Company Description
Liquid Innovations is a newly registered private limited company in the US. The firm intends to venture into the US non-alcoholic beverage industry. Thus, it will specialize in the production and marketing of non-alcoholic beverages. Some of the non-alcoholic beverages that the firm will produce include energy drinks and other ready-to-drink beverages. The enterprise will be located at Maudlin, South Carolina. A workforce of 50 highly skilled and experienced employees will facilitate the firm’s the production and marketing activities.
Vision and Mission Statement
Liquid Innovations will focus on developing a sizeable customer base by offering high-quality non-alcoholic beverages. The company intends to achieve this goal by complying with the set industry standards and the customers’ tastes and preferences. The company is of the view that pursuing this mission will lead to the development of a high level of customer satisfaction. Subsequently, the firm will attain long-term sustainability.
The company will focus on developing an extensive product portfolio to maximize profitability. The firm intends to achieve this goal by investing in new and continuous product development. Through this approach, the firm will be in a position to increase its customer base. In the course of its operation, the firm intends to optimize its performance. Therefore, to achieve this goal, the company will focus on gaining substantial market share within the industry. The market share will be improved progressively to attain a significant level of market dominance.
Industry analysis and trends
The firm’s success in the non-alcoholic beverage industry will be subject to the prevailing industry structure. The non-alcoholic beverages industry is very broad. The industry players offer two main categories of non-alcoholic beverages, which include hot and soft drinks. The soft drinks mainly include juices, energy and sports drinks, ready-to-drink tea and coffee, bottled water, and carbonates. This non-alcoholic beverage category is commonly referred to as the Liquid Refreshment Beverages [LRBs]. The LRBs “have continued to dominate the beverages and retail food sales in the US” (Beverage Marketing Corporation, 2015, par. 8). The industry is expected to grow further in the future due to different factors, including the growth in population and changing consumer trends. Consumers are becoming conscious of their health, and, thus, they prefer non-alcoholic drinks (Beverage Marketing Corporation, 2015).
In 2014, the volume of sales increased by a 1.7% margin, as opposed to the 1.3% decline experienced in 2013. Over 30.9 billion gallons of LRBs were consumed in 2014 (Beverage Marketing Corporation, 2015). A report by the Beverages Marketing Corporation affirms that the growth is mainly associated with positive economic performance. The country has experienced a remarkable increment in the level of disposable income amongst consumers, hence their confidence. The industry’s growth will further emanate from the increase in the size of the population.
Euromonitor International, which is a renowned market intelligence firm, estimates that the total global population will be comprised of over 1.5 billion middle-class households by 2020 (Beverage Digest, 2015). This aspect represents a 25% growth rate from the size of this population in 2012 (Bailey, 2014). These changes are expected to stimulate growth within the non-alcoholic beverages industry. It is projected that the industry will experience a 5% compounded annual growth rate between 2014 and 2017 (Beverage Marketing Corporation, 2015). The retail value within the industry is expected to be over $200 billion by 2020 (Bailey, 2014). Graph 1 below illustrates the estimated industry growth rate regarding the various product categories.
Industry structure
In addition to the above issues, Liquid Innovations appreciates the importance of understanding the prevailing industry structure. This aspect will play a fundamental role in making decisions on the strategic management practices that the firm will adopt. Therefore, to achieve this goal, the company evaluated the industry structure using Porter’s five forces model. The findings of the analysis are illustrated in the following section.
Buyer bargaining power – high
The industry is characterized by numerous non-alcoholic beverage brands. Thus, customers have the option of selecting brands depending on their tastes and preferences. Moreover, the cost of switching to a competing product is relatively low. Thus, a slight price difference can cause customers to compete with a competing brand.
Supplier power – low
Numerous suppliers dominate the industry. Despite the view that the suppliers have undertaken extensive product differentiation to attain a strategic market position, their capacity to influence the industry is considerably low.
The threat of entry – high
Due to the high potential for growth, the industry is very attractive to new entrants. However, the dominance of large players such as PepsiCo and Coca-Cola makes it difficult for new entrants to attain a competitive edge.
