ElectroLight
Practice Case

Electro-Light

Practice Case

Electro-Light

Client goal

Our client is SuperSoda. SuperSoda is a top-three beverage producer in the United States and has approached McKinsey for help in designing a product-launch strategy.

Description of situation

As an integrated beverage company, SuperSoda leads its own brand design, marketing, and sales efforts. In addition, the company owns the entire beverage supply chain, including production of concentrates, bottling and packaging, and distribution to retail outlets. SuperSoda has a considerable number of brands across carbonated and non-carbonated drinks, five large bottling plants throughout the country, and distribution agreements with most major retailers.

SuperSoda is evaluating the launch of a new product, a flavored sports drink called Electro-Light. Sports drinks are usually designed to replenish both energy (sugars) and electrolytes (salts) in the body. However, Electro-Light has been formulated to focus more on the replenishment of electrolytes and has a reduced sugar content compared to most other sports drinks. The company expects this new beverage to capitalize on the recent trend away from sugar-rich products.

McKinsey study

SuperSoda’s vice president of marketing has asked McKinsey to help analyze the major factors surrounding the launch of Electro-Light and its own internal capabilities to support the effort.

Question 1:

What key factors should SuperSoda consider in deciding whether or not to launch Electro-Light?

Helpful hints

Take time to organize your thoughts before answering. This tells the interviewer that you think about the problem in a logical way.

Develop overall approach before diving into details.

Question 2:

After reviewing the key factors SuperSoda should consider in deciding whether to launch Electro-Light, your team wants to understand the beverage market and consumer preferences to gauge potential success of Electro-Light.

Your team has gathered the following information on the US sports-drink market. The information shows an estimate for the share of electrolyte drinks, as well as the current share for the two main electrolyte products: CoolSweat and RecoverPlus.

ElectroLight
Based on the target price and up-front fixed costs, what share of the electrolyte drink market would Electro-Light need to capture in order to break even? Here is some additional information for you to consider as you form your response:

  • Electro-Light would launch in a 16-ounce presentation (one-eighth of a gallon) with a price of $2 to retailers.
  • In order to launch Electro-Light, SuperSoda would need to incur $40 million as total fixed costs, including marketing expenses as well as increased costs across the production and distribution network.
  • The vice president of operations estimates that each bottle would cost $1.90 to produce and deliver in the newly established process.

Helpful hints

  • Ask for clarification of information.
  • Take notes of the numbers, and don't be concerned if the units are unfamiliar to you.
  • Take time to plan out how to approach the calculation.
  • Describe your approach and talk the interviewer through your calculation. The more you talk the easier it will be for your interviewer to help you.

Question 3:

SuperSoda executives believe that the company's position as a top three beverage company gives them strategic strengths toward achieving the desired market share. However, they ask the team to outline what would be needed to achieve the target of 12.5 percent share of the electrolyte-drinks market. What would SuperSoda need to do to gain the required market share for Electro-Light following its launch?

Question 4:

To help SuperSoda determine how best to launch the new Electro-Light product, the team conducted a consumer-research study. The following information shows results from the study. What can you conclude from this regarding how the new Electro-Light product should be launched?

ElectroLight exhibit 2