PROJECT REPORT

DANONE NARANGS

Blue

Guided by
Prof. Rajesh K. Aithal

Group No.13
Amar
:
Arpit
:
Dheeraj :
Hari
:
Neha
:

PGP/30/182
ABM/11/023
PGP/30/193
PGP/30/198
PGP/30/210

Page 1

Table of Contents
EXTERNAL ENVIRONMENT AND ITS IMPACT ON THE PRODUCT BLUE ................................................................................. 3
Competition from other brands and products: .................................................................................................................. 3
Demographic Factors .......................................................................................................................................................... 3
Social and cultural forces: ................................................................................................................................................... 3
Natural forces...................................................................................................................................................................... 4
Economic forces .................................................................................................................................................................. 4
STUDY OF CONSUMER BUYING BEHAVIOR ............................................................................................................................. 4
Need recognition ................................................................................................................................................................ 4
Information search.............................................................................................................................................................. 4
Evaluation of alternatives ................................................................................................................................................... 5
Purchase decision ............................................................................................................................................................... 5
Post purchase behavior....................................................................................................................................................... 6
PRODUCT AND POSITIONING.................................................................................................................................................. 6
Product ................................................................................................................................................................................ 6
How does Danone-Narang and customers perceive Blue? ............................................................................................... 6
Packaging ............................................................................................................................................................................ 7
Positioning Of the Product .................................................................................................................................................. 7
Survey Results ................................................................................................................................................................. 8
Value Proposition of Blue............................................................................................................................................... 8
Competitor Analysis ........................................................................................................................................................ 8
BLUE PRICING STRATEGY ........................................................................................................................................................ 8
Demand ............................................................................................................................................................................... 8
Minimum costs involved ..................................................................................................................................................... 8
Competitor analysis ............................................................................................................................................................ 9
Value to customer and monopoly in flavored water segment in India ........................................................................... 9
Customer demographics ..................................................................................................................................................... 9
COMPETITOR ANALYSIS .......................................................................................................................................................... 9
Analysis ............................................................................................................................................................................. 10
Discounts ........................................................................................................................................................................... 10
Credit terms and margins ................................................................................................................................................. 10
Price Elasticity ................................................................................................................................................................... 10
Recommendations ................................................................................................................................................................ 10
References ............................................................................................................................................................................ 11
Page 2

EXTERNAL ENVIRONMENT AND ITS IMPACT ON THE PRODUCT BLUE

The following factors were considered in external environment which will affect the product Blue:
Competition from other brands and products
Demographic factors
social and cultural forces
Natural forces
Analysis and Comments

Competition from other brands and products: Functional beverages are becoming big (growth rate in double
digits) with other companies like Dabur, PepsiCo and Coco-cola are looking to enter the market too. Therefore Blue
needs to quickly consolidate its position as the functional energy drink, otherwise it may quickly lose ground to a new
product. Aggressive ad campaigns on media and internet will do the trick as our survey shows very less awareness.
Hence there is a need for celebrity brand endorsement from a youth icon. The online survey conducted on 76 users
shows the following results.
Figure 2: Recommendations for increasing awareness
Event
Social
Sponsors
Media,
hip, 13%
21%

Figure 1: Recommendations for increasing awareness

Aware,
15%

Celebrity
Endorse
ment,
25%
Advertis
ement,
41%

Not
Aware,
85%

Demographic Factors
The demographic profile of South Asian countries is predominantly young with median age for India at 25.9 years,
Bangladesh at 23.5 years, and Pakistan at 21.2 years. Hence these are all young nations which are also the target
segment of Blue. These nations will also be witnessing high urbanization rates in the coming years, which will increase
the demand for product like Blue primarily being consumed in urban areas. Twelfth five year plan states that Surging
growth and employment in cities will prove a powerful magnet 300 million Indians currently live in towns and cities.
Within 20-25 years, another 300 million people will get added to Indian towns and cities

Social and cultural forces:

