MBB Case - Sierra Springs

Market factors

• Consumers
  • Who drinks flavored water?
  • Are there specific market segments to address?
• Competitors
  • Which products is Berry Fizz going to compete with?
  • Which companies are key players and how will they react?
• Channels
  • What is the ideal distribution channel for this product?
  • Are current retail outlets willing to add Berry Fizz to their product catalogue?

Financial factors

• Profitability
  • Is the flavored bottled water market more profitable than those markets for Sierra Springs’s current products?
  • Is it possible to profitably sell (price set by the market, internal production costs) Berry Fizz?
  • Given fixed costs involved, what would be the break-even point for Berry Fizz?
  • What is the opportunity cost to launch Berry Fizz?
• Budget
  • What is the required budget for this product?
  • Has Sierra Springs the financial capacity to launch and market the new product?

Capabilities / Capacity factors

• Operations
  • Does the product require specialized production, packaging, or distribution?
  • Is it possible to accommodate Berry Fizz in the current production and distribution facilities?
  • What impact does geography have on the plant selection?
• Marketing and Sales
  • Are the required marketing and sales capabilities available within Sierra Springs?
  • Has Sierra Springs the appropriate brand equity to position this new product within the portfolio?

Risk factors

• Operational
  • What are the risks to produce a new product (e.g., sourcing of materials / ingredients, accommodation production lines in existing plants, etc.)?
• Cannibalization
  • What would be the potential revenue cannibalization of other Sierra Springs’s products?

After taking some time, the candidate should get back to the interviewer with a proposed structure for solving the questions, for example:

Step 1 - Calculate number of units to break even

Step 2 - Calculate number of gallons to break even

Step 3 - Calculate market share to break even

Once the interviewer validates the approach, the candidate could take a few seconds to do the calculations or choose to do them live.

The candidate should next proactively interpret the result. For instance, they could say that Berry Fizz would need to be number 2 product and name several implications to validate this result (e.g., competitive position against leading brands, competitors' resources, etc.)

• 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 consumer’s expectations
• Strong Branding/Marketing
  • Create a successful introductory marketing campaign, including advertising, pricing, and bundling promotions.
  • Leverage top 3 producer status and limited market fragmentation in order to position Berry Fizz brand within top 3 in the market segment.
  • Anticipate response from competitors (e.g., advertising, pricing, distribution agreements).
  • Ensure product positioning does not cannibalize on other, more profitable, Sierra Springs products (i.e., the demand for new products does not reduce the demand for existing ones)
• 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

• Branding should emphasize sports drink identity. “Healthy” identity is dominated by Citric Burst product, “Leisure” by Tropic Pop and “Sports” fragmented in other products. Clear niche within “Sports” identity, with top 2 brands currently occupying only 30% of share of mind. Sports branding should also determine thinking around the sales channels (e.g., sales during sports events or at sports facilities).
• 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 Sierra Springs managing mix across channels. “Other” channels need further research, since they are a major component of the flavored sparkling water segment.
• Marketing message to emphasize identity and availability. Marketing campaign should be built around the currently unaddressed market need for sports drink in order to connect with customers in that segment. Given required changes in distribution channels, Berry Fizz messaging should clarify new distribution strategy.

After taking some time, the candidate should get back to the interviewer with a proposed structure for solving the questions, for example:

Step 1 - Calculate daily production capacity

Step 2 - Calculate weekly production capacity

Step 3 - Calculate annual production capacity

Once the interviewer validates the approach, the candidate could take a few seconds to do the calculations or choose to do them live.

The candidate should next proactively interpret the result. For instance, they could say Sierra Springs Would need to increase its capacity because it would currently only allow to produce 315 million bottles of Berry Fizz. The client can study with other production lines can produce Berry Fizz and check if they have available capacity. Sierra Spring can also evaluate the required factors to increase production capacity within current production lines and the impact on profitability.

A good answer would include economic factors like: 

Economic factors

• Required investment in target plant consistent with Berry Fizz budget
• Match of selected plant cost structure with fixed and variable cost targets for product
• Product assignment matches network growth targets (i.e., expected growth due to Berry Fizz is consistent with planned growth for the plant)
• Speed of installation given current plant commitments
• Adequate location for overall logistics; if only one plant concentrates on production, national shipments should be optimized

A very good answer would include both economic and non-economic factors, and provide examples of how different conditions could shift decision: 

Non-economic factors 

• Availability of additional resources, for example:
• Space
• Water
• Material supplies (e.g., bottle caps, labels)
• Local labor pool
• Management bandwidth
• Skills and training needs due to specialized process

Commitments to and support from selected plant community 

Finance to allocate required resources for launch

• Communicate launch decision and timeline to Finance department
• Analyze upfront investment and ongoing profitability targets
• Secure resources required for initial investment and allocate to each department (e.g., Marketing, Sales, Production, Distribution)

Marketing to start designing launch strategy

• Design product identity, message, packaging, etc.
• Create advertising and promotional campaign
• Define any channel-specific considerations (e.g., displays, alternative campaigns)
• Prepare product communications for investors, customers, and consumers

Operations to begin product testing, production line design, and logistics

• Create and test product
• Communicate and negotiate product characteristics and prices with suppliers
• Renegotiate supplier contracts for materials and water supply if necessary
• Increase capacity of the existing production line (maybe building a new one)
• Hire new people if needed

Sales to start designing product approach and training for associates

• Collaborate with marketing in defining message for retail outlets and consumers
• Design distribution strategy and allocate resources for new product
• Design and deliver product training for sales
• Communicate new product characteristics and targets to clients (e.g., supermarkets, convenience stores, restaurants, sport clubs)