We played one of my favorite games with gl yesterday. Think that smartmoney.com/marketmap is the world, we are great alexender and we randomly pick a country (company) to invade.
Greece and its city states is silicon valley and its tech savvy innovative < 10yr old companies. We exclude these. Its the rest of the world, the old fashioned world that is the target. Greg picks a continent "Consumer Goods" and in it he picks the company that does all the energy drinks.
Thats Monster Beverages, the recently renamed 70-80 yr old company that had a rebirth after it focused into the energy/sport drink space.
Its a 10B market cap.
SO what is the game then? The game is to try to figure out how to "invade that country". Using innovations/understanding of disandvantages that are obvious to anyone in silicon valley , try to come up with a hypothetical war plan that can pass the bar of two relatively smart guys talking about it without having any real clue about the industry at hand. It makes for a nice coffe break discussion..
So here is the war plan for Monster Beverages (I've never really had any Monster beverage - so I will pretend that "energy drinks" are the same as "sport drinks" and I will be talking here about sport drinks as if Monster is the company that owns the sport drink space.
So, sport drinks like gatorade, or vitamin water or things like that are extremely overpriced watery colored drinks that have lots of electrolytes depending on the case lots of carbs, or not so many, and taste that varies from fruity to weird. It doesn'y seem thought that the taste of these drinks is a really proprieterary recipee. It seems that it is fairly simple to create a replica with all the properties that costs not $2 per bottle but 10-25cents per bottle (like the normal sodas).
So why do people spend $2.
My simple answer is that this space captured the price un-elasticity of the relatively afluent sportsy group a group that grew substantially as market share over the last 10-20 years. Together with well targeted marketing (bottles shapes, colors) and lots of TV advertising , presence/promotions in all health clubs etc.. they become a well known brand in a very small amount of time (compared to century old soda brands).
Its high price finances
- a expensive advertising model
- incentivizes supermarkets for premium self space (safeway makes much more per sq inch of gatorade than coke)
- a highly profitable corporation.
Thats all good..
Now seeing it from the tech side:
- Someone is managing to sell colored/artificially flavored 20c /bottle water for $2 => thats wrong/inefficient
- They do that by doing old fashioned typed of advertising that we know are loosing mind share (TV, magazines, stadium banners)
- They rely on old fashioned distribution models (retailers) that are seeing their own market erose for anything that is "commoditized"
The above more or less gives us the obvisou directions of attack:
- Provide a lower cost alternatice
- that doesn't pay for TV advertising
- that doesn't rely / pay high margin retailers for distribution
and possibly leverage more novel forms of viral marketing.
Here is an example:
(Assume that we have created a replica of the major gatorate like products and came up with an equally attractive bottle/labels names etc).
We have a bottler that fills them up and we have no distribution - zero awareness.
We will follow the soda drink model for advertising : free samples (soft drinks disperse 1/3 of their volume as "free samples" ie through the fast food industry where they practically make no money - allowing the fast food industry to make all the money (fast food industry produces the burger practically at a loss and makes all its margine through the soft drink - by providing an exclusive channel to a single company - cant find the research paper I have read all that...)).
In our case we will address the rather un-targeted children sport tournament space as the space where we would real-sponsor with free samples.
Typically every family with kids is involved in one or more sports, having weekly practices, matches and monthly or by monthly tournaments.
Open tournaments typically have half a dozen of small vendors that sell anything from foods to drinks.
We will need a methodology to identify all tournaments in all sports and contact the organizer with the proposal of "sponsored" "our sport drink" free for the tournament participants drinks in exchange for a free spot plus a few ad banners. Nobody has done sth like that so the odds are that we should be able to get something
more than local tournament awareness: kids love to play games to make an extra $.. they are allready socially connected in instagram, kick and all kinds of kid-chat thingys. They have a iphone/android or know someone that does. To get the free drink all they need to is (sth like download the app, like the drink, broadcast their choice to their friends/followers... add the fb app... or any some combination of the above). The outcome is that they "market to friends, show proof, get a free expensive icy cold drink. Primary costs are the people/truck that run the tent.
Ad Banners and bottle show - "can only purchased online" .(32 bottles at $1/bottle leaves enough room both for free shipping as well as for this kind of free sampling)
Such program would allow awareness within a year.
It would require investment - but it can grow locally area by area..(bay area first etc), which can make many things easier (including the actual shipping)
Thats all
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