Cadbury Beverages Inc. Case Study

Executive Summary

In October 1989 Cadbury Beverages (CB) Inc. has acquired soft drink brands from Procter & Gamble. Then in January 1990, the Cadbury marketing team decided to take up a challenge of relaunching the Crush soft drink brands. A marketing plan is strategically developed to achieve the target of the organization. The primary objective of this marketing plan is to relaunch the Crush brand through improved market coverage.

With the effort to relaunch the Crush Brand, Cadbury Beverages (CB) had identified three issues that were immediately noticeable which are affecting the current coverage and sales of the Crush brand in the market. These issues which subsequently became the secondary objective of this marketing plan will be further discussed in this paper. A strategy was developed based on these issues in order to achieve the primary objective of relaunching the brand through improved market coverage. The issues/secondary objectives are stated as follow:

• The need to revive the cooperation and bottling network for the Crush brand.
• The need to establish and build base brand positioning which is in-line with the brand equity.
• The need to develop a new advertising and promotion program.

By having the issues arranged in such a manner, it gives an easier understanding of the current situation that is affecting the company’s brand. It started with the primary objective of improving market coverage. With wider market coverage, the brand is able to broaden its horizons and reach for more customers in the market. The strategy to achieving this is through an improved network and cooperates with the bottler of Crush brand.

Through a better networking with these bottlers, CB is able to increase its output capacity in order to supply to a wider market. Moreover, improving bottler network also gives an opportunity for the company’s product to reach a broader area due to the exclusive right of the bottlers to distribute in a defined territory. The annual supermarket case volume of orange-flavored soft drinks is believed to decrease over the years due to market saturation. From the year 1985 to 1989, the market has been feeding on the same soft-drink brands with no new product being launched into the market.

Thus, it is critical for CB to revive its Crush brand and give it a new “image” in the market or it will continue to suffer as the trend continue to decrease. The new positioning of the brand in the market has to be consistent with previous positioning and this will require an approach that is integrated into the organization’s overall business objectives where one of it is to avoid the cannibalization of Sunkist while at the same time allows the Crush brand to stay distinctively unique. To further enhance this marketing plan, a new promotion concept is introduced through advertisement activities.

The new promotion concept is developed with aim to build awareness and to stimulate demand for the product. Having a broad market coverage means nothing if the market is unable to absorb these supply. A contingency plan is also developed to handle any uncertainties.

The challenges/Issues/Problem Statement

Following the acquisition of Procter & Gambler in 1989, Cadbury Beverages attempt to relaunch the Crush brand of fruit-flavored carbonated beverages on the following year. There are three prominent issues that require the attention and focus by the company.

The issues are as follows:

1. Rejuvenate a cooperative network relationship with bottlers. The decision of distribution system for selling Crush through warehouses rather than through bottlers has eroded the bottling network; causing Crush to record the poorest market coverage of orange category sales among major competitors. Besides poor market coverage and sales, the decision made by the former company has consequently caused a sense of ambiguity among the existing bottlers who are doubtful of their future position with the existing company (Cadbury Beverages) because this has prevented the bottler from selling Crush Beverages. Although the recruitment of more bottlers by CB in the mid-1990 has improved the output capacity to cover 75% of total orange sales in the market, more has to be done to rejuvenate a cooperative network relationship with these bottlers.
2. Develop a base brand positioning consistent with the brand equity. Developing a base positioning for the brand is important because it gives the brand an ‘image’ and thus distinguish it from other similar product. Furthermore, an undeveloped and unexecuted of a clear differentiated position for Orange Crush in the marketplace will likely to cannibalize the Sunkist Sales. The sales of the two main competitors’ brands which are Mandarin Orange Slice and Minute Maid Orange had outpaced Crush and Sunkist especially in attracting the diet segment of orange drinkers. As much as there is a need to build a base position for the regular varieties, the same effort should be given to the diet segment in maintain the ‘image’ and the ‘uniqueness’ of the diet varieties. In order to keep the brand ‘image’ relevant in the market, the new positioning have to run in line with earlier positioning to uphold existing customers as well as attracting new and potential customers. A clear positioning statement is important because it serves as a guideline to creative development underlying the advertising program which could not be initiated if it is not well developed.
3. Advertise and promote the Crush program which includes determining objectives, developing strategies, and preparing preliminary budgets. It is learned that the Crush brand have high name awareness in the existing and new bottlers markets in some areas. Hence, the objectives for the advertising and promotion had to be established and communicated to the advertising agency.

