Mars: Starburst Sports Drink Launch Strategy

By: Joshua S Neeper

Senior Management Seminar

January 5, 2011

Introduction

My internal and external analysis of Mars has expressed very impressive information about the industry and operations that Mars runs today. They are not the last players to adapt to a changing economy or implement new technologies that serve them and the environment positively. They are considered the leaders and are on the forefront of manufacturing innovation, global distribution and green energy implementation. While deciphering through their internal and external environment, I concluded that there is always room for improvement when your number one. They’ve been able to foresee trends in all economic realms and adapt accordingly. However, I had to think outside the box and determine what Mars could do to maintain market share and increase cash flows, assuming that they allocate the necessary resources to implement a strategy without second guessing. Their operations are streamlined and every aspect I examined; I determined that Mars could implement one of three strategies I consider to be notably profitable, sustainable and most all, efficient.

Strategies

1. Starburst Sports Drink 2. VO2 Performance Bar3. Green Energy Initiative

All three strategies should be, without a doubt, implemented. However, to stay competitive in a global market and use economies of scale to your advantage, a company must look at implementation times, rate of return, profit margin fluctuations and PE ratios if the company is publicly traded (Mars is Privately Owned). I strongly feel that the initial capital requirements are far more favorable for strategy one more so than strategy three.

Strategy-Idea & Selective Reasons

The concept and purpose of the Starburst Sports Drink Strategy Launch is to enter into a new market of manufacturing but targeting most of the existing consumers that use Mars products. This market only has two competitors: Gatorade and PowerAde, that compete for the same target market but no attempt has been made to threaten their market share, until now. Selective reasons are listed below. Starburst Sports Drink

- Enormous market and opportunity - 2 competitors: Gatorade and PowerAde - Gatorade does not have money or resources to compete with Mars or the Mars family regarding cash - Low manufacturing investment - Product distribution partnership with Budweiser

Industry Supportive & Unshakable Facts(all information below attained from http://researchwikis.com/Sports_Drink_Market)

Sports Drink Market Share Break Down

$300 billion sales worldwide in 2005 Market increased 10% to 9.71 million liters in 2005 North America accounted for roughly 49% consumption in 2005 Asia Pacific region accounted for a 38% share in global consumption in 2005 Japan ranked second to the U.S. in terms of per capita consumption, but China is assumed to overtake

Japan as Asia Pacific's leading consumer by volume in year 2010

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2003, Germany was the leading market for sports drinks in Western Europe followed by Italy then the U.K.

Market Metrics (all information below attained from http://researchwikis.com/Sports_Drink_Market)

Global functional drink volume (millions of liters)

CATEGORY 2006 FORECAST 2011

SPORTS DRINKS 9,870.6 13,301.70 ENERGY DRINKS 2,429.4 3,534.10 ELIXIRS 320.7 366.10

TOTAL 12,620.7 17,201.9

(Source: Euromonitor International, 2007)

Sports Beverage Market

Wholesale Dollars (in US billion)

1997 $1.48 1998 $1.69 1999 $1.87 2000 $2.01 2001 $2.18 2002 $2.41

(Source: “Closing the gap?” Beverage World, January 15, 2003)

Industry Players (all information below attained from http://researchwikis.com/Sports_Drink_Market)

PepsiCo’s

“Gatorade is the leader, holding eight spots in the Top 10 brands, according to data from Information Resources Inc. (IRI), Chicago. The PepsiCo brand now has nine categories which are brand names for different flavor profiles of Gatorade’s proprietary formula. The largest gainer is Gatorade Rain which was introduced in 2006, with a 376% increase, according to IRI data.”

Coca-Cola

“Two PowerAde formulations also feature in the top 10. PowerAde and PowerAde Option registered as the No. 2 and No. 8 sellers, respectively.”

Cadbury Schweppes

“They entered into sports drinks with their acquisition of Accelerade, from Pacific Health Laboratories. The brand is popular in fitness conscious regular exercisers. In contrast to other brands that replenish electrolytes, Accelerade uses a protein-based formula,” which Gatorade has implemented into their new product line Recovery.

