Case 1Dr. Prepper/Seven Up, Inc.

Case 1Dr. Prepper/Seven Up, Inc.

Chapter 5Chapter 5Chapter 5Chapter 5

Background

Kate Cox Brand Manager 2001 began drafting the

brand’s annual advertising and promotion plan.

Squirt is a caffeine-free, low-sodium, carbonated soft drink brand and distinctive blend grapefruit Juice.

Background

Squirt is the best selling carbonated soft drink brand in the US.

Cox believed that the market targeting and product position might require attention early in Squirt’s advertising and promotion plan development.

Both topics were highlighted in June 2001

Positioning Strategies

1)Attribute or benefit 2)Use or application3)Product or brand user4)Product or service class5)Competitors6)Price or quality

Attribute or benefit Is the strategy most frequently

used. Toothpaste Benefits

children

Teens

Family

Adults

Flavor /

Color /

Whiteness of teeth

/

Fresh breath /

Decay Prevention /

Price /

Plaque prevention

/

Stain Prevention /

Principle Brands for each segment

Aim, Stripe Ultra Brite, McClean

Colgate, Crest

Topol, Rembrandt

Background

Contract was given Foot Cone & Blending Brand Agency.

Coca-Cola and Pepsi-Cola was the major competitors and the company (Foot Cone) took this into consideration.

Dr Pepper/Seven up are consistently ranked among the top-ten soft drink brand in the US.

Carbonated Soft Drink Industry in the US

U.S. consumers drink more carbonated soft drinks than tap water.

In 2000 Americans consumed 53 gallons of soft drinks per person compared with 47 gallons in 1990.

$60.3 billion carbonated soft drinks in 2000.

Industry structure

Three major participants in the production of CSDs:

1) Concentrate Producers2) Bottlers3) Retail Outlets

The Coca-Cola Company, the Pepsi-Cola Company & Dr Pepper/Seven up, INC are the three major concentrate producers in the U.S.

Industry structure

Three major participants in the production of CSDs:

1) Concentrate Producers2) Bottlers3) Retail Outlets

Bottlers convert flavor concentrate into carbonated soft drinks.

There are 500 Bottlers in the US.

Industry structure

Classification of Bottlers:1) Own or have an equity2) Franchise their brand 3) Independent bottlers.

Industry structure

Retail Outlets: 1) supermarkets, 2) conveniences stores, 3) vending machines, 4) fountain services, 5) mass merchandisers and6) thousand of small retail stores

Industry structure

Soft drinks are typically sold in bottles and cans except McDonalds which mixes syrup with carbonated water for immediate consumption by customers

Competition in the Soft Drink Industry

The three command 90% CSD sales in the US.

Coca-Cola Company leads the industry with 44.1 market share

Pepsi-Cola 31.4%Dr Pepper/Seven up 14.7%

Competition in the Soft Drink Industry

Rank

Companies Market Share %

Share Change

Volume % Change

1 Coca-Cola Co. 44.1 flat +0.1

2 Pepsi-Cola Co. 31.4 flat +0.1

3 Dr pepper/Seven up

14.7 +0.1 +1.1

4 Cott. Crop 3.3 +0.2 +5.8

5 National Beverage

2.1 flat +4.2

6 Royal Crown 1.1 -0.1 -1.9

7 Big Red 0.4 flat +13.4

8 Seagram 0.3 flat +7.2

9 Monarch Co. 0.1 flat -35.8

10 Private label/other

2.5 -0.2 -12.2

Total Industry 100.0 +0.2

Top-Ten CSD. Companies and Brand in 2000Top Ten SDC

Competition in the Soft Drink Industry

Rank Companies Brand Owner Market share %

Market share

Volume % Change

1 Coke Classic Coca-Cola 20.4 +0.1 +0.5

2 Pepsi-Cola Pepsi-Cola 13.6 -0.2 -1.0

3 Diet Coke Coca-Cola 8.7 +0.2 +2.5

4 Mountain Dew

Pepsi-Cola 7.2 +0.1 +1.5

5 Sprite Coca-Cola 6.6 -0.2 -2.0

6 Dr Prepper Dr Pepper/7 up 6.3 flat +0.1

7 Diet Pepsi Pepsi-Cola 5.3 +0.2 +4.0

8 7up Dr Pepper/7 up 2.0 -0.1 -0.6

9 CF Deit Coke Coca-Cola 1.7 -0.1 -1.0

10 Barq’s Root Beer

Coca-Cola 1.1 flat +3.0

Total Top-Ten 72.9

Top-Ten Brand. Companies and Brand in 2001Top Ten SDC

Soft Drink Marketing

Soft drink marketing is characterized by: Heavy investment in consumer

advertising and promotion, Selling and trade promotion to and

through bottlers to retail outlets Consumer price discounting Concentrate producers usually assume

responsibility for:- developing national consumer

advertising and promotion programs- Product development and

planning- Marketing research

Soft Drink MarketingComparative Income Statement for the typical flavored concentrate producer &

soft drink bottler in the us (per standard twenty-four 8-ounce bottle case

Concentrate producer

Soft Drink Bottler

Net sales 100% 100%

Cost of goods sold

-17 -57*

Gross profit 83% 43%

Selling & delivery

2 28

Advertising & promotion

39 2

General & administration exp

13 4

Pretax profit 29% 9%Packaging represent the major element of bottler’s cost of goods sold

