SUMMARY

Introduction p.2

I- The carbonated soft drink industry in the US

- Industry structure p.4
- Industry economics p.5
- Brands & Products p.6
- Consumption behavior p.7

II- Changes in the orange category during the period

1985-1989
- Orange category p.8
- Relation between market share & market coverage p.11
- Relation between market share & advertising share p.13
- Brands positioning p.15

III- Cadbury competitive position in the US

- Swot analysis p.16

IV- Crush Positioning p.18

V- Crush advertising & promotion program

- Objectives & strategies p.18

- Advertising budget p.19

- Crush advertising budget p.20

VI- Crush Pro forma Income statement p.20

VII- Conclusion p.21

Sides p.22

1
 INTRODUCTION

Cadbury Beverages, Inc. is a beverages-manufacturing division of Cadbury

Schweppes PLC. It was created in 1969 by a merger of Schweppes PLC (1783,
London, the first world’s soft drink maker) and Cadbury (1830, Birmingham, a
major British confectionery manufacturer).

In 1989, the Cadbury Schweppes PLC was one of the world’s largest
multinational companies and the world’s third largest soft drink marketer (behind
Coca-Cola and PepsiCo), with worldwide sales of $4.6 billion, performed in 110
countries. Beverages accounted for 60 percent of company sales and 53 percent of
its operating income.

Additionally, at that time, Cadbury Beverages, Inc. was the fourth biggest soft
drink marketer in the US (behind Coca-Cola, PepsiCo, Dr.Pepper-7Up), with a
carbonated soft drink market share of 3.4 percent, and the market leader in some
specific soft drinks categories (see exhibit 1).

EXHIBIT 1.

Brand name Leader in category % of the US soft drink sales

Canada Dry Ginger ale, soda/seltzer 39
Sunkist Orange-flavored carbonated 22
Crush 20
soft drinks
Schweppes Tonic water 17

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In January 1990, the Cadbury marketing team decided to take up a challenge of
relaunching the Crush, Hires and Sun-Drop soft drink brands, recently acquired
from Procter&Gamble (October 1989). In the beginning, the marketing
executives intended to focus on relaunching the Crush brand on the soft drinks
market. As a result, three main issues need to be tackled:

- rebuilding a cooperative relationship with bottlers,

- developing a base brand positioning consistent with the brand equity,
- developing (objectives, strategies) and budgeting the advertising and
promotion program.

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I- THE CARBONATED SOFT DRINK

INDUSTRY IN THE UNITED STATES

 Industry Structure

Three main actors participate in manufacturing and distribution of carbonated soft

drinks in the United States: concentrate producers, bottlers, and retailers. The
concentrate producers’ and bottlers’ roles and margins of are different for regular
and diet drinks (see Exhibit 2).

EXHIBIT 2.

1. Regular soft drinks:

Actors Functions Gross Net
Margin Margin
Carbonat - manufacture the basic flavors 86% 16%
e
Producers
Bottlers - add sweetener to carbonated 46% 15%
water
- package in bottles and cans

2. Diet soft drinks:

Actors Functions Gross Margin Net Margin
Carbonat - manufacture the basic flavors 87% 30%
e - include an artificial sweetener
Producers
Bottlers - add carbonated water 43% 12%
- package in bottles and cans

4
There are approximately 40 concentrate manufacturers in the US, but only three
of them (Coca-Cola, PepsiCo, and Dr. Pepper/7Up) account for 82 percent of
industry sales. As far as bottlers are concerned, they are present in a number of
1,000 in the United States. They may be either owned by concentrate producers,
or franchised. Franchised bottlers are usually given the exclusivity rights for a
certain territory, but they cannot sell a directly competitive brand.

Concerning retailers, those are supermarkets (40 percent of carbonated soft drink
industry sales), convenience stores and small retail outlets, vending machines, and
fountain service (ex. McDonald’s). Among the above mentioned, supermarkets
are claimed to be crucial in the company’s distribution net.

 Industry Economics

Concentrate producers typically arrive at a gross profit of 86% (regular drinks), or

87% (diet drinks). When we take off selling and delivery, advertising and
promotion costs and general and administrative expenses, the net profit may reach
either 16% (regular drinks), or even 30% (diet drinks).

