Dr Pepper/7Up, Inc.
Squirt Brand Case Analysis
SOFT DRINK INDUSTRY
The soft drink industry in the United States is a highly profitably, but competitive market. In 2000, carbonated soft drink retail sales were estimated $60.3 billion, however, soft drink consumption growth has slowed in recent years. There are three major companies that hold the majority of sales in the carbonated soft drink industry in the U.S. They are the Coca Cola Company with 44.1% market share, The Pepsi-Cola Company with 31.4% market share, and Dr. Pepper/ Seven Up, Inc. with 14.7% market share. These three companies market the top ten brands account for 73% of soft drink sales in the U.S. Dr. Pepper/ Seven Up, Inc. owns two of the top ten brands: Dr. Pepper and 7UP.
Colas are the dominant flavor accounting for 60% of total sales, but flavored soft drink sales are growing fast. Flavored soda is more popular with Hispanic and African American teens. Industry research indicates that most soft drink is consumed by individuals aged 20 to 49. Teens and young adults consume more regular soda and over 25 year olds consume more diet soda. Per capita consumption of soda is higher among Hispanics and African American than other ethnic groups and among teens than adults.
There are three major participants in the production and distribution of carbonated soft drinks in the United State: concentrate producers, bottlers, and retailers. Concentrate producers manufacture the basic flavors for sale to bottlers, which add a sweetener and package the beverage in bottles and cans, which are then sold to retailers. Squirt is bottled and sold by 250 bottlers in the U.S. One-third of the bottlers were independent franchised bottlers or part of the Dr Pepper/ 7Up Inc. Bottling Group. Two-thirds of Squirt bottlers were affiliated with Coca-Cola Enterprises, Inc. and the Pepsi Bottling Group.
Squirt is a caffeine-free, low-sodium carbonated soft drink brand with a distinctive blend of grapefruit juices that gives it a tangy, fresh citrus taste. Squirt is the best selling carbonated grapefruit soft drink brand in the United States. The Squirt Brand remains highly competitive among the grapefruit and citrus-flavored brands in the United States. It has, however, extreme competition from similar brands distributed by Coca-Cola and Pepsi-Cola : Fresca (Coke) , Mellow Yello (Coke), and Mountain Dew (Pepsi).
The chart below shows the volume breakdown of citrus soft drinks by year compared to other competitors in the carbonated grapefruit and citrus-flavored market. Case Volume Trend for Major Carbonated Grapefruit and Citrus-Flavored Brands in the United States: 1996-2000 Company/Brand
Mountain Dew (P)
Total Case Volume
Squirt's market share is calculated by dividing case volume by total case volume for the entire market. The market share for Squirt for the past years is as follows: 1996: 55,800,000/768,400,000= 7.26%
1997: 55,700,000/900,800,000= 6.18%
1998: 54,800,000/964,400,000= 5.68%
1999: 56,000,000/989,100,000= 5.66%
2000: 54,600,000/981,800,000= 5.56%
The numbers above show Squirt market share has consistently declined in recent years. It is now up to Kate Cox, the brand manager, to draft advertising and promotion plan to increase sales and maintain Squirts' number one position in grapefruit soda segment.
STRATEGIC ISSUES: THREE MAIN OPTIONS
1. Continuing the present market targeting and positioning strategy Squirt has been targeted 18-34 year olds and positioned as a "grapefruit taste" and "thirst-quenching" beverage. It is obvious by the decreasing market share shown earlier that it would not be beneficial...
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