Dr Pepper Case Study PDF

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Answering questions regarding Dr Pepper and consolidate everything into the report....

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Figure : Dr. Pepper-Snapple and Keurig Green Mountain

Keurig & Dr. Pepper-Snapple: Tastier Together Prepared for:

SAIT Polytechnic

Prepared by:

SCMT 395 | BA Students | School of Business | SAIT Polytechnic

May 1, 2021

Keurig, Dr. Pepper-Snapple: Tastier Together

Contents Introduction....................................................................................................................................1 Keurig’s Competitive Strategy....................................................................................................2 The Five Generic Strategies...................................................................................................2 Keurig’s competitive strategy and their uniqueness............................................................2 Strategic Move, Timing and Scope of Operations...................................................................3 Dr. Pepper’s First mover Disadvantages..............................................................................3 The Impact to the Scope of Operations................................................................................3 The Merger of Keurig and Dr. Pepper-Snapple.......................................................................4 The Benefits Of Acquiring Dr. Pepper-Snapple...................................................................4 Potential Risks Of Failing The Acquisition, Main Competitors, and The Competitive Advantage.................................................................................................................................4 Keurig-Dr. Pepper’s International Competitions......................................................................6 Keurig- Dr Pepper’s International Strategy...........................................................................7 Challenges Of The Non-Coffee Industry...............................................................................7 Conclusion....................................................................................................................................8 References...................................................................................................................................9

Table of Figures Figure 1: Dr. Pepper-Snapple and Keurig Green Mountain..............................................0 Figure 2: Dr. Pepper Snapple's Subsidiaries....................................................................4 Figure 3: Fountain Drinks market share in the fast food restaurants................................6

Table of Table Table 1: Keurig and Dr. Pepper Snapper's Competitors.........................................................5

Keurig, Dr. Pepper-Snapple: Tastier Together

Introduction This paper will examine generic strategies used by businesses and will magnify Keurig’s competitive strategies that make them unique. Strategic moves, timing, and overall scope of operations for Dr. Pepper will be on display. A large portion of this paper will discuss Keurig merging with Dr. Pepper-Snapple and all the risks and advantages that come along with the merge. With a change in market size, comes a change in strategy; Keurig-Dr. Pepper’s competitive strategy in the international stage will be discussed in detail. The competitors of Keurig-Dr. Pepper will face and how the company needs to strategize will be analyzed. The challenges of the non-coffee industry result in the need for different strategy, and Keurig-Dr. Pepper’s adjustments will be elaborated further. Lastly, a conclusion will be provided to summarize the findings within this report.

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Keurig’s Competitive Strategy THE FIVE GENERIC STRATEGIES The five competitive strategies are overall low-cost provider strategy, broad differentiation strategy, focused differentiation strategy, focused low cost strategy, and best cost provider strategy. The low-cost provider is the company with the lowest cost of the product that is being sold. They utilize this strategy by using their low-cost products or services to either interest many buyers looking for a low price which creates larger revenues or having a high profit margin on their products/services. The broad differentiation strategy provides a unique product that many buyers are interested in and are willing to buy. The focused low-cost strategy is similar to the low-cost provider except a company sells their product to a niche market. The focused differentiation strategy is selling a designed product to a unique target market. The best cost provider are the combination of the low cost and differentiation strategies. KEURIG’S COMPETITIVE STRATEGY AND THEIR UNIQUENESS Keurig’s would be using the broad differentiation strategy. Keurig is now offering a new product of cold beverages which will attract a big group of customers. Also, Keurig adds many cold beverages into their product mix, which bring new unique flavors into the coffee business. By having both hot and cold beverages, Keurig will satisfy a wide range of buyers. The uniqueness of Keurig having both hot and cold beverages in their value chain make the broad differentiation strategy take effect for Keurig. The addition of cold beverages to Keurig’s value chain is a uniqueness driver. This uniqueness driver diversifies Keurig from other competitors in the industry. The cold beverages that Keurig now has to offer are unique and diversified as well. Along with many other drinks, they have soda brands such as Dr. Pepper, 7UP, A&W, Canada Dry, etc. Also, they offer a form of iced tea from Snapple which is a unique drink. With all these options “consumers have more choices than ever on what to buy and where to buy” [ CITATION And18 \l 4105 ].

