July, 2009 GEORGE R. COOK JOLT: AMERICA’S ORIGINAL ENERGY DRINK ( PAST & FUTURE ) Company Background While being a first mover and a major player in the development of a niche market – energy soft drinks, Jolt actually had its roots back in the early 1950s when the Rapp family of Rochester, New York, through the guidance and stewardship of Joseph F. Rapp, Jr. acquired the distribution rights to upstate New York for well known brands such as 7 – Up, Canada Dry, and Dr. Pepper when he operated six different soft drink bottling operations to service the franchise rights for several high quality products in the industry. At that time, geographic market coverage was from Jamestown, NY extending east to Albany, NY – strictly a regional operation. C.J. Rapp, current President and CEO and Son of Joseph F. Rapp, Jr., of Wet Planet Beverages (the parent company ) became involved in the beverage industry as a summer employee at the age of 12 and worked in the family bottling operations each summer until graduation from college. ©July, 2009 Executive Professor George R. Cook prepared this case study in conjunction with C.J. Rapp, President and C.E.O. of Wet Planet Beverages ( Jolt Cola ), and Courtney Rapp, Manager of Public Relations at WPB. The author would also like to express his thanks to the Marketing Faculty at the Simon School, University of Rochester and several MBA/MS students at the Simon School who provided valuable input and comments during the preparation of the case study. No part of this publication may be reproduced, stored in a retrieval system, or used in a spreadsheet or transmitted in any form by any means – electronic, mechanical, photocopying, recording, or otherwise without the express written permission of the William Simon Graduate School of Business Administration, University of Rochester, New York. This case study is solely intended to be utilized as a basis for classroom discussion and does not in any way suggest effective or ineffective management practices nor is it in any way an endorsement for the products discussed within the case study itself. - 1 - The idea for Jolt first began as a “topic of discussion” within the Rapp family household, involving many discussions about the overall direction of the soft drink industry. There was a relatively strong feeling amongst the family members that the soft drink industry seemed to be abandoning their basic roots and foundation and instead of staying true to their rich heritage of soft drink products that “tasted good”…they were reacting to various new consumer trends in the marketplace that involved the concept of “better for you” products. During the early to mid 1980’s America’s first ever Health Food era developed and the rest is history as we know it today. There were sugar free and caffeine free versions being created throughout the soft drink beverage industry and we saw and heard such popular advertising tag lines such as: “ 7-Up’s – Crisp and Clean and NO Caffeine!” While hard to believe, Jolt is now at the ripe old age of 23 and wants to compete at the highest possible levels in the energy drink category. The category experienced growth of 45% or more in both 2006 and 2007 and the future looks bright. Jolt’s main competitors in the energy drink category are: Red Bull, Monster and Rock Star. While Jolt may not reach the share levels of the “Big Three”, it is not unreasonable at all to think that Jolt can significantly increase share. Jolt’s overall category ranking is less than 1.0%, but currently represents a 10% share in the larger 23.5 oz can size segment. Jolt has excellent consumer awareness, reputation, brand recognition and significant mind share in the category that it can build upon. With increased media spending and expanded distribution opportunities at hand, Jolt is looking to gain a greater market share in the segment. In November, 2008 , Wet Planet Beverage’s management team ( CEO, Director of Marketing and Director of Consumer and Public Relations ) along with agency personnel is holding a planning session centered around marketing strategies and the future direction and potential market opportunities for Jolt. Each of the marketing mix elements is up for discussion and revision or modification as deemed appropriate for today’s highly competitive energy drink segment. In the past, the key elements that the company has focused on are: Product, Promotion and Distribution. Pricing strategy on the other hand has remained constant over the life of the product with the company utilizing a premium pricing strategy which is pretty much the standard within the segment. The company has introduced a plethora of innovative products and packaging since its inception with the primary focus, of course, being the Jolt product. The product, innovative packaging and a non traditional distribution