BMK810 – Brand Strategy II and BMK811 – Brand Metrics II

Drinkworks: Home Bar by Keurig

REMINDER

1. This is an individual case assignment and, as such, is worth a significant share

of your overall grade in BMK810/811. Please ensure that the quality of the
work reflects the overall importance that this assignment has for your overall
performance in the course.

These instructions are in addition to those provided in the “Case Assignments –

Overview & Instructions” document posted on Blackboard.

THE MANDATE

This case takes place in the summer of 2018 and your analysis, alternatives &
recommendations must reflect the situation at that point in time. You are the
Senior VP for Brand Marketing for Drinkworks, and your business decision deck
must be written from that perspective. You are preparing a deck that will be
presented to Nathanial Davis, CEO Drinkworks to get agreement on a number of
key strategic decisions on the launch of Drinkworks: Home Bar by Keurig.

Your primary focus for this case is to determine the appropriate market (what
business are we in?), evaluate the internal and external situation, identify and
clearly state “the” problem, make appropriate decisions on segmentation,
targeting and positioning, including developing a positioning statement, decide on
what type(s) of pods should be launched, and how the device and pods should be
priced. Your recommendation must solve the problem you identified and be
justified by the criteria you will have determined and outlined.

As you work on putting your business decision deck together, please note the
following:

1. An executive summary is NOT required for this deck

2. While the case brings raises question on which distribution channels should
be used to sell Drinkworks that is NOT TO BE DONE for this case.
o You can assume that the pods will be sold in all channels that are
legally allowed to sell alcohol products including liquor stores,

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supermarkets & mass merchandisers (where allowed by law) and e-
commerce (where allowed by law)

3. No external research is required to complete this case, nor is it allowed.

4. A template is provided to assist you with the required metrics calculations.

5. For the financial models, you should assume that the target market is 24
million people as determined below:
o 120.5 million households in the U.S.
o 59% of households consume alcohol every month
o Addressable market is 71 million households (120.5 x 59%)
o Use “young and old weekly drinker hosts” as a proxy for the size of
the target audiences which is a share of 34% (21% and 13%) from
exhibit i
This clarification of the case metrics is NOT intended to imply a choice
of segmentation or target audiences. This is provided simply to
ensure that all class members are using the same market size base for
their calculations.

6. Every decision requires the identification of alternatives, the evaluation of

those alternatives using appropriate close-ended criteria, a summary of
the analysis for each alternative and a recommendation/decision. Some
of these decisions will require a more thorough assessment than others
but all of these require some level of evaluation.

7. It is very important to note that you should not limit yourself only to
options presented in the case study. As well, in the absence of specific
information in the case document, you may have to use your “common
sense” to come up with relevant and appropriate alternatives for
segmentation bases and for then segmenting the market based on that
segmentation base.

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GRADE ALLOCATION – BMK810 Brand Strategy II

This assignment represents 5.0% of your final grade for BMK810 – Brand Strategy
and will be graded out of 100 marks as outlined below:

Your grade will be determined on the quality & completeness of your analysis,
specification of the correct problem(s), identification & evaluation of alternatives
and the resulting recommendation(s) and action plan along with the utilization of
appropriate course concepts in solving the case.

 10.0 marks for your market definition analysis (note that this is a decision
and requires alternatives, close-ended criteria, and a recommendation)

 15.0 marks for providing relevant background & situation analysis, including
Drinkworks & their joint venture partners’ objectives and competitive
advantages, and a clear, well written problem statement.
o Remember to also include insights on customers, consumers,
competitors, marketing channels (retailers & wholesalers), and
context in your situation analysis.

 15.0 marks for Market Segmentation and Targeting Analysis, Justification

and Recommendation
o You must segment the market based on demographics, behavioural,
psychographics. Clear consumer personas may help bring the
segments to life. Make sure they are mutually exclusive.
o Then using an appropriate selection of close-ended criteria
determine the right target audience for the Drinkworks Brand.

o Note that you cannot and should not limit yourself to the options
presented in the case study for segmentation bases and segments.