Brand and Flavor Competition

More than 900 registered brand name for CSD in the US.

Changing composition of the U.S. population has been an important factor in the growing popularity of flavored CSD.

Demographic of Soft Drink Consumption

30% increase in sales from 1990 to 2000.

849 eight-ounce servings of carbonated soft drinks annually.

Consumed by American who are b/w 20 to 49 years.

20-49 years, It is the largest segment of the US population.

Diet soft drinks is more pronounced among over 25 years.

Demographic of Soft Drink Consumption

Conventional wisdom In the soft drink industry hold that teens are the primary audience for soft drink marketing, since the taste and brand preferences are formed between the age 12-24.

Higher consumption of soft drinks is among Hispanic and African American.

More among teens than adults.

Squirt Brand Heritage & Marketing

Has been marketed by Dr prepper/Seven inc. since 1995.

Brand’s origins are found in the Great Depression of the 1930s.

Squirt Marketing

Squirt sales since 1995 have exceeded reacquisition levels due to a broadened bottling and distribution network

Increased marketing attention and investments.

Squirt MarketingSquirt Unit Sales Volume (millions of Cases)

0

10

20

30

40

50

60

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Squirt Marketing

Squirt Product Line and Competitive Brand

Consists of:1) Regular and diet squirt2) Regular and diet Ruby Red Squirt

Squirt Advertising & Promotion Expenditures

Media include:1) Newspapers2) Spot of television3) Cable television4) Spot radio5) Retail6) Consumer7) Trade promotion

Squirt Advertising & Promotion Expenditures

Coca-Cola and Pepsi-cola spend more on media advertising and promotion than does Dr Prepper/Seven.

Squirt Positioning

Squirt positioning was addressed after Cadbury PLC acquired the brand.

In 1994, Foote, Cone & Belding recommended and Brand management agreed that squirt should be the dominant positioning dimension.

Target Market & Positioning Recommendation

1995 Foote, Cone & Belding was asked to revise it is creative strategy.

The reason was the execution “was a bit too intense to fit with brand”

The target market was narrowed to adults, 18-34.

Fun relief when you, re dry

Squirt Positioning and Creative execution was revisited again 1999 following the

introduction of Citra by Coca-Cola

Target Market & Positioning Recommendation

Based on new research results featured Squirt’s consumption by racial/ethnic group and age in 2000, Foote, Cone and Belding recommended:

Squirt be targeted at multicultural, 18-24 years old.

The Hispanic Market Opportunities

Demographic of Squirt Consumption

Hispanic12%

African-American

15%

Caucasian73%

The Hispanic Market Opportunities

Demographic of Squirt Consumption

0

5

10

15

20

25

30

<6 6-12 13-19 20-29 30-39 40-49 50-59 60+

Age

Volu

me I

ndex

CSD users Squirt users

Target Market & Positioning Recommendation

Kate Cox met the brand management.

The meeting concluded with an assignment given to Jaxi Stollenwerck, the associate brand manager for Squirt.

The assignment to prepare a profile of Hispanic and African American consumers in the United States from recently released U.S. Census 2000 data and other relevant sources

The Hispanic Market Opportunities

Target Market & Positioning Recommendation

Hispanic population increased by 57.9% in 2000.

22.4 million in 1990 to 35 million in 2000.

58% Mexican origins 9.6% Puerto Rican 3.5% Cuban 8.6% central or south American 19% Hispanic Origins not

classified

Jaxie’s Report

Hispanic accounted for 12.5% of the American population.

African Americans accounted for 12.3% of the US population

More than 72% of the Hispanic live in the south

35% were under 18 years while in the states 25.7

Median age for Hispanic 25 years while 35.3 55.4% of Hispanic prefer to see & hear ads

in Spanish Strong brand link with heritage among

Hispanic Hispanics don’t like hard sell approaches Prefer shopping close to home

Jaxie’s Report

In mid-summer 2001 Kate Cox Assembled the team.

They begin drafting the annual advertising and promotion plan.

The plan would be formally presented to senior management for review and approval.

Squirt Advertising and Promotion Plan Development