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Electro-Light

Context
Our client is SuperSoda. SuperSoda is a top-three beverage producer in the United States and has
approached McKinsey for help in designing a product-launch strategy.
As an integrated beverage company, SuperSoda leads its own brand design, marketing, and sales
efforts. In addition, the company owns the 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 non-carbonated 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 both energy (sugars) and electrolytes (salts) in the
body. However, Electro-Light has been formulated to focus more on the replenishment of
electrolytes, and has a reduced sugar content compared to most other sports drinks. The company
expects this new beverage to capitalize on the recent trend away from sugar-rich products.
SuperSodas vice president of marketing has asked McKinsey to help analyze the major factors
surrounding the launch of Electro-Light and its own internal capabilities to support the effort.
Which factors should SuperSoda consider and act on before launching Electro-Light into the US
beverage market?
Helpful hints
Write down important information.
Feel free to ask interviewer for explanation of any point that is not clear to you.
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Practice case questions
In McKinsey case interviews, the interviewer will guide you through the case with a series of
questions that will allow you to display a full range of problem-solving skills. Below is a series of
questions and potential answers that will give you an idea of what a typical case discussion might be
like.
QUESTION 1
What key factors should SuperSoda consider in 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.
Reveal answer
A good answer would include the following:
Consumers. Who drinks sports drinks? Are there specific market segments to address?
Cost/price. Is the sports drinks market more profitable than those markets for SuperSodas current
products? Is it possible to profitably sell (price set by the market, internal production costs) Electro-
Light? Given the fixed costs involved, what would be the break-even point for Electro-Light?
Competitors. Which products will Electro-Light compete with? Which companies are key players and
how will they react?
A very good answer might also include multiple additional key factors SuperSoda should consider. For
example:
Capabilities and capacity. Are the required marketing and sales capabilities available within
SuperSoda? Does the product require specialized production, packaging, or distribution? Is it
possible to accommodate Electro-Light in the current production and distribution facilities? What
impact does geography have on the plant selection?
Channels. What is the ideal distribution channel for this product? Are current retail outlets willing to
add Electro-Light to their product catalogue?
QUESTION 2
After reviewing the key factors SuperSoda should consider in deciding whether to launch Electro-
Light, your team wants to understand the beverage market and consumer preferences to gauge
potential success of Electro-Light.
Your team has gathered the following information on the US sports-drink market. The information
shows an estimate for the 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 up-front fixed costs, what share of the electrolyte drink market would
Electro-Light need to capture in order 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 presentation (one-eighth of a gallon) with a price of
$2.00 to retailers.

Electro-Light, SuperSoda would need to incur $40 million as total fixed costs,
including marketing expenses as well as increased costs across the production and distribution
network.

deliver in the newly established process.


Helpful hints
Ask for clarification of information.
Take notes of the numbers, and don't be concerned if the units are unfamiliar to you.
Take time to plan out how to approach the calculation.
Describe your approach and talk the interviewer through your calculation. The more you talk
the easier it will be for your interviewer to help you.
Reveal answer
A very good answer would include the following:
Electro-Light would need to capture a 12.5 percent market share of electrolyte drinks in order to
break even. Therefore, Electro-Light would need to be the number-two product in the market:
1. Electro-Light would need to sell 400 million units in order to break even:
Variable profit per unit = $2.00 $1.90 = $0.10
Break even units = Total fixed costs/Variable profit per unit = $40 million/$0.10 per
unit = 400 million units
2. Electro-Light would need to capture a 12.5 percent market share:
Electrolyte drinks market = 5% x 8,000 million gallons = 400 million gallons
Electro-Light sales in millions of gallons = 400 million units/8 units per gallon = 50
million gallons
Market share = 50 million gallons/400 million gallons = 12.5%
QUESTION 3
SuperSoda executives believe that the company's position as a top 3 beverage company gives them
strategic strengths toward achieving the desired market share. However, they ask the team to
outline what would be needed to achieve the target of 12.5% share of the electrolyte-drinks market.
What would SuperSoda need to do to gain the required market share for Electro-Light following its
launch?
Reveal answer
A very good answer would include the following.
Match with consumer preferences. Ensure product image, attributes, and quality fulfill the needs of
all consumers or niche segment, reaching desired market share. Ensure target price is consistent
with other products in the market and the consumers expectations
Strong branding/marketing. Create a successful introductory marketing campaign, including
advertising, pricing, and bundling promotions. Leverage top-three producer status and limited
market fragmentation in order to position Electro-Light brand within top three in the market
segment. Anticipate response from competitors (for example, advertising, pricing, distribution
agreements). Ensure product positioning does not cannibalize on other, more profitable SuperSoda
products. (Note: In marketing, the decreased demand for an existing product that occurs when its
vendor releases a new or similar product is called cannibalization. It is not important for you to use
this business terminology.)
Operational capabilities. Ensure access to preferred distribution channels. Ensure sales force
capabilities to sell the new product. Ensure production ramp-up that allows response to increased
demand.
QUESTION 4
To help SuperSoda determine how best to launch the new Electro-Light product, the team
conducted a consumer-research study. The following information shows results from the study.
What can you conclude from this regarding how the new Electro-Light product should be launched?

Reveal answer
A very good answer would include the following insights:
Branding should emphasize healthy natural identity. Leisure drink identity is dominated by
CoolSweat product, energy replenishing by RecoverPlus, and healthy natural fragmented in
other products. There is a clear niche within the healthy natural identity, with top-two brands
currently occupying only 30 percent of share of mind. Healthy natural branding should also
determine thinking around the sales channels (for example, sales through health and nutrition
outlets, health aisles at supermarkets).
Distribution differs from current outlets and needs new agreements/research. Major shifts
compared to current distribution model required in supermarkets, other, and convenience
stores. Agreements with major retail players may accommodate for product introduction, with
SuperSoda managing mix across channels. Other channels need further research, since they are a
major component of the sports-drink segment.
Marketing message to emphasize identity and availability. Marketing campaign should be built
around the currently unaddressed market need for healthy natural drink in order to connect with
customers in that segment. Given required changes in distribution channels, Electro-Light messaging
should clarify new distribution strategy.