Charger Energy Drink: A Business Proposal For The Australian Market

Background of the Idea

The energy drinks are popular in Australia and it has grown considerably in the last few years. It is due to the vibrant, lively and most flavorsome way of life the Australians prefer to live. The growth of the energy drinks market likely to grow of the future market and shows no sign of stopping in near future. The market has a wide variety of products ranging from branded international brands to home grown products (reize.com.au. 2017). This report is a business proposal for a new startup in the Australian market. The following parts of the report will be presenting detailed information of the proposed product and the background of the idea. The mission and vision of the proposed business will be highlighted in the proposal for a clear view. The details of the product are presented in the following part. A detailed market analysis is done along with the market targeting. Product, pricing, distribution and promotion are discussed based on the above analysis and a one year financial plan made. The final part of the report is consisting of the critical risk identification.

  The demand of energy drink is nothing new in the Australian market. Their energized lifestyle demands this kind of products which is why, some of the best coffee in the world is in Melbourne. As mentioned in the introduction part, a rapid growth in the industry is visible for over a decade and unlikely to all in near future. There are a number of international and domestic manufactured products available in the market. However, the demand of the products fails to fall. Some of the big names in the energy drinks industry are Red Bull, V Energy drink, Rockstar, Monster and many more pre-exist in Australian market. It reflects the idea that, the target population loves to taste the variety available in the market which is the basic background of the idea formation.

Energize the mind, spirit, body of the customer and bring optimism in their thinking. Using this statement, the brand will be seeking to maximize the revenue generation and build long term relationship with the consumers.  

• Provide the customers an unique experience
• To become a leading company is the Australian energy drink industry.
• Maintain the quality of the product through quality management
• Up hold the social responsibility and gain customer loyalty.

The proposed name of the product is Charger Energy Drink. The name is not chosen out of the blue, but has significance in both promotion of the product and the purpose that it fulfils. The name itself represents its purpose that is to charge the people with high level of energy and increase their enthusiasm to work, harder to gain the desirable. The proposed tag line of the product is “Unleash Your inner BEAST” that represents the effect of the drink in the customers’ body, mind and soul.

The primary ingredients of the products offered are caffeine, carnitine and vitamin B complex. It will have dual effects in one’s body. The caffeine will energize the body and the soul of the consumer where as the carnitine is added to burn the fat composed in the body. It is will offer dual energy to and recharge the consumer in no time. The effect of the drink will last longer than any other energy drinks present in the market (huffingtonpost.com.au. 2017).

Mission and Vision

The product will be available in both with sugar and diet version for accessing the maximum number of population in the target market.

The energy drink market in Australia is showing positive trend in the market in the last few years. This is due to the reason that, with the introduction of various healthy energy drinks in the market, customers are opting for these drinks instead of conventional carbonated drinks. As of 2010, the annual energy drink consumption in Australia stands at 36.20 million litres. The market growth rate of energy drinks in Australia as of 2010 is 25.2 percent (Pennay et al. 2015). Thus, the growth trend in this industry is more compared to other growing industries in Australia. The market value of energy drink in Australia is valued at 247.3 million Australian Dollar. However, there are few regulations that to be adhered by the organizations in this sector. Various regulations are being initiated by the government of Australia regarding the maintenance of the quality of the drinks (Pomeranz, Munsell and Harris 2013). Charger will adhere to all the relevant regulations and will provide the best possible product quality for their customers.

Major competitors in this industry are the Red bull and Monster energy and various other domestic brands. Red bull is the current market leader in the Australian energy drink industry. However, majority of the competitors are offering their products with premium pricing. Thus, the market for then existing competitors in the market is limited (Upson et al. 2012). Charger will price their products accordingly to their target market of middle class populations. It will help them in catering to more number of customers effectively (Mobin, Dehghanimohammadabadi and Solomon 2014). In addition, it will help them to reduce the threat of substitute products. This is due to the reason that, the price of soft drink and the existing energy drinks in the market is having much difference. Thus, customers willing to have energy drinks will opt for soft drinks. On the other hand, the pricing strategy of charger will help to target the existing customers from the soft drinks sector. Thus, the targeted audience will be more for them.

The primary target market will be the middle class customer segments. This is due to the reason that middle class customers constitute of majority of the total population in Australia. Thus, the market size and market potential will be more for Charger (Kim and Mauborgne 2014). Moreover, the existing competitors in this market are catering to the higher end customers with their premium pricing. Thus, the energy drink sector for the mass market is untapped, which will be a huge opportunity for charger to operate. The sales volume will also be more due to catering to the mass market.

