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United Beverage Case Analysis

Eric Diamond
MBA595 Strategic Business Consulting

September 2011

ediamond@id.iit.edu

08
11

Eric Diamond

United Beverage Case Analysis

Strategic Business Consulting

United Beverage Case Analysis

United Beverage (UniBev) is a company that manufactures novelty soft drinks that
are contained in bottles that have licensed characters molded into the bottles. Many
of the bottles have moveable arms and heads. Called interactive beverages UniBev
markets their product under the brand name Gangbusters. Gangbusters is at the top
of their game, the number 6 in sales in the Juice/Fruit Drinks category (According to
ACNielsen Retail Measurement Insights).
But while sales are good, growth remains flat. Gangbusters growth depends on
finding new retail outlets to sell the drink and in a steady stream of licensed
characters to introduce. The lack of growth might be due to the ephemeral nature of
the popularity of licensed characters or it may be a sign that most of the retail
establishments that carry drinks targeted at children either already carry
Gangbusters indicating market saturation. This is a problem for Paul Diaz, UniBevs
CEO and founder. Diaz is used to rapid growth and now that the market is seemingly
mature, growth has slowed to a trickle. This is making Diaz very nervous. He feels
that a new innovation is needed to recapture UniBevs growth momentum.

13 September 2011

Eric Diamond

United Beverage Case Analysis

Strategic Business Consulting

UniBev has brought three options to the table to try and recapture their growth mojo.
Each project has strengths and challenges associated with them. Diaz is advocating a
new product concept that involves a bottle with a split down the middle and a
different flavor in each half of the bottle. When the drink is sipped, the flavors mix
and create a third flavor. This Dual-drink product concept is the most innovative, with
the most market potential, but is the most expensive to develop and the riskiest to
pursue. A second option is to develop an energy drink targeted at kids who are in the
same demographic as the Gangbusters target market. This one is less expensive, has
a better chance of succeeding in the marketplace, but the opportunities have less
market potential than the Dual Drink concept. A third option seeks to enhance the
market position of Gangbusters through an expansion program. This option is the
least expensive but yields only marginal market impact, even under the best
circumstances. Diaz and his team must decide which course of action to take.
If the choice is between only these three options, the choice is clear. Based on sheer
personality alone it is already clear that the safe option is the least attractive to Diaz
and crew, but given the flatness of sales investing $300,000400,000 per month
(which represents roughly 7-10% of monthly sales) to protect a 6% risk of loss is a
losing bet. Even so, there is no real evidence that Gangbusters has any real
competition yet.
The third option of creating a dual drink is an expensive gamble. Given the sparse
market research data (some focus groups) there is no clear indication that there
would be market acceptance. Mixed flavors are not a new concept. Brands like
Snapple, Lipton and Vitamin Water all offer products with two or more flavors
combined. Based on the prototype of a complicated dual drink bottle it is not clear
what the value of the new product would be as the drinker cannot actually see the
flavors mixing, they can only taste them, which removes the functional benefit of the
dual chamber bottle. Experiments have already been tried with dual flavors of the
type UniBev is evaluating. 7 Eleven for example rolled out a dual Slurpee with a
special straw that mixed the two flavors inside the straw. How did it do? Given the
$1,800,000 price tag of development, the project has a high likelihood of failing if
UniBev goes to market with the idea as is.
The second option of creating an energy drink targeted to kids has the best chance of
succeeding compared to the other two projects. In the best case, the expected
revenue will increase UniBevs overall sales by roughly 25% for a relatively modest
product development budget. Market research indicated that the product was well-

13 September 2011

Eric Diamond

United Beverage Case Analysis

Strategic Business Consulting

understood which might translate into a more appealing product. To say however that
the Energy Drink project is the best of the three is not to say that it is the
recommended course of action. UniBevs problems run much deeper than Paul Diazs
wish to do something quickly.

A Lack of Understanding
The founders of UB created a clear winner in Gangbusters. But it is increasingly clear
that Diaz and his team do have an understanding of precisely why Gangbusters is
successful in the first place. Since the vast majority of their resources go into
designing and manufacturing the bottles with colorful characters on them, one has to
wonder how much effort is put into the drink itself. While they have a designer on
staff who designs the bottles, they do not have a nutritional chemist on staff who
designs the stuff that goes into the bottle. An energy drink for children is fraught with
risk in the marketplace. Do kids even need an energy drink? Energy is code for
calories and a highly caloric soft drink might not gain the market acceptance
anticipated especially in an environment where the first Lady of the United States has
taken childhood obesity as her cause celeb. There might be regulatory hurdles to
overcome if nutritive additives are added to the drink. UniBev might be entering an
arena that has competitive brands like Gatorade, Powerade and Sobe that are wellpoised to take advantage of UniBevs innovation and duplicate it.
In the case of the dual drink, there has been no discussion around the experience of
mixing and why it is superior to other forms of combining flavor. More data is needed
to know whether this innovation is the right one. UniBevs strength has always been
in packaging juice drinks in innovative containers that have appealed to children.
Might not that be UniBevs secret sauce? Diazs has an entrepreneurial mindset,
but assuming that one hit will follow another simply because it is innovative is a
dangerous precedent. Gangbusters succeeded because it had the right need (highmargin juice drinks for kids) in the right market (theme parks) at the right time. To
make another hit they need to understand what about the company is successful and
how to leverage their core competencies to fully take advantage of their strengths.
UniBev is also targeting childrenwhy? Just because Gangbusters succeeded in that
market? It might be that while the childrens beverage market is saturated, new
markets might be easier to enter than developing a whole new product. For example,
is it possible that interactive beverages can be successful in the adult beverage
market? Light alcoholic drinks with likenesses of sports figures, characters from

13 September 2011

Eric Diamond

United Beverage Case Analysis

Strategic Business Consulting

famous movies or politicians might be successful. Red State Punch along with Blue
State Cooler could be sold with the satirical likenesses of popular public figures.
Skull heads and Zombies could adorn bottles of vodka and Zombie mix. A cocktail
party screwdriver kit could contain screwdriver cocktails that actually look like
screwdrivers. Or screws. Market research needs to be done to explore what can be
done with a interactive bottle. Another possible application for UniBevs capability
is to design packaging for childrens drinks that light up at night using LEDs or
nontoxic chemical lume sticks.
UniBev could also expand into overseas markets with the same basic strategy and
different licensed characters, like popular Anime characters in Japan. The possibilities
are wide open but will succeed on when UniBev understands why they are successful

Recommendations
This is not simply a case of risk management. UNiBev seeks to be a company based
on innovation and growth. To do that, Diaz and his team must find more systematic
ways to innovate, not just reach for the first idea when panic sets in. They should
develop more market research and design research to learn more about why
gangbusters was successful. Was it the licensed characters? If so that suggests that
anything in a Powerpuff Girls bottle will sell and that means that UniBev should
continue to expand its line of licensed products. Is it the drink itself? Success here
might support Diazs flavor mixing idea. Is it the packaging? If so then UniBev should
find other product categories (like milk, ice cream or toothpaste) to package in ways
that appeal to children. Doing this will reduce the risk associated with these problems
and help the company set a strategic direction that is more sustainable, will help
UniBev grow aand help Paul Diaz sleep better at night.

13 September 2011