Abstract
Reed’s Inc. is a leader in making natural carbonated soft drinks in United States. Brewing drinks in an old-fashioned manner with fresh ingredients gives the company an edge in terms of quality and taste of products. Reed’s Inc. operates in beverages industry under the soft drinks segment. The strategic group it operates in is natural foods segment. Product, distribution channel, communication and improving cost efficiencies are keys to a successful domestic and international marketing strategy for the company.
Reed’s Inc. is a beverages and confections making company. Christopher Chris founded the company in mid 80s and presently serves as its Chief Executive Officer. The company’s revenues crossed $20 million, an increase of 34% as compared to 2009 and it is a leader in selling soft drinks in the natural foods segment (Reedsinc.com, 2011). The key products of Reed’s Inc. are Ginger Brews, Virgil’s, Ginger Candies, Ginger Ice Creams and Colas.
Understanding Reed’s Existing Strategy
Reed’s Inc. mainly operates in the beverages industry under the soft drinks category. However, the niche market that the company operates in is the natural foods market. The company differentiates its products from other soft drink manufactures on two fronts. First differentiation strategy is adoption of age old natural brewing techniques rather than commercial manufacturing of drinks. The second strategy is to use fresh and natural ingredients rather than food concentrates, as used in other soft drinks available in the market. These two strategies are the key for the company’s success and make them the best in the industry in terms of a combination of taste and quality.
The strategy is more gut based than based on market research. However, basic need identification was done before implementing this strategy. In an interview with Theodore (2008), Chris Reed mentions study of Indian and Chinese herbal medicines as the inspiration behind this strategy. He believed in the medicine properties of ginger, felt the need gap and strived to blend ‘taste with health’, an apt combination for today’s health conscious generation. Rather than differentiating on price, Reed focussed on product differentiation and operates in a niche segment with a premium product.
Strategic Group Analysis
Strategic Group is a group of companies within an industry with similar business models or strategies. It can also be termed as a sub group within an industry. Broadly, Reed’s Inc. operates in the Beverages Industry, in the soft drinks segment. However, the beverage industry appears to be asymmetrical with different strategic groups operating in it. Some of the easily identifiable strategic groups in this industry, under soft drink segments, are artificial carbonated soft drinks, natural carbonated soft drinks and noncarbonated drinks. Reed’s Inc. functions in the natural carbonated soft drinks segment. As stated earlier, Reed’s Inc. is the leader in selling soft drinks in the natural food segment. According to Dannelke (2009), it reaches to around 10,500 supermarkets across United States. Also, given the changing consumer behavioural pattern and increasing focus of natural products, this natural food segment is growing at a very fast pace. According to Chaudhuri (2008), the natural foods market has grown organically and its size has grown from $2 billion in 1990 to $55 billion in 2007.
Natural carbonated soft drinks segment is a premier segment and brand stickiness appears to be very high in the segment. But, with bigger brands getting into this space and offering natural products, the segment is getting more and more competitive. Competition from artificial carbonated soft drinks also exists, which becomes an obvious choice for the price conscious customers.
Domestic Strategic Recommendation
Product Differentiation
Diversification to herbs other than ginger, which taste good and have good medicine properties, is recommended. Some herbs that can be used are fenugreek and mint. While fenugreek helps in controlling diabetes and cholesterol, mint helps in digestion and stimulating appetite.
Creating a separate product line of natural fruit flavoured ice-creams for children with attractive packaging is also recommended. Children love indulging in ice-creams and parents would not mind if the product is natural.
Distribution
Having a strong network of supermarkets, there is a need to focus on the direct store delivery and traditional retailers. The staffs of these outlets need to be educated on benefits of natural food products. Attractive in-store branding of the company’s products would pull attention of shoppers. Maintaining strong relationship with the key officials in the distribution channel is also important.
Tying up with the best organic food chains in the country would help in getting target customers.
As a new distribution channel, opening of drive through outlets would help increase retail presence and customer convenience. Elaborate menu options highlighting the health benefits would attract more customers.
Brand Communication
Increasing awareness about the health benefits of company’s product is a key to the success in establishing presence in the mainstream market. Communication can be done under the central brand idea “world’s best soda, naturally”. Communication done through endorsement from health practitioners and celebrities, social media and building public relations will help gain mass attention.
Improve Cost Efficiency
Improving cost efficiencies and optimising prices is another strategy that will help in the mainstream market. To compete with bigger brands entering into this segment, price will play a very important role. Cost efficiencies can be improved by backward integration by growing its own ginger through contract farming.
International Strategic Recommendation
The key aspects for international strategy are market and product selection, distribution, brand communication and improving cost efficiencies.
Market and Product Selection
Large economies like Europe offer huge market potential for going international. Reed’s Inc. has laid its foot on Europe, but not so firmly. Increasing demand for natural and organic products needs to be tapped promptly. International market requires careful product selection as cost of selling nonperforming products is higher. To start with, Reed’s Inc. can sell its range of ginger brews and can diversify to other products.
The other locations suitable for global expansion are large developing economies with increasing consumerism and huge demand for natural foods.
Distribution
The important distribution channels for a new entrant are supermarkets and tie up with food joints. Reed’s Inc. can establish its presence through these channels. Once there is enough understanding of the market, the company can move to traditional retail outlets and grocery stores. There is a lot of competition in selling products through supermarket, in terms of getting the right shelf space and advertising space. Therefore, having a strong and dedicated sales team is a perquisite in establishing a strong distribution channel.
Brand Communication
As a new entrant in an international market, making your presence felt is very important. The right communication mix can be through in store promotional activities, exhibitions, print media and social media. Having a health awareness series in local newspapers is a good medium to generate public interest.
Improving Cost Efficiencies
Setting up a local factory is more cost effective than exporting products from United States. Having local breweries and packaging plants will help gain competitive advantage by having the right technical expertise and cheaper production cost.
References
Chaudhuri, Saabira (2008, June 28). An All Natural Icon Reaches Beyond Whole Foods. Retrieved from http://www.fastcompany.com/articles/2008/06/reeds-ginger-brew.html?page=0%2C0
Dannelke, Leonora (2009, August 15). Root Cause. Business World, p 92-93.
Reed’s Inc. 2011. Reed’s Fact Sheet [Data File]. Retrieved from http://www.reedsinc.com/ir/pdfs/2011-11-17%20Reed's%20Fact%20Sheet.pdf
Theodore, Sarah (2008, April 9). Up Close WithReed’s Inc. Beverage Industry. Retrieved from http://www.bevindustry.com/articles/up-close-with-reed-s-inc