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2006 Market Share % Based on Sales (in billions)

Strategy Implementation Process

Step 1Divisions throughout the entire organization should synchronize the vision and goal of the purpose through teams. Divisions should consist of members from top management, R&D, legal, finance, accounting, engineering, sales, and marketing. After all representatives are present, a complete business plan and product life cycle needs to be constructed in accordance with a TOA (Team Operating Agreement), which sets forth dead lines, weekly agenda schedules, and expectations.

Step 2Assuming that everything is done accordingly to schedule and a proto-type Starburst Sports Drink is made; all sales representatives need to hit the road and the phones. They need furnish samples to sports teams in soccer, football, Nascar and baseball. Sales contracts should be signed and ready to enforce by the delivery time stated.

Step 3Top management needs to contact top management of Budweiser to develop and agree on a discrete product distribution contract so the public doesn’t affiliate the two companies together. Mars doesn’t distribute their products; they outsource logistic operations. Therefore, Budweiser would allow them distribution to sporting events all across the world and increase both companies’ leverage in the grocery stores. Budweiser is the most consumed beer in the world and have the highest market share in the entire world. Their beverages, international manufacturing and bottling processes possess one the most envied distribution models in the entire world. This completing represents the competiveness of their economies of scales and economies of scope.

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The number one distribution model belongs to Starburst Sports Drink’s new competitor, Gatorade which is owned by Coca Cola but holds the number one spot for weakest profit margin in the industry.

Step 4After a contract is signed and the first sales are made, contact Mars’s top rated customers such as Wal-Mart to make sales arrangements.

Step 5Implement the marketing plan which was constructed in the original business plan immediately as the product hits the grocery stores. The plan should consist of endorsements after the first two months, commercials, radio, ads and sponsoring sporting events. There should also be a detailed planned in creating a new bowl game in college football called the Mars Bowl or the Starburst Bowl played at the Dallas Cowboy’s stadium in Dallas, Texas.

Step 6Sit back and reap the rewards. No body can stop you now.

Wrap Up

There is opportunity, a new market and limited number of competitors in this strategy. A new plant must be constructed in order to implement this new product launch. The engineering is simple and streamlined. The leading expense is initial sales traveling and continuous marketing. The profit margin should generate 50-75 cents for every dollar minus 10-15 cents for Budweiser’s services. First year sales should be projected at $200,000,000 in the North America market with a steady but controlled growth rate of 5-10% per year (coinciding with population distribution). Europe, Russia and Asia Pacific should have the same projections if not higher. The marketing plan should be allocated no less than $50,000,000 which should consist of sub plans tailored to the geographical demographics such as different countries and different sports. Expense accounts for traveling sales representatives should not be less than $5,000,000 (includes food, transportation, hotels, cell phones, lap tops and product samples). Bear in mind that all sales reps will be sent on a two month excursion through Europe, Asia, Russia, Australia, South America, and North America. The bottom line should net 50% of sales. The implementation of this strategy should increase overall sales for all of Mars’s products. I would strongly encourage Mars to implement this strategy swiftly. “Right now Mars is at a total of 17-21% profit margin that is adjusted for inflation. Their subsidiary Wrigley has a current profit margin of 31-35% that is also adjusted for inflation. They adjust accordingly to inflation because it’s the most accurate way of determining their PE ratio since they are a privately owned company. Furthermore, they are currently projecting sales of $40-50 billion in 2011 from $30 billion in 2010. Their ROI and ROR of the Wrigley acquisition are scheduled to be paid off in two years.”1 That is less than five years. This strategy would ensure their projections for the 2011 year and create a new revenue stream and increase cash flows that could be allocated for strategy three, company wide green energy initiative (solar, wind & methane), which would increase profit margins all across the board by at least 7-10%.

1Scott G. Neeper, AAS, BSM - Systems Controls, Sr. Technician – Reliability MARS Chocolate NA

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Works Cited

http://researchwikis.com/Sports_Drink_Market

Scott G. Neeper, AAS, BSM - Systems Controls, Sr. Technician – Reliability MARS Chocolate NA

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