Harvard Case - Drinkworks: Home Bar by Keurig
"Drinkworks: Home Bar by Keurig" Harvard business case study is written by Sunil Gupta, Jonathan Levav, Julia Kelley. It deals with the challenges in the field of Marketing. The case study is 15 page(s) long and it was first published on : Sep 2, 2020
At Fern Fort University, we recommend Drinkworks pursue a multi-pronged strategy to solidify its position in the home cocktail market. This includes refining its product portfolio, leveraging its existing Keurig infrastructure for efficient distribution, and employing a targeted marketing approach focused on building brand awareness and driving consumer adoption.
2. Background
Drinkworks, a joint venture between Keurig Green Mountain and Anheuser-Busch InBev, launched a home bar system in 2018. The system aimed to disrupt the cocktail market by offering consumers a convenient and high-quality way to make cocktails at home. However, Drinkworks faced challenges in gaining traction, including consumer skepticism about the quality of the cocktails and competition from existing home bar systems.
The case study focuses on Drinkworks' efforts to overcome these challenges and achieve sustainable growth in the home cocktail market. The main protagonists are the Drinkworks team, tasked with developing a successful strategy to increase market share and profitability.
3. Analysis of the Case Study
To analyze Drinkworks' situation, we can utilize a combination of frameworks:
a) SWOT Analysis:
- Strengths:
- Strong brand recognition through the Keurig brand.
- Established distribution network through Keurig's existing infrastructure.
- Access to Anheuser-Busch InBev's expertise in brewing and cocktail development.
- Potential for innovation and expansion with new cocktail flavors and formats.
- Weaknesses:
- Limited consumer awareness and skepticism about the quality of cocktails.
- High initial cost of the Drinkworks machine.
- Limited variety of cocktails compared to competitors.
- Dependence on single-serve pods, potentially contributing to environmental concerns.
- Opportunities:
- Growing demand for convenient and high-quality cocktails at home.
- Potential for partnerships with other beverage companies to expand product offerings.
- Increasing interest in personalized and customized beverage experiences.
- Expanding into new markets with potential for global growth.
- Threats:
- Competition from established home bar systems and other cocktail options.
- Consumer preference for fresh ingredients and homemade cocktails.
- Potential for negative press related to environmental impact of single-serve pods.
- Economic downturn impacting consumer spending on discretionary items like home bar systems.
b) Porter's Five Forces:
- Threat of New Entrants: Moderate. The home bar market is relatively easy to enter, but significant investment is required for product development and marketing.
- Bargaining Power of Buyers: High. Consumers have many options for cocktails, and the price of Drinkworks pods is relatively high.
- Bargaining Power of Suppliers: Moderate. Drinkworks relies on suppliers for pods and other components, but there are multiple potential suppliers.
- Threat of Substitutes: High. Consumers can easily choose other options like pre-mixed cocktails, fresh ingredients, or other home bar systems.
- Competitive Rivalry: High. The home bar market is already crowded with established players and new entrants.
c) Consumer Behavior Analysis:
- Drinkworks' target market is primarily young adults and professionals seeking convenience and quality in their cocktail experience.
- Consumers are price-sensitive and value convenience, but also prioritize quality and taste.
- Consumers are increasingly environmentally conscious and may be hesitant about single-use pods.
4. Recommendations
To achieve sustainable growth, Drinkworks should focus on the following recommendations:
a) Product Development and Innovation:
- Expand Cocktail Variety: Introduce a wider range of cocktails, including classic and unique options, to cater to diverse consumer preferences.
- Focus on Quality and Taste: Invest in research and development to improve the taste and quality of cocktails, addressing consumer skepticism.
- Explore Alternative Formats: Consider offering larger-format pods or reusable containers to address environmental concerns and appeal to cost-conscious consumers.
- Develop Personalized Cocktail Options: Explore customization options, allowing consumers to create their own cocktails using different ingredients and flavor profiles.
b) Marketing Strategy:
- Targeted Marketing Campaigns: Focus on digital marketing channels like social media, influencer marketing, and targeted advertising to reach the desired audience.
