Dr. Pepper Case Analysis

Topics: Financial ratio, Financial ratios, Marketing Pages: 9 (3174 words) Published: March 18, 2011
Dr. Pepper Company

I.Case Summary
From being a practically unknown soft drink company to now being one of the highest performing of the 1000 largest manufacturing firms, Dr. Pepper has evolved to become an international beverage organization. Dr. Pepper began its roots back in 1880, in Waco, Texas, when a young soda jerk invented a soft drink which he named after his father-in-law (Dr. Pepper). Robert Lazenby began to market the drink on commercial basis in 1885, and it was not until 1922 that an extensive sales and distribution program was initiated. The current president of the organization is Mr. Woodrow Wilson Clements together with Joe K. Hughes who is the executive VP of the firm. The firm is facing a pressure of product differentiation and expansion despite of its extensive marketing strategy to expand its market and advertise its product.

II.Case Objective and Key Issues
A.Case Objectives
1.To understand the importance of product differentiation for a firm like Dr. Pepper who is constantly faced with fierce competition. 2.To observe marketing and other strategies of Dr. Pepper to gain market share and attract new consumers.

B.Key Issues
1.How Dr. Pepper can differentiate its products from that of the competition. 2.How to reach new markets and attract new consumers (decentralization) 3.How to diversity products and services.
4.How to ensure that the firm meets the legal requirement set forth by the law makers. 5.How to maintain long term relationship with the distributors.

A.External Threats
1.A major legal threat for Dr. Pepper comes from the banning of cyclamate by the government, which is the ingredient used in Diet Dr. Pepper. The company has no control over politics and laws set forth by the government. 2.A possible threat can be seen by external investors who might revaluate the current value of Dr. Pepper’s stock due to the psychological impact of ban on saccharine. Saccharine is a major component of Sugar free Dr. Pepper which accounts for more than 12%. 3.Dr. Pepper tries to differentiate itself by saying that it isn’t cola based but is constantly facing extreme threats from Multi-brand international firms like Coca-Cola, Pepsi Co and 7UP. 4.The market condition in 1970-1974 was highly unstable. Due to rise of inflation from 4.9% to 13.9% consumers were cutting down on expenses. There is an evidence of environmental threat and that can be seen as soft drink companies stocks failed to outperform the general market for more than three months in a row. The performance of soft drink industry dropped from 35th to 62nd in the last quarter accounting according the Value Line Composition Index. 5.Raw materials supply, and availability factor comes into effect and poses a threat because of the recent increase in price of sugar which might in turn increase the prices of the soft drinks. 6.With the introduction of Coke’s Mr. PiBB, which is very similar to Dr. Pepper in name and content, it poses a threat to Dr. Pepper since Coca Cola has more market share. 7.In a number of markets, Dr. Pepper is distributed by Coke bottlers, which might confuse consumers in thinking Dr. Pepper as a component of Coca Cola which threatens the firm’s ongoing process of product differentiation. 8.A potential threat comes from increase in consumer awareness program that shows soft drinks being one of the causes of obesity. There is a possibility that consumers will become more health conscious and demand lesser amount of soft drinks. 9.The passing of new tax laws and regulations on all plastic containers, and the banning or taxing of one-way beverage containers is a growing possibility that makes bottlers and the soft drink industry to be unsure about the long term stability of the industry.

B.External Opportunities
1.An opportunity exists for the firm to expand its market share and use its untapped potential. Since, there are large markets which Dr. Pepper...
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