompted the development of reduced-calorie sodas such as Diet Coke and Diet Pepsi. New Age drinks such as ready-to-drink teas, fruit juices, and flavored waters gained popularity in the early 1990s (Bottled and Canned, 2004). Sales of soft drinks reached a peak in 1998. Global sales declined from 4.3 percent in 1998 to 1.4 percent in 1999 (Soft Drinks, 2004). Health-conscious consumers began demanding alternatives to soft drinks in the early 2000s, and energy drinks, fortified fruit juices, bottled water, sports drinks, and iced teas gained market share (Soft Drinks, 2004). Currently, large, multinational corporations dominate production for most nonalcoholic beverage categories; however, the energy drinks market is led by smaller companies (Soft Drinks, 2004). The market leader, Austrias Red Bull, controls 60-70 percent of global energy drink sales and sells more than 1 billion cans a year and sells in 70 countries worldwide (Soft Drinks, 2004; Todd, 2003). Inspired by the success of this market leader, more than 1,000 smaller players have entered the market, according to BevNet (as cited by Helm, 2005). However, larger corporations are now rushing to gain market share in the energy drink industry: Hansen Beverage, once a producer only of juice, now produces a full line of energy drinks: o Energade a sports/energy drink o Rumba a 100 percent fruit juice drink spiked with caffeine and energy enhancers o E20 - an energy water (E20) o Monster - a traditional energy drink (Gondo, 2005). In an effort to become profitable in the energy drink market, Coca-Cola introduced its Full Throttle energy drink in January 2004. The lightly7

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carbonated, citrus-flavored drink with extracts of ginseng and guarana, caffeine and B-vitamins is available in 16-ounce cans at a cost of approximately $2 (Coke Accelerates, 2004). Pepsi Co. has begun targeting male consumers ages 30 to 45 and females between 18 and 45 years of age with its Sugar-Free SoBe Adrenaline energy drink (Kirsche, 2004). Anheuser-Busch recently introduced a beer and energy drink combination, Be (pronounced B to the E), that is targeted toward men and women ages 21 to 27 mix alcohol with liquid stimulants such as energy drinks. Anheuser-Busch also introduced 180 in January 2001. According to the companys Web site, the name 180 communicates the turnaround or energetic lift people look for in an energy drink (http://www.anheuserbusch.com).

While smaller companies currently control the energy drink market, many predict future growth will be by large corporations (Helm, 2005). According to John Craven, editor-in-chief of BevNet.com, due to a lack of distribution channels, many of the smaller energy drink producers will not be able to compete on a larger scale. According to Craven, in order to compete nationwide and distribute in all 50 states, a company would need between 250 and 300 distributors (Helm, 2005). In addition, while the energy drink category is now growing quickly, many experts believe it will remain a niche market and account for only a small percentage of beverage industry sales (Lewandowski, 2002, Roberts, 2004). The future of the category may be influenced by concerns on potential health consequences associated with energy drinks. In 2004, the World Health Organization issued a warning about herbal medicines and alternative ingredients such as those found in energy drinks (OFlaherty, 2004). Research done at the Medical College in Georgia, indicated that the amount of caffeine found in energy drinks may increase blood pressure enough to cause hypertension in teens that were predisposed to the condition (Kelly, 2004). In a study conducted at Johns Hopkins University, it was found that energy drinks could become addictive due the excess amount of caffeine they contain (Kelly, 2004). In Norway, energy drinks have been classified as a medicine; therefore, sales of energy drinks have been banned in retail outlets (Roberts, 2004).
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Energy drinks have been blamed for three deaths in Sweden (Roberts, 2004).

Another concern for the energy drink segment is that too many competitors are now entering the market. According to Burt Helm, author of Energy Drinks Build Their Buzz, more than 1,000 new energy drinks have entered the market since Red Bull was first introduced in 1987 (Helm, 2005). However, this concern is disputed by David Rohdy, vice president of Red Bull America; he claims, We welcome new entrants. Competition is good, and it only serves to validate that the energy drink category is legitimate (Todd, 2003.

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D. Marketing Trends Target Market The target market for energy drinks has generally been men between the ages of 18 and 25 (Day, 2004). Initially, energy drinks were marketed to 20-somethings in bars and nightclubs (Karp, 2004) and toward a young, suburban, extremeskateboarder crowd (Schmelzer, 2004). With so many competitors entering the market, however, companies have recently begun expanding their target audiences: Brands such as Nellys Pimp Juice, Russell Simmonss DefCon3, Ice-Ts Liquid Ice, and Lil Jons Crunk!!! are targeting the hip-hop audience (Helm, 2005; Day, 2004; Schmelzer, 2004). Bawls Guarana targets video gamers by sponsoring video game tournaments (Roberts, Jr., 2005). The manufacturers of Gay Fuel donate five percent of sales to local AIDS charities as a way to target the gay party circuit (Tale of the Tape, 2005). Bong Waters marketers target the marijuana sub-culture (Helm, 2005). Reduced-calorie and sugar-free brands are targeted towards adults and athletes. BOMBAenergy lines Solution is non-carbonated and geared towards adults (Guerrero, 2004). Red Bull recently launched a new campaign targeting golfers in an attempt to expand its market share (Karp, 2004). Pit Bull was named the official energy drink of the American Basketball Association (Schmelzer, 2004). Red Bull has started to market its brand as a functional product to workers, students, and drivers. Marketers have begun offering free cans to commuters, cab drivers, and car rental agencies in an attempt to market it as a way to stay alert while driving (Karp, 2004).

While marketing to a new target audience may open up doors and expand market share, there is a risk. According to Alfredo Marcantonio, founder of the advertising consulting firm MPH, There is a risk if [an energy drink] starts getting too acceptable. You dont want to wear the brand of jeans your dad wears (Karp, 2004).
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Tactics Guerilla and grassroots marketing tactics have been used time and again by marketers to attract the young, male crowd: Red Bull positions student brand managers on college campuses in order to establish word-of-mouth advertising. The student brand managers introduce the drink to friends and provide insight to Red Bulls marketing managers regarding the trends among their peers. (Beverage World information as cited by Todd, 2003). Go Fast! sponsors an annual skydiving event in Colorado and is now developing a winged jumpsuit which will allow the wearer to jump out of a plane without a parachute (Helm, 2005). Go Fast! also contributed to the development and launch of the first unmanned civilian rocket, which was launched in May, 2004 (Helm, 2005). Hansens Monster energy drink is promoted at extreme sporting events and rock concerts in an attempt to be more cutting-edge and risqu (Hansen, 2004). Monster also advertises on the Las Vegas monorail. The entire train is painted black with the trademark claw logo. Monster also secured vending rights at monorail stations and shows Monster promotions on video screens mounted inside the monorail cars (Hansen, 2004).

As noted above, the marketing tactics used by energy drink companies currently do not include traditional television commercials. An article published by the Buffalo News notes the similarities between energy drinks current marketing strategies and those used by tobacco companies in the past. Energy drink companies advertise sponsorships at clubs and bars and provide heavy sampling to consumers (Kwiatkowski, 2005). However, as the market matures, some expect the category to turn to more traditional forms of promotion such as print and other media (Roberts, 2004). This is due to the expertise and advertising budgets large manufacturers will bring to the market (Roberts, 2004). Coca-Cola has already demonstrated this, as it has budgeted between $5 and $10 million for print and outdoor ads to advertise its new Full Throttle energy drink (Coca-Cola to Unveil New Flavors, 2005).