- Brand Positioning: Emphasize Drinkworks' convenience, quality, and brand association with Keurig, highlighting the ease of use and consistency of the system.
- Content Marketing: Create engaging content that showcases the variety of cocktails, highlights the technology behind the system, and educates consumers about cocktail culture.
- Partnerships and Collaborations: Partner with bars, restaurants, and other beverage companies to promote Drinkworks and expand product offerings.
c) Pricing Strategy:
- Competitive Pricing: Analyze competitor pricing and offer competitive pricing for Drinkworks machines and pods.
- Value-Based Pricing: Emphasize the value proposition of Drinkworks, highlighting the convenience, quality, and variety of cocktails offered.
- Promotional Offers: Introduce limited-time promotions and discounts to attract new customers and drive trial.
d) Distribution Strategy:
- Leverage Keurig Infrastructure: Utilize Keurig's existing distribution network and retail partnerships to reach a wider audience.
- Expand Online Sales: Increase online sales through e-commerce platforms and partnerships with online retailers.
- Strategic Partnerships: Partner with retailers and restaurants to offer Drinkworks machines and pods in their locations.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: Drinkworks can leverage Keurig's expertise in single-serve beverage systems and Anheuser-Busch InBev's expertise in brewing and cocktail development.
- External Customers and Internal Clients: The recommendations focus on addressing consumer needs for convenience, quality, and variety while also appealing to environmentally conscious consumers.
- Competitors: The recommendations consider the competitive landscape and aim to differentiate Drinkworks through product innovation, marketing strategies, and pricing.
- Attractiveness: The recommendations are expected to increase market share, drive sales, and improve profitability, ultimately contributing to Drinkworks' long-term success.
6. Conclusion
By implementing these recommendations, Drinkworks can solidify its position in the home cocktail market. Focusing on product innovation, targeted marketing, and leveraging its existing infrastructure will allow Drinkworks to overcome its challenges, address consumer needs, and achieve sustainable growth.
7. Discussion
Alternative strategies include focusing solely on cost reduction, offering a subscription-based model, or partnering with a major online retailer for exclusive distribution. However, these options may not be as effective in addressing the core challenges of consumer skepticism, limited variety, and high initial cost.
Key risks include the potential for negative publicity related to environmental concerns, failure to attract new customers, and intense competition from established players. Assumptions include continued growth in the home cocktail market, consumer acceptance of Drinkworks' technology, and the successful implementation of marketing and distribution strategies.
8. Next Steps
To implement these recommendations, Drinkworks should:
- Phase 1 (Short-term):
- Introduce a wider range of cocktails within 6 months.
- Launch targeted digital marketing campaigns within 3 months.
- Partner with select retailers and restaurants to expand distribution within 6 months.
- Phase 2 (Mid-term):
- Explore alternative formats for pods and develop personalized cocktail options within 12 months.
- Expand online sales and explore strategic partnerships with other beverage companies within 18 months.
- Phase 3 (Long-term):
- Continuously monitor consumer feedback and adapt product offerings and marketing strategies accordingly.
- Explore international expansion opportunities and new product categories within 24 months.
By following these steps, Drinkworks can capitalize on the growing home cocktail market and establish itself as a leading player in this exciting new category.
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Case Description
In the summer of 2018, Drinkworks CEO Nathaniel Davis needed to make a number of go-to-market decisions ahead of his company's upcoming product launch. Formed through a joint venture between Keurig Dr. Pepper and Anheuser-Busch InBev, Drinkworks had developed an innovative home bar system that let consumers make single-serving cocktails or beer with the push of a button. Keurig and AB InBev provided valuable technological, supply chain, and regulatory expertise, but since the Drinkworks Home Bar was a novel product, there were no established market benchmarks for the Drinkworks team to follow as they prepared for the Home Bar's upcoming market launch. After conducting several market research experiments, they needed to interpret the results and make several decisions around customer segmentation, value proposition, product assortment, pricing, and distribution channels. Could Drinkworks be the next billion-dollar opportunity for Keurig and AB InBev?
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