Finish until 4 pm
6. What distribution channels should Davis select to launch Drinkworks?
Liquor Store / Traditional Retail store / E-commerce
Retail stores (device + pods)+ e-commerce (our own website (software updates) + Amazon)
Why not liquor stores?: high store margins
Traditional retail stores (e.g. Target, BestBuy):
- Keurig had also been distributing its coffee machines in traditional retail stores
- Provide broader market coverage
E-commerce (our website + e-commerce channels like Amazon):
- Our own website: avoid paying a retail margin, paying shipping costs?, device’s Wi-Fi
connectivity and updates, great for repeat purchases of pods and other accessories like
CO2 banisters.
- Keurig has a substantial online appliance business but Drinkworks and AB InBev had
relatively little experience in it
- Would customers buy a novel product without seeing it first?
Since liquor stores have higher retail margins, it is recommended for Drinkworks to sell the
mixer pods and machine through traditional retail stores (e.g. Target, BestBuy) and e-commerce
channels (Drinkworks website and Amazon).
First of all, Keurig has a significant brand awareness among customers in both e-commerce and
traditional retail markets. The latter distribution channel also provides a broader market
coverage for Drinkworks.
Secondly, Drinkworks website would serve as a centralized platform for product updates
(device’s Wi-Fi connectivity), promotional efforts, and sales operations, which are especially
useful for repeat purchases of pods and other accessories. While Drinkworks would take care of
the shipping costs (check this part later), it would reduce company’s retail margin.
To increase product awareness and gain bigger market share than Bartesian, Drinkworks
should rely on the digital marketing. By creating a brand slogan and logo, the company can
advertise the product on social media platforms (e.g. Instagram, TikTok, YouTube). Through
SNS algorithms, consistent content submission would reach a broader audience. Online
explanations of the “one-touch” cocktail creation could satisfy customers’ concerns. Amazon
also increases product’s visibility to consumers based on their previous searches.
For traditional retail stores, Drinkworks can set up product booths where customers could create
their own cocktails with the machine and learn the process first-hand. During peak holiday
seasons, Drinkworks could market the “holiday-themed” cocktail recipe updates and store
booths (e.g. New Year, Valentine’s Day).
showcase the process of creating cocktails with “one-touch”
The company can set up product booths in traditional retail stores to showcase the process of
cocktail creation to the customers.
In e-commerce, Amazon’s algorithms can increase visibility of the product based on its reviews
Marketing:
- Brand awareness of Keurig’s coffee machines: most consumers were aware of it
- Need to overcome customer’s skepticism
- Heavy reliance on digital marketing to generate awareness
- Average customer acquisition of about a $100
Hence Drinkworks will need to focus on gaining a bigger market share than Bartesian by
implementing
more promotions to attract consumers that are currently using Bartesian and to convert them
into
loyal consumers of Drinkworks. Since there are only two big players in this market, Drinkworks
still has a
great opportunity to capture a large amount of market share if promoted well enough
our strategy would be creating premium product booths at local stores where consumers can go
in to
interact and experience it. This will create brand awareness for people who are already walking
in stores.
The booth would also include having consumers making their own cocktails as well as
decorating it as if
they were hosting a party. The booth itself would be curated to be a luxurious experience for
consumers
so that not only the taste of the cocktail is remembered but the whole experience itself places
the brand
in the consumer’s evoked set.
Aimed at overcoming customers’ skepticism towards Drinkworks and converting Bartesian’s
users into Drinkworks’ customers
Make a 360 marketing plan, so that the public can get to know this new product, they should
make live demonstrations, either in supermarkets, shopping malls, retail stores, TV
commercials, social media campaigns, etc.i Should create a brand slogan, advertising
communication, etc.i could create a 30-second reel, showing the essence of the brand and the
product, in addition to its easy use.Consumers should be informed that cocktails are obtained by
pressing just one button.If you want to focus on the innovation of the brand and talk about the 2
types of capsules that the machine works with.The focus should be on demonstrating how
different Drinkwork is, and better, compared to the other alternative brands. You can take
advantage of the holidays of Christmas, new year, etc., as occasions to advertise the product
Drinkworks Case Analysis
1. Is Drinkworks a good product? What problem is it trying to solve?
The problem for people who want to enjoy a premium and high-quality drinks (cocktails) at
home and while hosting parties for the friends/family but do not want to buy a lot of
equipment/many ingredients. It is a quick and convenient solution which makes customers’ lives
easier.