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II. Competitive Landscape A. Structure of the Category Red Bull, the industry market-share leader, currently controls 60-70 percent of global energy drink sales (Soft Drinks, 2004). However, more than 1,000 smaller players have entered the market (Helm, 2005) and are trying to compete with Red Bull. Other beverage companies are desperate to grab market share from the industry leader, Red Bull. Challengers to Red Bulls success include Coca-Cola, PepsiCo, and Anheuser-Busch (Day, 2004). Strategies to compete with Red Bull include marketing less expensive products and increasing the number of ounces in a can. For example, Rockstar Energy Drink and Coca-Colas Full Throttle are twice the size of a can of Red Bull and retail for the same price (Day, 2004; Coke Accelerates, 2004, Howard, 2005). According to Information Resources Inc., as cited by 2004 State of the Industry, current industry leaders and their corresponding market shares are listed in the chart below. As indicated by the chart, Red Bull is the clear market share leader. However, there is no clear second-place in the race for market share. Rockstar, SoBe Adrenaline Rush, and Amp are all within 1.3 percentage points from each other.

Red Bull - 59.2 Rockstar - 7.7 Sobe Adrenaline Rush - 6.9 Amp - 6.4 Monster Energy - 4.6 Amp Sobe Adrenaline Rush Rockstar Red Bull Sobe No Fear - 3.7 Hansen's Energy - 1.7 KMX - 1.7 Blue Ox - 0.7 Eas Pirahna - 0.6 Bawls - 0.5 Other - 5.6

Source: Information Resources Inc., Total food, drug and mass merchandise (excluding Wal-Mart) for the 52 weeks ending July 11, 2004 as cited by 2004 State of the Industry.

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B. Competitive Trends According to 2004 State of the Industry, there are many new competitors entering the energy drink segment. Each of these is striving to differentiate themselves in the marketplace by using varying marketing tactics and strategies. For example: Impulse Energy Drink is sugar-free. US Energy Drink is low in carbohydrates. Wired is packaged in larger containers. YET (Your Energy Tonic) and Jugular are marketed toward extreme sports fans. Airforce Nutrisoda is targeted toward frequent flyers and is a mid-calorie option (2004 State of the Industry). Anheuser-Bushs Be (B to the e) is the first alcoholic energy drink and combines beer, caffeine, fruit flavoring, ginseng, and guarana (Washington, 2005).

Coca-Cola, which has been struggling in the energy drink market, hopes to turn things around with its introduction of its new Full Throttle which is marketed to men between the ages of 20 and 30 (Kirsche, 2004). The entrance of new competitors into the market has taken market share away from the market leader, Red Bull. While Red Bull has continued to dominate market share, its control has slipped in recent years from 80.8 percent in 2000 to 51.4 percent in 2005 (Roberts Jr., 2004). Although many competitors are entering the market, some experts believe that fewer than 10 brands are likely to survive (Lewandowski, 2002). As larger companies move into the market, they will begin to acquire some of the stronger brands (Helm, 2005). According to Burt Helm in Energy Drinks Build their Buzz, Now is the time for the edgiest of startups to make their money or position themselves for an eventual buyout (2005).

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III.

Consumer Analysis A. Primary Target Markets Geographics The global energy drink market is dominated by Asia and North America. These markets account for more than 80 percent of consumption. Many countries in Asia have a very weak demand; however, the volume of energy drinks consumed in Japan is only exceeded by the United States (Coke Accelerates, 2004). Demographics The primary target market for energy drink manufacturers has traditionally been males between the ages of 18 and 25 (Day, 2004). Initially, these drinks were marketed toward 20-somethings in bars and nightclubs and toward the young, suburban, extreme-skateboarder crowd (Karp, 2004; Schmelzer, 2004). According the Sherri Day a reporter for the New York Times, Energy drinks have quickly become the elixirs of choice for teenagers and young adults too hip for espresso, colas and fancy teas (Day, 2004). However, with so many competitors entering the market, companies quickly expanded their target niches within the primary target market: Brands such as Nellys Pimp Juice, Russell Simmons DefCon3, Ice-Ts Liquid Ice, and Lil Jons Crunk!!! target the young, male hip-hip audience (Helm, 2005; Day, 2004; Schmelzer, 2004). Red Bull has started to market its brand as a functional product to workers, students, and drivers. It has begun offering free cans to commuters, cab drivers, and car rental agencies in an attempt to market it as a way to stay alert while driving (Karp, 2004).

Psychographics The typical consumer targeted by energy drink manufacturers is younger than 30, has an active lifestyle, and is looking for a beverage that provides increased energy for working, partying, or studying (Balfour, 2005). This consumer also tends to have excess disposable income and values brands that reinforce their self-image. For this segment, the perceived benefits associated with purchasing energy drinks include an increased identification with the in crowd, as well as increased energy to participate in activities such as extreme sports, video games, and late-night partying (Helm, 2005). According to R.Bird & Company, an identity and design consulting firm, Energy drinks are not for your grandparents. Rather, theyre often geared towards a thrillcraved, hyperactive youth culture whose primary mission is to get their rocks off legally (Patterns, 2004).
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Behaviors Traditionally, energy drinks have been associated with young, thrill-seekers. Marketers have found a willing target audience in groups that purchase energy drinks to go along with their lifestyle. Typical groups that have been targeted include extreme sports fanatics, video game enthusiasts, and nightclub regulars (Helm, 2005). According to the Lifestyle Market Analyst, males between the ages of 18 and 34 rank much above the general population for lifestyle category interests such as: Automotive work Science fiction Home video games Electronics New technology Snow skiing Hunting/shooting Boating/sailing Camping/hiking (SRDS Lifestyle Market Analysis, males age 18-24)

In addition to being a prime target market, these interest groups create an occasion for energy drink consumption. Perhaps then, it is no surprise that marketers targeting them have designed ads and packaging to coincide with their interests. An obvious indicator of which market a manufacturer is targeting is its use of ads and packaging to coincide with the segments behaviors and interests. The graphics below were provided by R. Bird in Patterns in Consumer Product Packaging: Energy Drinks (Patterns, 2004) and give us a clue about manufacturers target markets. Auto shop influence The packaging below promotes a power surge and super concentrated fuel injector cleaner for the concentrated boost of energy it provides. The colors are similar to those used on Nascars.

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Science fiction/monsters and aliens These cans use images to attract the interests of science fiction fans.

Electronics This packaging closely resembles batteries and may appeal to the market that is interested in electronics.

Skateboarders/extreme sports The author of Patterns in Consumer Product Packaging: Energy Drinks ponders, If you ride the deck on the right, what would you drink?

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Extreme sports/dangerous things The packaging below may be attractive to those who are interested in taking a chance.

