Writing Sample

Here is a Marketing Case Analysis I co-wrote in my Marketing 602 class about Hawaiian Punch and their expanding market.

Intro

Hawaiian Punch was created in 1934 by A.W. Leo, Tom Yates and Ralph Harrison. It was a blend of pineapple, passion fruit, guava, and papaya that was supposed to be added to their line of ice cream toppings. Originally called Leo’s Hawaiian Punch, it was sold to restaurants, ice cream manufacturers, and soda fountains. In 1946, the company was bought by the Pacific Hawaiian Products Company. Customers had found that the Hawaiian Punch mixture was delicious with water, but they could not purchase it directly. Pacific Hawaiian Products decided to fix that by selling a ready to go 46 ounce can of Hawaiian Punch. In the 1950s, the sales of the drink had launched the Pacific Hawaiian Products Company into the middle tier of drink distributors in the United States. By 1955, Hawaiian Punch had become a national brand.

As it grew, the company realized they needed to capitalize on its popularity, so they created the mascot Punchy in 1961. It quickly became a success and the tag line “How about a nice Hawaiian Punch?” became synonymous with the brand for years. That, coupled with the continued success of the drink compelled the RJ Reynolds Company to buy Hawaiian Punch from Pacific Hawaiian Products in 1963 for about 40 million. In 1981, the Hawaiian Punch operation was moved to a subsidiary of the RJ Reynolds Company, Del Monte. They grew the Hawaiian Punch brand by adding flavors, a powder version, and new soft drinks.

In 1990, Proctor & Gamble bought Hawaiian Punch from Del Monte for 150 million dollars. P&G doubled the size of the concentrate business and made the gallon bottle as the ideal juice drink package. They also designed new packages for food and convenience store delivery while investing heavily into the Punchy mascot. In 1999, Cadbury Schweppes, PLC bought all rights to Hawaiian Punch for 205 million dollars.

Distribution Channels/SWOT Analysis

There are two different channels to distribute Hawaiian Punch, finished goods and direct store delivery. For the finished goods channel, the Cadbury Schweppes manufacture and package the Hawaiian Punch drink in ready-to-serve containers and the packaged drink is shipped to warehouse or distribution centers. Then the independent food brokers and sales representatives are responsible for delivery to retail outlets. The target audience is mainly focused on the African American and Hispanic mothers. The packing sizes include 1 gallon bottle, half gallon bottle and 6.75 ounce stand up pouch. The one gallon is the most popular in this channel and it only located in juice aisle. For the direct store delivery channel, the packaged drink is shipped to independent bottlers like Pepsi cola and Coca cola. Then bottlers deliver it to the retail outlets. Their targeted audience are mainly towards the urban, multicultural teens. They offer a wide variety of flavors. The packaging size contains 2 liter-bottle, 20 oz. bottle, 12 oz. can. The single serve packages are most popular in this channel with it only located in soft drink aisle.

Now the SWOT analysis. First, the strengths of Hawaiian Punch. The original red Hawaiian Punch fruit drink is one of the top-selling drinks in the United States. They are 70-year-old brand and they have high brand awareness among U.S. consumers. The interesting image of the brand Punchy mascot also contributed to the advertising success. Hawaiian Punch was owned by Cadbury Schweppes Americas Beverages, which is one of the top eight juice drink companies in the United States. The Hawaiian Punch juice is a unique drink because it contains Vitamin C. Second, the weaknesses. Compared to the original flavor juice, the company introduced the new flavor which lacked the consumer awareness. 77% of Hawaiian Punch buyers purchased only one package size. Their positioning and targeted audience are unclear. In addition, the advertising expenses of Hawaiian Punch is split between radio and magazine print, but not television. The advertising is weak compared to their competitors. Third, the opportunities for Hawaiian Punch. There are growing Hispanic inspired flavors to also attract the non-Hispanic family. There are growth opportunities for juice consumers in U.S., plus the market is looking for healthier drinks. The company can reinforce brand image and strengthen the brand relationship with the consumers. Finally, the threats. There was additional competition from other juice brands with more a advertising budgets. The juice consumption in US per capita declined from 1994-2004. There are some juice companies have repositioned their brands on the health benefits. There is growth in carbonated soft drinks category, from 50.0 to 52.3 gallons. The shift from juices to carbonated soft drinks is a major threat to Hawaiian Punch. Hawaiian Punch isn’t in immediate trouble, but they can always try and be a step ahead of their competitors.