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Strategic Move, Timing and Scope of Operations DR. PEPPER’S FIRST MOVER DISADVANTAGES For much of the time that Dr. Pepper was in the market, it was only bought regionally while Coca-Cola and Pepsi had already been one step ahead in turning their syrup into a Cola. It was costly for Dr. Pepper to gain a larger outreach in an already existing market. However, their first-mover disadvantage was that they were able to win over Coke and Pepsi buyers because their new and unique tasting soda earned its way to being sold coast-to-coast due to the unique flavor of their product. This could be the disadvantage because the product that they created was different from other sodas. While taking some of Coke and Pepsi’s customers, they were now under pressure to keep up with what they were doing with the threat of others attempting to mimic or reciprocate their product. Dr. Pepper had a hard time to step into the soft drink industry that had already been established by popular soda brands. Because Dr. Pepper differentiated their drinks from the others, this was another first-mover disadvantage; potential buyers were skeptical of what Dr. Pepper offers in comparison with Coca-Cola and Pepsi. Eventually the product was flourished, but because the new, innovative, and unique product was doing so well in the market as a first-mover, Coca-Cola was able to follow closely behind in Dr. Pepper’s footsteps and come up with an eerily similar product called Mr. PiBB. Although the fast follower Coca-Cola came up with a next-version product, it also helped in increasing Dr. Pepper sales in the long run, so essentially this firstmover disadvantage turned into an advantage. THE IMPACT TO THE SCOPE OF OPERATIONS Keurig scope of operations would broaden, as they acquired Dr. Pepper-Snapple. Their service offerings would become much broader with the combination of hot and cold beverages under two popular names, and their mix of business would also extend to a larger scope if they want to obtain more customers to their new combination of Keurig and Dr. Pepper. Specifically, both company’s horizontal scope would vary, hopefully in a positive way, because they are hoping to expand their market share through merging their businesses. When considering the vertical scope of both companies, they will need to have activities going on within both businesses, so that their value chain system can continuously improve to have a large outreach. Each company’s scope will have to continue focusing on the market that they already target in, so that they can successfully bring in Dr. Peppers’ market and customers and meet in the middle with Keurig’s market and customers. 4|PAGE

Keurig, Dr. Pepper-Snapple: Tastier Together

The Merger of Keurig and Dr. Pepper-Snapple THE BENEFITS OF ACQUIRING DR. PEPPER-SNAPPLE There are many benefits for JAB Holdings, which is the parent company, that come from Keurig acquiring Dr. Pepper-Snapple. Since the deal is made with the value approximately around $21B [ CITATION Jos18 \l 4105 ], this would be a great time for JAB Holdings and Keurig step up their efforts in the beverage industry. One of the benefits, is that Keurig could be able to extend the company’s product line by combining hot and cold beverages. Dr. PepperSnapple currently owns 7 Up, A&W, Canada Dry, Nantucket Nectars, Fiji Water, and other beverages [ CITATION Jos18 \l 4105 ], another benefit is that the company’s market share and geographic coverage is going to be expanded as well as the growth of profitability. Because Keurig and Dr. Pepper is merged to form Keurig Dr. Pepper, the company is capable of gaining access to Dr. Pepper’s technologies, resources, and capabilities. If the company is planning to come up with their own soft Figure 1: Dr Pepper Snapple's Subsidiaries drink brand, they don’t have to bypass a time consuming, and expensive effort to build up their own soft drink market. POTENTIAL RISKS OF FAILING THE ACQUISITION, MAIN COMPETITORS, AND THE COMPETITIVE ADVANTAGE As mentioned above, there are many benefits regarding to the combination of Keurig and Dr. Pepper Snapper. However, there are many risks associated to the merger of both companies which may cause to the failure to live up the expectations from both companies’ executives. One of the risk is the merging of the corporate cultures between the hot beverages company with the soft drinks firm, and it may cause to the resistance from organization members and the employees. Since the two companies are competing in different market, the key executives of each firm will find it’s difficult when it comes to reach the consensus in making business strategies, changes, and future plans for the newly-formed company, Keurig Dr. Pepper. There’s a possibility of employees giving up their positions due to the disagreement with the instituted changes. Different in 5|PAGE

Keurig, Dr. Pepper-Snapple: Tastier Together

management styles and operating procedures are other risks which may affect the company overall, and the lag behind the intense competition in the beverage industry. The main competitors of Keurig and Dr. Pepper Snapper will be combined due to the merger of both companies, and the forming of Keurig Dr. Pepper. There are many competitors not only in the coffee makers industry, but also in the soft drink industry.

Keurig’s Competitors

Dr. Pepper Snapple’s Competitors

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Starbucks

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Coca-Cola Company

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Hamilton Beach

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PepsiCo

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Cuisinart

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Nestlé SA

- Nespresso Table 1: Keurig and Dr. Pepper Snapper's Competitors The team has reached the consensus that they believed there are many competitive advantages for Keurig Dr. Pepper after Keurig acquired, and combined with Dr. Pepper Snapple. The reason being is that Keurig is famous for their high-quality coffee makers, and K- Cup pods, so the company has a strong relationship with online players, major supermarket, and national chains [ CITATION Sid18 \l 4105 ]. Because of that, the distribution system for Dr. Pepper Snapple is most likely to reach nearly all consumers at every point of sale. On top of that, Keurig Dr. Pepper can offer the combination of hot and cold beverages to the customers which gives them the competitive advantage. The diversity of the product mix and product line in both hot and cold beverages is going to give Keurig Dr. Pepper huge competitive advantages in the competition.