There is an increase in demand of non-cola products as Indian society is getting more and more educated and more
health conscious. Hence Blue has positioned itself as a flavored drink with health benefits that can capture the market.
A survey can be done on the vitamin deficiency in India and those vitamins which are most essential and deficient can be
added to the drink. For example a study revealed that a whopping 69 per cent of Indians suffer from vitamin D
deficiency, while a further 15 per cent found to be vitamin D deficient.
Changing work Environment: The employment opportunities are becoming more and more privatized thus increasing
Page 3

the average stress levels in the youth, hence demand for energizing and refreshing drink like Blue might increase due to
it.
Increase in standard of living is leading to more demand of packaged water, hence beneficial for Blue. Develop better
and classier packaging along with a good brand image.

Natural forces
The shortage of drinking water will only magnifies in the near future due to lowering of water table and drying of natural
resources, hence there would be an increase in demand of packaged water. A report shows that of the 27 Asian cities
with population of over 10 lakh (1 million), Chennai and Delhi have been ranked as the worst performing metropolitan
cities in terms of water availability per day, while Mumbai is the second worst performer, and Kolkata the fourth worst.
By 2050, there will be 2.5 billion more people on the planet and a good majority will be born in nations already facing a
terrible water shortage. Blue can do long term planning for water resources to be used in future manufacturing and tap
into the demand once it increases.

Economic forces
As India is a developing nation hence the disposable income of an average Indian is increasing. Middle Income group
whose annual household income is in the range of INR 200,000 to 1 million is likely to go up from about 13.3 million in
2005 to about 128 million in 2025. Thus giving the user more opportunity to try a product like Blue which normally the
user might not try.
Hence Blue has huge opportunity, it can come up with short tetra packs as it will be cheaper and once a user tries it,
there is probability that he will buy more.

STUDY OF CONSUMER BUYING BEHAVIOR

To understand customer buying behavior and process, thorough interviews were conducted with existing consumers of
various functional drinks within the campus of IIM L. Participants were given free Blue drinks of three different flavors
to taste along with one flavor of Gatorade drink, followed by a quick survey form and interview.
Total consumers interviewed
Age group category
Gender

:
:
:

14
21-28 years
10-M, 4-F

Analysis and Comments

Need recognition
The purchasing process begins with the consumer realizing that he requires something to drink. This acknowledgment
later deciphers into buying a beverage of a specific classification. In practice, a large proportion of the consumers decide
to go for a beverage when they are feeling thirsty and many times low in energy level. Their objective is to drink
something which quenches their thirst while at the same time freshen them up. Blue is principally promoted to
individuals who feel the requirement for an additional support to lift up their mood when they are feeling low.

Information search
The buyer's next step is to discover potential options i.e. drinks which may fulfill his needs. Customer looks around for
information to discover which drink may provide him greatest fulfillment in the minimal cost. Information about the
possible options is by and large done from the underneath.

Page 4

 Personal: More than 80% customers interviewed have depended on informal insights from their friends and
colleagues. Information is relied upon the close connections who had tried it earlier.
Advertisements: Approx. 15% get details of a particular drink from the promotional campaigns. The main subset
of this group have proceeded further primarily for experimentation purpose. As per the findings, approximately
50% feels that the claims made by companies a little exaggerated. Hence, the claims in advertisements are not
taken at the face value.
Internet / Social media: A little proportion (5% approx.) has depended on the web for getting more subtle
elements of the product. This was carried out essentially from the product websites, online reviews or
followership on social media platforms like Facebook.

Evaluation of alternatives
At this stage, the shopper is mindful of his choices and goes on further to evaluate the shortlisted drinks. It is on the
basis of these parameters that he assesses and takes out his decisions. In case of functional drinks category, the
evaluation parameters have varied drastically from person to person.
Large proportion of the consumers has taken the health benefits parameters of a drink primarily. This subset of
people requires something real, natural and a value for money. They have ended up on real juices, processes
packaged juices like Tropicana and Real.
Then we have young sports enthusiasts who focus primarily on drinks which have positioned them as sports and
energy drinks. The objective they want is a quick energy boost up after an energy draining session in field. The
considered drinks by them are Red bull and Gatorade.