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B. Secondary Target Markets Increased competition within the energy drink segment has forced manufacturers to expand into new markets, beyond males ages 18 to 25. Red Bull, the market share leader, has lost ground recently due to new energy drink competitors entering the market. From 2000 to 2005, Red Bulls U.S. market share dropped from 80.8 percent to 51.4 percent (Roberts Jr., 2004). Mintel International Group, a media, product, and consumer intelligence and analysis company, suggests the energy drink market should expand to include Hispanics, African Americans, and women in order to grab more market share (Roberts Jr., 2004). In order to expand market share, energy drink manufactures are attempting to follow this suggested route and have begun to take interest in the following markets: Health-conscious consumers Women Hispanics Seniors

In the United States, the market share leader, Red Bull, first became popular in health clubs in Santa Cruz, California. It soon expanded to extreme-sports enthusiasts, and as the beverage built a nationwide distribution network, it became popular in bars and clubs as a mixer used with vodka (Day, 2004). Health-conscious consumers For the last several years, low-carbohydrate, sugar-free, and low-calorie products are starting to play a major role in the growing energy drinks market (2004 State of the Industry). Several new products entered the market in 2004, which placed an emphasis on consumers who need an energy boost and also want to stay fit. Mintel expects the energy drink market to continue to experience growth in the low-calorie sector (Roberts Jr., 2004). According to Jane Perrin, Nielsens managing director of global services, Sales of sugary substitutes are outgrowing those of sugar (as cited in Adweek.com, OLeary 2005). She explains that people are watching more carefully what they eat because they want to live longer. This is a result of media reports that emphasize problems such as obesity and diabetes. The National Marketing Institute estimates that more than 25 million Americans have tried low-carbohydrate diets. In addition, there are approximately 16 million diabetics in the United States who watch the number of carbohydrates they consume and desire sugar-free products (http://www.bevnet.com, February 1, 2004). Many energy drink manufactures are now hoping to tap in to the lowcarbohydrate, low-sugar trend.
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Energy drink companies are formulating products to attract sales from the healthconscious segment: Sugar-Free Red Bull was launched in 2003 and now represents 15 percent of the companys business (Mastroberte, 2005). Almost a third [of all soft drink products] are sugar-free or of the diet variety, notes David Rohdy, vice president of marketing for Red Bull North America, We saw this as an opportunity (as cited in Beverage World, Todd, 2003). PepsiCo has launched its Sugar-Free SoBe in an effort to target women between the ages of 18 and 45 and men ages 30 to 45 (Kirsche, 2004). In an attempt to target older adults and athletes, some energy drink companies, such as Rockstar, Monster and Impulse, have begun offering sugar-free, lowcarbohydrate, and low-calorie versions of their beverages.

Women Many marketers recognize that women may represent the future growth of the energy drink category. Kantha Shelke, a reporter for Food Processing magazine, believes that because more and more women are attempting to lose weight through physical activity, their consumption of sports and energy drinks is likely to increase. Consumers are progressively more interested in a healthier lifestyle, and with a greater focus on health and wellness, the sports and energy drinks segment should continue to grow (Shelke, 2005). As noted in The Power of Power Beverages, Female teens reportedly have one of the highest rates of consumption of sports and energy drinks (Shelke, 2005), and as the focus on weight-loss remains at the forefront, it does not appear that this rate will decrease. According to Rich Gray, a health and physical education teacher, more than half of 72 health students, both male and female, who participated in an unofficial survey, said they had tried an energy drink (Kwiatkowski, 2005). A fall 2002 Simmons (New York) teen survey also showed that 18 percent of teenagers, in general, consume energy drinks (Roberts Jr., 2004). As teenagers become familiar with the taste of energy drinks, they are likely to continue to drink them as they grow older. Energy drink manufacturers may also want to consider mothers as potential consumers. In 2003, there were 141.6 million mothers in the United States, according to BS Media (as cited in ewowfacts.com, 2004). An article published by Beverage Industry notes that the alternative drinks category, which includes herbal iced teas, premium sodas, nutritionally enhanced beverages and some energy drinks, attract mothers who are shopping for a healthy beverage option for their children (Beverage Industry, 2003). In addition, energy drinks are focusing more and more on their functionality and physical and mental benefits.

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Women ages 45 and older are also prime candidates to become energy drink consumers. In her book, Marketing to Women, Martha Barletta notes that in the past, grandmothers would sit and drink tea, whereas today, women age 45 and older are going through a second youth. These women have the desire and the financial resources to reinvent themselves and to live healthy, active, emptynester years of freedom. She also states that they are looking for adventure, change, and new things (Barletta, 2003). Because they tend to have more disposable income, they may become a desirable target for energy drink marketers. In addition, according to Barletta, Between the years 2000 and 2010, the 55-64 [age] population will grow an astounding 48 percent. Because women generally live longer than men, the American population will become proportionally more female (Barletta, 2003). Hispanics The Hispanic population also presents a growth opportunity for energy drink marketers. Consumer research conducted by Mintel shows that males ages 18 to 24 and Hispanics have the highest rates of consumption of energy drinks (Roberts Jr., 2004). In addition, according to the U.S. Census Bureau, the population of Hispanics reached 39.9 million in July 2003, making them the largest minority group in the country (U.S. Census Bureau, 2004). In another report, the U.S. Census Bureau stated that more than one in eight people in the United States were of Hispanic origin in 2002 (U.S. Census Bureau, 2003). As noted in the following map, much of the Hispanic market resides in the southwest United States. Marketing and product development to target this segment may be most effective if focused in Puerto Rico, California, Arizona, New Mexico, and Texas. Other geographic targets may be Nevada, Colorado, Illinois, New York, and Florida. Percent of Persons Who Are Hispanic or Latino (of any race): 2000

Source: U.S. Census Bureau 2000 Summary File 1, Matrices P1, P8

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Companies looking to target this demographic are betting on Spanish-language advertising and promotions. Stamford, a Connecticut-based product line, has acquired the energy drink Clamato Energia, which focuses on Hispanic consumers in the United States. Omar Garcia, vice president of marketing for Clamato, explains: In 2000, the marketing team responsible for Clamato introduced a new advertising campaign that offered tailor-made promotions such as phone cards for Hispanics. The product has experienced 40 percent growth because of the Hispanic-targeted campaign. Examples of functional drinks that have been marketed to the Hispanic segment are as follows: Clamatos Web site, which is offered in English and Spanish, claims the product reenergizes the body and mind. The basic ingredients in Clamato are similar to other energy drinks (taurine, guarana, and ginseng). Another example is Gatorades Xtremo, which is available in flavors such as Mango Electrico and Tropical Intenso and targets the growing Hispanic market. Xtremo claims to have been formulated especially for the Latino athlete (Shelke, 2005).

Seniors Seniors may also be an important target market for the energy drink category because the American population is aging. The majority of Baby-Boomers are entering their 50s, and the mature market controls much of the disposable spending in the United States. According to Martha Barletta in her book Marketing to Women, From 1992 to 2020, the number of people age 50 or older is expected to increase 76 percent, while the number of people under age 50 will decrease one percent. She notes that although American ages 50 and older represent only 27 percent of the population, they control 50 percent of the disposable spending. Per capita, they spend 2.5 times as much as younger consumers (Barletta, 2003). Energy drinks could be the solution for this audience, which is increasingly seeking anti-aging antidotes and natural energy sources. Mintel believes that future products for this market segment could include antioxidants and skincare ingredients (Roberts Jr., 2004). Some companies have already begun launching functional drinks with energy claims to reach this segment: Ensure Energy Drinks Met-Rx Protein Shake Boost Breeze Nutritional Energy Drink Juice
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In addition, Red Bull recently began targeting golfers by sponsoring the PGA European Tour in an attempt to attract new customers and broaden its image. According to the National Golf Foundation, one-third of U.S. golfers are over age 50 and golf fans tend to be even older (as cited by Karp, 2004). There is an ongoing debate about how much caffeine is regarded as safe, and there is concern about its interaction with other ingredients such as taurine. According to consumer research conducted by Mintel, respondents age 45-64 were the most likely to express health concerns related to energy drinks (Roberts Jr., 2004). The downside of marketing energy drinks to this segment is their concern about the ingredients present in most energy drinks. In addition, as government warnings that taking herbs and vitamins may affect the effectiveness of prescription drugs become more prevalent, warnings may begin to appear on labels that would discourage this segment from buying energy drinks (Todd, 2003). Another challenge in expanding a target market is to not alienate current customers. Alfredo Marcantonio, founder of the London-based advertising consulting firm, MPH, There is a risk if it starts getting too acceptable. You dont want to wear the brand of jeans your dad wears (Karp, 2004).