According to Davis (CEO), the main problem is the inconvenience and lack of experience or
intimidation in preparing cocktails.
2. What is the right target market for it and what is its potential market size?
21+ years of age
Those who enjoy hosting and visiting home parties, enjoy drinking (frequence of alcohol
consumption)
People with higher income??
3. What is its value proposition and how should it be positioned compared to its competitors?
An alcoholic cocktail pod - Bartesian pods do not have alcohol.
Bar-quality drinks at home - ease and convenience.
Impressing the guests at home parties.
Modern and innovative technology and product.
4. Which pods should Davis introduce – cocktail pods with alcohol, mixer pods without alcohol,
or beer/cider pods?
Cocktail pods with alcohol
Mixer pods without alcohol is not the best option since it will be harder to differentiate and have
a unique value proposition
Beer/cider pods do not match with customers’ perception of premium drinks and quality, but
some websites state that machine can make beer/cider, so we can add it to the product
offerings. Since people who drink alcohol might also want to drink beer since it contains less
alcohol, in general.
5. How should the device and pods be priced?
6. What distribution channels should Davis select to launch Drinkworks?
For the machine: online and traditional retail stores
For the pods: online liquor stores and offline liquor stores
7. Can Drinkwords be the next billion-dollar opportunity for AB InBev and Keurig?
NO :(
The market size is too limited and people have their own perceptions about pods.
Actual example of Drinkworks:
Machine:
https://www.walmart.com/ip/Drinkworks-Home-Bar-by-Keurig-Single-Serve-Pod-Based-Premium
-Cocktail-Spritzer-Brews-maker-Black-Pods-Sold-Separately/217584643
They sell the machine at traditional retail stores and sell alcoholic pods separately (online liquor
stores)
Pods:
https://shopliquorland.com/drinkworks-by-keurig/drinkworks-pods/
https://www.gotoliquorstore.com/b/spirits/drinkworks/2852
https://www.tasteofhome.com/article/cocktail-machines/
“Drinkworks has a “Top Shelf” line of cocktail pods which are made with brand-name spirits like
Jack Daniels, Chambord and Herradura, while their standard pods are made with generic spirits
and liqueurs.”
Cost: $299.99 available on the Drinkworks website, Amazon and other online retailers.
Pods: $3-5 per pod on the Drinkworks website and Amazon.
CO2 cartridges: $7.50 per cartridge on Drinkworks.
Cleaning tablets: $2 per cleaning on Drinkworks.
Water filters: $4.50 per filter on Drinkworks.
https://wgntv.com/reviews/br/kitchen-br/bar-wine-br/bartesian-vs-drinkworks-cocktail-maker/
“The drink maker can also craft ciders and beers for those who are more partial to less
spirit-forward drinks. Alcohol-free beverages can also be crafted using the CO2 cartridges that
come with the product.”
Case research findings:
Target market selection:
- In 2017, total U.S. sales of alcoholic beverages—including sales for on-premise and
off-premise consumption—were $234 billion, including about $110 billion for beer, $63
billion for wine, and $61 billion for distilled spirits.2 Of total sales, an estimated $130
billion related to in-home consumption.
- Of those, 77% reported purchasing non-alcoholic drinks beforehand; 67% purchased
beer or wine; and 50% purchased hard alcohol.8 Fifty-one percent of hosts noted that
they tried to provide types of alcohol their friends would like, and 49% offered multiple
types of alcohol at their parties.
- In a 2018 survey, 23% of respondents reported consuming cocktails outside the home
during the past three months, while 19% consumed them at home
- It recruited about 2,300 people between the ages of 21 and 65 years old, who consumed
alcoholic beverages at least once per month, and had an annual household income
greater than $50,000
- respondents who were willing to pay at least $299:
- Ages 21-29
- Live in urban area
- Socialize at home >= once a week
- Higher household income levels
Chose at home because it was more relaxing and !cheaper.