Surprisingly, the proportion of customers looking for something to lift up mood is extremely low which have
made us doubt the promotion strategy and positioning of the product Blue.

Customer Involvement
Number of brands examined
Number of sellers considered
Number of product characteristics evaluated
External information sources used
Time spent searching

High

Medium

Low

Purchase decision
This is the phase when the consumer has really settled for his choice. This choice comes after a thought on lots of
components examined in the previous stage. The main findings are as given below:
Page 5

 Most of the consumers have very clear idea about the drink they have to purchase. The decision to purchase
was pre-decided and in rare cases was finalized after coming and seeing all the products at the point of sale.
In case of Blue, since the awareness level is low so it is important to have a direct visibility in the shop. 20% of
customers can change their decisions if the products they want to buy are not visible properly.

Post purchase behavior

If after consuming Blue for the first time, consumer expectations are not met than 90% of the consumers are
not willing to try it again and will move on to other competitor drinks.
If the product is found good it is promoted and communicated within the friends and chances are high for
becoming a loyal customer.
Only in rare cases, consumers will go over the board to promote goodwill or badmouth the product on internet
and social media.

PRODUCT AND POSITIONING

Product
Philip Kotler who coined the theory of marketing describes Product in terms of Variety, Quality, Design, Features, Brand
name, Packaging and Services. Here we will go through the different aspects of product.
Blue was launched by Danone-Narang beverages in 2012 in the test market of Pune, Maharashtra. This was followed
by a pan-India launch in March 2013 across 35 cities. Danone has variations of this product in the Indonesian and
Chinese markets under different brand name; however Blue was specifically conceived and designed for the Indian
market. Few months after launch Blue won 1st place in the Best Alertness Drink category at the 2012 International
Beverage Innovation Functional Drinks Awards.
Awareness level of Blue is quite low with only 62% have heard about it, while only 29% of them have actually
tried
Overall=18% penetration among elite class has been found.
Figure 3: Usage and awareness of Blue

Have you heard of B'lue?

Have you tried B'lue?

Yes,
29%

No,
38%
Yes,
62%

No,
71%

How does Danone-Narang and customers perceive Blue?

Blue is a ready-to-drink (RTD) that energizes as well as quenches thirst. This is first of its kind product in the Indian
market and claims to be packed with a delicious fruity taste, stimulating aroma and special blend of 4 vitamins and 3
minerals to enliven the body, mind and mood (BMM). Blue comes under main category of functional drinks and sub-

Page 6

category of flavored water. It does not contain any caffeine, color, preservatives or carbonated assets. It is available in 4
flavors in India viz.: Guava, Peach, Orange and Apple.
From the primary research and survey, we have found out that Apple (with 43%) is the most preferred test
followed by peach and Guava.
Figure 4: User Preference for Various Flavors of Blue
Guava,
Peach,
19%
24%

Orange,
14%
Apple,
43%

Packaging
Blue is designed to draw customers and promote reusability of the bottle. Comparing packaging of Blue and Gatorade,
it is found out that customers perceives Blue packaging as appealing but it lacks a sports drink look. On the other hand
Gatorade is perceived as a sports drink.
Blue packaging is found out to be an issue since owing to the almost same packaging for different flavored drinks, it is
difficult for consumers to differentiate between these.
Figure 5: SWOT Analysis
Low Brand Awareness- 40%
functional drink consumers have
not heard of B'lue
Low product preference for
flavored water
Over priced
High sugar content

Unique product
Water based light drink
fortified with minerals
Absense of caffeine, color,
preservatives and carbonated
acids
Energizes body, mind, and
mood