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C. Consumption Patterns Knowing how many people have tried energy drinks and which groups consume them most often can help marketers target specific sectors and tailor their messages more effectively. This kind of information may also help with identifying emerging target markets. In order to better understand energy drink consumers, it is important to look at where the drinks are purchased and where they are used. According to a 2004 report by Mintel, the penetration rate for energy drinks has reached 11 percent in the United States. Even more revealing, in a survey done in 2002 in Simmons, New York, 18 percent of teenagers polled reported that they consume energy drinks. (Roberts, Jr., June 2004) Currently, energy drinks are predominately sold in convenience stores. Data shows that 60 percent of all energy drinks are sold in grocery stores, convenience stores, or similar outlets (Day, 2005). According to the Natural Grocery Buyer, convenience stores, liquor stores, and bars will continue to be the primary sources for energy drink sales as impulse buys. The National Grocery Buyer also states that although grocery stores stock energy drinks, they will not become grocery staples such as soft drinks (Lewandowski 2002). While energy drinks are sold primarily in convenience stores, much of the marketing for energy drinks in the United States is done at clubs, bars and sports events. However, marketers have begun expanding the availability of their products to other locations: Beverage Marketing found that 85 percent of consumption of energy drinks was done off premise in 2002 (Phillips). Many smaller companies have figured out that they can get their cans in hands by distributing to their target markets where they will most likely use the products. For example, Skaterade is distributed in skateboard shops (www.skaterade.com). With the introduction of Budweisers Be, an energy drink/beer combination, the drinks are now sold in liquor stores as packaged liquor, not just as a mixer for alcohol (in states that allow non-liquor products in liquor stores) (Sanger, 2005). Fitness clubs and gyms are entering the energy drink market by creating targeted functional energy and sports drinks that claim to provide fitness benefits for their members (Shelke, 2005). Strong sales have begun to occur at mass merchandisers as well, with heavyweights such as Pepsi entering the market (Roberts Jr., 2004).
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According to Vencoa Vending Machines, 2 percent of beverages sold in vending machines in 2003 were energy drinks. They also report that 75 percent of all cold beverage sales in vending machines were packaged in 11.5 to 12 oz cans. (http://www.vencoa.com/vending_trends.html)

The type of retailer also helps define potential target markets. Convenience stores and grocery stores are accessible to a wide range of consumer sectors; therefore, future energy drink customers might end up being mothers, tired office workers and health-conscious consumers (Russo, 2004). Red Bull has started to market its brand as a functional product to workers, students, and drivers. It has begun offering free cans to commuters, cab drivers, and car rental agencies in an attempt to market it as a way to stay alert while driving (Karp, 2004). This trend shows that companies may be looking for a way to get their products to commuters and those who work in the transportation field. Hansens Monster energy drink advertises on the Las Vegas monorail. The entire train is painted black with the trademark claw logo. Monster also secured vending rights at monorail stations and shows Monster promotions on video screens mounted inside the monorail cars (Hansen, 2004).

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IV.

Company Profile Virgin is a global brand, made up of more than 200 companies. Despite the extraordinary diversity of the Virgin Group, all of the Virgin companies have an entrepreneurial culture and a strategy based upon original approaches to creating value for customers. According to Courtney Reeser, managing director of the branding firm Landor, The Virgin brand is built around an idea, and in general, [includes] brands that have a strong idea (de Mesa, 2004). History In 1970, Richard Branson began his Virgin Empire with a mail order record retailer which developed into a record shop named Virgin. It was located on Oxford Street in London (www.virgin.com). The first artist that recorded in his studio was Mike Oldfield, whose recording of Tubular Bells sold 5 million copies. Richard began Virgin Records in 1973 and in 1992, sold the Virgin Music Group to THORN EMI for one billion dollars (www.virgin.com). Following years of success, Richard Branson began expanding his empire into new fields.
1984 - Virgin Atlantic Airways was born 1987 - Virgin Records in America was founded 1988 - Virgin Hotels was launched 1991 - Virgin Publishing (Virgin Books) was formed 1994 - Virgin Cola Ltd. Company was announced 1996 - Virgin.net and Virgin Trains were launched 1998 - Virgin Cola was launched in the United States 2000 -Virgin Cars, Virgin Wines and Virgin Travelstores were launched 2002 - Virgin Credit Card was launched 2004 - Virgin Galactic was launched (developing space tourism for everybody).

The Virgin group employees 35,000 people, had $8.1 billion in sales in 2004 and conducts worldwide operations. Structure The Virgin Group is comprised of more than 200 operating companies and several holding companies, most of which are located in Britain. The common threads that link these companies are the use of the Virgin trademark and Richard Branson acting as shareholder, chairman, public relations guru and in a management role. (Grant, 2004).

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A high-level organizational chart is provided below: Virgin Group Investments Ltd.

Air Travel
Virgin Atlantic Virgin Express Virgin Blue

Mobile
Virgin Mobile
(UK, Aus, and USA)

Financial
Virgin Money

Retail
Entertainment Victory

Music
V2

Internet dot.com
Virgin Cars Virgin Wines Virgin Net Virgin Student

Hotels & Leisure


Virgin Hotel Group Virgin Active

Rail
Virgin Rail Group thetrainline.com

Drinks
Virgin Drinks

Virgin Groups financial and legal structure is influenced by Bransons unconventional ides regarding business as well as his wary approach in dealing with the financial community. Branson strives for an organizational structure that is consistent with his vision of people-oriented capitalism. Will Whitehorn, Bransons strategist and business developer, thinks of Virgin as a branded venture capital organization (Grant 2004). In Bransons own words, as quoted by Grant Were structured as if we are 150 small companies. Each has to stand on its own two feet, as if they are their own companies. Employees have a stake in their success. They feel and are crucial to their company because they are one-in-fifty or one-in-a-hundred instead of one-in-tens-ofthousandsSome chairmen want [to structure their own companies] so that one divisions loss can make up for anothers profit, but wed rather have a lot of exciting companies that are all making profits- as are all of ours (Grant, 2004). The organizational structure of the Virgin companies involves very little hierarchy, which means short lines of communication and flexibility within the organization. Employees are encouraged to generate ideas, take initiative, and have fun. In addition, Virgin lacks a corporate headquarters which, along with the small size of the operating companies, fosters teamwork and entrepreneurship (Grant, 2004). The Virgin brand is the groups most valuable asset. It communicates value for the customers and is also linked with concepts of style. According to Branson, One of the reasons for our success is the core values which Virgin aspires tolike providing
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quality service. However, we also promise value for money, and we try to do things in an innovative way (www.virgin.com). Virgin Strategies Each of the markets in which Virgin operates have several features in common: they are typically markets where the customer has been over-charged or under-served and where there is confusion or where the competition is complacent (www.virgin.com). According to the Virgin Web site, the company enjoys breaking into markets and shaking things up. It does this by embracing the following values which carry across all Virgin brands: Value for Money Simple and honest pricing Good Quality High standards and attention to detail Brilliant Customer Service Professional but un-corporate Innovation Challenging convention with modern and stylish designs Competitively Challenging Challenging major establishments Fun Providing the public and customers a bit of entertainment (www.virgin.com)

In addition, the Virgin brand is not associated with any specific product or markets, which is what has allowed the group to expand to a wide range of businesses (Grant, 2004). Virgin Drinks Virgin Drinks was founded in the United Kingdom 1994 as the Virgin Cola Company, and launched Virgin Cola. The drink found moderate success in the U.K., and Richard Branson decided to tackle a larger market, the United States. In 1994, Branson entered New Yorks Time Square in an army tank ready to crush the cola competition. Branson was determined to take on the two leading U.S. competitors, Coke and Pepsi, despite great concerns from his Investment Advisory Committee (Hall, 2004). Branson believed that consumers were being forced to pay inflated prices for brand name colas and he wanted to be the one to tackle the market with a unique cola at a reasonable price (Agence France-Presse, 1994). However, Virgin Cola soon disappeared from the United States and is considered a flop in the Virgin history. In 1994, Virgin did not offer the consumer much other than a brand. It was said to be just another sugary drink in a red can (Hall, 2004). Once again, in 2004, Virgin Drinks decided to tackle the United States soft drink market. Virgin was approached by a Southern California company, the Firm, to initiate a 50-50 partnership to re-release Virgin Cola (Schiller, 2004).
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Section 2 Energy Drink Proposal

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I.

