This case study paper was compiled and submitted by the following students from MGT 101 - Section

T class of Prof. Loida Mojica on January 12, 2012:

Arellano, Regina Mae Q. 2008-56620 BS Computer Science Ramos, Darril

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________________________________ BS Computer Science Sabio, Bambi ________________________________ BS Agricultural Business Smith, Justine ________________________________ BS Biology Tolentino, Karen ________________________________ BS Computer Science

SNAPPLE STEALS SHARE

I.

Point of View The point of view taken from the case analysis of Snapple is the managers point of view since the manager possesses the authority in decision-making and has the control over the implementation of necessary actions to the problems challenging the company.

II. Problem Statement How can the implementation of strategic plans help Snapple withstand the rising competition against big beverage companies, and as well as increase its profitability? Snapples success in launching their ready-to-drink iced tea alarmed the two known soft drink companies, Coca-Cola and Pepsi. Because of the threat imposed of the iced tea market to the cola market, both Pepsi and Coca-Cola joint venture with the other companies offering iced tea brands, thus, beginning a competition against Snapple.

III. Analysis of Relevant Case Facts

A. Macro environment Analysis

The market for iced tea in the United States is unexpectedly huge since nearly 75 percent of the households served iced teas, and the market is still growing. Because of this big market for iced tea, the ready-to-drink iced tea market immediately accepted by the consumers and climbed up to 50 percent versus the cola market, with only 1.5 percent increase in 1992. Although, Snapple took an upturn when they launched their product, they were still not recognized all over United States. Only 51 out 278 major supermarket chains Snapple was distributed and also, they lack advertisements. The company being able to offer beverage in bottle does not have its own production facilities thus, having analyst to speculate that they will not survive the upcoming competition with the giant companies. The lack of production facilities results to their high price cost and inability to distribute products in the supermarkets. B. Industry Analysis The acceptance of Snapple in the market was due to increase in customers health consciousness and the growing market of iced tea. Due to its preservative-free assurance and being a ready-to-drink package bottle, the customers saw it appealing and started to buy the product. The increase of sales of ready-to-drink iced teas alarmed the soft drink companies such as Coca-Cola and Pepsi, giving them the thought of joint alliances with Uniliver and its Lipton brand for Pepsi, and with Nestle S.A. and its Nestea brand for Coca-Cola. Their decision made way for an intense competition against Snapple. Although, the customers response to Snapple was relatively good, it cannot be concluded that all potential customers would buy the product because of its relatively high price of about $1 per 16 ounce bottle compared to the preference of other customers to make their own iced tea at home which was way cheaper that buying ready-to-drink iced tea. Snapple do not acquire the greater supermarket presence because of the lack of distribution of their products in the market. This might due to the absence of production facilities in the company and the relatively small size of their employees. C. Internal Environment Analysis Snapple is a small, entrepreneurial company housing only 87 employees. It launched a ready-to-drink iced tea in the market in 1988, offering 11 different flavors. The relatively small size of the company gave the doubts that Snapple

might not be able to survive the industry, in addition to the lack of facilities in the company.

SWOT Analysis Strengths Companys innovation of a new product The introduction of ready-to-drink iced tea in 11 different flavors. Company promote the health benefits of their products Snapple promotes a preservative-free ready-to-drink iced tea which captured the health consciousness of people in 1990s. Captured the increasing percent of households serving iced tea The introduction of the ready-to-drink iced tea was a big hit because of the large portion of the United States households serving iced tea, and still growing. Weaknesses Company has no production facilities The failure of having production facilities of their own resulted to the inability to distribute products in the market and high price cost of the product. Lack of national recognition of the product The product was not well-known all over the place because of lack of advertisements and inability to distribute products in different supermarket chains. Inability to produce products in different package The only size of bottle of Snapple available was 16 ounce, which was not possible to be in the vending machine market which requires a smaller size of packaging. Opportunities Big market for iced tea drinks Increased in the demands of iced tea in the United States households. Favorable response of costumers to ready-to-drink iced tea

The fast acceptance of customers to the ready-to-drink ice tea products. Preference of customers to a healthier options of drinks The promotion of Snapple of a preservative-free ready-to-drink iced tea. Threats

Increasing players (competitors) in the industry Increases the competition between Snapple and the other beverage companies such as Pepsi and Coca-Cola. Joint ventures of soft drink companies with companies offering iced tea brands Sift drink companies alarmed in the sudden success of Snapple in the market, acquired access through the joint alliances with companies with iced tea brands to pull a competition. Distribution and marketing power of competitors The wide distribution of competitors products in the supermarkets and vending machines, and the big advertisements put Snapple to the corner.