Strength

Weakness

Opportunity

Threats

First of its kind product:

untapped market
Suitable for all age groups

High competition in the

fucntional drink category
Consumer bargaining
Threat of new entratnts
Low advertisement budget

Positioning Of the Product

This product is one of the innovations of Danone Narang Beverage Group. Blue is a restoration drink that energizes as
well as quenches thirst. This is first of its kind product in the Indian market. It is packed with a delicious fruity taste,
stimulating aroma and special blend of vitamins and minerals.
Page 7

Survey Results
1- Age Group- More than 80% of the target segment who currently consume Blue or are willing to purchase lie in
the age group of 20-25 years.
2- Consumer Preference - More than 66% respondents consume functional drink more than once in a month of
which 25% respondents consume it every frequently, more than twice in a week.
3- Product USP- Over 75% consumers rated taste and packaging to be the products USP of all features.
4- Current Positioning- The product is currently positioned as aromatic, flavored water with a blend of minerals and
vitamins.
Figure 6: Consumer Perceived USP of Blue

Value Proposition of Blue

This is the only product in the Indian market under flavored water
category.
a.
b.
c.
d.

Water based drink with a blend of 4 minerals and 3 vitamins

Absence of caffeine, color, preservatives or carbonated assets
Thirst quencher to enliven body, mind and mood (BMM)
Fulfils the needs, wants, and demands of youth- Youth want to be
stay hydrated, energized and consume a healthy drink.

Competitor Analysis
Since this is the one and only product in the flavored water category, it does not face any direct competition. However
it faces indirect competition from the followinga. Packaged Juices such as Real, Tropicana: More than 60% consumers prefer these for taste and health benefits
b. Energy Drinks such as Gatorade, RedBull, Tzinga: A significant majority prefer this category to re-energize after
heavy physical activity
c. Ready to Mix Powdered Drinks such as Glucon-D, Tang- Used by age group of 10-15 for energy and health benefits
More than 85% consumers are not aware of the benefits and value proposition of flavored water, which reduces Blue
competitive edge among peers. Moreover, more than 30% consumers have not heard of Blue. Increasing brand
awareness by television advertisements and celebrity endorsements would be helpful in providing sales boost to the
product.

BLUE PRICING STRATEGY

There are multiple factors on the basis of which pricing of Blue drink is determined. These are analyzed as given below:

Demand
Being a new product in market along with its low visibility, Danone cannot price its product extensively high. As per the
survey it was found out that most of the respondents (71%) have not tried this product. Keeping price in the range of
Red Bull (a premium segment) will further avoid consumers from trying it and could affect the revenue for it adversely.
So, price of Blue should be less than Red bull initially.
Price (Blue) < Price (Red Bull)

Minimum costs involved

In manufacturing Blue drink, there is a certain minimum threshold which needs to be charged to cover the costs
associated with the factors of production like raw materials, factories and labor. Blue have positioned itself as a drink
Page 8

which is replacement of water with the added benefits and flavors. So, it must cover at least the price charged by
leading mineral water brands with an additional cost for added flavors and benefits.
Price of 500 ml of mineral water (e.g. Bisleri) INR 10
Added cost for flavors and added minerals INR 5
So, total manufacturing cost including advertisement can be considered around INR 15, and so the pricing for Blue
should be more than this.

Competitor analysis
Pricing strategy also depends upon the substitute products operating in the market. And needs not be excessively higher
or lower due to elastic nature of demand of the product.
Mineral water (500 ml) are priced from INR10 to INR12
Real juices (e.g. Tropicana) is priced at INR 90/liter. So, per 500 ml cost can be considered around 45.
Flavored sports drink (e.g. Gatorade) is priced at INR 35/500 ml.
So, the pricing of Blue should be more than water due to the higher utility provided by this product. But, it should be less
than Gatorade as the raw material used for both products are more or less same with a little different positioning. Plus,
Blue being a challenger and new entrant should have a better value for money for the end customer.
INR 15 < Blue (500 ml) < INR 35

Value to customer and monopoly in flavored water segment in India

As of now in Indian market there is no direct competition for Blue which also offers flavored water. Hence, due to this
monopolistic nature in this specific segment, it can command a premium for this. Since, a customer looking to drink a
flavored water dont have any other direct substitute in this category. So, we can consider a premium of approximately
INR 5.

