1.How can the beverage market be segmented? What should Urzza target?

2.What was the intended positioning at the time of conceptualization of Uzrra? In your view, what positioning options are available for Uzrra? Discuss their pros and cons.

3.Discuss the pros and cons for Uzrra in creating a product category different from energy drinks that can generate mass appeal.

4.Evaluate the current marketing mix of Urzza.

5.Do you think the target volume set for Uzrra is acaiveable? What should Urzza do next?

POSITIONING URZZA: LAUNCHING A NEW ENERGY DRINK

Bisleri International (Bisleri), a leading bottled drinking water company in India, launched a new drink, Urzza, in the energy drink market in September 2014. After five years of brainstorming, the company had come up with the drink, which it believed defied many preconceptions about the energy drink category. Unlike other energy drink brands, Urzza did not contain caffeine and had healthier ingredients that could attract more consumers. Ramesh Chauhan, the chairman and managing director of Bisleri and the man behind the launch, was quite excited about the new drink. He was making a comeback in the soft drink market after almost 22 years, having sold off his carbonated drink brands to Coca-Cola in 1993. Chauhan was optimistic about the new drink and the timing of the launch. He believed the drink could make n entirely new category in the functional beverage segment and generate mass appeal. Earlier, he had succeeded in creating and building a market for bottled drinking water in India with his Bisleri brand, but it remained to be seen whether he could recmake a success story with Urzza.

COMPANY BACKGROUND

Bisleri was set up in India in 1965 by Italian entrepreneur Felice Bisleri and was the first to launch bottled water in India, doing so under the Bisleri brand. The company, however, could not carve out a market for bottled water in India and was sold to the Chauhan family, the owners of the Parle Group, in 1969. Ramesh Chauhan created a strong foundation for the drinking water brand and grew the business tremendously in a short time.In 2014, Bisleri led the mineral water segment with a 60 per cent market share, and the brand was available in over half a million outlets spread across India.

A veteran Indian businessman, Chauhan was popularly known as "the man with a golden hand." He had led a series of successful product launches in the past. His previous launch of the carbonated drink Thums Up, in 1977, was a huge success. After just 15 years, Thums Up had acquired a share of 60 per cent in the soft drink market. The success of Thums Up was attributed to the appropriate timing of the launch, the identification of the right needs of the customer, and the marketing that followed the launch. Under his leadership, the company had also launched other soft drink brands like Limca, Gold Spot, and Maaza, which were also huge successes. Thus, time and again, Chauhan had proved his ability to make brand from scratch and win over the market. In 1993, Chauhan sold off his carbonated drinks, including Thums Up, to Coca-Cola. Reportedly, his bottlers wanted to join Coca-Cola, which had re-entered the Indian market in 1993 with ambitious growth plans. Now, 20 years later, Chauhan had launched a new drink in the functional drink category and was optimistic about demand in the market. When asked whether the launch of a new drink might imply reduced attention to the existing drinking water product, Chauhan replied that Bisleri intended to continue making progress in the bottled water category. In the drinking water segment, Bisleri was focusing on giving customers more options in terms of packaging and the size of bottles. However, because of lower margins in the drinking water business, the company needed to diversify. A distributor of bottled water noted,

You pay only 20 to buy a 1-litre bottle of Bisleri while you pay around 40 for the same bottle of Coca-Cola. The input costs for both are roughly the same, you can add 1-2 for Coca-Cola's costs to account for the additional flavor and soda, while the margins are more than double that for Coca-Cola. It is natural for a company such as Bisleri to diversify.

Another distributor estimated the total costs for a can of Urzza to be around 20-21 per can, and revenues to be 35 per can, excluding excise and sales tax. Thus, the profit margin was close to 10-12 per can of Urzza as compared to 2 per bottle for the drinking water. As such, launching a drink in the functional segment made business sense for Bisleri.

THE BEVERAGE MARKET IN INDIA

The beverage market in India was huge and had great potential for growth. Low penetration, low per capita consumption, increasing disposable incomes, and the growth of organized retail were some of the factors working towards the growth of the market. For instance, annual per capita consumption of soft drinks in India was estimated to be around five to six bottles in 2012 as compared to 17 bottles in Pakistan and 605 bottles in Mexico. Given the large population of consumers, even a small increase in the average consumption could result in a huge increase in total sales in the market.

The beverage market was highly diverse in terms of drink categories and brands. The non-alcoholic beverage segment was broadly divided into soft drinks and hot beverages. Even though soft drinks had existed for a long time, soft drink consumption in India was primarily an experience, as opposed to Western markets, where it was consumed frequently in order to wash down the relatively drier food in those regions compared to India. The soft drink market mainly included carbonated drinks, fruit-based drinks, bottled water, and functional drinks. As of 2011, carbonated drinks dominated the soft drink market at 60 billion, and the segment was growing at 10-12 per cent per annum.Fruit-based drinks, valued at 50 billion, had seen encouraging annual growth of 35-40 per cent. Energy drinks dominated the functional drink category. In 2011, the energy drink market, at 5 billion, was expected to grow at a compound annual growth rate of 25 per cent.

