Question

Utilize the data below to answer the following question:

Ready-to-Drink (RTD) Coffee Market

Overall RTD Market	$ 2.5 billion
Starbucks Share	$875 million 35% share
Dunkin Doughnuts Share	$150 million 6% share
Current Cold Brew RTD Share (multiple brands) Predicted Market Size of RTD Cold Brew	$50 million (2%) $200 million (8%)

Coca-Cola and Dunkin’ Doughnuts have a strategic alliance to distribute Dunkin branded coffee to consumers via convenience, discount and grocery stores. Both are highly interested in the growing cold brew market. Coke also is interested in testing expansion of its Peak Gold brand into the cold brew coffee market. Coke is testing ready-to-drink cold brew with both brand partners in US southern markets to determine what path to take in northern markets for a spring launch. They are testing Peak Gold and a Dunkin’ Doughnuts RTD cold brew, both in 3 flavors. (Black/Espresso Cold Brew, Café Mocha Cold Brew, and Vanilla Almond). Coke only wants to introduce cold brew coffee in one brand to optimize distribution capability, and they believe the market will only grow to a total of $200 million (4x current, 300% growth.) Therefore, at their estimated share, it would only justify one brand entry into the market.

Both Coke and Dunkin’ are concerned about cannibalization of the current 4-flavor lineup of Dunkin’ Iced Coffee distributed by Coke with this introduction.

Test results showed Dunkin’ to get an impressive 25% out of the predicted $200 million growing RTD cold brew market, but 75 % of that volume was cannibalization of the current Dunkin’ RTD line. In the Peak Gold test market, they got 10 % of the RTD cold brew market, but did not cannibalize any Dunkin’ Brand. Project test results and estimate the volume of “net new business” (revenue less cannibalization) that would be earned in the rollout of each brand. Which brand provides the greater “net new business” and how much volume is predicted?

Group of answer choices

a.Peak Gold at $20 million net new business.

b.Peak Gold, at $25 million net new business.

c.Information is inadequate to choose an optimal brand.

d.Dunkin’ Doughnuts Brand, with $50 million net new business.

e.Dunkin’ Doughnuts Brand, with $12.5 million net new business

Answer 1

Correct Answer is ‘a. Peak Gold at $20 million net new business’

Explanation:

Four flavour line up of Dunkin’ Iced coffee distributed by coke are Black/Espresso Cold Brew, Café Mocha Cold Brew, and Vanilla Almond and Peak Gold. We will analyze it by case scenarios in the following:

Case 1. If all four RTD are launched into the market

25% of 200 million which is 50 million market share.

But in this 50 million 75% is cannibalized (75% of 50 million = 37.5 million) by current market products of Dunkin’s RTD Line. Therefore, new market share achieved by this approach is (150 + 50 - 37.5) - 150 million = 12.5 million net new business.

Case 2. If Peak Gold alone is launched into the market.

            10% of Current Brew RTD market share of 200 million = 20 million net new business

Therefore, it is clear from the cases above that the Peak Gold launch into market achieves more net new market without cannibalizing the existing market of any brand. Therefore, the better choice is launching Peak Gold brand into coffee brew market to achieve a total 20 million net new market.