The new energy drink, called V8 V-Fusion® + Energy, is the exhilarative, delicious beverage with well-known components, for example, green tea, which gives people the assurance to trust it and feel calm drinking. It includes one hybrid portion of vegetables (V-Fusion® + Energy, 2015).
The sales in the international market of energy drinks increased by 5% in 2014 compared to 2013 reaching almost $49.9 billion. The American Beverage Association considers that the global energy drink industry will grow significantly in 2017. The USA, Brazil and China will become most popular markets (Fontinelle, n. d.). There are three segments, namely liquid energy drinks, energy drink blends and energy shots, in the U.S. market of energy drinks. It was noted that customers prefer energy drinks over soda. The energy drinks’ segment makes up particular 78% market share, afterwards energy shots comprise 18%, and energy drink blends (approximately 4%) based on the data of 2012 (Report Linker, 2013).
Currently, U.S. market is very attractive and provides with more opportunities than threats. First of all as the U.S. population is the third by population, analyzed energy drink will have enough customers. Market growth is benefited by changes in the U.S. adult populace by age and ethnicity/race. As there is a tendency for healthier life style among customers, V-Fusion + Energy has the opportunity to satisfy customers’ needs properly. Also, political situation in the country, crucial role in many international organizations and its technological progress offer the company prospects to overcome the market successfully.
However, the general economic situation in the USA is challenging due to slow GDP growth (2.2%), huge trade deficit of nearly $40.9 billion in April 2015, relatively complex and diverse tax system (the highest nominal corporate tax rate among OECD-countries) and unemployment rate of 5.6% in 2014 FY (Trading economics, 2015). The last one leads to the shortage of incomes. As the energy drink is not the essential item, its sales can be threatened.
Therefore, new product launches and extended retail supply positively affect total increase of energy drinks and shots.
The biggest competitors on the market include Red Bull, Monster Beverage Corp., Rockstar International, Coca-Cola (Burn) and PepsiCo (Adrenalin Rush). There are also some other noticeable sellers like Celsius, Kraft Foods, Arizaona Beverage, SK Energy Shots, Living Essentials, etc. Speaking about market structure, it is worth mentioning that industry’s companies operate in the oligopoly market, where a relatively small number of large enterprises (Red Bull, Monster Beverage Corp. and Rockstar International) jointly control over 85% of total size. The impact of rivals can be considered as high intensive as a result of high entry barriers and presence of companies, which have the major share of the market.
Being oriented on the premium class with higher price over rivals, Red Bull Positioning Strategy Statement sounds as the company offers prospects of stimulating individual’s physical and mental weakness during worrying and damaging circumstances. Its energy drinks will improve individual’s operation, attentiveness, observance and metabolism applying health awakening energy-building components. Red Bull’s advertising strategy depends seriously on occasion and extreme sports sponsorship, buzz marketing, and TV commercials (Fontinelle, n. d.).
Monster Beverage Corp. also prefers to put premium prices on its products. Red Bull leads the foreign market share, but Monster has chipped away at its competitor’s position with grown supply and branding efforts. The company has recently concluded an agreement with Coca-Cola to accelerate new-market penetration, at the same time facilitating to increase profitability. Its position is greatly influenced by its wide distribution network, which allows it to serve different categories of consumers with energy drinks (Fleck, 2015). Monster Beverage Corp. promotes itself as it is not just usual energy drink, rather it is a lifestyle in a can. The company connects itself with active sports, punk rock music, festivities, spending time with the girls, and living life on the edge (Fontinelle, n. d.).
Rockstar International considers its beverages are aimed at people, who enjoy dynamic lifestyles. Company’s cans are recognized for their optimistic, different colors by every aroma (product line extension) with an exclusive color. Customers perceive Rockstar distinguishes its trademark with special lifestyle brand and motto of partying like a rock star. The price is the same as of above discussed competitors, but the difference is in its bigger volume (Fontinelle, n. d.).
There is an uncertain segment of substantial users: 5% of grown-ups consume energy drinks 5-7 times per month and less than 2% drink energy drinks 10 or more times. Customers of 18-34 years old, males, Hispanics, Pacific region residents, and adults with children in the household are demographics that over index in energy drink usage (Report Linker, 2013).
As V8 V-Fusion® + Energy is the exhilarative, natural, delicious beverage with well-known components, it can target a little broader segment of customers, namely the average age is 15-50 years, out of which more than 60% under the age of 35. Buyers are socially active and mobile, always ready to try something new as well as they are not bound by unity of interests, education, income, but have the preferences of taste. Basic consumer expectations of product are particular state (excitation, euphoria, joy), increase of efficiency, tidal forces to perform a specific task in a given time period, relaxation, stress relief, even some “forgetting”, quality leisure and health improvement.
V8 V-Fusion® + Energy should be positioned as the product of new generation, which not only gives power and increase productivity, but also positively influencing energy-drink with B vitamins’ elements. Lack of sugar in the recipe makes it a low-calorie, which gives the cocktail more attractiveness. V8 can somehow stand like V-Fusion® + Energy Vital Vitamins Vanquish Various Voids Via Veins.
Having an idea of the rules governing the formation of demand for the goods, the overall situation in the industry, the prices and costs of competitors, defining its own pricing strategy, the company can go to the choice of a particular method of pricing for manufactured goods. Obviously that properly set price should fully recover all the costs of production, distribution and marketing of goods and also provide a certain rate of return. There are three methods of pricing, namely setting minimum prices determined by costs, setting a maximum price level formed by demand, and finally, the set of an optimal level of prices. When setting prices the commodity producer must predict the quality of own goods and goods of competitors, the price level compared to the quality, as well as take into account the possible behavior of buyers.
V8 V-Fusion® + Energy should be priced on the basis of “perceived value” of the energy drink. It is one of the most original methods of pricing, when a growing number of companies begin the calculation of the prices from the perceived value of their products. In this method costly landmarks fade into the background, giving way to the perception by consumers of the goods. In order to form in the minds of consumers’ understanding of the value of the goods it is necessary to use non-price methods of impact, namely energy drinks effects, components, popularity among celebrities, company’s service, etc. The price in this case reinforces the perceived value.
Fleck, A. (2015). Monster set to enjoy improved international sales and margins with its Coca-Cola partnership. Retrieved from http://analysisreport.morningstar.com/stock/research?t=MNST®ion=USA&culture=en-US&productcode=MLE [Accessed: June 23, 2015]
Fontinelle, A. (n. d.). The Energy Drinks Industry. Retrieved from http://www.investopedia.com/articles/investing/022315/energy-drinks-industry.asp [Accessed: June 23, 2015]
Report Linker (2013). Energy Drinks and Shots: U.S. Market Trends. Retrieved from http://www.reportlinker.com/p01095494-summary/Energy-Drinks-and-Shots-U-S-Market-Trends.html [Accessed: June 23, 2015]
Trading economics (2015). United States – Economic Indicators. Retrieved from http://www.tradingeconomics.com/united-states/indicators [Accessed: June 23, 2015]
V-Fusion® + Energy (2015). Retrieved from http://www.vfusionplusenergy.com/ [Accessed: June 23, 2015]