Amid rising health concerns worldwide about the use of carbonated drinks and increased competition from local, healthier drinks, the carbonated drink volumes experienced an uphill battle to grow. A survey of a representative sample from Indian metropolitan cities indicated that 79 per cent of the respondents preferred non-carbonated drinks over carbonated drinks.

FUNCTIONAL BEVERAGE MARKET IN INDIA: ENERGY DRINKS

The functional drink was a relatively new concept in the Indian market. It mainly comprised energy drinks, sports drinks, ready-to-drink tea and coffee, and fortified water. Energy and sports drinks had seen good growth globally and in India in the last few years. The major restraining factor to growth in the future could be the growing concern over health issues related to their consumption. Sports drinks were criticized for their high sugar and calorie content, and energy drinks for their high caffeine content. In India, the energy drink market was estimated to be around 7 billion and was growing at a rate of 20-25 per cent. Sports drinks had gained less traction than energy drinks in the Indian market because not many Indians engaged in heavy sports activities. The sports drink segment stood around 2 billion, with a growth rate of 30 per cent over the last few years. Gatorade, PepsiCo's brand, dominated the sports drink category in 2012 with an approximately 82 per cent market share; whereas Red Bull, the Austrian brand, led the energy drink category with an approximately 88 per cent share.

Energy Drinks

For a long time, Red Bull was the only energy drink brand available in India, and the category was synonymous with Red Bull. By 2010, realizing the potential of the segment, other brands like Cloud 9 (Goldwin Healthcare), Tzinga (Hector Beverages), XXX Energy Drink (JMJ Group), and burn (Coca- Cola) had been launched, and Red Bull's share was reduced to 69 per cent in 2013. There was no clear definition of energy drinks in the market, and brands differed in terms of ingredients and caffeine levels. Red Bull, the pioneer and market leader in the category, dictated the perception of energy drinks in the Indian market. The sale of energy drinks was mostly limited to urban areas. The use of energy drinks was associated with a hectic working and partying lifestyle, popular with the urban youth of the country. Hence, these drinks were highly common in pubs and bars, where they were used as a mixer with alcohol. Another major use of energy drinks among youngsters was to stay awake during late-night work or study. Caffeine present in energy drinks acted as a stimulant and helped the body combat sleep and stay awake for prolonged hours. Thus, these drinks were primarily targeted at college students and young working professionals who had long and erratic work hours.

Given the growing urban middle class and the changing lifestyle of Indian youth, the energy drink segment presented huge growth potential. Also, the high profit margins associated with the energy drink segment provided a lucrative opportunity to enter the market. Many companies and entrepreneurs had identified this opportunity and launched their products in the market. Some of the players that had entered in the last two to three years included multinationals like Monster Beverage, PepsiCo, Spitz KG, and Krungsiam Beverage, as well as local companies like JK Ansell, KG Functional Beverages, Heinz India, and Dabur.

The market for energy drinks was limited by its premium pricing. Compared to carbonated soft drinks, energy drinks were priced nearly five to six times higher per unit. Due to the high price, the demand for such drinks was highly linked to macro-economic conditions. The higher price narrowed the target users to a small stratum of the population that could afford to spend that amount. The distribution was by and large restricted to larger metropolitan cities in India. The drinks were primarily sold through three distribution channels: traditional retail, modern retail, and new channel development, which included pubs, bars, clubs, and lounges. A research report indicated that in 2012 approximately 57 and 30 per cent of sales came from the traditional and new channels, respectively. Sales through modern retail were, however, growing rapidly.

A significant number of incidents of adverse effects (and even deaths, in certain cases) after the consumption of energy drinks had been reported from different countries in the last five to 10 years, which put pressure on food regulatory bodies to look into the safety of consuming these drinks. Studies indicated that caffeine intake could result in undesirable physical and mental conditions, including rapid heart rate, anxiety, and nausea; in rare cases, it could also prove fatal. The risks due to these drinks particularly increased if they were used as a mixer for alcohol. With energy drinks being a relatively new concept in India, there were no separate regulations for these drinks. In 2009, the permissible limit of caffeine in carbonated drinks was reduced from 200 parts per million (ppm) to 145 ppm, and this was made applicable to energy drinks as well. Brands like Red Bull and burn exceeded this limit. However, in 2010 a stay order was placed on the amendment, leaving the energy drink segment highly unregulated.