On the other hand, the gross profit for bottlers usually accounts for 43% (diet
drinks), or 46% (regular drinks), whereas the net pretax profit gets at 12% (diet
drinks), or 15% (regular drinks).

In view of the analysis of the above cost structure it seems obvious that
concentrate producers should be more interested in manufacturing diet soft drinks,
and bottlers are supposed to slightly prefer mixing and packing regular drinks.

5
  Brands and Product Categories

 Brands

More than 900 brands are registered on the US market, however most of them sell
their product on local markets. The most successful 10 brands are marketed by 3
major concentrate producers: Coca-Cola, PepsiCo, and Dr.Pepper/7Up, of which
the US market share accounts for 71.4 percent (see Exhibit 3). Six of these top
brands are colas (56.4 percent of market share).

EXHIBIT 3.

Brand Market Share

1. Coca-Cola Classic 19.8%
2. Pepsi-Cola 17.9%
3. Diet Coke 8.9%
4. Diet Pepsi 5.7%
5. Dr. Pepper 4.5%
6. Sprite 3.7%
7. Mountain Dew 3.6%
8. 7Up 3.2%
9. Caffeine-free Diet Coke 2.5%
10. Caffeine-free Diet Pepsi 1.6%

Top ten brands: 71.4%

Colas: 56.4%
Regular: 37.7%
Diet: 18.7%
Other brands: 28.6%

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  Flavors
As far as flavors are concerned, cola one is the most popular with market share
accounting for 65.7 percent. Other successful flavors are lemon-lime (12.9 percent
of market share), orange (3.9%), root beer (3.6%), ginger ale (2.8%), and grape
(1.1%) ones. The flavor of our concern, orange, occupies the third position, after
cola and lemon-lime, with market share of some 3.9¨%.

 Regular vs. Diet

The carbonated soft drink market is divided into two parts: regular soft drinks and
diet soft drinks. The consumption of diet soft drinks accounts for 31% of total soft
drink consumption and is higher among consumers over 25 years of age.

 Consumption Behavior

 Buyers
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 ex end-of-aisle displays, and other
promotions in the place of sale ex shelf tags). Also, it appears that the purchase of
soft drinks (mostly in supermarkets, accounting for 40% of carbonated soft drink
industry sales) is often unplanned.

The US 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.

 Seasonal and Geographical Variations

The consumption of carbonated soft drinks differs slightly according to a season:
it is more pronounced in summertime than in wintertime. Moreover, there seems

7
to exist some geographical differences. The highest per capita carbonated soft
drinks’ consumption in the United States (54.9 gallons in 1989, compared with the
national per capita average of 46.7 gallons) was noted in the East South Central
states of Kentucky, Tennessee, Alabama, and Mississippi. The lowest per capita
carbonated drinks’ consumption (37.1 gallons in 1989) was that of the Mountain
states (Montana, Idaho, Wyoming, Colorado, New Mexico, Arizona, Utah, and
Nevada).

II- CHANGES IN THE ORANGE CATEGORY

DURING THE PERIOD 1985 – 1989

 Orange Category
In 1989 the total sales in the orange-flavored carbonated drink category were of
126 million cases, which means 3.9% of total industry sales through
supermarkets. Four major brands make the core of this category (see Exhibit 4):
Mandarin Orange Slice by PepsiCo (the category leader with a market share of
20.8%), Sunkist by Cadbury Beverages, Inc. (14.4 % of the total market share),
Coca-Cola’s Minute Maid Orange (14%), and Orange Crush (7.5%).

EXHIBIT 4. Market Shares for the 4 Major Orange Category Brands.

8
 MOS
MMO
Sunkist
Crush
Others

Both regular and diet drinks are present within the orange-flavored carbonated
soft drink category, the regular accounting for 73.2% of the category sales in
average. For more details, see exhibit 5.