system have been instrumental in Jolt’s reputation and success to date. Since Jolt’s introduction to the marketplace in 1985, competitive entries into this segment of the soft drink industry have been steadily increasing year over year. There is a multitude of energy drink products in the segment today, all vying for a piece of the action. Again, the major players are: Red Bull, Monster, and Rock Star. The challenge now is to develop a comprehensive marketing strategy that will enable Wet Planet Beverages and Jolt to enjoy a satisfactory growth in share, revenues and profits for the upcoming year and foreseeable future. “Where Does Jolt Go From Here and How Do They Get There?” - 2 - The Jolt Product Jolt ( now Wet Planet Beverages ), was incorporated in November, 1985 and the original Jolt product was first sold in March, 1986. The first retail customer was Wegmans a renowned grocery retailer headquartered in Rochester, New York. Initially introduced to the market in a standard 12oz can size with the promotional tag line, “All the sugar and twice the caffeine and Dare to Want it All!” ( See Exhibit 1 ) The product was an immediate hit with the targeted audience. Wet Planet Beverages originally offered only a cola flavor but has since extended their product offering to seven (7) flavors in an attempt to broaden the market and spark growth. The more recent flavors are: Blue Raspberry; Wild Grape, Cherry Bomb and Orange Blast. ( See Exhibit 2 for past and current Jolt product offerings ) Among independent mid-sized energy brands, Jolt is the longest lived, preeminent brand in the $4.9B energy drink category. Within this category, the Jolt brand is distinct for an approachable taste profile, breakthrough packaging and a consumer base that represents a demographically broad segment. Over time the Jolt product has gone through a series of product packaging innovations: 12 oz can; 12oz glass bottle; 20 oz plastic bottle and in 2005 the 23.5 oz battery bottle.( See Exhibit 3 ) More recently the 16 oz resealable cap can ( August, 2008 ) has been added to the list and should dramatically improve the marketability and product reach, in particular within the convenience and grocery store outlets. The 16oz product will provide greater portability and customer convenience, and is a much more approachable package size for consumer trial. Also, the company will benefit from the “optimal eye level” shelf space that the 16 oz can brings as it will have a broader market appeal. This package size, according to industry experts, accounts for over 55% of total category sales. Also, the 16 oz. size segment is expected to grow by 36% or nearly twice the rate of the overall energy market. Jolt is also developing a 4-pack of the 16 oz can size which should further penetrate the “at home” consumption market. In terms of share of volume by size of can, the 16 oz. can continues to take a larger and larger share of the volume. ( See Exhibit 3a ) (Source: Beverage Marketing Corporation) Wet Planet Beverages has always provided an energy drink with a pleasant taste in contrast to so called “functional” energy drinks which tend to emphasize energy at the expense of a pleasing taste. Jolt is positioned as a refreshment energy beverage which offers both – energy and a pleasing taste. Red Bull tends to be the top “ functional energy” drink while Monster tends to lead the way in terms of the refreshing energy drink. It would appear that this puts Jolt in a very promising position – a very approachable taste profile with a diversified portfolio of refreshing energy flavors which should put the company in a position to capture market share in the highest growth sub category of the overall energy drink market. Another recent product announcement by the company was the 2 oz Jolt Endurance Shot. (See Exhibit 4 ) The product is currently available in a grape flavor and offers an extended energy buzz. In 2007, the energy shot category generated approximately $ 275.0M in sales - 3 - and is projected to grow to $500.0M in 2008, a very healthy CAGR! It is typically sold by retailers near the check out aisle for easy access and to stimulate impulse purchase. The company has also created a partnership to launch a line of Jolt branded energy gum and mints as well. Further expansion of certain third party relationships to develop non beverage related products ( energy candy, energy powders, and energy strips ) will potentially add additional licensing revenues and expand the reach of the Jolt brand and further enhance the company’s position as – “ Jolt All Things Energy!” ( Exhibit 5 ) (Source: Wet Planet Beverages) In terms of product content, Jolt energy beverages maintain a relatively consistent amount of energizing additives ( 5 ) specifically: taurine, guarana, ginseng, vitamin B complex, and caffeine.