In 2013, the Food Safety and Standards Authority of India drafted a regulation that imposed limits on caffeine levels in caffeinated drinks. The lower limit and upper limit of caffeine content in caffeinated beverages were proposed to be 145 ppm and 320 ppm, respectively.²⁴ Energy drinks were classified under caffeinated drinks. The proposal mandated that the packaging label proscribe a daily intake of more than two drinks of 250 millilitres (ml) each and warn against consumption by children and pregnant and lactating women. The draft regulation stipulated that energy drinks could not highlight claims of health benefits or enhanced bodily functions. However, the implementation schedule of the draft regulation was not clear.²⁵ On the other hand, two factors indicated an imminent toughening of regulations in the segment. Firstly, regulations constraining the amount of caffeine and the marketing of energy drinks were seen implemented in other countries. Secondly, energy drinks had received strong negative publicity and media attention in the last few years because of reported deaths linked to their consumption. The toughening of regulations could mean a change in formulation for many of the brands and an opportunity for other brands to enter the market.

THE LAUNCH OF URZZA

Looking at the narrow target segment for energy drinks and the growing health concerns related to their intake, Chauhan thought that a drink that could address these issues had good prospects in the market. After much brainstorming by him and his team, Bisleri launched Urzza in September 2014.

Urzza was planned as a non-caffeinated power drink. Also, Urzza did not have any of the stimulants popular in the energy drink industry, such as guarana and taurine. Rather, it was infused with vitamins B and C and tartaric acid, which aided in digestion. With the media flooded with negative sentiments about caffeine, it seemed natural for consumers to look for safer alternatives. Also, with the caffeine regulations expected to be made stricter, Urzza could have an edge over competitors, which were heavily dependent on caffeine. Not having caffeine also meant access to a wider audience, including teenagers. Having vitamins B and C could also strike a chord with ingredient- and health-conscious consumers. The absence of caffeine in the drink also allowed Urzza to be sold in pharmacy shops. However, the challenge for Bisleri was whether it could promote the notion that a drink without caffeine could impart energy. The main source of energy for most energy drinks was sugar, but consumers perceived caffeine to be the source. Chauhan and his team were positive that they would be able to break the preconceived notions, but they did not advertise the source of energy of Urzza. An analyst commented,

The market (for energy drinks) has only grown over the past two to three years. Right now, the reference point for any energy drinks consumer is Red Bull, which had a first-mover advantage. They think energy drinks are supposed to taste like that. But there are many people who have not tasted energy drinks yet.

The name of the drink, Urzza, was based partly on what the product stood for and partly on Chauhan's experience in the market. In the Hindi language, the word urzza meant energy, and thus conveyed one of the primary benefits of the drink, which was to energize and refresh. Chauhan believed that the term urzza, being a short and simple word, was easy to remember. That was important for a brand name to become popular. When asked about the double "z" in the name, Chauhan indicated his preference for five-letter words over four-letter ones, stating, "Five-letter words are wholesome. Also, the pronunciation of the letter z varies within Indian languages. To make the pronunciation very clear to consumers, we made it a double z." Consumer reactions to the name Urzza were mixed, with some saying it was apt for an energy drink and others saying it was suitable only for the Hindi-speaking community and difficult to spell out.

Chauhan wanted taste to be a key differentiator for Urzza. He wanted the drink to taste great and provide refreshment. This would widen the scope of the drink further beyond just night clubs and occasional drinking. Urzza was intended to be a drink that could be casually consumed like tea or coffee, anytime and anywhere. A lot of experimentation had gone into achieving a taste that was thought to be liked by most consumers. Taste tests with focus groups were also conducted. However, even Chauhan was skeptical of the results of such tests, because it was difficult to extract the true opinion of people through such studies. There was a tendency for the opinion of people to get biased by the answers of others in the group. Hence, even if the product did well in these studies, there was a fair chance of the product getting rejected when launched in the market.

Typically, soft drinks in India were available in many different sizes and flavours. Energy brands also had variants based on flavour, sugar content, and colour. For instance, Monster had 34 variants, Red Bull had eight, burn had seven, and Tzinga had three.²⁹ Urzza was not launched in multiple variants. The majority of the energy drinks present in the market were available in metal cans. However, Urzza was launched in cans (250 ml) as well as polyethylene terephthalate (PET) bottles (300 ml). Chauhan believed that PET bottles would be preferred because the contents of the drink were visible and the bottle was more mobile, being easily capped and re-used. The fonts for the Urzza label were chosen to be golden in colour to convey a premium image, and below the name appeared the slogan "The Liquid Charger."

Urzza was introduced at 50 for a 250-ml can or a 300-ml PET bottle, priced lower than most existing energy drinks (see Exhibit 1). However, it was still priced at a premium compared to soft drinks. Chauhan believed that the Indian market had evolved over time, and customers were demanding more premium products. They were willing to pay extra for an improved quality or experience. Urzza had the advantage of access to the extensive retailer and distributor network of its mineral drinking water. A bottle or can of Urzza was sold to retailers for 40 and thus provided them with a margin of 10. Red Bull also provided a similar margin of 15 to 20 per cent to its retailers, but additionally offered them attractive package deals.

