Energy Gel: A New Product Introduction

Energy Gel: A New Product Introduction (A)

While taking a break during his usual Sunday bike outing, Harry Wickler, vice president of business development at High Performance Corporation (HPC), bit into a Quickpro energy bar and reflected on the heated discussions of the last week.

Wickler and his business development team in the energy food division had presented a comprehensive new business plan for the product introduction of Energy Gel, a small gel-type nutrition package designed to replenish the body with carbohydrates and electrolytes much more rapidly than traditional energy bars were designed to do. Several quickly growing entrepreneurial companies had already introduced similar products and, according to Wickler, the most recent marketing evidence suggested that gel-type nutrition bars might be the most important development in the carbohydrate energy-food market since the introduction of energy bars. Nonetheless, major food or energy drink companies had yet to enter this expanding and lucrative market. Wickler was convinced that it was time (in October 2000, four years after the first energy gels were introduced) for HPC to react by launching a gel product of its own and thus strengthening its position in the energy foods market.

Unfortunately not all of the parties involved in the decision-making process at HPC agreed with Winkler's line of reasoning. Two issues in particular, both of which impacted significantly on the profitability calculation of the new product, remained unresolved: First, did the potential cannibalization of HPC's highly profitable energy bar products diminish the attractiveness of launching the new energy gel? Second, should the new project bear incremental or even full costs for the use of otherwise-idle capacity?