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Keurig, Dr. Pepper-Snapple: Tastier Together

Fountain Drinks Market Share in the Fast- Food Restaurants 10.00%

70.00%

20.00%

Pepsi Coke Dr Pepper

Figure 2: Fountain Drinks market share in the fast food restaurants

Keurig-Dr. Pepper’s International Competitions The three international strategies that may be adopted by companies are multidomestic, global and transnational. These strategies outline how the company’s plans to operate in two or more companies simultaneously [ CITATION Mar15 \l 4105 ]. Multidomestic means that the company focusses on the specific country in order to decide about the products and services specifically that they are going to offer in a particular country. The idea in this strategy is “think local, act local”, which helps the company strategize consumers in different countries based on their buying habits, reactions to marketing campaigns as well as different regulations and distribution channels in the specific country. In some cases, the company’s strategies will include selling their products under a different brand name in specific regions as well as having different packaging and marketing strategies that will fit more appropriate with the culture. Global strategy includes thinking globally as well as acting globally. Company’s implement this by keeping most of the company’s aspects the same regardless of the culture differences in the market. This involves integrating strategic endeavors worldwide instead of specific strategic moves for each channel. Transnational is another strategy that may be implemented by a company. This strategy involves thinking globally and acting locally in the areas where they provide products and services. This strategy essentially allows the company to having a strategic theme that is the same throughout but enables them to customize their products and services from country-to-country to better suit the 7|PAG E

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local markets. One example of this strategy is the McDonalds’s menu, which is mostly universal, but having different food choices in different countries. KEURIG- DR PEPPER’S INTERNATIONAL STRATEGY A strategy that the combined forces should adopt is the transnational strategy. This would be the best approach for them because they already have brand recognition in many areas of the world. By keeping their strategy universal, Keurig-Dr. Pepper could be able the expand their market share as well as build up their brand recognition. Also, this approach allows them to keep the essence of the current strategies in place, as well as differentiate some of their products to countries that they are going to target. This international strategy would benefit them because they will gain more international recognition and be able to build more strategic relationships with other businesses if they could maintain the consistency throughout their products and services. CHALLENGES OF THE NON-COFFEE INDUSTRY A unique challenge that Keurig is going to face from their recent acquisition of Dr. Pepper Snapple is the major ongoing decline in the soda industry. Within the last 20 years, sales of soda have declined more than 25% in the United States (Sanger-Katz, 2015). Recently, anti-obesity campaigns have rocked the United States, and are still working in process to fight the sales of unhealthy products. With that being mentioned, many Americans are trying to avoid unhealthy drinks in order to support the living of a healthy lifestyle. This is a major challenge that Keurig will have to strategically combat because health and fitness industry is growing rapidly. With more people vowing to give up unhealthy products, the sales of Dr. Pepper Snapple and other soft drink companies have started to decline slowly, and it will continuously place a negative impact in the soda industry in the future.

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Conclusion Keurig uses a broad differentiation strategy that is largely possible due to the fact that they merged with Dr. Pepper-Snapple. Now that the two companies are one, Keurig-Dr. Pepper international strategy must be modified to thrive in the international market. Modifications such as targeting certain regions with particular products and also, keeping their core values universal will benefit Keurig-Dr. Pepper with their international ventures. They now have a larger scope of operations, that allows them to explore the non-coffee industry market. With expanding operations and increasing product lines, Keurig-Dr. Pepper is faced with new benefits, as well as new risks. A disadvantage of being a firstmover include uncertainty the customers will be faced with when confronted with a new option to choose from.

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References Cavale, S. (2018, January 29). The Globe and Mail. Retrieved from www.theglobeandmail.com: https://www.theglobeandmail.com/report-onbusiness/international-business/us-business/dr-pepper-snapple-and-keurig-greenmountain-to-merge/article37764453/ Cheng, A. (2018, January 30). Forbes. Retrieved from www.forbes.com: https://www.forbes.com/sites/andriacheng/2018/01/30/why-keurig-greenmountain-really-wants-dr-pepper-snapple/#7eb4ed35649c Kosman, J. (2018, January 29). New York Post. Retrieved from www.nypost.com: https://nypost.com/2018/01/29/keurig-to-buy-dr-pepper-snapple-in-21b-deal/ Nunes, K. (2018, January 29). Food Business News. Retrieved from www.foodbusinessnews.com: https://www.foodbusinessnews.net/articles/11186-jabholding-co-to-acquire-dr-pepper-snapple-group Sanger-Katz, M. (2015, October 2). Decline of Big Soda. Retrieved from New York Times: https://www.nytimes.com/2015/10/04/upshot/soda-industry-struggles-asconsumer-tastes-change.html

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