Also, there was a need to set the budget for advertising expenditures and amounts to be spent on a per case basis for promotion. In addition, a pro forma statement of projected revenues and expenses had to be prepared in order to realistically portray market and competitive conditions.

Situation analysis

Consumers are often very responsive to price promotion, in-store display and point-of-sale promotion. Secondly, the most common purchaser of soft drinks is married woman with children under the age of 18 living at home. Seasonally, the market record higher sales during summer months compared to winter. Based on a study in 1989, an average individual consumes 46. 7 gallons of soft drink in the nation with the highest per capital consumption recorded in the East South Central with 54. 9 gallons whereas the lowest per capita consumption was 37. 1 gallons in the Northern Mountain States. Consumption of diet beverages was more significant among consumers over 25 years. Teenagers and younger consumers preferred regular soft drinks.

The two major competing external brands in the orange flavored soft drink categories are PepsiCo’s Mandarin Orange Slice and Coca-Cola’s Minute Maid Orange. Besides Crush, CB also sells Sunkist in the market which becomes an internal brand competitor. The introduction of Mandarin Orange Slice and Minute Maid Orange has taken a chunk of the market shares which leaves very little shares for CD’s product combined.

Orange Carbonated Soft Drink Brand Market Shares, 1985-1989 The chart above shows the market shares for all competing brands from 1985-1989 which shows that Crush having the lowest market share percentage. The market is mainly dominated by Mandarin Orange Slice with Sunkist and Minute Maid Orange having quite balanced shares. This is a worrying situation for CB because both of its products are declining over the years which slowly replaced by Mandarin Orange Slice. The declining trend of Crush is worrying because in 1989 it has only 8% of the market shares.

One of the reasons that contribute to this declining of market share was due to low advertisement activities carried out by the company. Record shows that CB has the lowest investment in advertizing compared to other companies with only 10% of the total advertisement investments spent by the highest competitors; MOS. This has prompted the company to reinvest into advertising activities to stimulate consumers’ awareness and demand for the Crush brand in general.

The case volume saw an increasing trend from 1984-1987 and then decreased from the year 1988 to 1989 while in 1988 the case volume remains the same as the previous year. The unchanged volume shown between 1987 and 1988 should be treated as an indicator of possible reduction in sales which happened to be true in the following year. This could due to market saturation because the market has been feeding on the same soft-drink brands with no new product being launched into the market.

The growing of health conscious among consumer has leveraged the sales of diet category especially among consumer over 25 years of age. The sales of diet variety for Crush based on 1989 is very low compared to the sale of the regular form. This has causes a lower profit generation to the company as diet has a higher profit margin compared to the regular. Comparatively, Mandarin Orange Slice and Minute Maid Orange both have fairly equal sales among the two varieties.

The current target consumers for the Crush brand are aged between 13-29 years old which falls in the category of teenagers. Thus, the new positioning must stay consistence within this range of age category. The carbonated soft drink market is divided into two varieties which consist of the regular and diet soft drinks. The consumption of diet soft drinks accounts for 31. 1% of total soft drink consumption in the market and is higher among consumers over 25 years of age.

The table above shows the sales volume according to brand accounting for regular and diet varieties. In the diet segment, Mandarin Orange Slice (MOS) and Minute Maid Orange (MMO) recorded a case volume at 51% and 49% respectively which are significantly higher than both the Cadbury orange-flavor brands. Crush recorded a 29% share while Sunkist stands at only 18% of the market shares. Both MOS and MMO recorded a high case volume due to its consistent positioning in the market targeting young singles and young couples which are the major consumer of the diet soft drink.

This may present an opportunity for Crush, of which orange diet version could be repositioned to attract teenager consumers either single or couple living in big cities giving the brand a new positioning as opposed to previous “family-based” positioning.

Alternatives Marketing Strategies

There are many marketing alternatives that are considered before arriving at the recommended strategies. The alternatives are addressed according to the issues.

Rejuvenating Bottling Network

One of these strategies is to focus immediate attention and effort on reestablishing the bottling network for the Crush line, particularly Orange Crush.

Approximately there are 1,000 bottling plants in U. S that most of them work as franchised bottlers. Franchised bottlers are usually granted the right to package and distribute a concentrate producer’s branded line of soft drinks in a defined territory and not allowed to market a directly competitive major brand. But franchised bottlers can represent noncompetitive brands and decline to bottle a concentrate producer’s secondary lines. This means that a franchised bottler of Pepsi-Cola cannot sell Royal Crown (RC) Cola but can bottle and market Orange Crush rather than PepsiCo’s Mandarin Orange Slice.