Target Market and Sectors Based on our situation analysis, we, as Virgins consultant, propose that the primary target market for the Virgin Vibe energy drink be women with active lifestyles who are looking for a healthy beverage alternative to soft drinks and coffee to provide an extra boost of energy and an appealing taste. The companys brand will be positioned at the low-price, high-quality end of the energy drink category. Many marketers recognize that women may represent the future growth of the energy drink category, but few have yet tapped into this market. Tom Peters, author of The Circle of Innovation notes, It is a ridiculously rare corporation that takes advantage of the womens opportunity. What a costly mistake (as cited by Barletta, 2003). According to Martha Barletta, author of Marketing to Women, the womens consumer group in the United States has greater spending power than the entire economy of Japan (Barletta, 2003). Market Strategy We recommend that Virgin pursue segment marketing to create a unique and appropriate energy drink product and price it according to the target segment. This will provide Virgin with the clearest and most efficient communication and distribution channels. Segmentation Variables We recommend that Virgin use a needs-based segmentation approach to segment its consumer markets based on gender and activity level. We propose that the primary target market for Virgin Vibes energy drink be women with active lifestyles who participate in physical activities and exercise. These women may be identified by the fact that they belong to gyms or fitness centers, participate in sponsored walks or runs, belong to sports teams, subscribe to fitness magazines, or purchase exercise equipment or clothing. As a secondary market, we recommend that Virgin focus on other active women. This segment may include such women as working mothers, busy office workers, and students who are active in school and social activities. They may be identified by the fact that they subscribe to parenting or professional magazines, enroll their children in daycare, or attend classes at a university or community college. Segment Size The size of the proposed primary target market provides significant opportunity for sales. According to health club and exercise industry data provided by www.fitnessmanagement.com, approximately 33.5% of women exercise (2005). Based on 2000 census data, there are approximately 143.4 million women in the United States. (www.census.gov, 2000). Therefore, we estimate our target market is approximately 48 million women.
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The following statistics, provided by The Business Womens Network, indicate the number of females over the age of six, who participated in fitness activities 100 or more times in 2002 and provides additional insight into the behaviors of this segment: 6.1 million worked out using free weights 6 million used the treadmill 4.7 million jogged or ran 3.3 million rode stationary cycles 3.2 million used resistance machines 1.4 million used stair-climbing machines 1.1 million swam 500,000 used home gyms. (Womens Sports Foundation, 2003, as cited by www.ewowfacts.com)

In addition, we believe this segment has potential for future growth. For example, the number of participants in Women's collegiate sports at NCAA member colleges and universities increased 15.5 percent from the 1995-96 school year to the 200-01 school year. As of 2000, there are 150,916 female NCAA athletes. Also, female athletes represent 43 percent of total university athletes (NCAA, 2000, as cited by www.ewowfacts.com). Eighty percent of women who were athletes in college during the late 1960s and early 1970s still engage in moderate or strenuous physical activity at least three times a week (Womens Sports Foundation, as cited by www.ewowfacts.com); therefore, we would expect the target market include a wide age range. According to the Nutrition Business Journal, the functional foods category, which includes nutrition bars as well as sports and energy drinks, made up 34 percent of the entire U.S. nutrition industries $50 billion in sales in 2001 (as cited by Shelley, 2002). In addition, sales of weight-loss supplements reached $3.9 billion in 2001. And, the fastest moving segment within the functional foods category is the energy segment (Shelley, 2002). Segment Attractiveness There are several factors that contribute to our assessment that Virgin would be wise to market their energy drink to women: they carry the greatest purchasing power, they are generating more income than ever before, and many are actively trying to maintain a healthy lifestyle. Purchasing Power Women have generally been recognized as the primary purchasers of household products, but their influence on purchasing reaches much further than clothing, toiletries, and cleaning products. o Women are buying a large portion of cars, computers, insurance policies, and home improvement services and supplies (Barletta, 2003).
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o According to Martha Barletta, women carry more purchasing power than men due to two main factors: loyalty and referrals. Because women are more demanding in making the initial purchase in a category, they recoup their time investment by staying more loyal to the brand theyve chosen in subsequent purchase cycles (Barletta, 2003). In addition, women are more likely to recommend a product to other consumers, therefore providing free publicity for the products women find desirable (Barletta, 2003). o Another important factor to consider is that effectively targeting women also generates higher satisfaction among men. Barletta notes that women generally value the same things as men, and then some. When the higher demands of women are met, the demands of men are generally met or exceeded as well (Barletta, 2003). Income While still trailing mens average salaries, womens salaries are steadily increasing. The following points illustrate why womens earning and spending power should not be overlooked: o Women comprise 47 percent of individuals with assets over $500,000 o Between 1996 and 1998, the number of women with greater than $500,000 in assets grew 68 percent. The number of men with greater than $500,000 in assets grew only 38 percent. o Females carry less debt than men. o Women bring in half or more of the household income in the majority of U.S. households. o The number of women who out-earn their husbands has increased from 25 percent in 1997 to 30 percent in 1999 (Barletta, 2003). Lifestyle Many women are becoming increasingly health-conscious. Concerns such as obesity and diabetes are prompting women to look for healthy foods and beverages for themselves and their families. o According to the National Marketing Institute, more than 25 million Americans have tried-low carbohydrate diets. o There are approximately 16 million diabetics in the United States who watch the number of carbohydrates they consume and desire sugar-free products (http://www.bevnet.com, February 1, 2004). Because more and more women are attempting to lose weight through physical exercise, we see it as appropriate to position an energy drink to meet the growing demand for an energy supplement.

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II.

Product Concept The energy drink we have developed to reach the desired target market is called Virgin Vibe. We have checked the trademark availability with the United States Patent and Trademark office and found that there are no other products in the beverage category with this name. Product Description and Branding We propose positioning this new product as a healthy beverage alternative to soft drinks and coffee that provides an extra boost of energy and an appealing taste. The companys brand will be positioned at the low-price, high-quality end of the energy drinks category. We view the major competitors to this brand as not only other energy drinks but also diet soft drinks and coffee, and will therefore price the product to compete at this level. We will market the brand as one that is healthy, and we will provide consumers with valuable information regarding health issues via an informative Virgin Vibe Web site and through sponsorships of health-related events. Virgin Vibe is the brand of energy drink for health-conscious women that seek not only a healthy and delicious beverage, but also a smart value. Because we know that the number of women who are concerned about their health is increasing, this product will contain no sugar, will be free of carbohydrates, and will have only 10 calories. It will contain a moderate amount of caffeine to provide a boost of physical and mental energy. We propose developing three unique flavors, which will be named after the benefit they provide. Each of the flavors will contain different herbs and nutrients to enhance performance. The flavors are as follows: Clarity, containing ginkgo biloba and ginseng, will promote clear thinking. Balance, with an infusion of guarana and soy, will reduce menopausal symptoms and lower the risk of heart disease and breast cancer. Endurance will utilize taurine and phosphorus to promote healthy bones, increase strength, and prevent osteoporosis (Matises, 2004).

