Product Retail Pricing Strategy: Dr. Pepper Snapple Group

Essentially, the soft-drink industry is largest beverage industry. It gross millions a year, and has different distribution channels. For example, these soft-drinks are sold in supermarket, Vending Machines, Gas stations, etc. The cost is incomparable to the amount of consumer we currently have in America. If Americans consumer on average 50 gallons in a year. The cost of 2.00 is not missed by the average person. With that said, there is a least likely chance that a person would attempt to duplicate the process at home. The soda making process is too time consuming, and inconvenient when a person can simply can go to the store to purchase. Consumers can either be very loyal to the brand or fickle. Influx in prices can make consumers switch very quickly. However, there are typically incentives associated with loyalty. There are giveaways and contest that entices the customers to keep purchasing. For example, Snapple does this with a real fact on every lid. I personally know people that will buy the product just to read the facts.

For instance, USDA defines soda and “water ices” as having minimal nutrition for school lunch programs. Various studies have been conducted to compare the health of SNAP participants and non-participants (Polhemus, Dalenius, Mackintosh, Smith, and Grimmer-Strawn). Additionally, USDA budget for SNAP exceeds $75 billion, implementing changes and educating participants on quality food choices is beneficial in the long run because costly diseases are prevented, which are paid by taxpayers via Medicaid and other public funded health care. Lastly, implement food choice after WIC program, retailers profit by accepting SNAP benefits and will conform to new

By imposing a sugar beverage tax, consumers will demand less of the good and drive demand downward. Similarly, the sugary beverage market is elastic to price changes ("Price elasticity of the demand for sugar sweetened beverages and soft drinks in Mexico"). If the prices of sugar beverages increase, the demand will decrease ("Price elasticity of the demand for sugar sweetened beverages and soft drinks in Mexico"). However, a counterclaim does arise which argues that even if consumers of these beverages decide to stop purchasing a taxed good, they will purchase substitute goods that have the same satisfactory effect at a price that isn't affected by the tax. This idea was presented by Jason Fletcher from the University of Wisconsin. In his published research, Fletcher found that BMI remained constant or increased even when consumers are confronted with a beverage tax (Fletcher, Frisvold & Tefft 2009).

The competition between Coke and Pepsi reached its peak to become a real war battle by the year 1980. This war had affected the industry profit for both concentrate producers and bottlers, while the effect of bottlers was much higher. After the successful “Pepsi Challenge” (blind taste tests: sales shot up) in 1974, Coke countered with rebates, retail price cuts and significant concentrate price increases. Pepsi followed of a 15% price increase of its own. During the early 1990’s bottlers of Coke and Pepsi employed low price strategies in the supermarket channel in order to compete with store brands. The concentrate producers were always able to increase their profits by increasing the concentrate price, while the bottlers, especially the

For states that have needed more help to become healthier in their food choices such as southern states like Alabama and Georgia, they could receive a higher rebate of $0.45 for every dollar they spend on fruits and vegetables. Adding this incentive into the program is expected to actually increase consumption of fruits and vegetables by twenty-five percent, according to the Healthy Incentives Pilot program in Massachusetts. This policy should be enacted because as of right now there is no other way to promote spending on healthier choices when the prices on these choices are already so high for low-income families. In order to expand the SNAP program to fund this incentive, we need to allow for more government spending on this program. Though this would lead to higher debt for our domestic consumption, it would help those in the U.S. who have virtually nothing to eat. We plan on getting the money to fund this by allocating money from other unneeded government purchases such as the ones in our so called, “waste book”.

The pricing strategy that I chose is marketing objectives. Our company will deliver on this strategy to this stand by competing with our competitor’s stand. Our competitor, Jimmy, manages the Lemonade Stand “Liquid Yellow” charges $1.50 for one cup of lemonade. However, they use artificial ingredients, such as artificial flavoring and coloring, white sugar, etc. My company decided that we want to have a price that is higher than Jim’s price. We decided that we want to charge $2.00 for a cup of lemonade. We decided to charge this price because unlike Jim’s stand, we use all natural ingredients, which cost more than artificial ingredients and are healthier for you than artificial ingredients are. That is my company’s pricing strategy.

Contemporary debates regarding the increase of obesity are dominated by a personal responsibility frame. However, the most impacting factor for obesity in the United States is income. With farm subsidies, the price of soft drinks decreased by 23% between 1985 and 2000, meanwhile the cost of fruits and vegetables increased by 40% (SG5 Lecture Notes, 11/8/16). Based off the Bureau of Labor Statistics the cost of unhealthy foods has dramatically fallen while the price of fruits and vegetables has inflated.