EXHIBIT 5. Case Volume in 1989 by Type of Drink: Regular vs. Diet

Brand Regular Diet

Crush 71.3% 28.7%
Sunkist 82.1 17.9%
MOS 49% 51%
MMO 53.1% 46.9%

The shares accounting for diet orange soft drinks are considerably higher for
Mandarin Orange Slice and Minute Maid Orange (51% and 49%) than for
Cadbury orange-flavor brands (Crush: 29% and Sunkist:18%), since their
positioning is based on the young singles and young couples and therefore
corresponds to the diet drinks’ consumption patterns. This may present an
opportunity for Crush, of which orange diet version could be repositioned as the
one that is drunk by young people (singles and couples) living in big cities, in
opposition to family-based positioning of Crush and Sunkist.

 Changes in the Orange Category Sales and Market Shares in

1985-1989.

9
During the period of 1985-1989, the total sales in the orange carbonated drinks’
category increased by 23.5%, from 102 million cases to 126 million cases (see
exhibit 6). This evolution was due to the launch in 1985-1986 of Mandarin
Orange Slice (MOS) and Minute Maid Orange (MMO) by respectively PepsiCo
and Coca-Cola, which, accompanied by intensive advertising, promotion, and
distribution-rejuvenating efforts, revitalized the category. As a result of the above
change, market shares of main competitors have been subject to some major
changes (see Exhibit 7). In particular, the Cadbury’s Crush and Sunkist brands
lost a lot of their market share while PepsiCo’s and Coca-Cola’s newly created
brands evolved in a successful way.

EXHIBIT 6. Changes in Total Orange Category Sales in 1984-1989.

Year 198 198 198 198 198 1989

4 5 6 7 8
Category Sales [Million 102 100 126 131 131 126
∗
Cases]

EXHIBIT 7. Market Shares’ Changes in 1985-1989.

Year
198 198 198 198 1989
Brand
5 6 7 8
Sunkist 32% 20% 13% 13% 14%
MOS - 16 22 21 21
MMO - 8 14 13 14
Crush 22 18 14 11 8
Total of top 4 54 62 63 58 57
brands

 Advertising Expenses.
As for changes in advertising approach, two trends were apparent at that time.
Since 1996 (the year when MOS and MMO were introduced nationally) the total


Annual Supermarket Case Volume of Orange-Flavored Soft Drinks in millions.

10
expenditures for print and broadcast media declined each year (see Exhibit 8). On
the other hand, the variety of media used for advertising increased, in addition to
some traditionally used media like spot television and billboards, some new ones
submerged, including broadcast media (network, spot, syndicated, and cable TV
and network radio) and print media (outdoor, magazines, and newspapers).

EXHIBIT 8. Concentrate Producers’ Advertising Expenditures for Broadcast and

Print Media for Major Soft Drink Brands, 1985-1989 (in thousands of Dollars).

Brand 1985 1986 1987 1988 1989

$ % $ % $ % $ % $ %
MOS 17,80 60.3 32,08 62.7 29,55 67.5 15,00 41.2 11,38 43.8
9 0 6 1 8
Sunkist 7,176 24.3 4,013 7.8 911 2.1 1,719 4.7 2,302 8.9
Crush 4,371 14.8 7,155 14.0 4,297 9.8 6,841 18.8 2,020 7.8
MMO 174 0.6 7,952 15.5 9,027 20.6 12,81 35.3 10,46 39.5
1 3
Total4 29,53 100. 51,20 100. 43,79 100. 36,37 100. 26,00 100.0
1 0 0 0 0 0 3 0 7

 Relationship between Market Share and Market

Coverage

EXHIBIT 9. The Four Main Brands’ Market Shares and Market Coverage Rates,
1985-1989.

11
 MADARIN ORANGE SLICE

100

87 88 88

80

68

60
Market Share
Market coverage
40

20 22 21 21
16
10

0 0
1985 1986 1987 1988 1989

Year

SUNKIST

100
95
91
86
83
80 79

60
Market share
Market coverage
40

32

20 20
13 13 14

0
1985 1986 1987 1988 1989

Year

12
 CRUSH

100

80 81 81
78 78

62
60
Market share
Market coverage
40

20 22
18
14
11
8
0
1985 1986 1987 1988 1989

Year

MINUTE MAID ORANGE

100

87 88 88

80

60 60
Market share0
Market coverage
40

20
14 13 14
10
8

0 0
1985 1986 1987 1988 1989

Year

The above graphs clearly demonstrate that here is some positive correlation
between the company’s market share in the carbonated orange soft drink category
and its market coverage. In practice it means that if the company market coverage
increases, its market share increases too. Consequently, companies in this
category should focus their efforts on their market coverage evolution.