Customer demographics
This product primarily caters to youth segment like college going students and young executives in industries in the age
group of 18-30 years. This is also the segment which is generally price insensitive and whom status makes a difference.
Hence, elasticity of price would not be much for this specific segment. And customer would be ready to pay and try a
higher price segment of drink.

COMPETITOR ANALYSIS
Blue faces major competition from health & energy drinks, fresh fruit tetra-pack juices, and other powdered energy
drinks such as Tang and Glucon-D.
Competitors and Consumer Preferences
As per the consumer survey, major competitors as per consumer preferences are as given below:
Powered products
10%

Juice
Tetrapac
k
60%

Page 9

B'lue
10%

Gatorad
e
20%

Competitors
Price (500 ml)
Discounts
Allowances
Credit Terms
Retail margin
Value for money (as
perceived by consumers)

INR 32
No
During Promotional Event
Favorable
18%

INR 45
During Clearance
Yes
Favorable
20%

INR 40
During Clearance
Yes
Favorable
25%

Slightly Overpriced

Priced Correctly

Value for Money

Analysis
As it can be seen from the comparative chart, the pricing is competitive relative to its direct peers. However, customers
perceive it to be slightly overpriced. According to the survey conducted, a significant majority (80%) of the customers
are willing to pay only INR 20- INR 24 for a 500ml Blue bottle.

Discounts
After speaking to four retail outlet stores in an around our campus we found that Blue has not offered any discounts to
retailers or consumers. However, recently Blue conducts ties up with cinema halls during promotional events and sells
the product at concession. The current positioning and preference patters of Blue does not justify the price charged,
and is highly sensitive towards business loss resulting competitors predatory pricing policies.

Credit terms and margins

Blue offers favorable credit terms to its wholesalers and retail outlets receiving between 18-20% profit margin.
However, this is lower as compared to the margins offered by Tropicana and Gatorade. This product has low product
awareness among consumers, hence the company can increase the profit margins to increase shelf space and visibility.

Price Elasticity
According to our survey, when asked by a sample of consumers who have tried the product before:
How would your consumption vary if we increase the price of the product?
A majority of consumers said that due to availability of a large number of close substitutes, the consumers would shift to
other drinks. The product has a very elasticity of demand, and does not have scope for further increase in price.

Recommendations
1) Increase awareness level of Blue & flavored water through television advertisements, celebrity endorsements,
and distributing free samples
2) Change packaging of different flavors of Blue for easy identification
3) Use of push mechanism by incentivizing retailers to stack product and increase visibility
4) Improve the distribution network to increase availability at retail outlets
5) Introduce smaller packs to encourage consumer to try the product
6) Blue being positioned and promoted as a replacement of water is perceived as a little over priced by most
customer. So, it should operate in around 25-30 INR range to be more competitive.
Page 10

References
1) http://www.drinkblue.in/
2) Marketing Management- A South Asian Perspective by Kotler, Keller, Koshy and Jha
3) http://healthmeup.com/reviews-buzz/product-review-blue-flavoured-water/20773
4) http://en.wikipedia.org/wiki/Consumer_behaviour
5) http://www.outlookbusiness.com/article_v3.aspx?artid=288089
6) http://businesstoday.intoday.in/story/challenges-ahead-for-newcomers-in-energy-drinks-market/1/199794.html
7) http://www.business-standard.com/article/management/kit-non-alcoholic-beverage-market-in-india-111101700049_1.html
8) http://www.b2bmarketing.net/blog/posts/2013/06/24/5-steps-understanding-your-customer%E2%80%99s-buying-process

Page 11