Harvard business school case analysis – crescent pure

Crescent purePeter Hooper founded Crescent Pure in 2008

All natural organic juice infused with herbal stimulants, delivered 80mg caffeine

Sugar quotient was 70% lesser than sports and energy drinks on average

Sold 1,000 cases per month. 8-ounce can retailed for $3.75 apiece

Sold out before inventory was replenished, sold out even when retailers hiked prices by 25%

High demand among men as well as women

Portland drake beverages(pdb)Manufacturer of organic juices and sparkling water

Revenues hit $120.5 million in 2012

Part of the $131 billion beverage industry

Wanted to expand into the functional beverage (sports and energy) sector through acquisition

Acquired Crescent in July 2013

CEO of PDB, Michael Booth entrusted Sarah Ryan, VP of Marketing with the brand positioning of Crescent.

Production capacity constraints restricted them to a soft launch in 3 states in January 2014

Major beverage companies to launch organic energy drinks in 2nd half of 2015

PDB wanted to enter that market early

Advertising budget - $750,000

Product positioning to be defined by 1st, October 2014.

Important factors

Market positioning options

Energy Drink

Sports Drink

Organic Drink

Energy drink marketPros

Projected market -$8.5 billion, growing at 40%, to reach $13.5 billion by 2018

Avg price for 8 ounce can - $2.99

Enthusiastic consumers – Men of 18-24 years old

Sales of energy drinks with lower levels of caffeine and purer ingredients rising due to demand for healthier drinks

ConsNegative marketing – health risks

Top 4 brands occupied 85% market share.

Only 32% of consumers had an energy drink in past 6 months

11% of them decreased consumption due to health risks

Sports drink marketPros

Market revenue -$7.5 billionExpected to grow to $9.58 billion in 2017

Attracted a wider consumer base than energy drinks

Consumers – 62% aged b/w 18-24, 77% aged b/w 12-17

Increasing demand for diet and low sugar sports drinks. Market grew by 33% in 2yrs

Market size for diet sports drinks expected to increase from $1.4 to $2.97 billion in 2017

ConsNegative marketing – Childhood obesity.

Top 2 brands occupied 94% market share.

Slowing market – increased only by 9% between 2007 and 2012

Avg $1 to $2 for 12 & 14 ounce containers respectively

Only 27% of consumers are females

Perceptual map of sports and energy drinks w.r.t. hydration vs energy

Perceptual map of sports and energy drinks w.r.t. nutrition vs taste

organic drink marketPros

Growing market for products with natural and organic ingredients

Target a wider consumer base

Command a premium pricing (25% more than conventional beverages)

Focus is one quality ingredients. Hence target consumers who are willing to pay more for quality

ConsSole focus on health and quality - lose out on other important customer segments

Appeal to wide range of customers not feasible on $750,000 budget

More distributors and retailers to be evaluated – time won’t permit

Demographics of Crescent online consumers Age ranges

18–24 44% 25–34 36% 35–44 15% 45–54 3% 55+ 2% Male 59% Female 41% College degree - 62%

Household income (median) ~ $42,500

Percentage of respondents who described Crescent

Descriptor Refreshing 35% Healthy 22%

Affordable 29% Functional 47% Too sweet 9% Suitable for teens 8% Fun 19% Natural 38% Hydrating 29%

Crescent – customer perception

Feedback on crescent

Retailer FeedbackTheir inventory of Crescent depleted quickly

Popular among customers aged 18 to 30

Higher percentage of women purchasers than anticipated

Stocks got depleted even when prices where hike by 25%

Customer FeedbackTaste appeals to most consumers

Only 25% remained concerned about lower amount of caffeine

Perceived well as a healthy alternative to energy drinks

Good taste, healthy ingredients and slight pick-me-up : consumer thumbs up.

energy organic

Organic energy drink

Reasons for such positioning

Consumers viewed “Energy” as Crescent’s most descriptive character

Positioning Crescent as and energy drink would reinforce existing perceptions from Oregon

Contains healthy ingredients, low sugar, yet packs a punch – 80mg caffeine

Energy drinks contained artificial sweeteners and excessive levels of stimulants

Crescent, as an organic energy drink can be a healthier alternative to these energy drinks

Advantages of such positioning

Avg pricing of energy drinks are $2.99 per 8 ounce can. Crescent, at $2.75 is a cheaper and lucrative option

Energy drink market is booming, growing at 40% and customers are already looking for healthier alternatives

Interest in Crescent’s natural ingredients reflected focus on health and wellbeing, thus transcended age groups and demographic profile.

Can make inroads into the organic drink market by brand extension

Cost Area Amount

Wholesale price / can $1.24

Cost price / can $1.02

Profit / can $0.22

Number of cans / case 24

Profit / case $5.28

Production of number of cases / month 12,000

Profit / month $63,360

Profit / year $760,320

Advertising costs $750,000

Net Profit $10,320

BREAK EVEN? YES!

BREAK EVEN ANALYSIS

Disclaimer Created by Aniketo Ghosh, Heritage Institute of

Technology, Kolkata during a marketing internship under Prof. Sameer Mathur, IIM – Lucknow.