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  Relationship between Market Share and Advertising

Share

EXHIBIT 10. The Four Major Brand’ Market Shares and Advertising Budgets,
1985-1989.

MANDARIN ORANGE SLICE

100

80

67
62
60 60
Market share
Advertising share
41 43
40

22 21 21
20
16

0 0
1985 1986 1987 1988 1989

Year

14
 SUNKIST

100

80

60
Market share
Advertising share
40

32

24
20 20
13 13 14
8
2 4
0
1985 1986 1987 1988 1989

Year

CRUSH

100

80

60
Market share
Advertising share
40

22
20
18 18
15 14 14
9 11
8
7
0
1985 1986 1987 1988 1989

Year

MINUTE MAID ORANGE

100

80

60
Market share
Advertising share
40 40
36 35

20 20
14 13 14
8

0 0
1985 1986 1987 1988 1989

Year

15
  Brand Positioning

The four main competitors in the orange carbonated soft drink category tried to
adopt different positioning strategies for their products. Some of them stressed the
orange flavor of their products (Minute Maid Orange), some others attempted to
associated drinking their product with a specific lifestyle (teens lifestyle for
Sunkist). Also, they targeted different age groups and household models:
Mandarin Orange Slice and Minute Maid Orange focused their attention on young
adults with no children (singles, couples) while putting stress on “better for you”
idea (health, fit, vitamins, natural). The Cadbury Beverages’ Brands traditionally
aimed at families with children and teens at home (see Exhibit 11).

EXHIBIT 11. The Four Major Brands Positioning Strategies, 1989S.

Teens & young adults

ut
ee
e
ut
e
Orange
m taste
ai
d

Family with children at home

KEY :
Crush : Mandarin Orange slice :
Minute Maide orange : Sunkist :

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There appears to be a positive correlation between marketing coverage and
marketing share, which means that if the market coverage increases, the
corresponding market share increases too.

As far as market shares are concerned, a positive correlation seems less

pronounced, but still present. Also, companies’ advertising and promotion
strategies seem different: while Sunkist and Crush spend less on advertising and
use less advertising vehicles, Coca Cola & PepsiCo spend a lot even if they win a
small market share. In their promotion campaigns they use a variety of media.

Concerning our positioning recommended for Crush, we will describe it later in

this report.

III- CADBURY COMPETITIVE POSITION IN

THE US SOFT DRINK INDUSTRY

Cadbury Beverages is the American fourth biggest soft drink manufacturers,

behind Coca-Cola, PepsiCo, and Dr. Pepper/7Up, with a market share of 3.4%.
The company’s brands are often market leaders within their categories. The major
Cadbury brand’s sales (in relative terms) are presented on Exhibit 1

In 1989, the orange category market share accounted for 3.9% of the total soft
drinks’ market share. Cadbury was in the leading position within this category,
with its market share of 22% for both Sunkist (14%) and Crush (8%) brands.
Concerning competitors, the market share for the Coca-Cola’s Minute Maid
Orange accounted for 14% (1989), and the PepsiCo’s Mandarin Orange Slice
market share for about 21% (1989). For graphical presentation, see Exhibit 4.

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  SWOT Analysis

To complete the analysis of a Crush competitive position in the orange soft drink
category as well as within the soft drink industry, we employed the SWOT
analysis scheme. The major strengths, weaknesses, opportunities and threats are
presented on Exhibit 12 below.

EXHIBIT 12. The SWOT Analysis for the Crush Orange Carbonated Soft Drink
Brand.
INTERNAL FACTORS
STRENGHTS WEAKNESSESS

 4th largest marketer in the US  Low market share

 High name  Low market coverage
 Long-life brand  Limited bottlers network
 Know-know  Relatively low ad & promotion
 High brand awareness in big expenditures
cities  Risky positioning :
cannibalization with Sunkist

EXTERNAL FACTORS
OPPORTUNITIES THREATS

 Variety of medias vehicles  Huge competition

 Increase in sales for diet soft  Heavy advertising expenses
drinks  Unplanned soft drink purchase
 Increase of consumption

