Cadbury Beverages, Inc. is the beverage-manufacturing division of Cadbury Schweppes PLC. It was created in 1969 by a merger of Schweppes PLC (1783, London, the first world’s soft drink maker) and Cadbury (1830, Birmingham, a major British confectionery manufacturer). In 1989, the Cadbury Schweppes PLC was one of the world’s largest multinational companies and the world’s third largest soft drink marketer (behind Coca-Cola and PepsiCo), with worldwide sales of $4.6 billion, sold in 110 countries. Beverages accounted for 60 percent of company sales and 53 percent of its operating income.
Additionally, at that time, Cadbury Beverages, Inc. was the fourth biggest soft drink marketer in the US (behind Coca-Cola, PepsiCo, Dr.Pepper-7Up), with a carbonated soft drink market share of 3.4 percent, and the market leader in some specific soft drinks categories (see exhibit 1).
2. Problem or Opportunity
In January 1990, the Cadbury marketing team decided to take up a challenge of re-launching the Crush, Hires and Sun-Drop soft drink brands, recently acquired from Procter&Gamble (October 1989). In the beginning, the marketing executives intended to focus on re-launching the Crush brand on the soft drinks market. As a result, three main issues need to be tackled:
•Rebuilding a cooperative relationship with bottlers,
•developing a base brand positioning consistent with the brand equity, •developing (objectives, strategies) and budgeting the advertising and promotion program.
The Carbonated Soft Drink Industry in the U.S.
Three main actors participate in manufacturing and distribution of carbonated soft drinks in the United States: concentrate producers, bottlers, and retailers. The concentrate producers’ and bottlers’ roles and margins of are different for regular and diet drinks.
There are approximately 40 concentrate manufacturers in the US, but only three of them (Coca-Cola, PepsiCo, and Dr. Pepper/7Up) account for 82 percent of industry sales. As far as bottlers are concerned, they are present in a number of 1,000 in the United States. They may be either owned by concentrate producers, or franchised. Franchised bottlers are usually given the exclusivity rights for a certain territory, but they cannot sell a directly competitive brand.
Concerning retailers, those are supermarkets (40 percent of carbonated soft drink industry sales), convenience stores and small retail outlets, vending machines, and fountain service (ex. McDonald’s). Among the above mentioned, supermarkets are claimed to be crucial in the company’s distribution net.
Concentrate producers typically arrive at a gross profit of 86% (regular drinks), or 87% (diet drinks). When we take off selling and delivery, advertising and promotion costs and general and administrative expenses, the net profit may reach either 16% (regular drinks), or even 30% (diet drinks).
On the other hand, the gross profit for bottlers usually accounts for 43% (diet drinks), or 46% (regular drinks), whereas the net pretax profit gets at 12% (diet drinks), or 15% (regular drinks).
In view of the analysis of the above cost structure it seems obvious that concentrate producers should be more interested in manufacturing diet soft drinks, and bottlers should slightly prefer mixing and packing regular drinks.
The four main competitors in the orange carbonated soft drink category implemented different positioning strategies for their products. Minute Maid Orange stressed the orange flavor of their products, Sunkist attempted to associate drinking their product with a specific lifestyle (ex. teens lifestyle). Also, they targeted different age groups and household models: Mandarin Orange Slice and Minute Maid Orange focused their attention on young adults with no children (singles, couples) while putting stress on “better for you” idea...