Because we are positioning the beverage as an alternative to diet soft drinks and coffee, we recommend that Virgin Vibe energy drink be sold in 12-ounce cans. According to an article published by BevNet, sales of 16-ounce energy drinks grew three times faster than those of 8-ounce energy drinks during 2004 (BevNet, 2005). These statistics reveal a need to cater to customers who feel that the smaller-sized energy drinks are not a great bargain. The 12-ounce packaging would allow Virgin Vibe to compete not only with other energy drinks, usually sold in 8-ounce cans, but also with soft drinks in general, reinforcing Virgins value for money brand positioning. This size will also allow the drink to be sold in a large majority of existing vending machines without retrofitting them for a different sized can.
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The Virgin name will appear prominently on the products can and in marketing materials to take advantage of Virgins positive brand equity. The colors of the Virgin Vibe cans will allude to the flavors of this new energy drink: Clarity, packaged in an orange can, will have an orange flavor. Balances green can alludes to its lime flavor. Endurance, in a lavender can, will provide a fruity, grape flavor.

We anticipate the color and design of the cans will be especially appealing to women. We also anticipate that the bold design of the can will attract attention in stores and will be consistently used in all marketing materials. A sample of our proposed packaging is provided in the following pages.

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Pricing There is no question that the high price of energy drinks contributes to the large profit margins of the categorys manufactures. According to an article published by the Atlanta Journal and Constitution, although the energy drink segment accounted for only 2.3 percent of the United States $64 billion soft drinks sales in 2004, profit margins were strong (Leith, 2004). According to our primary research, energy drinks sold in supermarkets and convenience stores are priced much higher than other carbonated drinks: Energy drinks sold in individual cans or bottles are priced at approximately $1.99 in supermarkets and convenience stores. This means that, on average, an eightounce energy drink costs twice as much as a 12-ounce regular soft drink. At supermarkets, a package containing four cans of an energy drink costs, on average, $6.99. A 12-can case of Coca-Cola or Pepsi costs around $5.99. In convenience stores, a 24-can case of any energy drink sells for about six times the amount of a case of coke or Pepsi. Bars and nightclubs may charge as much as $8 for an eight-ounce Red Bull can (Day, 2004).

However, the Virgin brand stands for quality and value for money (www.virginusa.com). Therefore, in spite of the energy drink categorys higher price trend, we recommend that Virgin introduce the Virgin Vibe energy drink using a super-value pricing strategy. The new Virgin energy drink should be a high-quality beverage, offered at a suggested low retail price between $.50 and $1.00. This lower price would be comparable to prices charged for soft drinks, allowing Virgins Vibe to compete in this category. According to our primary research, our target markets demand is elastic. In general, the people interviewed were price sensitive. Most people who participated in our survey stated that price is an important consideration when shopping for beverages. In addition, a survey conducted by Mintel, as cited in an article published by Prepared Foods, shows respondents who do not consume energy drinks listed price as one of the main deterrents (Roberts Jr., 2004). Our market penetration pricing strategy is likely to stimulate market growth. The increased consumption of Virgins energy drink, resulting from a more affordable price, would make up for the lower price charged for it in comparison to other energy drinks. We recommend that Virgin use a perceived-value pricing strategy, making use of several marketing mix elements, such as advertising and sales promotions, to communicate and enhance the perceived value of the product.

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III.

Distribution We recommend using Virgin existing U.S. distribution channels to produce and distribute the new product. Using the existing channels will help minimize costs and will allow Virgin to make good on its promise of value for money. We also recommend implementing a strategy to get the product into the hands of our active, healthy target market in areas where they will most likely consume the product. Virgin Drinks currently operates production facilities in the United States on both the East and West coasts where it produces four flavors of Virgin Cola (Leith, 2004). We recommend using the existing facilities to produce and distribute Virgin Vibe. By keeping the production in-house, Virgin will retain control of the products quality and can better monitor the costs of production. Virgin Drinks also utilizes an extensive network of beer and new age drink distributors throughout the United States (Leith, 2004). We propose using these distributors to target our primary market for the first stage of distribution. We recommend beginning with limited distribution in markets containing a large percentage of healthy, active people, as this is our target market. The table below, as cited in Mens Health Magazine, provides a list of cities that might be likely primary distribution areas. Mens Fitness Top Fittest Cities 2005 1 2 3 4 5 6 7 8 9 10 Seattle Honolulu Colorado Springs San Francisco Denver Portland Sacramento Tucson San Diego Albuquerque

Source: Mens Fitness Magazine, 2005

As noted in the table above, the fittest cities tend to be on the West coast. Therefore, we recommend that Virgin Vibe be launched primarily on the West coast, focusing on California and the Northwest where people lead active, healthy lifestyles. We would also recommend an initial rollout in the state of Colorado, where two of the top ten cities, as well as many ski resorts, are located. It is our recommendation that Virgin Vibe begin with selective distribution in convenience stores, vending machines, and health clubs in these areas. In order to guarantee distribution in convenience stores, we suggest following in the footsteps of
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Virgin Cola by contracting with 7-11 stores. This would guarantee a product rollout into 5,800 7-11 stores when launching nationally (Schiller, 2004). We also recommend seeking distribution opportunities in fitness clubs such as 24Hour Fitness, which has facilities primarily on the West coast and in Midwestern cities. We also believe that Virgin seek a partnership with Curves Fitness. According to their Web site, www.curves.com, they are currently the largest franchise in the world with over 8,000 locations. Curves offers membership to women only, which would help to attract members of our primary target market. In order to attract busy shoppers and other members of our secondary target market, we recommend distribution in the Virgin Megastores located in our primary distribution areas. Vending machines located just inside the doors will provide shoppers with an energy boost to continue with their shopping. After a year of limited distribution in the geographic locations listed above, we believe Virgin Vibe will be able to begin expanding successfully across the entire United States adding more convenience store locations.

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V.

Promotion Our main objective in the promotion of the Virgin Vibe energy drink will be to create awareness of the product and encourage trial. To do so, we will use the do-feellearn model of consumer-response. We feel that this is the most appropriate model because the audience has low involvement and generally perceives little differentiation within the energy drink product category (Kotler, 2004). We will start by providing free samples at health clubs and sponsored events, such as charity walks. By sampling the product, we hope consumers will feel that it is a goodtasting beverage that provides a boost of energy and is available at a reasonable price. Once consumers have developed a feeling about the product, we plan to educate them on the health benefits through our packaging, print advertisements, and via the Virgin Vibe Web site. We recommend launching an informational, health-oriented Web site to promote the product. Using this Web site, we will educate our target audience about the nutrients contained in the beverage. In addition, we will include other health-related information such as weight-loss and exercise tips, information about the best ways to prevent osteoporosis, and links to other Web sites, such as WebMD. We believe the most opportune time to launch Virgin Vibe would be January 1, 2007. Because health clubs generally experience increased activity due to people who made a New Years resolution to exercise, the energy drink will achieve increased exposure in this environment. In addition, the product launch will have occurred in time to sponsor such events as the AIDS walk, and the Breast Cancer Societys Race for the Cure. Sample Web site homepage provided on the following page.

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Budget There are several factors that would lead us to expect that the promotional budget for the first several years will be substantially higher than in subsequent years when the product is established in the market: Because this is an initial product launch, we will need to create brand awareness and trial among our target market. Because Virgin currently does not hold U.S. market share in the energy drinks category, we will need to build this share. Because there are many competitors in this segment, we will need to differentiate the brand.