Also principal retail channels for carbonated soft drinks are supermarkets, convenience stores, vending machines, fountain service and thousands of small retail outlets. Among them supermarkets solely account for 40% of carbonated soft drink industry sales. Industry analysts consider supermarket sales as the key to a successful soft drink marketing effort. From all said above we can conclude some alternatives to this strategy as follows:

1. To expand the bottlers network through contracts with those franchised bottlers whom their primary product is of those for Cola and Pepsi. Crush is not considered as a direct competitor for them.
2. To enter into a dealership with those bottlers who have a strong relationship with dominant supermarkets. As a result of the important part of supermarket in industry sales from where these bottlers are responsible for distribution of final products into supermarket networks hopefully this will finally leads to better sales figures.
3. To encourage bottlers to enter into a dealership, the Cadbury Beverages marketing executives can take up another aggressive strategy such as paying a bigger proportion in advertising and merchandising promotions. As far as it is dealt, advertising and promotions programs are jointly implemented and financed by both the firm and bottlers. The usually split the costs 50-50 among them. To strengthen the bridge between the firm and their bottlers, the firm can propose to make a new deal to split these costs as for example 60 percent of the cost will be borne by the firm and the remaining 40 percent of the cost will be borne by the franchisor.
4. The firm may also outsource/seek for other bottlers within the same region instead of relying on the current bottlers. Furthermore, there might be some other potential bottlers that are not known of but would be willing to bottle for a much lower price given their low reputation in the market.

Developing a Base Positioning

The right positioning incorporates strong values and differentiators that are important to locate the brand in the minds of consumers to maximize the potential benefit to the firm. Besides that, a good brand positioning helps guide marketing strategy by clarifying the brand’s essence, identifying the goals it helps the consumer achieve, and showing how it does so in a unique way.

Some of the positioning alternatives are as below:

• The brand is targeted at consumer with age between 12-28 for teenagers or 18-30 for young adults. These categories of ages usually have an active lifestyle and are mainly college or high school students depending on the targeted age category of customer.
• A brand that provides healthy drink. This would be the positioning strategy for the diet category which mainly focuses on orange flavored. A suggestion to include Vitamin C into the drink is being considered.
• Improve the sales of diet category with a 50:50 sales between regular and diet because the diet category offer a higher profit margin compared to the regular.
• Gender segmentation is widely used in consumer marketing. Generally men and women have different attitudes and behavior, so we can design the product with difference packing or extra ingredient to suit their need. Through demographic segmentation, it will be easier to estimate the size of the market and the media we should use to reach it efficiently.

Advertising and Promotion

There are several alternatives that the company may pursue in advertising and promotion strategies. The alternatives are discussed as follows:

• Build awareness: Building awareness is a very important when the product is new in the market. Initial promotional effort has to be established on building an identity of the product. This can be achieved through advertisement. Advertisement is a very powerful marketing tool to deliver and bring message across to consumers. Product information is so effectively channeled to consumer through advertisement in mass media such as newspaper and TV network.
• Creating interest: Consumers usually buy a product because they are interested with the product. To build interest for the product, the product has to offer something that can fulfill the wants and needs of consumers.
• Provide information: This is one of the strategies that are used by the company in assisting consumer in the search stage of the purchasing process. One of the deciding factors that influence a consumer’s purchasing decision is their knowledge about the product. Consumers tend to buy a product if the information of the product is clear to them.
• Stimulate demand: Unless the product sells itself and the consumers/customers are lining up to buy it, there will need to be a program to stimulate demand for it in the market. Thus, the need for the right promotion is needed to drive consumer’s purchasing decision.
• Brand reinforcement: Brand reinforcement usually becomes important in building consumer’s loyalty toward a certain products. One of the approaches in building brand reassurance is sales-after-service. This will maintain consumer-company relationship even after a sale is committed.

Recommendations

Here are some of the recommendations that we think are suitable to be applied in this case. These recommendations are selected based on the best alternatives for each issue highlighted in this case and are discussed as follows i. Bottling We would recommend that the firm should take the initiative to strengthen the relationship between their franchised bottlers and the firm. There were some disagreements on plans and actions practiced previously by P&G. A good and aggressive way to achieve a stronger bond with the bottlers is to pay a bigger proportion in the advertising and promotion costs.