The threat of substitute – high
Different industry players produce numerous non-alcoholic beverage product categories. Subsequently, customers are presented with diverse beverage product options. Furthermore, the high rate at which consumers are inclining towards health-conscious consumption behaviors presents an opportunity for the introduction of non-alcoholic beverages that address this new market trend.
Rivalry – high
The degree of rivalry in the industry is considerably high due to the existence of both large and small firms. The industry players are increasingly adopting different competitive practices such as price war, new product introduction, and market expansion to maximize the level of profitability (PR Newswire, 2015).
Strategic position & risk assessment
Strategic position
Liquid Innovations will seek to attain a high competitive advantage by entrenching an optimal strategic position. Thus, to achieve this goal, the firm will focus on leveraging different customer perception factors. Some of the strategic factors that the firm will take into account entail product price, quality, customer service, convenience, and product features. The firm will undertake continuous adjustments regarding its product pricing and quality. This aspect will ensure that its products align with the changing market trends and customer preferences.
The firm will be concerned with developing a unique customer experience by integrating an optimal level of customer service. Therefore, it will undertake extensive customer service training to achieve this goal. This move will aid in developing a talented and highly customer-focused workforce. In addition to these aspects, the company will gather and utilize market intelligence in developing its products. Thus, Liquid Innovations will succeed in satisfying the customers’ non-alcoholic beverage tastes and preferences. Addressing the customers’ product requirements will enable the company to entrench the level of trust and loyalty towards its brands.
Risk assessment
The firm’s success will be subject to diverse risks originating from the external market. Some of the major risk categories that the firm has identified include market risk, competitive risk, product risk, and technology risk. The market risk will emanate from the dynamic nature of the market, such as a change in consumer behavior. Therefore, to deal with this risk, Liquid Innovations will study the market continuously with the objective of developing adequate market intelligence that will aid in addressing the existing market needs. The firm will encounter competitive pressure, especially from large enterprises, due to the degree of rivalry within the industry. The firm will undertake an extensive and continuous competitor analysis to identify gaps regarding the competitors’ products and the implemented strategic practices.
The firm understands that failure to integrate technological changes within the industry might affect its competitiveness negatively due to the risk of obsolescence. Liquid Innovations will study the technological environment progressively to understand and implement the necessary technological innovation. The company will ensure that product changes are undertaken effectively and efficiently to minimize the chances of encountering product risk. This approach will make the firm effective in exploiting market opportunities and ensuring that its products are positioned optimally, hence promoting their competitiveness.
Target market
Liquid innovation has appreciated the importance of effective market targeting to penetrate the non-alcoholic beverages market segment successfully. Hollensen (2015) affirms that market targeting increases the likelihood of achieving profit maximization because a firm is in a position to address the needs of a specific market segment. The firm’s marketing targeting process will be based on a multifaceted approach. The core approaches to be considered include the customers’ attitude and preferences, product usage and purchase behaviors, demographics [age, gender, income, social class, and occupation], personality, and lifestyle, and benefits sought.
Based on demographics, Liquid Innovations will target the middle-class professionals of both genders. The firm will also target customers who require high-energy needs, such as students and athletes. Moreover, the firm will ensure that its products address the product requirements of customers belonging to different age groups. This market targeting approach will enable the firm to maximize its sales revenue by marketing to a sizeable customer group (Abrams, 2014).
Competitive Analysis
Understanding the competitive environment is critical in the firm’s market entry process (Jobber & Ellis-Chadwick, 2012). Liquid Innovations will encounter competition from several well-established companies such as PepsiCo, Gatorade Company, the Coca-Cola Company, Dr. Pepper Snapple Group, National Beverage, Nestle, and Redbull GmbH. These firms have been in existence for a considerable period and have attained a substantial market share. The chart below illustrates the market share for the respective industry players.
The chart above shows that Coca-Cola and PepsiCo dominate the market. PepsiCo and the Coca-Cola Company have developed a massive brand portfolio comprised of 22 and 500 brands, respectively. Out of these brands, the two firms are in a position to generate over $ 1 billion in sales revenue from each brand. The dominance of the two firms indicates that Liquid Innovations might experience a major challenge in the quest to enter the industry.