Urzza did not clearly fit into any of the categories of the functional drink segment in the market. It was seen as competing with energy drinks, but the absence of caffeine gave it an opportunity to be classified differently. During an interview in September 2014, Chauhan commented,

Don't think of Urzza as a specialized product. We are looking at this product as one for . . . I wouldn't say mass consumption . . . but not for restricted consumption either. So we're not saying 'it is supposed to be a mixer,' or 'it is not for ladies,' or 'it is not for children' . . . Such things are out."

Post-launch, Chauhan and his team started a comprehensive pan-India marketing campaign through all popular media channels, including television, print, billboards, and social and digital media. They planned to reach out to schools and colleges in order to increase product awareness and promote the drink for everyday consumption. Television commercials were also launched, keeping a young audience in mind.

Although the use of celebrities was a popular way to promote soft drinks, Chauhan planned not to use celebrity endorsement for Urzza. Competitors connected with the young population in various ways. Red Bull associated itself with regular and extreme sports in its advertisements and also sponsored sports events.³² In 2012, it launched a digital campaign promoting Red Bull at work. Tzinga targeted the students of the country, who needed to stay awake to study. The latter strategy seemed to work for Tzinga, as Indian youth were studious and career-oriented. Urzza, however, marketed itself differently. It tried to position itself as an energy-boosting drink that tasted good and could be had anytime by anyone because of the absence of harmful ingredients (see Exhibit 2).

THE ROAD AHEAD

The energy drink market in India was at a nascent stage but growing rapidly. In the last few years it had become very competitive. Multinational giants like Coca-Cola and PepsiCo were trying to establish their foothold in the segment. Nevertheless, there was good scope for new players because the category was growing, and new users approached the market with an open mind. They were trying different options. Changing consumer preferences, macro-economic conditions, and regulations, as well as rising health concerns, were believed to decide the course of the market in the future.

The Urzza launch was backed by extensive research and enjoyed distribution support from Bisleri's existing mineral water business. Urzza did not use caffeine; hence, it seemed able to sustain the impending tightening regulations against caffeinated drinks. But, given the absence of caffeine, would consumers question the source of energy in Urzza? Could it end up as an ordinary drink, making it difficult to justify the premium price? Through Urzza, Chauhan was trying to carve out a completely new segment that had a much broader target audience compared to energy drinks and had no competitors in the segment. Was the value proposition compelling enough for the consumers? Could the product generate the mass appeal it was aiming for?

As a firm, Bisleri was also facing the challenge of channelling enthusiasm in employees towards Urzza while continuing to make progress in the drinking water segment. In an interview, Chauhan iterated,

Our competition is our own people: staff, distributors, salesmen. Have you been to our manufacturing plant, our warehouse? It's a mess! There are cartons and cartons of Bisleri. The top management, sales force, warehouse, trucks all have to give Urzza attention.

Chauhan set a target for the sales team: 10 per cent of Bisleri's sales volumes. This translated to 240 million cans of Urzza in a year. At the current pricing level, the expected target revenue was around 8 billion.³⁴ If Urzza could achieve the target, it would not only mean success for the product but would also open up new opportunities for Bisleri in the functional drink market. If it could successfully position itself to have a mass appeal, the targets looked easier to achieve. But it remained to be seen whether it was the right positioning for Urzza.

EXHIBIT 1: PRICE OF ENERGY DRINKS IN INDIA

Brand

Manufacturer

Price ( per unit)

Red Bull

Red Bull GmbH

95

Urzza

Bisleri International

50

Monster

Monster Beverage

95

Cloud 9

Goldwin Healthcare

95

Tzinga

Hector Beverages

30

KamaSutra

JK Ansell

90

Source: Rajat Ubhaykar, "Can Urzza Quench Ramesh Chauhan's Thirst?" Outlook Business, October 31, 2014, accessed October 1, 2015, www.outlookbusiness.com/strategy/feature/can-urzza-quench-ramesh-chauhans-thirst-39#undefined.

EXHIBIT 2: TAGLINE FOR DIFFERENT ENERGY DRINKS IN INDIA

Drink

Tagline

Red Bull

Red Bull gives you wings

burn

Fuel your fire

Urzza

The Liquid Charger; Awesome Taste

Cloud 9

Energizes Naturally

Monster Energy

Unleash the beast

Source: Red Bull, http://energydrink-in.redbull.com; Urzza, www.urzza.in/discover-urzza.html; "burn," The Coca-Cola Company, www.coca-colacompany.com/brands/burn; Cloud 9, www.cloud9energydrink.com; Monster Energy, www.monsterenergy.com/in/en/products; all accessed October 1, 2015.