Cadbury Beverage Outline

MRKT 4014:. CRUSH Case Analysis Outline

1. Identify the strategic issues and define the problem

Relaunch of CRUSH, HIRES and SUN-DROP Brand repurchased from P&G. Focus on relaunch of CRUSH brand. Positioning and Advertising are key strategic issues. Bottling strategy is also a key concern.  

1. Provide an analysis of the market environment.  
2. Define the market and consider market structure. Three major participants which include concentrate producers, bottlers and retailers. Of 40 concentrate producers in US, the soft drink industry is dominated by 3 major producers (KO, PEP, Dr. Pepper/ 7Up. Market is oligopolistic with 4 firms representing most of sales in US. There are some 1000 bottling plants that take lead in developing trade promotions and selling/servicing of accounts. Some bottlers are owned by concentrate producers.
3. Identify the competitors. KO (Minute Maid), PEP (Orange Slice), Sunkist (Cadbury) for orange-flavors. For overall soft drink market, KO, PEP, Dr. Pepper represent 71.4% of US sales from top 10 brands.

1. Analyze the environment (possible PEST analysis).

1. Provide an analysis of the firm.

1. Frame the mission, goals and objectives. Successful re-launch of CRUSH.

1. Use relevant data to frame the financial aspects. In 1989, the average American consumed 46.7 gallons of carbonated soft drinks or twice the amount consumed in 1969. Population growth compounded by rising per capita consumption produced an estimated $43 million in retail sales in 1989. There are over 40 concentrate producers in US. 82% of industry accounted for by KO, PEP, and Dr. Pepper/7Up. 1000 bottling companies. Some owned by concentrate producers. Bottlers owned by concentrate brands can decline to produce secondary lines. Principal retail channels are supermarkets (40%) and are key to success. East south-central US consumes 54.9 gallons compared to national average of 46.7 (per capita). Lowest consumption is in Mountain states. Consumers over 25 years old prefer diet beverages. Orange Slice and Minute Maid targeted young adults and households without children emphasizing “better for you” brands. Sunkist positions as teen lifestyle, Minute Maid emphasized orange flavor. See page 117. Per case budget for advertising expenses.
2. Discuss the firm (consider adding a SWOT analysis). See SWOT.

1. Review alternative action plans and outcomes.

1. Point out the advantages and disadvantages of your alternatives.
2. Use qualitative and quantitative perspectives.
3. Consider the response by competitors. Price discounting.
4. Recognize any skill or resource gaps. Bottlers.

1. Recommend a strategy.

1. Select an action plan to pursue.

Build relationships with bottlers to expand market coverage.

Expand diet category.

Increase media coverage and promotional support (end-of aisle).

1. Recognize the target market. 

Typical purchaser is married women with children under 18.

1. Propose a marketing mix.

1. Pricing: Consider discount on diet soda to gain larger share of market over 25?
2. Distribution: Supermarkets Convenience stores?
3. Product: Standard
4. Advertising: tv, inserts, newspapers.

SWOT:
Strengths: 

• Part of Cadbury Schweppes PLC, a major global soft drink and confectionary marketer. 60% sales in beverages, 40% in confectionary items.
• Presence in more than 110 countries.
• 3rd largest soft drink marketer behind KO and PEP. 4th in US (note: Dr. Pepper/7Up).
• Brands market leaders in specific categories (Canada Dry, Schweppes tonic water, and seltzer.
• Sunkist/Crush leading orange flavored.
• World’s first soft drink maker. Strong heritage dating back to 1783.
• One of world’s largest multinational firms.

Challenges:

• Heavy investment in advertising, selling and promotion.
• Bottlers are central to successful marketing.
• Creating brand awareness.
• CRUSH has lowest market coverage of major competitors.
• Consumer discounting.
• End-of isle displays crucial (60% of volume).
• Shelf space.
• Flavored soda accounts for approximately 1/3 of sales.
• Bottlers owned by concentrate producers can decline secondary lines.
• Soft drink purchases are somewhat seasonal (higher in summer).
• Cannibalization of Sunkist brand.

Opportunities:

• American consumers drink more soda than tap water.
• Soft drink purchases often unplanned.
• Expanded market coverage. Crush was only in markets that represented 62% of market coverage. Sunkist in 91%.
• Heavy advertising of orange soda by competitors.
• Orange-flavored beverages 3rd largest seller behind colas and lemon-lime, representing 3.9% of total industry in 1989 at 125 million cases compared to 100-102 in 1986.
• Add flavors
• De-centralized bottling. Recruit bottlers.
• Vending machines, supermarkets (40%), convenience stores, fountain service (MCD).
• Diet soda can be sold for higher price. Benefits concentrate producers but not bottlers.
• Reaching beyond teen and young adult markets.
• Vitamin C (family market appeal?)

Threats:

• Competitors Pepsi introduced Minute Maid (KO) and Mandarin Orange (PEP) in mid-80s. Caused rapid and sizable decline in CRUSH (from 22%-8% 1985-1989) and Sunkist (decline from 32%-14%) market share.
• Bottlers’ primary lines.
• Over 900 registered soft drink brands in US.