Research Proposal: Red Bull Candy Is a Hard

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Red Bull Candy is a hard candy based on the Red Bull formula, combining caffeine and herbs. The product will be marketed at the existing Red Bull customer base, as it is believed to share the same demographic and psychographic profile. We believe Red Bull Candy has tremendous market potential, but our optimism is guarded, based on a few unresolved issues.

At its core, the concept leans heavily on the established Red Bull brand equity and distribution capabilities. The market for caffeinated candies, however, is relatively underdeveloped at this point. This represents an opportunity, but it also represents a potentially significant constraint. We will need to focus the marketing message on the development of the candy market, so as not to cannibalize our existing beverage business. We also believe that if we build this market, many competitors will enter. This means that we will need to establish a saturation strategy, allowing us to defend against such new competition.

There are a number of areas for further research as well. We will need to study the perception of the product's effectiveness, which we feel may be a constraint to building the market. Another area for future research is to determine how best to market the product leveraging the Red Bull brand but without drawing down the beverage business. We must figure out the triggers in our target market that are not currently being used that we can use to develop new uses for the Red Bull concept. We must also determine the degree to which online marketing can be used for this product. Unlike our beverages, we can easily utilize this channel, but its effectiveness at this time in unknown.

Replies

Q1. There are a number of caffeinated candies and mints on the market. These competitors include Jolt Gum, Penguin Mints, VoJo Energy Mints, Blitz Energy Gum, Foosh Energy Mints, Black and Buzz Bites. There are even caffeinated breath sprays and sunflower seeds. Most of these products are fairly gimmicky, and only pose a moderate to minor competitive threat.

The Red Bull Candy concept has several advantages over most of these competitors. When analyzing the competitors, several factors must be considered. One is the type of product -- the more normal the product as a means of caffeine delivery the more of a competitive threat. The strength of the brand name is important. The distribution capability of the company is another element of the competitive threat. Many of these products have low brand equity and poor distribution.

Penguin and Jolt Gum are therefore the strongest competitive threats, because of their packaging, brand image and their distribution. While neither of these can be expected to be a stronger competitor than Red Bull, they both have established brands and good distribution capabilities. Red Bull consumers are more likely to be attracted to Penguin, based on the low-end image of Jolt. There are several strong competitive threats not yet competing in this space as well -- caffeine merchants such as Rockstar, Starbucks and lesser known but solid competitors like Bawls, 5-Hour Energy, and a wide range of others. Any of these brands could enter the caffeinated candy segment and represent a strong competitive threat. Indeed, if Red Bull candy performs well, we would expect some of these players to enter the market.

Q2. Red Bull Candy is a hard candy, with the caffeine and herbal compound of Red Bull. The taste profile is the same. Essentially, the candy starts with the base Red Bull recipe, but it crafted into hard candy rather than liquid format. In some ways, it is a condensed Red Bull, being slightly more intense in flavor. The caffeine delivery will be about equivalent to half a can of Red Bull per piece. The candy comes in a small pack containing six pieces.

As a brand extension, the target market is similar. The different delivery format has certain implications for the marketing and the distribution chain. With respect to distribution, the convenience and grocery business will remain the same. Indeed, the candy product, being smaller in size than Red Bull cans, will give us greater capabilities with respect to point-of-purchase marketing through this channel. The new product will not have the same nightclub usage, and will thus not be marketed through that channel. The smaller format will allow for mail order channels to be utilized however.

The market will remain the core 15-35 middle class segment. The product will be priced in accordance with the Red Bull brand image and the means of the target market. The psychographic will be similar to the Red Bull beverage -- consumers on the go, with busy lives and hectic schedules. These are people who need a restorative at various points during the day, to maintain alertness.

Q3. The revenue projections for Red Bull Candy are based on two main components. Essentially, the projections began with the success of such products already on the market. To this, the effects of using the Red Bull name, marketing and distribution muscle are applied. We feel that our presence will increase the size of the industry. We have projected a short-term market share superior to that of the Red Bull beverage. Over time as more, stronger competitors enter the market we expect our market share will approach the level owned by the beverage.

The revenue projections at present are optimistic, and based on the distribution of the candies matching the distribution of the beverages. We predicate our projections of being able to get Red Bull Candy onto the counters and into the shelves of all the retailers that currently carry the beverage. This is realistic, but it is also optimistic. More likely, we will get a trial. Our projections are based on that trial being successful, and the retail partners then continuing to stock our product.

Profit projections are based on the revenue projects and our expected markups. The Red Bull beverage has long been a price-setter in its industry. We believe we can do the same in the candy business as well, allowing us to set our own margins. The marketing campaign will need to support our price, by delivering a premium message. We also want to ensure that we do not cannibalize our beverage, causing our overall corporate profit will decline. Thus, the marketing message needs to focus on differentiating the candy market from the beverage market. We are targeting the same consumers, so what we will need to do is place increased emphasis on product usage. We want people to use the convenience of the candy format to find new uses for Red Bull restoration. The message should plant a few ideas in consumers' heads that are far enough removed from the present beverage applications as to avoid cannibalization.

3a) Based on everything seen so far, it appears that the venture has strong potential. One reason is that the Red Bull brand is one of the leading brands in the industry. This gives the product an immediate edge over most competitors. Another competitive advantage is that this product can leverage the existing Red Bull distribution network. The target market is almost identical in terms of demographics and psychographics. Indeed, the biggest question is not whether we can sell this product to this market, but whether we can do so in substantial volume without cannibalizing our existing business. Not only does the Red Bull brand have a dominant market share but it also has the strongest brand in the business. This can easily be leverage through brand extension. The product is sufficiently differentiated and the market for caffeinated candy has been introduced and deemed by many competitors to be viable.

There are, however, some questions that remain. One involves cannibalization. We will need to conduct further research with respect to this risk, and attempt to determine ways to minimize this risk. We want to build a new market, not take from our existing base. Another question that remains is the size of the market. The current market for caffeinated candies is relatively small, compared to the beverage market. We understand that Red Bull started with a minor market and grew the segment, but we also know that Red Bull was confident about its ability to grow the energy drink segment because of the success of the segment in Southeast Asia, where the Red Bull concept originated. There is less information available about the upper potential of the caffeinated candy market. Lastly, we are unsure of the potential to leverage new distribution channels. We are going to lose the nightclub channels with this product, and we want to replace that channel with a new one. We have targeted online marketing since we can easily sell candies over the Internet. Some of our competitors in this space already use this channel effectively, but we are unsure as to whether this will be a major distribution channel or a fringe one at this point. Further research into target market purchasing habits should help us determine the extent to which… [END OF PREVIEW]

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