SITUATIONAL ANALYSIS

Big Boom Beverages (BBB), is a caffeinated alcoholic beverage catering to college students
with young males being the specific target market. The company launched their first product,
Highbrid whose alcoholic content was only slightly higher than the rest of the similar
offerings in the market and contained malt liquor, caffeinated energy drink and fruit-flavored
sparkling soda. Their market campaign was focused on establishing a connection with the
audience using tag-lines that they associated with their colleges. The campaign was a success
and the sales of the company grew but not enough to increase the cash flow of the company.

With the looming liquidity crunch, the company decided to overhaul the product. They
increased the alcohol and energy drink content, revamped the packaging design and changed
the name to Totaled to connect more with the audience. They focused on various marketing
events to garner attention and increase the sales of the product.

In the next few months, users started posting videos of them engaging in dangerous and risky
activities such as driving rashly on roads after drinking Totaled, consuming it while on the ski
run, etc. Studies found out that caffeine covered the effect of alcohol so consumers mistook
alertness for sobriety. Drinkers after consuming such beverages were also more likely to
indulge in unprotected sex, rash driving and have more alcohol-related injuries thus affecting
their healths. Moreover, the consumption of the beverages was also connected to sexual
assault cases on the campuses. This got the company and such beverages negative publicity
with the parents of the victims condemning its sales thus affecting the image of the company.
Since it did not have a PR strategist, no consistent and strong message was given to the
media- all the four founders spoke different things- after the reports circulated that Totaled
was responsible for two college incidents.

FDA increased its scrutiny on caffeinated alcoholic beverages which could lead to the ban of
such products or a formal warning to the company ordering corrective action. Also, a formal
warning letter could lead to the withdrawal of support from banks, investors and distributors.

Since BBB was known for its alcoholic caffeinated beverages, removal of the product could
lead to the closure of the company unlike its competitors since it currently has only one
market offering.
Considering the situation, the founders are strategizing about what action the company could
take to deal with the possible FDA warning letter and how they should tackle it. They are also
considering the option of preemptively taking action before the FDA releases a formal
warning and evaluating what both the options could mean for the company.

PROBLEM STATEMENT

Considering the effect of such beverages on consumer health coupled with the image of BBB
in their minds, the possibility of FDA warning and the cost of implementation of measures
and its effects on the long term growth, should BBB withdraw the beverage or reduce the
alcohol content.

CRITERIA

● Effect on consumer’s health and image of the company in their minds

● Effect on the possibility of receiving an FDA warning and alignment with possible
changes in future regulations
● Cost of implementation and its effects on long term growth

OPTIONS

● Option 1: Withdraw the product from the market and focus on specialized beverages
such as solely caffeinated or alcoholic beverages
● Option 2: Reduce the alcohol content in the current product and improve the brand
image via social media
● Option 3: Take measures for consumer education and promote responsible drinking,
without reducing the alcohol content

EVALUATION OF OPTIONS

Option 1: Withdraw the product from the market and focus on specialized beverages
such as solely caffeinated or alcoholic beverages

a. Effect on consumer’s health and image of the company in their minds:

The company could withdraw the product, but at the same time, the consumers can still
get caffeinated alcoholic beverages at local bars. Hence this option certainly can not
provide assurance of customers’ health. Companies will certainly create a positive image
in the consumers’ minds as they will be taking proactive steps to address the issue instead
 of FDA shutting them down. BBB can leverage their positive image while launching new
products.

b. Effect on the possibility of receiving an FDA warning and alignment with

possible changes in future regulations:

As the company is removing its products from the market, there will be no issue of
receiving FDA warnings and it can be in alignment with possible changes in future
regulations.

c. Cost of implementation and its effects on long term growth:

Withdrawing the product will be detrimental to the company as the company doesn't have
expertise in any other offerings. Also if the focus needs to be shifted on specialized drinks
then there will be added expenses associated such as new machinery, new distributor,
developing a new marketing strategy, etc. As the company will be entering into a new
segment where there are already established players, growth prospects might not be
promising.

Option 2: Reduce the alcohol content in the current product and improve the brand
image via social media

a. Effect on consumer’s health and image of the company in their minds:

The ‘Totaled’ drink was wrongfully targeted by the media in the case of students at two
colleges getting hospitalized after drinking alcoholic energy drinks more than the
recommended quantity. Even after a report stating that these students didn't consume
Totaled, the focus of the media continued on the ‘Totaled’. Hiring a PR firm and a
dedicated social media team can help in managing the negative publicity. Also reducing
alcohol content will put forward the notion that the company is listening to the concerned
people and open to making changes in the product. With the reduced content of alcohol,
people will be less inebriated and will lead to fewer events of aggression, accidents, etc.

b. Effect on the possibility of receiving an FDA warning and alignment with

possible changes in future regulations:

There are rumors that the FDA is contemplating reviewing the policy on beverages. If
they decide the maximum level of alcohol in beverages to be maintained, then reducing
 alcohol content will allow the company to continue selling its product. If we wait for the
FDA to announce their policy, we may incur a huge loss on the products which are
currently in the market.

c. Cost of implementation and its effects on long term growth:

The PR firms that so far have approached the company are expensive. They will charge
the company higher fees but can improve the company’s image which will be helpful for
immediate and long-term survival.

Option 3: Take measures for consumer education and promote responsible drinking,
without reducing the alcohol content

a. Effect on consumer’s health and image of the company in their minds:

FDA has defined binge drinking as when more than 4 or 5 cans are consumed. The Big
Boom Beverages were discouraging drinking more than one or two cans in a short time.
All the events of accidents and people falling ill were caused due to more than
recommended consumption of these beverages. Hence, if the company can educate
customers about the ill effects of binge drinking, it can avoid bad publicity and can come
up as a responsible company. The company can make use of social media for promoting
its messages. They can highlight the pitfalls of binge drinking and promote responsible
consumption of the beverage.

The company can also restrict consumers from buying more cans at a single time by
making ID cards compulsory for any purchase. The company can provide software to the
retailers which will have centralized data to track the weekly purchase of the particular
customer. Thus, the company can take some measures to try and break the habit of binge
drinking.

b. Effect on the possibility of receiving an FDA warning and alignment with

possible changes in future regulations:

If the company is able to restrict the binge drinking habit of its consumers and is able to
educate consumers, then there will be very few accidents due to drinking these beverages.
Hence the FDA might not issue a warning and the provision of working capital from
banks and investors won't dry up.

c. Cost of implementation and its effects on long term growth:

 The cost will be higher as the Big Boom Beverages company will have to make various
awareness campaigns, drives and ads to inform customers about the ill effects of binge
drinking. Also, the company has to provide software to the retailers which will also
increase their cost. The company might face a decrease in demand due to this but with
consumers following a responsible drinking habit, the company can have sustainable
growth in the future.

RECOMMENDATION

Taking into consideration the current situation, option 3 seems to be the best option for the
company. Here BBB would not make changes to their product, but their brand image by use
of social media. Reducing the alcohol content or withdrawing the product completely means
that BBB risks losing and alienating its loyal customer base or simply closing up shop.
Instead, BBB would take an active part through social media and brand messaging in quelling
binge drinking amongst its consumers and promote responsible drinking.