Electro-Light

Client goal

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

Situation description

As an integrated beverage company, SuperSoda leads its own brand design, marketing, and sales efforts. The company also owns its 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 noncarbonated 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 energy, with sugars, and electrolytes, or salts, in the body. However, Electro-Light has been formulated to focus more on the replenishment of electrolytes and has a lower sugar content compared to most other sports drinks. The company expects this new beverage to capitalize on the recent trend away from high-sugar products.

McKinsey study

SuperSoda’s vice president of marketing has asked McKinsey to help analyze key factors surrounding the launch of Electro-Light and its own internal capabilities to support that effort.

Helpful hints

• Write down important information.
• Feel free to ask the interviewer to explain anything that is not clear to you.

What key factors should SuperSoda consider when 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.

After reviewing the key factors that SuperSoda should consider when deciding whether to launch Electro-Light, your team wants to understand the beverage market and consumer preferences to gauge the potential success of Electro-Light.

Your team has gathered the following information about the US sports drink market. The information shows an estimated 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 upfront fixed costs, what share of the electrolyte drink market would Electro-Light need to capture to break even? Here is some additional information for you to consider as you form your response:

• Electro-Light would launch in a 16-ounce format—or one-eighth of a gallon—at a price of $2 to retailers
• To be able to launch Electro-Light, SuperSoda needs to bear $40 million in total fixed costs, including marketing expenses and increased costs across its production and distribution network
• The vice president of operations estimates that each bottle would cost $1.90 to produce and deliver in the new process

Helpful hints

• Don’t feel rushed into performing calculations. Take your time.
• Remember that calculators are not allowed—you may want to write out your calculations on paper during the interview.
• Talk your interviewer through your steps so that you can demonstrate an organized approach; the more you talk the easier it will be for your interviewer to help you.

SuperSoda executives believe that the company's position as a top-three beverage company gives it strategic impetus toward achieving the desired market share. However, they ask the team to outline what would be needed to achieve the target 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?

Helpful hint

Consider the issues raised in the question and group your thoughts around them. This will ensure that you are giving the most relevant answers.