This case study examines the product development challenge facing United Beverages, Inc., whose flagship beverage line, GangBusters Interactive Beverages, has experienced slowing sales after five years of sustained success. The paper evaluates the pros and cons of three potential growth initiatives—the GangBusters expansion program, a kid-energy drink project, and an innovative dual-drink project—and identifies the key factors the development team must weigh, including market uncertainty, resource allocation, product life cycles, and emerging beverage packaging technologies. Drawing on team member recommendations and focus group data, the paper concludes with a recommended integrated strategy designed to leverage all three initiatives while protecting the company's primary revenue source.
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GangBusters Interactive Beverages, the first product created and marketed by United Beverages, Inc., has been a major success. The product has achieved widespread brand recognition and has even acquired a collectors' following on the level with Pez Candy dispensers. During recent months, however, sales of the company's flagship beverage product have languished, and the United Beverages product development team must formulate new approaches for the company's future growth.
Among other factors, the product development team must take into account the respective costs and anticipated product life cycles of potential new products, together with market and technical uncertainties as well as resource allocation issues based on United Beverages' product development strategy. To determine which of three courses of action — or combination of approaches — is best suited to achieve United Beverages' goals for future growth, this study identifies the pros and cons of each option, discusses the factors that should be taken into account when deciding which product or products to develop, and summarizes the project team's recommendations. An analysis of possible scenarios and underlying assumptions is followed by a summary of the research and recommendations in the conclusion.
The three ongoing development projects at United Beverages, Inc. are (a) the GangBusters expansion program, (b) the kid-energy drink project, and (c) the dual-drink project. Each of these projects has some merit — and its champion — but each also has corresponding drawbacks and its critics. The respective pros and cons of each initiative are summarized below.
Pros: Potential new markets exist in foreign countries through expanded flavors and local and regional characters for interactive design. The brand has become ubiquitous and has acquired a collectors' following comparable to Pez. The product has a proven track record of success and is the company's main source of corporate revenues. Distribution chains are already in place, and forty-five major world-class collectible characters are currently under licensing agreements.
Cons: The product may have reached its plateau and is highly vulnerable to competition from major players such as Coca-Cola and Pepsi.
Pros: The product is easy to produce.
Cons: Competition in this market is fierce.
Pros: This market may be four to five times as large as the GangBusters market. Innovative products are congruent with the company's culture, its R&D commitment (8% to 10% of revenue), and its in-house expertise. The product may also be patentable.
Cons: The market is not well defined and no consumer preference data are available. The project involves substantial development costs and would drain scarce resources from the flagship product, GangBusters, at a point when it is especially vulnerable.
Because the company does not have deep pockets but does have a commitment to innovation, there is little room for experimentation or false starts — the first major decision must be the right one. The product development team at United Beverages, Inc. therefore has much to consider in deciding which of these three avenues to pursue, given the highly competitive nature of the industry. As Jonsson and Tyler (1999) emphasize, "Packaging is a crowded, competitive industry. Major beverage producers use all types of packaging even within individual product lines. Aseptics, glass, aluminum, paper, and plastic packaging manufacturers fight tooth and nail for even slight market share gains" (p. 44).
First and foremost, any corporate resources diverted from improving and expanding the company's cash cow — GangBusters — will likely reduce the company's revenues in the short term. In addition, the target markets for the dual-drink and energy drink projects are ill-defined and uncertain compared to the target market for GangBusters, making further research in this area essential. The product development team should determine the size of the target markets for the respective products, what revenues can be reasonably expected, the potential life cycle of each product, and what barriers to entry exist.
Finally, and perhaps most importantly, the development team must consider current trends in beverage packaging technologies that might allow them to create even more interactive containers — innovations that could help the company achieve its corporate goals for sustainable growth in the future.
In some cases, development team members brainstormed broadly, while in others more concrete observations and recommendations were provided. A summary of the development team's recommendations is presented below.
"Individual team member views on each project"
"Scenarios, assumptions, nanotechnology, and consumer packaging trends"
The development team established the following assumptions for these three product initiatives:
General Assumptions:
1. Continued growth for GangBusters in its target customer segment (consumers aged 9–14 years). 2. Cross-selling opportunities exist due to product familiarity with GangBusters. 3. The kid-energy drink initiative has potential for a moderate to successful outcome. 4. The dual-drink project is potentially lucrative, but the market is uncertain, development time will require approximately one year, and development costs will be high. 5. Ongoing investment will be required to maintain GangBusters' market share.
Preliminary Conclusions for the Dual-Drink Project:
1. The potential market is four to five times as large as GangBusters over the long term. 2. A potentially slower take-up rate is anticipated. 3. Only a quarter of focus group participants viewed the product with some type of positive feedback, while fully half were "not sure."
Preliminary Conclusions for the Kid-Energy Drink Project:
1. The potential market is smaller than the current GangBusters market. 2. A fast acceptance rate is anticipated. 3. Approximately 80% of focus group participants responded favorably to the concept.
Based on current trends in beverage packaging, it is also reasonable to suggest that further innovations in nanotechnology will provide manufacturers with the ability to produce truly interactive beverage containers. These containers could provide a wide range of product information (including the temperature history of the beverage), display graphics and messages that change over time, and perhaps even respond to individual questions from the consumer (Buzby 2010). According to this industry analyst, "In the beverage packaging sector alone, worldwide sales of products using nanotechnology grew almost six-fold in two years from $150 million in 2002 to $860 million in 2004" (Buzby 2010, p. 529).