The common practice of this proportion of cost is to split evenly between the firm and the bottlers. By agreeing to pay a bigger chunk of the said cost, for example 60% – 40% with the former percentage borne by the firm, it will lessen the bottler’s cost and in turn would be an invaluable economic advantage to them. Hopefully by doing so, the firm would once again be able to have a good tie with the bottlers. In the medium to long run, we would recommend the firm to seek for ways to decrease the reliance of the bottling network.

This is crucial to ensure that the process flow of the company’s production line would not be disrupted by an external factor which is out of their mean to solve it. By erecting a plant of their own, the firm could not only gain an edge in economic advantage, by decreasing the production cost and cutting down the middle-man cost completely, but they will also be freed of dependence on an external factor. The bottling process is a complicated process. Therefore, we would also urge the firm to start doing the research and develop the needed knowledge in the soonest time possible.

While in the long term, the firm could come up with own franchise/bottling plant. This way, they do not have to rely on sourcing out the bottling process to other franchisors. The reduction of the ‘middle-man’ or franchisor cost will greatly decrease the production costs. Savings from these costs would then be used to invest in the marketing or advertising division. Although a huge sum of investment has to be inducted in erecting a plant, the firm will be looking at handsome yields, in terms of capital and positioning growth, in the long run. By having their own bottling plant, the firm would have a much stable production flow and this in turn ensures the smoothness and consistency of the bottling processes.

Positioning Due to increasing market for healthier drinks as oppose to soft drinks with high amount of sugar, thus, it is necessary to expand the diet Crush category. New formulation of diet Crush with Vitamin, Magnesium, Niacin, and Zinc, and marketed as “Diet Crush”. The new Crush healthy soda drinks are targeted young adult in the 18 to 28-year-old demographic.

Gym regulars, outdoor professionals, college students, sport persons and enthusiasts are potential targeted group of consumer. Generally, the consumers under this category are energetic, fresh, and active. Their attitude and behavior are always related to adventure sports, the love for challenges, essence of not giving up and winning. Thus, the brand image for this product is sports centric and gradually developed to beyond the sporty image. In addition, due to existence of colleague student, the price should be in the mid-category range. The brand positioning is focus on “active” lifestyle and enhances their performance.

Promotions and advertisement In order to successfully relaunch Crush into the market the company must set a very clear objective for its promotional activities which will be the guiding force for the marketing team and the advertising agency in their effort to reintroduce the brand and gain a better market coverage and improving sales. The company’s research report shows that one of the factor that lead to poor acceptance of the product was due to poor promotion of the product.

Generally the main objective of marketing promotion activities is o build awareness among the customers on what the product has to offer. Promoting information for the product can be delivered through mass media advertisement. This is especially important in region where the awareness of the brand is still low. In the region where this product is widely known, the company shall focus on stimulate demand among its customers. One of the factors that affect customers’ purchasing decision is their interest toward the brand. Hence, it is important to create interest within the target customer in order to stimulate demand for the brand.

Promotion in terms of pricing and free gift has evidently been successful in attracting more customer buying a product or services. With strong competitions in the market, a price promotion is required to put the business back on track

Development of the new brand position has to be consistence with its previous image to increase the chances of acceptance by consumers. “Diet, healthy and active” is the new positioning for Crush. Crush has added a new “active” element into its image which remains consistence with its previous position of “healthy” as portrayed by its diet category and “thirst-quenching’ beverages.

Brand familiarity refers to how well the customer recognized the product. Strong association and awareness about brand increased the brand familiarity. Thus, bottle design, availability in market and customers’ access to product’s information would be an ideal plan to determine the brand position. Sport events and theme campaigns are essential to impress customer with the “active” image of Crush. Perceived fit with regards to similarities between Crush and Sunkist due to product features such as taste and ingredients is believed to have a smooth transition due to existence of loyal customers.

The effort of publishing the new image of Crush will strengthen brand fit between Crush and Sunkist in customers’ perceptions. It is necessary to minimize the cannibalization of Sunkist by clear differentiation between both brands. Consumer innovativeness is related to consumer attitude such as how frequently consumer use and buy the product and loyalty. Crush has 46% of loyal consumer and this gives a positive effect on extending product brand image, as well as favorable outcome such as enhanced market share and increased revenue and profit.

A theme for the marketing promotion activities is conveyed to consumers through advertising agency. The main theme for this product is to portray an “Active Lifestyle”. One of the approaches is to increase and improve advertising activities on top of what is being done currently. Advertisement should include a wider media network to reach a greater customer network. Since the target customers are active teenagers, media which is closely related to the intended customer becomes the target media. The brand will be advertised in teens and sports magazine.