Marketing plan and sales strategy
Marketing Strategy
Liquid Innovations will be focused on attaining significant performance in the US non-alcoholic beverages market segment. Thus, it will focus on reaching and capturing a sizeable number of customers. This goal will be achieved by formulating and integrating an effective marketing plan and sales strategy. One of the issues that the firm will emphasize in its marketing strategy is to develop a high level of awareness regarding its products. In its marketing strategy, Liquid Innovations will integrate the marketing mix concept by focusing on four main strategies, which include pricing, promotion, place, and product strategies.
The firm will ensure that it develops an extensive product portfolio. This goal will be achieved by integrating diverse categories of non-alcoholic beverages by investing in extensive research and development. Based on research and development, the firm will be effective in undertaking new product development and continuous improvement. Thus, the firm will address the prevailing customer product requirements successfully. Furthermore, the firm will ensure that its products are of high quality. The firm will observe high-quality standards in its production process. Moreover, Liquid Innovations will undertake continuous product improvement using the market intelligence attained from the market. Considering that Liquid Innovations is a new entity, it will adopt the penetration pricing strategy. Subsequently, the firm will set the price of its products at a point that is relatively lower as compared to its competitors. However, the firm will ensure that its price point set is sufficient to cover the cost of production.
In creating market awareness, the firm will adopt integrated marketing communication. The firm will use different marketing communication vehicles such as advertising, public relations, and direct marketing. Direct marketing will be achieved in marketing to institutional customers, such as sports clubs and educational institutions. Public relations will be undertaken by conducting trade shows and product exhibitions. Advertising will be undertaken by integrating conventional and emerging mediums. Some of the conventional mediums to be considered include using broadcast and print media such as television, radio, magazines, and newspaper. The emerging mediums will entail the integration of different web-based platforms, such as social networks. The emerging mediums will enable the firm to reach a substantial number of technology-savvy customers.
Liquid Innovations will ensure that its products are distributed efficiently. Subsequently, the firm will integrate direct and indirect channels of distribution. The direct distribution will be achieved by marketing through distribution outlets that will be located in different states in the US. On the contrary, indirect distribution will be achieved by marketing through different retail enterprises such as convenience stores.
Sales strategy
The firm’s sales activities will be facilitated through inside and outside sales personnel. The inside personnel will handle telemarketing within the firm’s stores. On the other side, the outside personnel will entail marketing to customers through sales representatives located in different regions. Therefore, Liquid Innovations intends to generate revenue from onsite, telephone, online, mail order, and off-site sales. The outside sales personnel will be compensated based on a basic salary plus a commission. The compensation package will further entail other forms of intrinsic motivation, such as awards and gifts. Liquid Innovations will ensure that the sales personnel are trained adequately. These aspects will aid in motivating the salespeople.
Ethics and social responsibility plan
Corporate Citizenship
The company understands that its success will be subject to the developed public image. Thus, the firm will seek to develop a positive public image. This goal will be achieved by taking into account several issues. First, the firm will ensure that it complies with the production standards stipulated by the US government through the Ministry of Health. Moreover, the firm will entrench a high level of tax compliance. These aspects will aid in eliminating legal interventions by the government.
The company’s commitment to corporate citizenship will further entail offering job opportunities to South Carolina’s residents. The firm appreciates the importance of diversity in developing a strong human capital. Subsequently, Liquid Innovations will desist from any discriminatory practices in the course of recruiting and selecting the workforce. The firm will observe equality and equity in treating the employees. For example, the management team will ensure that employees are treated with high-level honesty and fairness.
Effect of the company to the environment
Liquid Innovations recognizes that its operations might affect the environment negatively. For example, its production and sales activities might lead to different forms of environmental pollution, such as water, soil, and air. Therefore, the firm will integrate the concept of reducing, reusing, and recycling to deal with this challenge. Concerning reduction, the firm will focus on using renewable sources of energy to minimize carbon emission. Moreover, the firm will ensure that scarce natural resources such as water, which is a key component in its production process, are utilized optimally. This aspect will be attained by integrating the concept of recycling. The recycled water will be used for other activities such as cleaning. Moreover, the concept of recycling will aid in minimizing environmental pollution through solid waste.
