Professor: Elias G. Rizkallah
Class: MKTG 676 Advertising Management
Group case study March-06-2013 1. Background:
(1) History: Cadbury Beverages, Inc. is the beverage division of Cadbury Schweppes PLC, a major global soft drink and confectionery marketer, located in London, England; worldwide headquarters are in Stamford, Connecticut. Company is the world’s first soft drink maker and 4th largest soft drink marketer. Its history can be traced to 1783 in London. The first major product of the Schweppes was artificial mineral water. After the development of 80 years, in 1960s, the company had diversified into different segment of food market. In 1969, Schweppes merged with Cadbury which was a major British candy maker. In 1989, Cadbury Schweppes PLC was one of the world’s largest multinational firms which owned the Crush, Hires, Sundrop and other famous soft drink brand. (2) Current situation: In 1989, Cadbury Schweppes PLC acquired soft drink brand Crush from Proctor & Gamble for $220 million and PLC had worldwide sales of $4.6 billion, produced by product sales in more than 110 countries. Beverage accounted for 60% of worldwide sales and 40% were confectionary. Crush offers several beverages under the Cadbury Beverages, Inc. Typically they are sold in bottles and cans, except for fountain service (e.g. McDonald’s). Beverages fall under the following categories; Carbonates (Canady Dry, Sunkist, and Crush); Waters (Schweppes, Canada Dry, Pure Spring) and Still Drinks/Juices (Oasis, Mott’s,Clamato). Over the years, Cadbury Schweppes has established a diverse product portfolio of water and juices in addition to its carbonates. Today, trailing only Coca-Cola and PepsiCo, Cadbury Beverages, Inc. is the third largest soft drink marketer in the world 2. Problems and opportunities:
(1) Before we start to discuss the problems in this case, let’s discuss the function of Ads first. Ads are a kind of communication that intends to create advantages in competitions for a company. There is a good example in Micro Economics book: Company #1 and Company # 2 are two competitors in the same market. If both of them do not do AD. The market will remain the same. They will lose nothing. If one of them does AD, but the other does not do that, the one who do the AD will win the market share that the other loses. If all of them do AD, they will all lose some revenues, because of the extra expenses.
From this example, we can infer that Ads are the tools to make the market imbalance in order to beat the competitors. However, this is imaginary model, not based on the reality. In fact the competitors such as Coke and Pepsi have already created huge advantages by using Ads.
(2) Then, let’s talk about the property of soft drinks. Soft drink is a kind of low involvement product, for low involvement/thinking products where routine behavior patterns and learning occurs most often after purchase. The price of soft drink is cheap. And for consumers, the best way to know whether they like this product or not, is to have a try first. For that reason, if the drinks have the same level taste as competitors’ products, the look, in store Ads, and shelves level of the product will be very important to a product to attract customer’s attention. (3) By combining the reality and those two factors together, we can find that Crush brand has 4 main problems. 1) From the charts that were shown in the case, we can see the market share and market coverage were both came down year by year in the past few decades. However, the population of U.S. kept growing from 1960s to 1980s. During these years, the company still did the Ads. That means consumers have begun to forget this brand. The old Ads. Strategy did not work anymore. 2) From the case we can infer that the younger Coke and Pepsi brands...