To mitigate the above factors, we suggest the following: Leverage Virgins existing brand recognition as much as possible in packaging, advertisements, sales promotions, and sponsored events to promote awareness. Concentrate on targeting the primary target market, as we believe this is a sector that has not yet been tapped into by energy drink manufacturers. This will decrease the number of direct energy drink competitors. Create differentiation by promoting the health benefits of the brand and by using unique, educational sales material and advertisements.

We recommend using the objective-and-task method of setting a promotional budget.


Objective Market share goal Task Attract 7.2 million consumers Rationale The estimated size of our target market is 48 million women who exercise. Our goal is to attract 15% of the market. Approximately 28.8 million We estimate that one in three who try the brand will become users. Because our target is 7.2 million consumers, we will aim to have a 21.6% trial rate of those who are aware of the brand. We estimate that there will be 35 exposures for every 1% of the population will result in a 21.6% trial rate. Because we aim to achieve 35 exposures to 60% of the target market, we estimate Virgin will want to purchase 2,100 gross rating points.

Percent of market to reach Percent of aware prospects that try the brand

Reach 60% of target market 21.6% trial of those who are aware

Number of impressions per 1% trial rate Rating points to purchase

N/A

Purchase 2,100 gross rating points

Based upon the objective-and-task method referenced by Kotler, 2004. 41

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Based upon the model above, we will work with Virgin to estimate the cost per one gross rating point. We suggest the majority of the promotional budget be used toward advertising in magazines, sponsoring sales promotions and health-related events, and creating a comprehensive public relations strategy. We recommend a first quarter budget of no more than $3 million for advertising, and will spend half of that on media buys (magazine ads and outdoor). The remainder will be spent on sampling at and sponsorship of health-related charity events such as walks/runs. This figure is only a fraction of the $5-10 million Coke spent to introduce their KMX energy drink in just one month in 2001 (Hein, 2001). Advertising We do not recommend television advertising for the initial product launch due to cost considerations. Instead, we recommend placing advertisements in womens health magazines, such as Shape and Self, and other publications for women, such as Oprah and In Style. It was discovered by the marketing research company AnswerStream that customers responded favorably to advertisements that promoted a benefit (such as lowcarbohydrate) and elicited an emotional response to the ad (Elliot, 2005). Therefore, we recommend promoting the health benefits of Virgin Vibe in advertising communications. In addition, AnswerStream found that 56 percent of those surveyed avoided products that overwhelmed them with advertising (Elliot, 2005). Therefore, it is our recommendation that Virgin produce a total of three print advertisements, one for each style of Virgin Vibe. The advertisements should remain simple, and should graphically convey the benefit of each of the three styles. The ads will also introduce the Win a Spa Weekend in England contest. The contest will drive traffic to the Web site, where participants can check codes found inside the cans to see if they have won. While there, visitors will learn about the value of our product and recognize the site as a place to go for information about nutrients and to find answers to other health questions. Sample print advertisement provided on the following page.

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Sales Promotion We recommend Virgin use sales promotion in the launch of its new energy drink, as sales promotion offers an incentive for consumers to buy the product. For the initial product launch, we recommend the following sales promotions: Free product samples We would recommend providing samples at sponsored events such as charity walks to increase consumer trial. Incentive promotions Virgin may leverage its existing brands by handing out coupons for Virgin Vibe in its retail record stores. Another recommendation would be to create a points program where each energy drink can is worth a certain number of points, and the points may be used towards other Virgin merchandise such as discounts on CDs or frequent flyer miles on Virgin Airways. Giveaways Virgin may also leverage its existing brands by providing a destination giveaway. We recommend a spa getaway via Virgin Airlines to Bath, England. We believe this would be a desirable destination to Virgin Vibes target audience and will increase purchasing frequency.

The benefit of a sales promotion for the initial product launch is that that it provides an incentive for new consumers to try a product. It may also help differentiate the brand in the minds of consumers. However, sales promotions generally do not provide a substantial gain in market share. For this, we recommend implementing a long-term public relations campaign. Public Relations Our recommended public relations campaign will emphasize the health benefits provided to our target market by the Virgin Vibe energy drink. According to an article published by Prepared Foods, By 2025, female baby boomers will reach retirement age and swell the older population ranks (Matises, 2003). Osteoporosis, menopause, heart disease and cancer are some of the concerns of this market segment. Women are looking for help in the foods they eat (Matises, 2003). They are attempting to get as many needed nutrients and vitamins as they can from the foods they consume. We recommend Virgin Vibe implement a Web site that will feature articles about common concerns and conditions among women. The Web site will periodically feature one womens health-related topic at a time, such as breast cancer, providing information about the disease and prevention methods. The featured topic will change on a regular basis. The site will also highlight the benefits provided by ingredients found in Virgin Vibe energy drink, such as soy, which reportedly lowers breast cancer risk (Matises, 2003). In an article about marketing products to women, Matises notes that successful products tend to Satisfy more than one need or wish for todays time-pressured women (Matises, 2003). Therefore, the Virgin Vibe energy drink will be promoted as a beverage that tastes great and provides an energy boost from nutrients that are specifically suited to womens needs.
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The Web site will also promote health related events sponsored by Virgin Vibe energy drink, such as the Breast Cancer 3-Day Walk. The sponsored event should be one that specifically relates to women and may be coordinated with the featured topic on Virgin Vibe Web site. During the sponsored events, Virgin Vibe energy drinks samples will be distributed to participants. Virgin may also want to promote certain health topics during certain months. For example, May is Osteoporosis Awareness Month, which means this topic will probably be in the media. By monitoring health publications, Virgin can strategically place its ads, emphasizing the benefits of phosphorus found in its Virgin Vibe Endurance energy drink. Personal Selling We recommend invoking guerilla marketing techniques and extensive sampling to promote the launch of Virgin Vibe. In order to create a buzz in cities across the United States, we recommend positioning Virgin Vibe as the sponsor of charitable, fitness-related events. There are many such events occurring nationwide, so Virgin will be able to select the ones that would provide the most brand exposure. For example, the Portland, Oregon, Race for the Cure drew 38,000 runners in 2004, and sold in-kind sponsorships for $1,000 to $30,000 (www.raceforthecure-pdx.org). If Virgin Vibe were to sponsor an event such as this, its logo would be included on banners and in promotional materials. In addition, samples of Virgin Vibe could be distributed to participants to increase trial and familiarity with the brand. We also recommend creating a Virgin Vibe tour bus. The bus would travel to different Virgin-sponsored events, providing free samples to event participants. It would also allow Virgin Vibe representatives to engage in personal selling with potential consumers. We recommend the bus include the following: Samples of all three Virgin Vibe flavors Interactive computer kiosks to browse the Virgin Vibe Web site An opportunity to enter the Virgin Vibe Spa Weekend in England Giveaway A place for racers to relax before and after the race Oversized, inflatable Virgin Vibe cans to draw attention

The Virgin bus could also park in front of local health clubs between race events and pass out samples to customers. Finally, we recommend that Virgin Vibe be given to health club employees as free samples so they may promote the product while they are on the job. With the belief that people emulate those who teach them, we believe that if we can get our product
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into the hands of those who are epitomized as healthy, more will flock to buy the product.

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VI.