A premium positioning getting more popular:
we’ll see more activity in this high-end, pre-mixed cocktail space, whereas before, the RTD
market was dominated by flavored malt beverages bearing recognizable spirit brand names
such as Smirnoff Ice
Pricing-related:
- Bartesian attracted 6,500 preorders on Kickstarter and was called “the Keurig of
cocktails” by Business Insider.18 It planned to sell its device for $299 and non-alcoholic
pods—containing non-alcoholic liqueur, bitters, juices, and other mixers—in packs of 12
for $20
- The Kold device (soda in a pod) retailed for $299 to $369, and the pods retailed for $1 to
$1.25 each. However, Kold sales were lackluster, prompting Keurig to discontinue it in
mid-2016
- [specifically, Drinkworks] Survey respondents’ interest in purchasing a $199
drink-making device and $4 pods varied by customer segment and ranged from 9% to
39%.
- Device purchasing:
- 42%: not interested to purchase at any price
- 6.9%: willing to purchase >=$199
- 3.8%: pay >=$299
- 2.1%: pay >=$399
- Pod purchasing:
- ~50%: >=$4 per cocktail pod
- ~7%: $4 per mixer pod
- 35%: $4 per beer/cider pod
- Manufacturing costs:
- $250 (including everything)
- Alcoholic cocktails pods ($1.20), non-alcoholic mixer pods ($0.95), beer pods
($1.10)
- Experiment results:
- 40%: probably or definitely spend >=$249
- 47%: undecided at that price point
In real life, Drinkworks was sold for $299.
Problems with regulation:
- Twelve states banned liquor sales on Sundays
- Some areas mandated that alcohol only be sold by state-run liquor commissions; others
prohibited vertical integration in the alcohol industry
- In most states, alcohol could only be purchased at licensed bars, restaurants, liquor
stores, and grocery stores
- In the vast majority of counties, bars and restaurants were only allowed to sell alcoholic
beverages for on-premise consumption
- All but two states allowed beer to be sold in at least some grocery stores; more than half
prohibited the sale of liquor at grocery stores
- Most states allowed alcohol to be sold online, but conditions on these sales—such as
permissible order size—varied
Important device characteristics:
- The device could last five or more years.
- It would take less than a minute to make a drink such as a Manhattan, margarita, or
Moscow mule.
- Updated through wi-fi connection
- Mobile app - additional purchases
Pods:
- Pods could fall into three categories: cocktail pods with alcohol, mixer pods without
alcohol, and beer/cider pods.
- Mixer pods (without alcohol):
- Users add their own alcohol (similar to Bartesian)
- Cheaper
- Avoid regulatory problems
- Easier for consumers to comprehend
- Mixer pods (with alcohol):
- Ease and convenience (no additional actions) - main value proposition
- Consistent with consumer perception of Keurig’s coffee machines
- Problems with distribution, regulatory issues, consumers cannot add their
preferred brand of liquor
Consumers’ attitude:
- perceived the Drinkworks device as being innovative, convenient, and upscale
- when it comes to hosting and relaxing
- Positive perception: positive emotions, such as happiness, excitement, and relaxation
- Negative perception (12%): perceived lack of purpose, high price point, and complexity
- 90% of respondents viewed the Drinkworks Home Bar device as a premium product
-
Usage rates:
- Weekly attachment rate: from 8+ in the beginning of the experiment to ~6 at the end
- Davis’ expectation: attachment rates would normalize to ~5-6 pods/week
Distribution channels:
Liquor stores:
- a major strength of Anheuser-Busch (long relationship)
- If alcoholic pods, then distribute through licensed stores (regulatory issues)
- Wholesalers: margin of 20%-25%; retail stores: margin of 25%-35%
- Spirits excise tax of ~$0.10 - $0.15 per pod
- Con: liquor retailers don’t like slow-moving, non-repeat items, attempts to commercialize
home draft beer systems were not successful
Traditional retail stores (e.g. Target, BestBuy):
- Retailers: margin of 25%-35%
- Broader market coverage
- Cannot sell beer/cider or alcoholic cocktail pods.
- Bartesian had partnership with Hamilton Beach Brands
Machine in traditional retail stores and cocktail/beer pods in liquor stores?
E-commerce:
- Retail margins: 15-25%; but for their own website: no retail margins => responsible for
paying shipping costs
- Would customers buy such innovative product without seeing it first?
- Challenging regulatory issues for alcoholic online sells
Marketing:
- The need to overcome consumers’ skepticism
- “Keurig makes good coffee - what are they doing making alcoholic drinks?”
- Buy it unseen or would want to sample it first
- Reliance on digital marketing
- Average customer acquisition cost: ~$100
