Cadbury Beverages Case Study
Cadbury Beverages is the beverage division of Cadbury Schweppes, a major soft drink and confectionary marketer. In 1989 they had worldwide sales of $4.6 billion. Schweppes was the worlds first soft drink maker and the 3rd largest soft drink marketer. In 1969 Schweppes merged with Cadbury in the year 1989 and Cadbury Schweppes was on of the world’s largest multinational firms and was ranked 457th in the business week’s global 1,000. Beverages accounted for 60% of the company worldwide sales and confectionery for 40%. Cadbury Beverages is the 4th largest soft drink marketer in the U.S., with a market share of 3.4%
In January 1990 the marketing executives at Cadbury Beverages began the task of re-launching the Crush brand, which was purchased from Procter and Gamble in October 1989. In re-launching the brand they had three issues that had to be addressed if they wanted to make this a success. They were to develop a base positioning, to build a cooperative relationship with bottlers and to budget the advertising and promotion program.
The major competitors for the soft drink industry are Coke, Pepsi and Dr. Pepper/7up. Revenues are extremely concentrated in this industry, with Coke and Pepsi tighter with their associated bottlers. Market trends for the soft drink industry can be summarized by six fundamental themes. Changing consumer beverage preferences, featuring a shift toward heath-oriented wellness drinks. The growing friction that is going on with the between bottlers and manufactures in the distribution system. Continually increasing retailer strength, fierce competition, complex distribution system composed of multiple sales channels, beverage safety concerns and more-stringent regulations.
Three main actors participate in manufacturing and distributing of carbonated soft drinks in the U.S. They are concentrate producers, bottlers, and retailers. The concentrate producers and bottlers’ roles and margins are different for regular and diet drinks. There are approximately 40 concentrate manufactures in the U.S. but only the big three (Coca-Cola, PepsiCo, and Dr. Pepper/7up) account for 82% of industry sales. In the U.S. there are around 1,000 bottlers, they are either owned by concentrate producers, or franchised. Franchised bottlers are usually given the exclusivity rights fir a certain territory, but they cannot sell directly competitive brands. Concerning retailers, those are supermarkets (40% of carbonated industry sales), convenience stores and small retail outlets, vending machines and fountain service. Supermarkets are claimed to be crucial in the company’s distribution net.
Concerning consumption behavior, the soft drink buyers seem to be very responsive to different advertising and promotion techniques especially to coupon promotions, in-store displays (end-of-aisle displays) and other promotions in the place of sale (shelf tags). Also, it appears that the purchase of soft drinks is often unplanned. The Per capita consumption in the East South Central states of Kentucky, Tennessee, Alabama, and Mississippi was highest in the US in 1989. The U.S. customers drink more soft drinks than tap water. The average American consumes 46.7 gallons of carbonated soft drinks per year (in 1989 compared to the 23 gallons in 1969). The typical customer purchasing soft drinks is a married woman with children under 18 years of age living at home.
The company’s financial performance was exceptional even during the stock market crash during October 1987 and continued to go about its business and continued its pursuit of the U.S. soft drink market by acquiring Crush International from Procter & Gamble for $220million. Cadbury Beverages controlled a 3.4% market share in the United States. In a sense, the takeover speculation surrounding Cadbury Beverages was a tribute to its success over the last decade. Cadbury...