Case Study

Crescent was a non-alcoholic functional beverage with an impending launch in three U.S. markets. PDB acquired Crescent in July 2013; the drink’s combination of energy enhancing, hydrating, and all-organic ingredients made it a natural extension for PDB’s existing organic product lines. However, PDB’s management team disagreed about which of two viable positioning strategies would maximize Crescent’s revenues. Some felt the drink’s energizing ingredients supported an energy-drink positioning, while others felt that due to the drink’s hydrating elements, a sports-drink positioning made more sense.

PDB planned to embark on a “soft launch” of Crescent in three western states (California, Oregon, and Washington) in January 2014. PDB projected that these three states represented 15% of national functional beverage demand.

PDB was under pressure to define the product by October 1 in order to negotiate with beverage distributors and retailers, and to hire advertisers to develop ad campaigns in time for the January 2014 launch. PDB planned to spend $750,000 on advertising for Crescent in 2014 and used that figure as a benchmark earnings goal. If 2014 profits met or exceeded the goal, PDB would fund Crescent’s national expansion in 2015.

US Beverage Industry: Non Alcoholic

In 2013, the non-alcoholic beverage market—which included water, dairy, juice, soda, and functional beverages — was estimated to be $131 billion and was projected to grow to $164 billion by 2018.2 This market had suffered due to restrained consumer spending during the economic recession, but the trend was slowly reversing as the economy recovered. Many new products were launched in the segment by 2012. This wave of introductions was expected to continue into the foreseeable future.

Distributing food and beverage products, which involved moving products from a manufacturing site into the hands of consumers, entailed many steps and varied by the size and influence of both retailers and manufacturers. In...