It is important that the design of the advertisement convey a message of “active lifestyle”. Besides printed media, the company should also focus on electronic media such as local TV network. The advertisement should be aired in sports channel especially during big and live matches because this is the time with the higher number of viewers. Conservatively, the company should also consider of promoting the brand in both schools and colleges through sponsorship of school team or sporting events. A few strategies are laid out to stimulate demand of the product.

While most of the brand will be sold in the supermarket, product placement in the aisle will be very crucial. Research has shown that people do not look beyond items at eye level much, therefore the products has to be placed at eye-level on the shelf. Besides that, creating the right environment is also an important factor. Playing fast and upbeat music will create an active environment which will influence customer’s decision. This will help to promote the theme of the brand which is to build an “active” lifestyle brand image.

It is hard to tell how good a product is unless it can be proven hence it is hard to attract customers to buy the product unless they can try it. By this approach, the company should give free trial and samples on supermarket floor at a place near to the shelf where the product is placed. Record shows that there were 315 million cases of orange flavour soft drink were sold in 1989, the table below shows the amount in cases of orange flavour soft drink being sold by the four main brands.

The average market shares among the four competitors give an average of 14% whereas Crush was only capable of securing 8% of the market shares. Hence, a new target was set for Crush to penetrate at least 14% of market share in the following year. Therefore, the sale of Crush in orange flavour soft drink has to increase from 25,200,000 cases to 44,100,000 cases. This is sales target involves an equal sales percentage of both the regular and diet categories at 50% each.

Thus, a forecast on advertising budget would be 10 million dollar where 4. 5M dollar will be spent on regular soft drink and 5. 5M dollar on diet soft drink. We allocate more expenditure on diet soft drink than regular soft drink to boost the awareness of this product due to the reasons of poor sales record for this category and to stimulate awareness on the “healthy” image of our product. This is consistence with the current target position on “active” and “healthy” consumers. A pro forma statement is shown follow: Pro Forma Statement

At the pre-targeted sales of 44,100,000 cases and allocating 10 million dollar budget on the advertisement, the advertisement spent on regular soft drink is 20 cents per case and 25 cents per case for diet soft drink. Hence, the profit on regular soft drink will improve from 15% to 19% and the profit on diet soft drink will increase from 12% to 15%. 7. Contingency Plan Once the product has been established with its key target consumer, there is the opportunity to develop the product to target different demographics such as vary packaging design for diverge groups. Products are mixed with specific ingredients customized for women and men.

The men’s drink contains additional mineral while the women’s drink contains added folio acid, zinc and selenium to meet women’s needs. For men, the products stresses on muscle size, muscle loading, boosts metabolism, enhance stimulation and others. The product design is in “gripping” size which appeal to men. For women, the product is emphasized on weight reduction and energy booster. The shape of bottle is softer or softens package drinks color such as pink, green or blue in order to attract female consumers. Most of the products in market are gender neutral and lack of specific targeted directly at men or women ndividually.

Once the product has been established with its key target audience, there is the opportunity to develop the product to target different demographics such as vary packaging design for diverge groups. Products are mixed with specific ingredients customized for women and men. For men, the products is stresses muscle size, muscle loading, boosts metabolism, enhance stimulation and others. The product design is in “gripping” size which appeal to men. The bottle is larger and chunky appeal more to the male desire to use drinks to satisfy thirsty. Berry, lemon lime and others are considered as men’s favour preference.

The men’s drink contains additional mineral such as taurine, caffeine and other booster ingredients that claim to increase energy and alertness. The other ingredients like guarana, ginseng and ginkgo biloba are catered for health conscious male customers. For women’s market, it is necessary to emphasize on their preference which is vary taste, decoration labels, lighter colour and weight, natural, more details pattern, nice look and perfect image. The shape of Diet Crush bottle is softer or softens package drinks color such as pink, green or blue in order to attract female consumers.

Each bottle features women’s silhouettes and small size which appealed to women. The drink favoured with exotic fruits such as lychee, dragon fruits, green tea and passion fruits are considered as their preference. Diet Crush is also emphasized on improved digestion, weight reduction and energy booster, as well as with products clearly marked “low calories”, “healthy” or “light” that generally perceived as aimed at women market. In addition, any suggestion of a health expert’s endorsement or nutritionist’s advice is creates female appeal.