Client goal

Our client is SuperSoda. SuperSoda is a top-three beverage producer in the United States and has
approached McKinsey for help in designing a product-launch strategy.

Description of situation
As an integrated beverage company, SuperSoda leads its own brand design, marketing, and sales efforts.
In addition, the company owns the entire beverage supply chain, including production of concentrates,
bottling and packaging, and distribution to retail outlets. SuperSoda has a considerable number of brands
across carbonated and non-carbonated drinks, five large bottling plants throughout the country, and
distribution agreements with most major retailers.
SuperSoda is evaluating the launch of a new product, a flavored sports drink called Electro-Light. Sports
drinks are usually designed to replenish both energy (sugars) and electrolytes (salts) in the body.
However, Electro-Light has been formulated to focus more on the replenishment of electrolytes and has
a reduced sugar content compared to most other sports drinks. The company expects this new beverage
to capitalize on the recent trend away from sugar-rich products.

McKinsey study
SuperSoda’s vice president of marketing has asked McKinsey to help analyze the major factors
surrounding the launch of Electro-Light and its own internal capabilities to support the effort.
Helpful hints
 Write down important information.
 Feel free to ask the interviewer for an explanation of any point that is not clear to you.
 Remember that calculators are not allowed - you may write out your calculations on paper during
the interviews.
Question 1:
What key factors should SuperSoda consider in deciding whether or not to launch Electro-Light?
Helpful hints
 Take time to organize your thoughts before answering. This tells the interviewer that you think about
the problem in a logical way.
 Develop overall approach before diving into details.

Answer 1
Good answer
Consumers. Who drinks sports drinks? Are there specific market segments to address?
Cost/price. Is the sports drinks market more profitable than those markets for SuperSoda’s current
products? Is it possible to profitably sell (at a price set by the market and internal production costs) Electro-
Light? Given the fixed costs involved, what would be the break-even point for Electro-Light?
Competitors. Which products will Electro-Light compete with? Which companies are key players and how
will they react?
Very good answer
Capabilities and capacity. Are the required marketing and sales capabilities available within SuperSoda?
Does the product require specialized production, packaging, or distribution? Is it possible to accommodate
Electro-Light in the current production and distribution facilities? What impact does geography have on
the plant selection?
Channels. What is the ideal distribution channel for this product? Are current retail outlets willing to add
Electro-Light to their product catalog?
Question 2
After reviewing the key
factors SuperSoda should consider in
deciding whether to launch Electro-
Light, your team wants to understand the
beverage market and consumer
preferences to gauge potential success
of Electro-Light.
Your team has gathered the following
information on the US sports-drink
market. The information shows an
estimate for the share of electrolyte
drinks, as well as the current share for
the two main electrolyte products: CoolSweat and RecoverPlus.
Based on the target price and up-front fixed costs, what share of the electrolyte drink market would Electro-
Light need to capture in order to break even?
Here is some additional information for you to consider as you form your response:
1. Electro-Light would launch in a 16-ounce presentation (one-eighth of a gallon) with a price of $2 to retailers.
2. In order to launch Electro-Light, SuperSoda would need to incur $40 million as total fixed costs, including
marketing expenses as well as increased costs across the production and distribution network.
3. The vice president of operations estimates that each bottle would cost $1.90 to produce and deliver in the
newly established process.
Helpful hints
 Ask for clarification of information.
 Take notes of the numbers, and don't be concerned if the units are unfamiliar to you.
 Take time to plan out how to approach the calculation.
 Describe your approach and talk the interviewer through your calculation. The more you talk the easier it will
be for your interviewer to help you.

Answer 2
Very good answer
Electro-Light would need to capture a 12.5 percent market share of electrolyte drinks in order to break
even. Therefore, Electro-Light would need to be the number-two product in the market:
1. Electro-Light would need to sell 400 million units in order to break even:
 Variable profit per unit = $2.00 – $1.90 = $0.10
 Break even units = Total FC/Variable profit per unit = $40 million/$0.10 per unit = 400 million units
2. Electro-Light would need to capture a 12.5 percent market share:
 Electrolyte drinks market = 5% x 8,000 million gallons = 400 million gallons
 Electro-Light sales in millions of gallons = 400 million units/8 units per gallon = 50 million gallons
 Market share = 50 million gallons/400 million gallons = 12.5%
Question 3
SuperSoda executives believe that the company's position as a top three beverage company gives them
strategic strengths toward achieving the desired market share. However, they ask the team to outline what
would be needed to achieve the target of 12.5 percent share of the electrolyte-drinks market. What
would SuperSoda need to do to gain the required market share for Electro-Light following its launch?

Answer 3
Match with consumer preferences. Ensure product image, attributes, and quality fulfill the needs of all
consumers or niche segment, reaching desired market share. Ensure target price is consistent with other
products in the market and the consumer’s expectations
Strong branding/marketing. Create a successful introductory marketing campaign, including advertising,
pricing, and bundling promotions. Leverage top-three producer status and limited market fragmentation in
order to position Electro-Light brand within top three in the market segment. Anticipate response from
competitors (for example, advertising, pricing, distribution agreements). Ensure product positioning does
not cannibalize on other, more profitable SuperSoda products. (Note: in marketing, the decreased
demand for an existing product that occurs when its vendor releases a new or similar product is called
“cannibalization.” It is not important for you to use this business terminology.)
Operational capabilities. Ensure access to preferred distribution channels. Ensure sales-force
capabilities to sell the new product. Ensure production ramp-up that allows response to increased demand.

Question 4:
To help SuperSoda determine how best to
launch the new Electro-Light product, the team
conducted a consumer-research study. The
following information shows results from the
study. What can you conclude from this
regarding how the new Electro-Light product
should be launched?

Answer 4
Branding should emphasize “healthy
natural” identity. “Leisure drink” identity is
dominated by CoolSweat product, “energy
replenishing” by RecoverPlus, and “healthy natural” fragmented in other products. There is a clear niche
within the “healthy natural” identity, with top-two brands currently occupying only 30 percent of share of
mind. “Healthy natural” branding should also determine thinking around the sales channels (for example,
sales through health and nutrition outlets, health aisles at supermarkets).
Distribution differs from current outlets and needs new agreements/research. Major shifts compared
to current distribution model required in “supermarkets,” “other,” and “convenience stores.” Agreements
with major retail players may accommodate product introduction, with SuperSoda managing mix across
channels. “Other” channels need further research, since they are a major component of the sports-drink
segment.
Marketing message to emphasize identity and availability. Marketing campaign should be built around
the currently unaddressed market need for “healthy natural” drink in order to connect with customers in
that segment. Given required changes in distribution channels, Electro-Light messaging should clarify new
distribution strategy.