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.

Helpful hints

• Write down important information.
• Feel free to ask the interviewer for an explanation of any point that is not clear to you.

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.

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.

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

• Don’t feel rushed into performing calculations. Take your time.
• Remember that calculators are not allowed - you may wish to write out your calculations on paper during the interviews.
• Talk your interviewer through your steps so that you can demonstrate an organized approach; the more you talk the easier it will be for your interviewer to help you.

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?

Helpful hint

Consider the issues raised in the question, and group your thoughts around them. This will ensure that you are giving the most relevant answers.