The core product of charger will be the energy drink. However, the product will be released in various variants and flavors in order to cater to diversified taste and preference pattern of the customers. It will help them in expanding their market presence in Australia. The product will also come in various size and quantity (Chernev 2012). It will help the customers to buy the product according to their requirement. On the other hand, the organization will be benefited by offering their products in various price points. Thus, more customer segments in terms of the economical segmentation will be covered.

Product Offerings

As discussed earlier, pricing will be done according to the market status of the target market. The pricing strategy will help them to reach out to more number of customers effectively. The pricing will be done much lower compared to the existing competitors in the market. Thus, it will also act as competitive advantages for them (Wagner III and Hollenbeck 2014). It is being projected that with the success of the initial introduction of the mass-market energy drinks, premium priced products will be introduced in the later stage. Those products will have premium pricing for the niche market. Thus, the chosen pricing strategy will help them in catering to both the mass and niche market effectively.

Place or distribution refers to the mode and extent of availability of the products in the market. Charger being a mass market will be made available in as many more outlets as possible in the Australian market. This will help to reach out to more number of customers. Moreover, the brand value and exposure will be enhanced with the availability of the products in more number of outlets (Zauner, Koller and Fink 2012). The products will be made available in departmental and super stores also. It will help to cater to the customers from as much sales point as possible. The distribution network will be directly controlled by the organization. It will help them in controlling the distribution network according to the organizational policies and objectives

Charger will involves extensive promotional activities due to the fact that, it belongs in the fast moving consumer goods category. Thus, with having huge number of competition in this market, it is necessary for them to initiate aggressive marketing activities in order to attract more number of customers. The brand promotion will be done involving potential medium such as print and electronic medium. Print and electronic media is having the most effective penetration among the mass market. In addition, they will also initiate social media marketing in order to engage with the customers effectively (Tuten and Solomon 2014). It will help them in determining the current market trend as well as the current taste and preference pattern of the customers. Initiation of social media marketing will help them to interact with their customers to gain opinions about their user experience.

Sample distribution will be initiated in various sports events to enable the potential customers in having the taste of the drink. It will help them to generate positive word of mouth from the potential customers. Moreover, promotion in the sports events will help them to position their products effectively. These promotional activities will be implemented in a holistic basis to cover the all the customer segments effectively.

The product will utilize the social media marketing as their primary tool for promoting the brand as it shows potential impact in the given market (Heymann-Reder 2012). Other means of promotion are leaflet distribution in the popular places like offices, stadiums and other potential areas. Free sample distribution in events is another promotion that is kept under consideration and thought to be useful.

Primary Ingredients

The product line on the other hand offers two varieties of products that are diet and with sugar that will maximize the potential demography in the target market. The diet version is specifically made for the fitness concerned people as their number is rapidly growing in the market.

The price range will be kept from low to medium cost to attract the maximum number of customers in the initial stage of the business as the purchasing power of the target population is medium as analyzed. Moreover, the target population that prefers the product ages from 25 to 38 years. However, one third of the teenage population shows potential consumption of the product. Hence, the pricing is justified according to this analysis (Duffie 2010).

The company seeks to prepare a guided CSR policy for value creation and gain customer loyalty. To meet the mission and vision of the company, it is important to provide quality product with unique taste without violating the CSR protocol. Moreover, the customers’ feedback is incorporated in their business strategy to get an insight of the customers’ taste and opinion of the product.

The budget structure is the integral part of the business plan. The sequential budget planning determines the total estimated capital amount that is required to be invested while establishing an entrepreneur business (Wilks et al. 2011). However, it is necessary to ensure the liabilities and the total estimated cost at the initial stage. Charger Energy Drink has estimated $2,00,000 budget for the entire business plan. The company has total asset of $1,00,000 and it would borrow $1,00,000 from the outer sources. The entire plan is structured further:

Budget Actual	Revenue
Business Registration Fee	$200
Domain name registration	$200
Insurance Premiums	$350
Licences	$400
Workers compensation	$2,000
Setting up the premises
Lease deposit and advance rent	$25,000
Fitout	$1,000
Utility bonds and connection	$1,000
Stationery and office supplies	$5,000
Plant and equipment
Equipment	$5,000
Vehicles	$2,000
Telecommunications	$2,000
Computers and software	$6,000
Total Start Up Cost	51150

Table 1: Start Up Cost

(Source: Created by the Author)

The above table shows that the company requires considering some of the specific amount invested for different segments. For example, the company requires investing on the registration charges, domain name registration, insurance premium, license, and the compensation of the workers. In the next phase, the company has placed the budget for lease, fit-out, utility bonds, and stationery purposes. The company even requires investing on vehicles, equipment, computers and software, and telecommunication purposes. The total budget for the start up plan is thus estimated up to $51,150 (Mao, Li and Humphrey 2010).

