Hawaiian Punch Case Analysis Kate

Hawaiian Punch

Case Analysis

Kate Hoedebeck has a difficult task to revitalize the Hawaiian Punch brand while simultaneously bringing the product into the Cadbury-Schweppes distribution structure. If growth is the goal, and the current segment of juice drinks is stagnant, Hoedebeck needs to extend the brand beyond its current muddled message. Given that she has few resources, she will have to pick her strategies carefully.

This analysis will argue that Hoedebeck should grow dealer/broker sales and deemphasize concentrate. This appears counterintuitive at first: the investment required for new brand extensions is lower in DSD, and the top-line gross margins are higher.

The primary reasons for pursuing this strategy are as follows:

The margin picture could look worse for Broker/Warehouse, as little is disclosed about the assets required to produce the contribution margin. It seems likely that the Return on Assets for HP Broker/Warehouse is even worse than the gross contribution after marketing (16% versus 53%). The effective counterargument to this is that, now a part of a larger soft-drinks manufacturer, the fixed plant and expertise, distribution and sales are already there, and HP can take advantage of the larger infrastructure at less cost per unit delivered.

Strategies to pursue

New fruit flavors and packaging has failed to take off. They simply add cost and complexity to the line, and cost a lot ($250 per flavor) to get stocked on shelves. Since HP's advertising budget is only 2% of the fruit juice category, they don't have the scale to develop significant consumer interest in other flavors, and the brands don't seem to sell themselves directly to the consumer with packaging. The suggestion to introduce "Hispanic" flavors is more of the same -- inadequate budget to pursue it, poor previous experience.

Since the fruit drink segment is stagnant and 100% fruit is growing HP may want to consider a lateral move into that segment.

100% fruit drink based on similar tropical fruits would take advantage of HP's image -- healthy, vitamin C, selling in the fruit juice aisle -- while giving HP a way to take advantage of a market area that is growing. In addition, it would appeal to the same customers who are currently buying the 1-gallon jugs, Moms (no need for the smaller and more-expensive packaging aimed at teens, nor is there a need to market to under-8-year-olds.

This author does not favor an immediate pull-out of the DSD division: it still accounts for nearly 50% of the contribution margin. In order to support advertising and a simpler sales message, HP may want to reduce the number of lines of syrup that it sells to DSD customers; their capacity and lot-size constraints make it difficult for them to support more than a few flavors anyway.

Innovation

This division has suffered from too much innovation and too little follow-through. Now that HP will have better control over its distribution channel, it needs to focus on a few innovations that support the basic message for HP, and for the new thrust into the fruit juice market.

Rather, HP needs to cut flavors and packaging, and focus on those few areas where it plans to grow.