Advertising, Innovation, and Positions

Advertising, innovation, and positions which related the issues to the two manufacturing, sales and distribution. For the position dilemma, there are three options:

1. No change, which means there is dual distribution network with finished goods and direct-store delivery, but it is inefficient for the director to serve the problems.

2. Change the positioning in both finished goods and direct-store delivery, like the company can target the market with families having children under the age of 17. According to the customer insights, “the juice aisle was shopped more by households with children in the “under 6” to 12-year-old age group. The soft drink aisle was more popular among households with children in the 6 to 17-year-old age range and skewed toward households with teens. Therefore, a shift in positioning would be useful. The company can also emphasize more on fun-filled media advertisements and bring back Punchy the mascot. These changes could attract the children. To attract parents who are the gate-keepers, the company can also add health benefits to the product, such as increasing the content of vitamin C or multi-vitamins.

3. The company could focus on each distribution network’s target market individually. The finished goods could target on children between 6 to 15 years old. The direct-store delivery could target on teenagers between 15-21 years old. For different target markets, the company should offer different kinds of Hawaiian Punch, such as different flavors, different packages, or different size. For children, they like more colorful and beautiful packaged products. To attract teenagers, the company could introduce the energy drinks.

For the innovation part, there are two options:

1. No change, which means the company would not add any new flavors and packages. It is inefficient for solving the current problems.

2. Adding new flavors could increase brand recognition. In addition, the Hawaiian Punch juice drink aisle buyer are more likely to repurchase the same size serving package. To bring in a change in this practice more emphasize on new packaging sizes in both networks should be introduced and sound advertising is required. As the bottlers often faced capacity and distribution constraints, this alternative could be difficult to bring in practice. The finished goods network did not face such constraints but had placement allowances paid to retailers for shelf space which the bottlers did not have.

For the allowances and advertising part, there are three options.

1. No change, which means the company would continue to maintain $2.2 million on media advertising per year, which was separated equally on video and magazine print advertising. As mentioned before, no change is inefficient.

2. Cut the advertising budget. It may damage the popularity of the brand. Even though it had high brand awareness in the United States, advertisement will always be needed to attract more potential customers. Thus, this option was not good.

3. Increase marketing budget, by introducing new marketing initiatives. As the competitors spend more on advertising through television, Hawaiian Punch could also shift its advertising line from radio and magazines to television. Targeting the children and youth using television and internet could help them attract the target market easily. They could bring back Punchy to increase the brand image among young target customers.

Financial Analysis

The contribution margin of finished goods is 39,198,000/184,196,000, which equals 21.28%. The contribution margin of direct-store delivery network is 27,064,410/38,502,414, which comes to 70.29%. As for unit contribution per case finished goods, 39,198,000/49,267,000, and that comes to $0.80. For direct store delivery unit contribution per case, it is 27,064,410/28,024,266, or $0.97.

The current market for juice/soft drinks in the United States has a total population of 293.7 million. The average consumption per consumer is 182.5 gallons per year. That means the consumption of the US for a year of the total beverages is 53,600,250,000 gallons. Fruit juice and juice drink market share in the overall beverage market is 4.7%. The total amount of the juice drink market share in the United States would be 53,600,250,000 * 4.7% = 2,519,211,750 gallons. Actual Hawaiian Punch consumption in the market is 173,905,573.5 gallons. The market share under fruit juice and juice drink category is 173,905,573.5/2,519,211,750, or 6.903%. Here is a table showing in which aisle people buy their Hawaiian Punch.

Total volume in cases

Volume for specific dealers

Volume of dual shoppers

Finished goods (Juice aisle)

49,267,000

(63.74%)

43,824,204 (56.70%)

5,442,745 (7.04%)

DSD (Soft drink aisle)

28,024,366

(36.26%)

13,989,373 (18.10%)

14,034,628 (18.16%)

Total = 19,477,424

Recommendation

The financial analysis showed that the contribution margin of DSD is higher than finished goods. Thus, the promotional expenses and innovations made should be more in DSD than in finished goods network. They should increase advertising and product promotional spending in the amount of 20 cents per case based on fiscal year 2004 sales. The company should concentrate national media advertising split 70% with direct-store delivery network and 30% to the finished goods network. Cadbury Schweppes could bring back Punchy as a television mascot and change their policy and not advertising to children under 8 years old.