McKinsey Recruiting Podcast

A good answer would include the following:

Consumers. Who drinks sports drinks? Are there specific market segments to address?

Cost/price. Is the sports drinks market more profitable than those markets for SuperSoda’s current products? Is it possible to profitably sell (at a price set by the market and internal production costs) Electro-Light? Given the fixed costs involved, what would be the break-even point for Electro-Light?

Competitors. Which products will Electro-Light compete with? Which companies are key players and how will they react?

A very good answer might also include multiple additional key factors SuperSoda should consider. For example:

Capabilities and capacity. Are the required marketing and sales capabilities available within SuperSoda? Does the product require specialized production, packaging, or distribution? Is it possible to accommodate Electro-Light in the current production and distribution facilities? What impact does geography have on the plant selection?

Channels. What is the ideal distribution channel for this product? Are current retail outlets willing to add Electro-Light to their product catalog?

A very good answer would include the following:

Electro-Light would need to capture a 12.5 percent market share of electrolyte drinks in order to break even. Therefore, Electro-Light would need to be the number-two product in the market:

1. Electro-Light would need to sell 400 million units in order to break even:

• Variable profit per unit = $2.00 – $1.90 = $0.10
• Break even units = Total fixed costs/Variable profit per unit = $40 million/$0.10 per unit = 400 million units

2. Electro-Light would need to capture a 12.5 percent market share:

• Electrolyte drinks market = 5% x 8,000 million gallons = 400 million gallons
• Electro-Light sales in millions of gallons = 400 million units/8 units per gallon = 50 million gallons
• Market share = 50 million gallons/400 million gallons = 12.5%

A very good answer would include the following.

Match with consumer preferences. Ensure product image, attributes, and quality fulfill the needs of all consumers or niche segment, reaching desired market share. Ensure target price is consistent with other products in the market and the consumer’s expectations

Strong branding/marketing. Create a successful introductory marketing campaign, including advertising, pricing, and bundling promotions. Leverage top-three producer status and limited market fragmentation in order to position Electro-Light brand within top three in the market segment. Anticipate response from competitors (for example, advertising, pricing, distribution agreements). Ensure product positioning does not cannibalize on other, more profitable SuperSoda products. (Note: in marketing, the decreased demand for an existing product that occurs when its vendor releases a new or similar product is called “cannibalization.” It is not important for you to use this business terminology.)

Operational capabilities. Ensure access to preferred distribution channels. Ensure sales-force capabilities to sell the new product. Ensure production ramp-up that allows response to increased demand.

A very good answer would include the following insights:

Branding should emphasize “healthy natural” identity. “Leisure drink” identity is dominated by CoolSweat product, “energy replenishing” by RecoverPlus, and “healthy natural” fragmented in other products. There is a clear niche within the “healthy natural” identity, with top-two brands currently occupying only 30 percent of share of mind. “Healthy natural” branding should also determine thinking around the sales channels (for example, sales through health and nutrition outlets, health aisles at supermarkets).

Distribution differs from current outlets and needs new agreements/research. Major shifts compared to current distribution model required in “supermarkets,” “other,” and “convenience stores.” Agreements with major retail players may accommodate product introduction, with SuperSoda managing mix across channels. “Other” channels need further research, since they are a major component of the sports-drink segment.

Marketing message to emphasize identity and availability. Marketing campaign should be built around the currently unaddressed market need for “healthy natural” drink in order to connect with customers in that segment. Given required changes in distribution channels, Electro-Light messaging should clarify new distribution strategy.