IV- CRUSH POSITIONING

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Three approaches can be considered to position the Crush brand:
- Attributes : Natural & competitive taste since 1954
Bright color
Regular & diet

- Uses : Orange Crush drinking for fun :during parties & week-end
Orange is better for health than colas: natural vitamins

- Users : Orange can be drink by adults, teens and children

We avoid canibalization with Sunkist
We target family with children

Concerning our positioning recommended for Crush we decided to reposition this

brand on the family with children market segment (as differentiated from Sunkist
“families with teens” to avoid cannibalization effect). Moreover, we recommend
to position Crush Diet in a different way: by focusing on young singles and
couples (above 24 years old), living in big cities (where Crush is well-known),
and associating its consumption with healthy, natural, dynamic lifestyle). This
would enable a strategy that would be more consistent with the consumption
profile of diet drinks’ consumers.

V- CRUSH ADVERTISING AND PROMOTION

PROGRAM

 Objectives and Strategies

While deciding on our strategy we had some clear objectives in mind. First of all
we thought that the efficient distribution network (bottlers, retailers) is one of the
key success factors in the soft drink industry. That is why we set up as one of our
priorities a rapid and substantial broadening of our cooperation with bottlers in
order to be able to relaunch the Crush brand successfully. Obviously, we
considered it also as a way of increasing our market share in the orange soft drink

19
category. Our objective is then a 10% market share for Crush alone in the orange
drink category at the end of 1990 (an 8% market share was recorded in 1989).
Finally, we need to relaunch the Crush brand name by developing its basic
positioning, advertising and promotion strategy, and their successful
implementation. Also, ongoing control of results should be carried on and strategy
adjustments applied if necessary.

In view of the above quoted objectives our strategies for the Crush relaunch are
following: in the beginning we need to recruit new bottlers: for this purpose we
decided to employ the push strategy, which means using our distribution channels
to obtain the largest possible market share. Also, as the market in question is very
responsive to advertising and promotion, we need to take it into consideration and
implement in parallel to the push strategy the pull strategy. This will require using
an increased portfolio of medias (as Coca-Cola and PepsiCo do), as well as
developing merchandising and sponsoring activities. For relaunching the Crush
brand, some specific promotional techniques, such as coupons, special volume
offers, contests, may be employed to attract the maximum of customers.

 Advertising Budget :

BRANDS ADVERTISING MARKET MARKET ADVERTISING

EXPENDITURES SHARE % SHARE / $ SPENT PER
CASES CASE
SUNKIST 2,301,900 14 44,1000.0 0.05
CRUSH 1,853.6 8 25,200.0 0.07
Mandarine 11,388.1 21 66,150.0 0.17
Orange
Slice
Minute 10,463.1 14 44,100.0 0.23
Maid
Orange

 Crush advertising budget :

20
Budget : - General : $11,970,000
- Diet : $4,189,500
- Regular : $7,780,500

So we allocate $0.38 per case.

Allocation : - $0.18 for « dealer loader » ( premium given to retailers)

- $0.20 for promotion that we divides as follow : $0.1 for displays
& outdoor, $0.05 for TV spots and 0.05 for magazines.

VI- CRUSH PRO FORMA INCOME STATEMENT

Regular (65%) Diet (35%) Regular &Diet

Total sales 15561000 10143000 25704000
Cost of goods sold 2252250 1323000 3575250
Gross profit [$] 13308750 8820000 22128750
Gross profit [%] 85,53 86,96 86,09
Selling and Delivery 409500 220500 630000
Advertising &Promotion 7780500 4189500 11970000
General & administrative expenses 2661750 1433250 4095000
Pretax cash profit [$] 2457000 2976750 5433750
Pretax cash profit [%] 15,79 29,35 21,14

CONCLUSION

We should avoid direct competition with Coca-Cola & PepsiCo, it could bring on
a price war. No frontal attack means that Cadbury remains a niche marketer.

We avoid cannibalization with Sunkist in positioning the Crush brand name on the
family with children at home segment. As far as diet Crush is concerned, we
reposition it as a healthy and rich in vitamins, energetic drink for young people
living in big cities.

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Finally, we have no choice but to increase advertising & promotion expenditures
in order to reach our market share and repositioning objectives.

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