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 20.0 marks for developing your positioning recommendation(s) which will
include building effective, properly designed and complete perceptual
maps, and then a thorough assessment of the possible position options
o A minimum of 3 unique perceptual maps are required for the
positioning analysis.
o Two of the maps must have unique axes (no repetition of the axis
used in the maps
o The third map can either have unique axes or be a combination of
other positioning opportunities.
o If you decide it makes sense to look at more positioning
opportunities or additional combinations of axes, then that should be
a fourth or a fifth perceptual map.
o Remember to ensure that your perceptual maps reflect the relevant
competition given how you defined the market.
o Exhibit 4 (both pages) can provide some good ideas for axis for
perceptual maps and/or potential benefits.

 20.0 marks for a properly written and compelling positioning statement

which includes the identification and assessment of relevant benefits with
supporting reasons to believe for your chosen positioning.
o You must identify and assess a minimum of 3 functional and 3 emotional
benefits.
o These 3 functional and 3 emotional benefits must be derived from and
relate to your chosen positioning
o A well written positioning statement is a mandatory part of that
recommendation.
o Your positioning statement must outline a compelling position and
reason to believe that will cause your chosen target market to purchase
the Drinkworks: Home Bar over competitive products.
o Please remember that a positioning statement isn’t an advertising
“tagline” and must follow the “standard” format for positioning
statements taught in BMK710.

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 10 marks for your overall recommendation and supporting rationale

including your recommendation on whether or not the Drinkworks Home
Bar by Keurig should be launched or not.
o This deliverable requires you to summarize all of your strategic
marketing decisions.
o You then need to use an appropriate and complete range of close-ended
criteria to evaluate the overall Drinkworks Home Bar offering and decide
if it should or should not be launched.
 There will only be 1 alternative – Should the Drinkworks: Home
Bar be launched
 You will need to determine the appropriate close-ended criteria
to make that decision

 5.0 marks for a 6 Forces analysis of the market (i.e. what business are we
in) as you have defined it.
o What does this analysis enable you to conclude about the attractiveness
of the industry and its future profitability and why?
o The evaluation of this section includes how you incorporate and use
your 6 Forces industry analysis into your thinking in the actual deck not
just the content you provided in the appendix.

 5.0 marks for your identification of Keurig Drinkwork’s core competencies

and determining which of those core competencies are competitive
advantages with supporting rationale (VRIO analysis).
o The evaluation of this section includes how you incorporate your work
on identifying competitive advantages into your thinking in the actual
deck not just the content you provided in the appendix.

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GRADE ALLOCATION – BMK811 Brand Metrics II

This assignment also represents 15.0% of your final grade in BMK811 – Brand
Metrics I. The assignment will be graded out of 75 marks for BMK811 as follows:

Note that a template is provided for the required metrics calculations.

 20 marks for your channel margin calculations for the device and the three
different pods
o Device
1. Calculate channel margins at retail selling prices of $499, $399.
$299, $249, $199 and $149
2. The manufacturing cost is $250, retailers will take a 30% gross
margin and there is a customer acquisition cost of $100 (your only
variable cost for the manufacturer beyond the cost of making the
device)
o Pods
1. Calculate channel margins at retail selling points of $6.00, $5.00,
$4.50, $4.00, $3.00 and $2.00 for the cocktail pods, and $4.00,
$3.00, $2.50, $2.00 and $1.00 for the mixer and beer/cider pods
2. Retailers will take a 30% gross margin and wholesalers will take a
22.5% gross margin.
 We will assume that the selling marketing channel for the
pods has all sales going from Drinkworks to a wholesaler to
the retailer to the consumer.
3. Cost of goods is $1.20, $0.95 and $1.10 for cocktail pods, mixer
pods and beer/cider pods, respectively.
4. There is an excise tax of $0.125 per pod on cocktail and beer/cider
pods.
 You should assume that Drinkworks pays this excise tax so
that for cocktail and beer/cider pods, the price per pod we
receive from the wholesaler is reduced by the per pod
excise tax.
5. Assuming that the average customer uses 5.5 pods per week over
52 weeks, you can calculate the annual (1 year) dollar gross
margin that Drinkworks expects to earn per customer.