Obesity has been a problem in the United States for far too long, and it is time for the government to take action and protect the health of its citizens. This could be accomplished by taxing junk food and subsidizing healthy food, such as fruits, vegetables, and meats. The easiest foods to find and the cheapest foods to buy are foods that contain large amounts of calories and few nutrients (“What’s Behind the Obesity Epidemic”). This means that obesity disproportionately affects poor families (Mitchell, Catenacci, Wyatt, & Hill). In order to redress this issue, the government should put extra taxes on foods with high amounts of calories with few nutrients to act as a deterrent and keep people from buying them. The money gained from the taxes

The worry over obesity has reached monumental proportions that New York requested to conduct a pilot project with New York City that would eliminate SNAP benefits for sugar-sweetened beverages. However, the USDA (US Department of Agriculture) denied the request, a very controversial decision on August 19, 2011. New York was not the only one disappointed in the decision, other states like California asked for such permission and urged Congress limit and set standards for what type of products that can or cannot be purchased with SNAP benefits. Initially the Food Stamp Act of 1964 was enacted to help feed needy people at a time when hunger was the nation’s most prominent problem. Now, almost 50 years later, the program’s focus has shifted and has begun to slowly adapt to a changing nutritional environment. “Among low-income young children in the United States, the prevalence of overweight and obesity now exceeds underweight by about 7 to 1. In its proposal, New York argued that sugar-sweetened beverage consumption causes obesity and diabetes and that government cannot afford to subsidize disease-promoting behaviors.” The New York City Mayor claimed that the proposal would have helped people by protecting them from preventable illnesses and that it had little or no cost to taxpayers.

Food stamps are government-issued coupons for low income families. People in America like to take advantage of those coupons and use them for unhealthy food and drinks. In SNAP households, soft drinks are ranked the second highest purchase (Tanner). SNAP is the formerly known program for food stamps. In one study, low income women admitted their babies into a government nutrition assistance program. Researchers confirmed that “The rate of youngsters at risk for obesity fell during the study, from almost 15 percent in 2010 to 12 percent overall in 2014” (Tanner). In that study, the government took control of what food stamps were available, and the obesity rates fell among the families. Additionally, another survey published by SNAP provides a glimpse into the shopping cart of a typical house. As said by a group of Stanford researchers, “Banning sugary drinks for SNAP would be expected to significantly reduce obesity prevalence and type 2 diabetes incidence” (O’Connor). Here, it means, that instead of promoting unhealthy food, the government can give out food stamps that are a healthier alternative for the public . Although this may be true, some people consider that it is society’s responsibility to be healthy. Ryan Schwertfeger, president of the Student Senate concludes, “Those who make healthy choices will have no reason to suffer or worry about those

Pepsi’s has a large number of product lines and brands and thus the prices are considerably varied. Their main pricing strategy is based on the Market-Oriented pricing strategy to ensure that its prices are competitive as compared to the competitor’s prices and market conditions. Pepsi also used

Also soft drink companies diversify business by offering substitutes themselves to shield themselves from competition. Rivalry:

There are many sellers in the market heating up pricing competition. Competitors like McDonald’s, Dunkin Donuts, Peet’s Coffee and other specialty coffee companies incentivize price wars. Furthermore, coffee’s demand is elastic which makes it difficult to increase prices without greatly reducing the demand. This makes differentiation and positioning very important. Also, it is easy for customers to switch from coffee vendors. Whichever company is most convenient for the customer will likely win the business. Competition is a top priority in the industry.

The pricing technique of Coca-Cola has supported the firm to compete and grow in the soft drink effectively. The volume discount and pricing penetration are the vital aspects to provide the firm generates its sales in the market. For instance, Coca-Cola partners with large supply chains such as Costco, Sam’s Club, and Walmart to provide great discount pricing in order to generate its sales substantially in the U.S and the global market. Equally, the firm also distributes its

The global beverages industry is currently a low-growth market, with an expected compound annual growth rate of 5.7% between 2017 and 2025 (Grand View Research 2017). Additionally, the industry is quite saturated with firms that offer increasingly differentiated products. However, due to this low growth rate, companies have been engaging in price competition to gain competitive advantage and increase their market share. Nevertheless, Coca Cola is a dominant force in this market, controlling 40% of the industry, and is therefore at a low risk of losing its position.