Health concerns
Liquid Innovations is a new entrant into the market; therefore, the likelihood of the target consumers being skeptical of its products due to health concerns cannot be ruled out. This aspect might arise from the view that the firm will be introducing new products into the market. The high rate at which consumers are inclining towards the healthy consumption process may further instigate the development of such health concerns.
Therefore, to deal with this challenge, the company will ensure that the market understands that negative health issues are not associated with the consumption of its beverages. On the contrary, the firm will state the health benefits that a customer can achieve by consuming its products. The firm will outline the ingredients used in producing beverages to increase the level of consumer confidence. Moreover, the firm will ensure extensive involvement of the relevant authorities. For example, endorsement by the US Health Department will aid in improving the level of consumer confidence.
Negative health impacts on certain segments
Liquid Innovations recognizes that its products might result in negative health effects to certain market segments. Some of the market segments that the firm should consider pregnant mothers and children. Therefore, to minimize the chances of such occurrences, the firm will integrate a comprehensive quality process. This aspect will ensure that the final products have fully complied with quality standards. The firm will ensure that its products are marketed effectively. This goal will be achieved by clearly stating the possible health consequences that pregnant mothers and young children might encounter by consuming some of its products, such as carbonated beverages.
In its branding process, the firm will ensure the health effects of consuming carbonated drinks by the two customer categories are stated clearly on the product package. Moreover, the firm will state the negative health consequences. Therefore, the firm will encourage its sales personnel to outline all the product benefits and negative effects to the specific customer groups. Through this approach, the firm expects to create sufficient awareness about the possible negative consequences. Consequently, the likelihood of the firm encountering negative publicity will be reduced substantially.
Financial projections
The company’s decision to venture into the non-alcoholic beverage industry is motivated by the need to maximize profitability. The company will incur a substantial cost to achieve this goal. Therefore, to meet this cost, the firm estimates that its total budget to be around $ 2 million. The firm intends to facilitate its operations by using both equity and debt capital. Equity capital will entail sourcing funds from personal savings and donations from friends. On the other hand, debt capital will be comprised of loans from different sources. One of the fundamental sources of funds that the firm will consider entails bank loan. In the process of seeking funds, the company will focus on several financial projections. The firm will ensure that it sources the bank loan from the most cost-effective institution to achieve this objective. In addition to the bank loan, the firm will source funds from angel investors. The firm is of the opinion that it will raise the required start-up capital successfully from bank loans and angel investors.
The firm is of the opinion that it will develop a strong financial position successfully. Subsequently, the firm will be in a position to repay the debt finance. Thus, the firm has established several financial projections that it intends to achieve during the first financial year. These projections are illustrated in the following Pro-forma income statement, balance sheet, and cash flow statements.
Table 1: Liquid Innovations, income statement
From the income statement above, it is evident that the level of profitability within the company will increase progressively. The increase in operating expenses will arise from the firm’s endeavor to enhance its market entry.
Table 2: Balance Sheet
Table 2 above shows that the firm will develop a substantial financial strength, as evidenced by the value of its net worth.
Firms projected cash flow analysis
The firm expects to incur a substantial cost to generate profitability considering the intensity of competition in the beverage industry. However, the firm is of the opinion that it will succeed in generating positive cash flow within the first year of its inception. Table 3 below illustrates the projected cash flow.
Table 3: Cash flow statement
Table 3 above shows that the firm will be in a position to maintain a positive cash flow within the first financial year. Subsequently, the firm will sustain its operational efficiency. For example, the firm will be in a position to meet its working capital needs. The firm will integrate effective financial control measures to ensure that the funds obtained from different sources are utilized optimally.
References
Abrams, R. (2014). Successful business plan: Secrets & strategies. Palo Alto, CA: Planning Shop.
Bailey, S. (2014). A guide to the non-alcoholic beverage industry. Web.
Beverage Digest: Special issue; US beverage business results for 2014. (2015). Web.
Hollensen, S. (2015). Marketing management: A relationship approach. New York, NY: Pearson Education.
Jobber, D., & Ellis-Chadwick, F. (2012). Principles and practice of marketing. New York, NY: McGraw-Hill Higher Education.
PR Newswire: Non-alcoholic drinks market; global industry analysis, size, share, growth, trends, and forecast 2014-2020. (2015).