While much of this investment in nanotechnology in food and beverage packaging has been focused on improving the structural integrity of containers, these innovations will also provide manufacturers with new ways to manipulate packaging that were never previously possible. It may even be possible within the foreseeable future for beverage containers to transform into new shapes after consumption — for example, an aerodynamic shape that can fly like a glider or be spun like a Frisbee. According to Wilson and Vozikis (2008), beverage producers that remain tied to static designs run the risk of being overtaken by competitors who recognize the potential of new packaging technologies. As these authors report, "It is important to realize that no design is sacred: form follows where the future leads. Consider the containers used in the beverage industry" (Wilson & Vozikis 2008, p. 39).
In support of this assertion, Wilson and Vozikis (2008, p. 40) cite the following examples from beverage container developmental history:
1. Glass bottles and crown bottle caps allowed beverages to be stored for individual consumption. 2. Advancements in tin and aluminum production allowed for the replacement of glass bottles in some cases, due to cost savings in transportation and production. 3. Advancements in plastics — namely high-density polyethylene — allowed for the substitution of metal packaging with plastic. 4. Advancements in materials technology changed the bottling industry and, with it, the design of the container itself.
It can also be assumed that consumer interest in innovative packaging will continue to increase. Studies have shown that consumer perceptions of beverage packaging have changed significantly in recent years. As one source notes, "Instead of viewing it as a necessary evil, consumers see desirable packages as a reason to purchase, and packages they don't like as a reason to avoid products they might otherwise choose" (Consumers yearn for better packaging 2000, p. 37). The eye-catching and colorful designs used by United Beverages in its GangBusters product line are therefore a desirable reason for consumers to select this product over its numerous competitors.
A survey by the Consumer Network found that "triggering such a shift is a critical mass of consumer-friendly packages that relieve widely experienced frustrations, delight the eye, or facilitate multi-tasking lifestyles with new levels of convenience and flexibility" (Consumers yearn for better packaging 2000, p. 37). Although the GangBusters package may "delight the eye" — as demonstrated by the collector following that has emerged in recent years — the Consumer Network survey of 1,600 respondents also found that consumers were interested in other aspects of beverage packaging, including:
1. Twist-off closures on juice cartons were the most widely noted improvement, followed by personal-size milk bottles, zipper closures, and no-spill (sports-cap) water bottles. 2. Consumers appreciate ergonomic packages shaped to fit the hand and eye-pleasing graphics. 3. Many consumers believe that all gable-top milk containers should have spouts or yield to alternative, more user-friendly packages. 4. Consumers feel soft drinks have failed to keep up with needs for smaller sizes, hand and mouth fit, reclosing, fizz retention, and sturdier bottoms. 5. Consumers like plastic, but miss the cold-keeping attributes of glass. 6. A majority of respondents indicated that packaging improvements are needed in sugar and flour (80%), drugs in pill and tablet form (68%), crackers and cookies (61%), chips (58%), canned soft drinks (58%), cereal (57%), milk (55%), and two-liter soft drinks (50%). 7. There is also wide interest in packages that can be harmlessly composted, can be stored in small spaces, and go beyond tamper-evidence to show abuse that sometimes causes damaged or broken contents. 8. Packages that notify consumers when leftovers have gone bad also have great appeal (Consumers yearn for better packaging 2000, p. 37).
Less is known, however, about the acceptance rates of these different beverage packaging concepts in countries where the company does not currently compete. In this regard, Buzby (2010) emphasizes that "consumer acceptance of new food technologies is influenced by many factors, including consumers' perceptions of the risks and benefits as well as perceived quality, perceived naturalness, price, and general attitudes, values and cultural norms. Diverse cultures, traditions and values in different parts of the world may also have a significant impact on consumer acceptance of new technologies and products" (p. 529). These are therefore exciting yet challenging times for United Beverages, and the harsh reality the company faces means that an optimal allocation of resources must be made among the three projects described above.
The research shows that United Beverages' flagship product, GangBusters, remains a viable product line but requires some ongoing commitment of resources to stay competitive. The GangBusters product line has much going for it, including numerous valuable licensing agreements with world-class characters and a collectors' following comparable to Pez.
Based on the respective pros and cons of each of the three projects discussed above, the optimal application of the company's resources would best be achieved by integrating all three projects into one cohesive strategy. Since the kid-energy drink project is easy to produce, it could readily be added to the company's existing beverages within their interactive containers. Likewise, the existing interactive containers could be modified to accommodate the dual-drink innovation rather than developing an entirely new container from scratch. This approach would capitalize on the pros of all three projects while minimizing their respective cons.
The company should also exploit the opportunity represented by its enormous collectors' following by creating new containers specifically for that market. Finally, United Beverages should investigate opportunities beyond these three initiatives — including the use of so-called "drink boxes" for its product line (particularly appropriate for the kid-energy drink product) as well as innovative ways in which its beverage containers can be recycled into useful household products, while retaining the integrity of the brand image.
Buzby, J.C. (2010). 'Nanotechnology for Food Applications: More Questions than Answers.' Journal of Consumer Affairs, vol. 44, no. 3, pp. 528–530.
Chao, R. & Kavadias, S. (2007, November 15). 'United Beverages: Product Development Genius or One-Hit-Wonder?' Darden School of Business: UV0900-PDF-ENG.
'Consumers yearn for better packaging.' (2000, April). USA Today: Society for the Advancement of Education, vol. 128, no. 2659, p. 5.
Jonsson, D. & Tyler, W. (1999, June). 'Thinking out of the Box.' Chief Executive, no. 124, pp. 44–46.
Wilson, J.M. & Vozikis, G.S. (2008). 'Bridging the Gap from Concept to Prototype: A Case Study.' SAM Advanced Management Journal, vol. 73, no. 3, pp. 39–41.
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