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 20 marks for determining of the annual contribution margin (i.e. gross
margin less customer acquisition cost on the device) for cocktail, mixer and
beer cider pods
o This analysis will be done in 4 steps

1. Determine the number of customers

 This is done using the information in Exhibit 5
 You multiply the % willing to pay for the device (appliance) by
the % willing to pay for each type of pod and then multiply this
by the size of your target market (as provided above)
 Note that the template has been pre-populated with the %
willing to pay numbers

2. Determine the one-time contribution margin from device

(appliance) sales for Drinkworks
 For this calculation, you take the number of customers as
calculated in Step 1 and multiply it by the applicable gross
margin net of customer acquisition cost for Drinkworks based
on the customer selling price of the device as calculated
previously (channel margins)

3. Determine the annual gross margin from the sales of pods

 For this calculation, you take the number of customers as
calculated in Step 1 and multiply it by the applicable gross
margin for Drinkworks based on the customer selling price of
that type of pod

4. Add the annual gross profit, net of customer acquisition cost, for
the device/appliance to the annual gross profit for the pods for
each type of pod

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 15 marks for your recommendation on the price of the device and the price of
the pods
o Pods can fall into 3 categories: cocktail pods with alcohol, mixer pods
without alcohol, and beer/cider pods.
o You can recommend that 1, 2 or all 3 types of pods are launched.
o You do NOT have to use a criteria table (decision matrix) for this section
of the assignment.
o If you want, you can provide your recommended pricing for the device
and the pods with an explanation of why you selected the prices that
you did.
o You explanation will need to include qualitative and quantitative
support for your decision (and why you didn’t select the other
alternatives).
o Of course, if you want to use a criteria table, you are free to do so.

 20 marks for the presentation of your metrics in your deck and its appendices
and how you use those metrics in your business decision deck.

All the necessary information for the reader to evaluate your recommendation
must be included in your business decision deck and its appendices:
 Any excerpts from your spreadsheet included in your presentation must be
formatted properly and presented so that it looks like it is an integrated part
of your presentation.
 The financial information presented in your actual deck (versus what is in the
appendices) must be a summarized version of the detailed financial models
that are contained in your appendices. Do not waste the reader’s time by
putting the exact same information in two places in your deck.
 Your spreadsheet must be submitted to the professor at the same time as
you submit your powerpoint file. You must also upload a pdf of your
business decision deck to SafeAssign by the designated time.

As with all cases in this course, all the information required to solve the case is in
the case unless otherwise stated in the specific case instruction document.
Searching for information and answers on the internet is not required, nor is it
permitted unless specifically required in the case instructions.

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The business decision deck must be designed to present all the necessary facts
and analysis in a logical manner to support your recommendation – it needs to
“tell the story” in a concise and clear manner but it must also be thorough and
complete. You are free to flow the content in your deck in whatever way best
communicates the “story” you want to tell. The allocation of space for each of
the required areas is up to you as long as the assignment requirements are
appropriately covered.
 There is no maximum or minimum length specified for this deck. I would
suggest that more than 16 slides, excluding the cover page and appendices,
is excessive and less than 9 slides means that you have not covered all the
decisions that need to be addressed.
 There is a maximum of 5 slides of appendices

Detailed submission instructions and requirements, and submission deadlines are

outlined in the “Case Assignments – Overview and Instructions” document that
has already been posted on blackboard.

As a reminder, your overall grade on the case can be adjusted +/- 10% of the total
marks available for the case by the professor to reflect the quality and quantity of
your participation in our class discussions.

The overall quality, flow, consistency & professionalism of your submission

must meet an appropriate standard for a business deck in the “real world”.
Marks, up to 25% of the total grade for this assignment can be deducted if the
following expectations are not met or if too much irrelevant content is included.

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