Conclusion and Sales Objectives In conclusion, the target market for the Virgin Vibe energy drink will be women with active lifestyles who are looking for a healthy beverage alternative to soft drinks and coffee to provide an extra boost of energy and an appealing taste. The companys brand will be positioned at the low-price, high-quality end of the energy drink category. Based on total market potential, the company will aim to for a 15% penetration rate within the target market during the first year. We would estimate that the 15% of consumers would consume, on average, one of our energy drinks per month. At an average suggested retail price of $.75 per can, we will aim to sell $64.8 million in the first year (48 million consumers in the target market x 15% of market x $.75 average retail cost x 12 energy drinks per consumer per year = $68.8 million). Based on the information provided in the Market Analysis Section, the total 2005 projected sales for the category is $1.5 billion; therefore, we will aim for a 4.5% market share in the first year ($68.8 million/$1.5 billion). During the second year, we will aim for a 12% increase in sales, to $77.1 million. The product will be offered in Clarity, Balance, and Endurance in individual cans with a suggested retail price between $.50 and $1.00 and multi-packs at prices comparable to soft drinks. Free samples will be distributed at health clubs and sponsored events. Sales promotions will include a reward points program, coupons distributed in Virgins retail stores, and a destination giveaway. Personal selling will take place at the sponsored events and health clubs where free samples are available. The total promotion budget will be created with the objective of obtaining, 2,100 gross basis points and will include advertising, sales promotion, and personal selling expenses. Advertising copy will feature simple, clean text that emphasizes the benefits of the product and leverages the Virgin brand. The colors used will be appealing to women and will differentiate the advertisements from other energy drink advertisements.

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We would like to thank the Virgin Group for allowing us the opportunity to collaborate with you on energy drink market research and the Virgin Vibe new product plan. We believe there is significant opportunity for Virgin Vibe within the energy drink category, and we look forward to continuing to work with your organization through the products launch and through succeeding stages of the product lifestyle. Should you have additional questions, please do not hesitate to contact us. Sincerely, Your marketing plan consultant team:

Bob Deck

Angelike Gaunt

Tracy Walker

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Energy Drinks Build Their Buzz: With the Beverage Industrys Giants Still on the Sidelines, Startups are Doing Whatever it Takes to Build Market Share. BusinessWeek Online, January 5, 2005. From "Chapter 10: moms and working moms". Wow 2004 U.S. Women's Market. Retrieved on March 19, 2005, from http://www.ewowfacts.com/pdfs/chap04/10.pdf. From Hispanic and Asian Americans Increasing Faster Than Overall Population. June, 14, 2004. U.S. Census Bureau. Retrieved on March 26, 2005, from http://www.census.gov/PressRelease/www/releases/archives/race/001839.html From The Hispanic Population in the United States: March 2002. June, 2003. U.S. Census Bureau. Retrieved on April 1, 2005, from http://www.census.gov/prod/2003pubs/p20-545.pdf From The Liquid Supplement Solution (Special Section: Alternative Beverages). Beverage Industry. May, 2003. Online Factiva Database. 19 March, 2005. Gondo, Nancy. Hansen Battles Beverage Giants as Energy Drinks Go Mainstream. Investors Business Daily, January 25, 2005. Guerrero, Lucio. (2004, August). Red Bull challenger hopes to become the Bomba; Austrian firm makes Chicago battleground in energy-drink war. Chicago Sun-Times. Retireved February 15, 2005, from LexisNexis Database. Hall, Story James. (2004, December 18) Passion and Restraint. Australian Financial Review. Retrieved April 6, 2005 from Factiva Database. Hansen: Unleashing the possibilities. (2004, October). Retrieved February 27, 2005, from http://www.beverageindustry.com. Hein, Kenneth. A Bulls Market the Marketing of Red Bull Energy Drink. Brandweek. May 28, 2001. Hein, Kenneth. SoBe Stays Off the Beaten Path with Mad Magazine and XXX Promotions. Brandweek, April 8, 2002. Helm, Burt. Energy Drinks Build Their Buzz; With the Beverage Industrys Giants Still on the Sidelines, Startups Are Doing Whatever it Takes to Build Market Share. BusinessWeek Online, January 5, 2005. Hoovers.com. Financial overview. Retrieved February 28, 2005, from http://www.hoovers.com/free/co/fin/factsheet . Hosking, Patrick. (1994, October,11) Bransons Virgin Cola will take on Coke and Pepsi. Agence france-presse. Retrieved April 13, 2005 from Factiva Database.
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Matisse, Marvin. The New Product Game: Why Targeting Women is Key. Prepared Foods. June 1, 2003. Retrieved April 23, 2005, from http://www.findarticles.com/p/articles/mi/is_6_172/ai_105460708/print Much, Marilyn. New America Spotlight for Beverage Supplier, Youth Will Be Served. Investors Business Daily, May 14, 2004. OLeary, Noreen. Food Sales Healthier. Adweek.Com. January 31, 2005. Online. LexisNexis Academic. 4 March, 2005. Packaging Trends of the Future. Beverage Industry, November 2004. Patterns in consumer product packaging (2004, July). R.Bird & Company. Retrieved February 27, 2005, from http://www.rbird.com/patterns. Penn, Catherine. (2005, January). 2005 R&D Survey: New drinks include a health benefit in 05. Beverage Industry. Retrieved March 2, 2005, from Factiva Database. Phillips, Bob. (February 15, 2004). A Beverage to call their own: Packing the punch of coffee, energy drinks have become the calling card of generation next. Retrieved March 30, 2005, from Factiva. Premium Bottled Beverages. Encyclopedia of Emerging Industries. Online Edition. Thomson Gale, 2005. Reproduced in Business and Company Resource Center. Farmington Hills, Mich.: Gale Group. 2005. http://www2.lib.ku.edu:2192/servlet/BCRC . Roberts Jr., William A. (2004, June). Beverages with a boost. Retrieved March 1, 2005, from http://www.findarticles.com/p/articles. Rodgers, Anni Layne. Its a (Red) Bull Market After All. Fast Company. Retrieved April 29, 2005, from www.fastcompany.com/articles/2001/10/redbull.html Rotate and Balance. Retrieved April 30, 2005, from www.eventmarketermag.com. Russo, Laurie. (2004, September) Sponts, Energy Drink-Makers. Beverage Industry. Retrieved February 26, 2005, from http://www.bevindustry.com. Sanger, Elizabeth. King of Beers Gets Wakeup Call. Newsday, January 27, 2005. Schiller, Gail. (2004, June 21). Firm, Virgin order Drinks: Team to relaunch Cola in N.A. Hollywood Reporter. Retrieved April 6, 2005 from Factiva database. Schmelzer, Randi. (December 28, 2004). Moore stylizes Pit Bulls hip-hop attitude. Business Media, Inc. Retrieved March 15, 2004, from LexisNexis Database.
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Shelke, Kantha. The Power of power beverages: because of the convenience and pleasure they offer, functional beverages are one of the most aggressive growth segments in the health and wellness foods arena. Food Processing. February, 2005. Online Factiva Database. 19 March, 2005. Soft drinks and bottled water. (2004). Encyclopedia of Global Industries. Online edition. Retrieve February 23, 2005, from Business and Company Resources Center Database. Sports, energy drink-makers. (2004, September). Retrieved February 27, 2005, from http://www.bevindustry.com. Terhune, Chad. (2004, October). Coca-Cola to launch new energy drink early next year. Dow Jones Newswires. Retrieved March 2, 2005, from LexisNexis Database. Thornton, Coach Dick. Looking Ahead. Beverage World, September 15, 2004 Todd, Heather. Red Bull North America Inc. Beverage World. May 15, 2003. Online. LexisNexis Academic. 26 February, 2005. Washington, Roxanne. (January 29, 2005). Beer maker seeks niche for keeping drinkers partying all night. Plain Dealer Reporter. Retrieved February 15, 2005, from LexisNexis Database. Wed Like to Thank our Generous Sponsors. Retrieved April 29, 2005, from www.raceforthecure-pdx.org.

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