	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
Sales
Revenue	$20,000	$20,000	$20,000	$20,000	$25,000	$25,000	$42,000	$55,000	$55,000	$88,700	$95,000	$100,000
Cost of goods sold	$7,000	$7,000	$8,000	$10,000	$15,000	$16,000	$16,000	$20,000	$21,000	$21,500	$25,000	$27,000
Gross profit	13000	13000	12000	10000	10000	9000	26000	35000	34000	67200	70000	73000
Expenses
Accounting fees	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000
Advertising	$15,000	$15,000	$15,000	$15,000	$15,000	$5,000	$5,000	$5,000	$5,000	$5,000	$5,000	$5,000
Bank charges	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000
Bank interest	$1,500	$1,500	$1,500	$1,500	$1,500	$1,500	$1,500	$1,500	$1,500	$1,500	$1,500	$1,500
Depreciation	$0	$0	$0	$0	$0	$0	$0	$0	$0	$0	$0	$0
Electricity and gas	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,500	$1,500	$1,500
Equipment hire/lease	$12,000	$0	$0	$0	$0	$0	$0	$0	$0	$0	$0	$0
Insurance	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000
Legal fees	$1,000	$0	$0	$0	$0	$0	$0	$0	$0	$0	$0	$0
Motor vehicle expenses	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000
Postage, telephone and fax	$2,500	$2,500	$2,500	$2,500	$2,500	$2,500	$2,500	$2,500	$2,500	$2,500	$2,500	$2,500
Stationery	$500	$500	$500	$500	$500	$200	$200	$200	$200	$200	$200	$200
Rent	$13,000	$13,000	$13,000	$13,000	$13,000	$13,000	$13,000	$13,000	$13,000	$13,000	$13,000	$13,000
Repairs and maintenance	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$500	$500	$500	$500	$500
Security	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000
Superannuation	$4,000	$4,000	$4,000	$4,000	$4,000	$4,000	$4,000	$4,000	$4,000	$4,000	$4,000	$4,000
Transport/courier costs	$2,000	$2,000	$2,000	$2,000	$2,000	$2,000	$2,000	$2,000	$2,000	$2,000	$2,000	$2,000
Wages	$20,000	$20,000	$20,000	$20,000	$20,000	$20,000	$20,000	$20,000	$20,000	$20,000	$20,000	$20,000
Workers compensation	$12,000	$12,000	$12,000	$12,000	$12,000	$12,000	$12,000	$12,000	$12,000	$12,000	$12,000	$12,000
Total Expense	90500	77500	77500	77500	77500	67200	67200	66700	66700	67200	67200	67200
Net Profit	-77500	-64500	-65500	-67500	-67500	-58200	-41200	-31700	-32700	0	2800	5800

Table 2: Profit and Loss Statement

(Source: Created by the Author)

The above table shows that the company may face the downfall in first few months. Some of the fixed costs, such as accounting fees, bank charges, interests, etc. However, on the other hand, the advertisement costs can be variable. It would be different after few months since the promotional works would be accomplished. It is noticeable that the company may reach to the breakeven point after 10 months. From this month onwards, the company is expected to start making profits (Altman, Sabato and Wilson 2010).

