Snapple Case Study

I. Point of View

This case study examines the critical decisions to be made by Arnold Greenberg, Chief Operating Officer (COO) of Snapple. The point of view of the latter was chosen since his role is increasingly important to the company’s ability to execute its strategy. The chief operating officer’s main concern is to come up with strategies that will drive operational excellence and high performance in the operation of the business. His decisions are very critical to the success or failure of the business. He is also responsible for turning such decisions into actions.

II. Analysis of the Case Situation

Industry Environment

When a single firm became successful in a market wherein there is no competition, the positive profits enjoyed solely by the latter will induce other firms to finally enter on that same industry. Hence, the then dominant firm will have to face competition among the new entrants/firms. In the case of Snapple, after its five-year supremacy on the ready-to-drink iced tea market, it has to face its new giant competitors namely: Coca-cola/Nestea and Pepsi/Lipton

Snapple has captured a large share of the market by attracting health-conscious individuals on 1990s with its preservative-free ecological image and its new twist which offers iced tea on 11 different flavors.

Company Analysis

Marketing

Snapple offers ready-to-drink preservative-free iced tea in 11 different flavors which attracted the health-conscious market. In promoting
its product, Snapple does not spend much on expensive advertisements but rather ride on with its competitors’ promotional ads which lead to Snapple’s dilemma, its lack of national recognition. Market distribution of Snapple is in only 51 out of 278 major supermarket chains in the United States. In addition, the ready-to-drink iced tea of Snapple is relatively expensive as compared to its competitors. Another problem is the company’s inability to enter into the vending machine market.

Finance

Snapple does not have enough funds to finance such expensive advertisements unlike their giant competitors, Coca-cola and Pepsi. In addition, the company has no production facilities of its own.

Production

Snapple is a relatively small entrepreneurial company with only 87 employees. They do not have their own production facilities. Hence, it impedes the company’s production.

Discussion of the Case Issue:

Snapple has to struggle with its giant competitors, Coca-cola/Nestea and Pepsi/Lipton which spend on promotional and expensive advertisements to promote their product, which Snapple lacks. Given the fact that Snapple is in only 51 of the 278 major supermarket chains in the United States, it has to face problems in expanding its market distribution and be able to cope up with its issue of lack of national recognition. The Chief Operating Officer of Snapple has to devise efficient and effective strategies and techniques that will help them achieve its goals and help them to be competitive enough to stay on the industry.

III. Problem Statement

What strategy should Snapple need to do to remain competitive in the ready-to-drink iced tea market?

IV. SWOT Analysis

Strength

Snapple has a preservative-free, ecological image. It has given a new twist in the ready-to-drink iced tea, providing 11 different flavors.

Weaknesses

Snapple has no production facilities of its own and has a small number of employees. They lack national recognition, and are only in 51 of the 278 major supermarket chains in the country. In addition, they are unable to produce packages for vending machines, and have a relatively expensive price.

Opportunities

There is a growing number of markets by 50% versus the cola industry. There is also a growing number of consumers- 75% of all households in US.

Threats

The consumers can make iced tea at home and would cause them less, rather than buying ready-to-make iced tea. In addition, there is an upcoming competition with Coca-Cola/Nestea and Pepsi/Lipton.

|Formulation and Evaluation

Alternative Solutions:

1. The company may merge with a bigger company.

2. The company may introduce a powdered Snapple iced tea drink.

3. The company may expand market distribution and increase promotional and advertising activities.

4. The company may apply for financial loans as an investment for production facilities of their own.

Decision/ Recommendation

Snapple should expand its market distribution and increase its promotional and advertising activities.

With limited resources, the company can gradually increase their market distribution. They will have more established advantages, like growth of profit, increase of national recognition and distribution, once they penetrate the market.

VIII. Implementation

The Finance Division is to re-allocate the company’s funds to come up with a better budget for the needed strategies.

The Marketing Division shall expand market distribution to at least 25 more supermarkets around the country especially to large states and venture to other possible dealers like schools canteens, office cafeteria, fast-food chains, and the like.

The Advertising Division shall spearhead promotional strategies to opt consumers who make their iced tea at home to prefer ready to drink Snapple iced tea. They shall improve advertising strategies like giving out freebies, posters, etc. to increase national recognition, emphasizing in their advertisements the health benefits (preservative-free ecological image) of the product and its 11 different flavors.

In line with these actions, the Human Resource Division shall hire the necessary number of employees for the increase in production, in distribution and in promotion, bearing in mind the budget for employment.

Contingency Plan

If the first plan of action will fail, Snapple may merge with a bigger company interested in entering the ready-to-drink iced tea industry, and willing to support them.