SWOT Matrix

OPPORTUNITIES External Enviro nment Analysis Internal Environment Analysis Big market for iced tea drinks Favorable response of costumers to ready-todrink iced tea Preference of customers to a healthier options of drinks

THREATS

Increasing players (competitors) in the industry Joint ventures of soft drink companies with companies offering iced tea brands Distribution and marketing power of competitors

STRENGTHS

SO Strategies

ST Strategies

Companys innovation of a new product Company promote the health benefits of their products Captured the increasing percent of households serving iced tea

Perform product phase-out and introduce new product Introduce products that promotes health benefits

Production of quality products in a low price Increase promotion and advertisements of products

WEAKNESSES

WO Strategies

WT Strategies

Company has no production facilities Lack of national recognition of the product Inability to produce products in different package

Investment in purchasing production facilities Promotion of products in a new packaging

Joint alliance with companies which will support their production Introduction of products in market areas

IV. Formulation and Evaluation of Alternative Solutions to the Identified Problems A. Investments on purchasing production facilities Investment in purchasing production facilities will minimize the cost of production compared to the previous productions, which they do not have their own facilities to be used. The investment of production facilities will also strengthen their personnel management because there will be a proper allotment of people for a certain job or division in the company. B. Joint alliances with the other companies which will support their production Known to the fact that Snapple is only a small company compared to its competitors, forming alliance with other company will be favorable to their situation because they need support to continuously put their product in the market. The alliance will help them in the production, distribution, financial, and marketing aspects in the industry. C. Perform product phase-out and introduce new products

Gradually perform product phase-out if the product cannot withstand the competition. Then, introduce new products that will satisfy the needs and wants of the customers and its marketability.

D. Increase promotion and advertisement of the products Promotion and advertising products will help Snapple gain recognition from the customers. The advertisement should promote the products good qualities and benefits like health benefits over the competitors products to pull in customers to procure it.

V. Decision and Recommendation The group has agreed upon on choosing the investment in purchasing production facilities as the alternative solution to the companys problem. The investment of the said facilities will ensure the company of more outputs, meaning the resources and raw materials will be maximized, thus, minimizing the cost production. In this way, the company may distribute more of their products to the prospective supermarket chains without the worry of disbursing a huge bulk of money. The company may now lower the prices of the products in the market because they will no longer disburse a lot of capital in paying the production of their products from other companies, therefore, encouraging the consumers to buy it, resulting profit entry to the company. The decrease in the prices of the products in the market is appealing to the customers in relationship with the prevalent products in the market, which is iced tea at that time. The ownership of production facilities will also strengthen the personnel management in the company. Employees can now be designated to different work around the company, given that they now have the facilities they need. The company may not need to worry about the summation of salaries of the employees because the success of the distribution and marketability of their products will result to higher profits, thus, continuously providing the salaries of the employees, and may offer additional benefits to the employees. The additional benefits will encourage them to work efficiently and effectively in the company.

Implementation Plan

A board meeting shall be called upon to discuss the alternative action to be taken which is to invest in purchasing production facilities for the company. The management should bring in the possible options on where to purchase a high-quality but low cost production facilities. They should also consider the maintenance of the facility for the future purposes. They should consider all the pros and cons for every possible option they will take for it will greatly affect the production of their products. If there is a financial instability inside the company, they should discuss on how to resolve it. They can search for a bank that can give them a loan in a desirable interest rate and that would give them a good deal. They can also consider taking partnership as another option. It could be a partnership with a bottling company to lessen the procurement of different production facilities necessary, like the bottling facility.

Contingency Plan If, however, the investment of the production facilities does not improve the current state of the company, the joint alliance with other company which will support their production of product will be implemented. They could have an alliance with other companies offering food and drink services in the market. Since Snapple is a beverage company, alliance with another beverage company can be an option. They can come up with innovations that will bag a big market, thus, increasing the profitability of not only Snapple, but also the allied company.