	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
Starting Cash Position
Inflow (Source of Fund)	$20,000	$25,000	$30,000	$35,000	$40,000	$45,000	$50,000	$60,000	$70,000	$80,000	$90,000	$100,000
Cash Sales	$2,000	$3,000	$4,000	$5,000	$6,000	$7,000	$80,000	$90,000	$10,000	$110,000	$120,000	$130,000
Collection from Accounts Receivable	$1,000	$2,000	$3,000	$4,000	$5,000	$6,000	$7,000	$8,000	$9,000	$100,000	$110,000	$120,000
Other Cash Receipts	$2,000	$2,200	$2,300	$2,400	$2,500	$2,600	$2,700	$2,800	$2,900	$3,000	$3,100	$3,200
Total Cash Inflow	25000	32200	39300	46400	53500	60600	139700	160800	91900	293000	323100	353200
Outflow (Use of Fund)
Fixed Cost	$55,000	$55,000	$55,000	$55,000	$55,000	$55,000	$55,000	$55,000	$55,000	$55,000	$55,000	$55,000
Administration	$2,000	$2,500	$3,000	$3,500	$4,000	$4,500	$5,000	$5,500	$6,000	$6,500	$7,000	$7,500
Marketing	$10,000	$10,000	$10,000	$20,000	$20,000	$20,000	$30,000	$30,000	$30,000	$40,000	$40,000	$40,000
Operations	$5,000	$5,000	$5,000	$8,200	$8,200	$8,200	$9,500	$9,500	$9,500	$11,000	$11,000	$11,000
Variable Cost
Administration	$20,000	$20,000	$20,000	$35,000	$35,000	$35,000	$50,000	$50,000	$50,000	$60,000	$60,000	$60,000
Marketing	$15,000	$15,000	$20,000	$20,000	$35,000	$35,000	$50,000	$50,000	$65,000	$65,000	$80,000	$80,000
Operations	$20,000	$25,000	$35,000	$45,000	$55,000	$65,000	$75,000	$85,000	$95,000	$10,500	$11,500	$12,000
Total Cash Outflow	127000	132500	148000	186700	212200	222700	274500	285000	310500	248000	264500	265500
Closing Cash Position	-102000	-100300	-108700	-140300	-158700	-162100	-134800	-124200	-218600	45000	58600	87700

 Table 3: Cash Flow Analysis

(Source: Created by the Author)

The cash flow analysis presents the idea that the company requires investing up to $55,000 as their fixed costs. On the contrary, the total cash inflow amount is variable. The results derived from the closing cash position determine that the company might start making profits after 10 months (Dickinson, V., 2011).

Assets
Current assets	$2,50,000
Cash	$200,000
Petty cash	$20,000
Accounts receivable	$10,000
Stock	$10,000
Short-term investment	$50,000
Prepaid expenses	$65,000
Fixed assets	$50,000
Land	$35,000
Buildings	$60,000
Improvements	$20,000
Equipment	$10,000
Furniture	$15,000
Motor/vehicles
Total assets	200000
Liabilities
Current liabilities	$32,000
Accounts payable	$12,000
Interest payable	$6,000
Taxes payable	$12,000
Income tax	$8,000
Sales tax	$5,000
Payroll accrual	$25,000
Long-term liabilities
Borrowings	100000
Total liabilities	200000

Table 4: Balance Sheet

Market Analysis

(Source: Created by the Author)

Risk analysis is essential task for a company to understand potential threats in the market and take necessary measurement to mitigate them (Aven 2012). Some potential risks can be identified carrying out operating in the particular target market. They are mentioned in the following:

Competition – There are a number of local and international companies with similar products are operating in the particular target market. They have already captured a potential percentage of the market share. Hence, it will be difficult for the company to enter the market and gain potential percentage of market share to make profit out of it. Importance has to be given on the promotion in the initial to make an image in the customers’ mind. Brand value has to be build before making impact in the market. Social media promotion and events that are mentioned in the above section have potential capability to increase the value.

Product uniqueness – The product line offered by the competitors is greater in number which is a potential threat. The uniqueness is essential to make potential impact in the target market. The proportionate combination of the mentioned ingredients will provide unique taste and longer effect on the consumers. It is likely to draw customer interest.

Damage Risk – Proper packaging is required to avoid any damage loss. Cans are the best way to sell the product. However they are vulnerable to minor accidents. Hence it should be packaging is required for avoiding this kind of loss.

Conclusion

It can be concluded based on the above discussion that potential chances of making profit in the given market are present for the particular product. Though, there are some competition lies ahead, but the proposed product is partially unique which gives it chances to rise up. Moreover, their promotion tactics is best suited for the situation of the market to make an initial image in the minds of the customer. It is also capable to deliver customer value to the company. Risk analysis presented in the final part of the report describes the potential risk and proposed solution to the issue. Three risks are identified above that are competition, uniqueness and damage. Possible solutions are mentioned and integrated in strategy to stand against the problem.

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