Cadbury Case Study

Introduction

Company Overview

Cadbury Beverages, Inc. s 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. Cadbury Schweppes PLC is the world’s first soft drink maker and 4th largest soft drink marketer with a market share of 3. 4% in the year 1989. In the same year, Cadbury Schweppes PLC acquired soft drink brand Crush from Procter and Gamble for $ 200 million. 3. 4% in1989. Beverage accounted for 60% of worldwide sales and 40% were confectionary. Crush also offers several beverages under Cadbury Beverage, Inc. Typically. They are sold in bottles and cans. Over the years, Cadbury Schweppes has established a diverse product portfolio of water and juices in addition to its carbonates. Key Dates: 1783: Jacob Schweppe founded the Schweppes Company in Geneva 1824: John Cadbury begins selling tea, coffee, and chocolate in Birmingham, England 1854: John Cadbury partnered with his brother, Benjamin, and formed a company called “Cadbury Brothers of Birmingham”. 1873: Cadbury decided to cease trading in tea due to the popularity of a newly expanded product line. 1897: Schweppes Limited goes public 969: Cadbury Limited merges with Schweppes Limited to form Cadbury Schweppes PLC 1986: Cadbury Schweppes acquires Canada Dry and Sunkist from RJR Nabisco.

Industry Overview

In the year 1989, Americans consumed 46. 7 gallons of carbonated soft drinks, about double the total amount of 23 gallons of carbonated soft drinks consumed in the year 1969. There are over 40 producers and more than 900 registered soft drink brand names in the markets. 82% of the industry sales are accounted for by Coca-Cola, PepsiCo, and Dr. Pepper/7Up. Orange-flavored carbonated drinks recorded 3. 9% of total industry sales in the year 1989.

Four brands included Mandarin orange Slice, Sunkist, Minute Maid Orange, and Orange Crush captured the majority if the orange-flavored soft drinks sales in the year 1989.

Products Overview

Crush was first premiered as Ward’s Orange Crush. Originally Orange Crush included orange pulp in the bottles, giving the consumers an illusion of fresh-squeezed. Orange Crush was changed to only concentrate consisting of flavors and color after Crush been purchased by Procter & Gamble in the year 1980. Other than orange-flavored, there are several flavors that are available in the markets including grape, strawberry, cheery, and others.

However, some of the flavors are distributed only within small markets. Key Dates: 1916: Clayton J. Howell, president and founder of Orange Crush Company partnered with California chemist Neil C. Ward perfected an exclusive formula that yielded a zesty, all-natural orange flavor of Orange Crush Success of the beverage was remarkable 1918: Crush available in Canada throughout 20s, 30s, and 50s Crush advanced into South America, Europe, New Zealand and Africa 1980: Crush was purchased by Procter & Gamble. 1989: Cadbury Schweppes acquired Crush USA from P&G Co.

Case Study Overview

The case had discussed Crush, a fruit-flavored carbonated beverage. Cadbury Beverages, Inc is the third largest soft drink marketer in the world after Coca-Cola and PepsiCo. Cadbury Schweppes acquired Crush, Hires, and Sun-Drop soft drink brands from P&G Co. In the year 1990, Cadbury assigned the responsibility for managing the relaunch of the Crush soft drink brand to Kim Feil, the Senior Product Manager, who had 5 years working experience in various product management positions at a large consumer goods company.

After the acquisition of Crush, marketing executives at Cadbury Beverages, Inc, began the challenging task of relaunch the Crush. Based on the case study, three issues were prominent.

1. Immediate efforts were needed to rejuvenate the bottling network to Crush soft drinks.
2. Sort through and figure out Crush brand equity, how the brand was build and develop a based positioning.
3. Developed a new advertising and promotion program for Crush, including setting an objective, developing strategies, and preparing preliminary budgets.

SWOT Analysis

Strength

• Established Brand Name Cadbury Schweppes PLC was one of the world’s largest multinational firms and was ranked 457th in BusinessWeek’s Global 1000 Beverages accounted for 60 percent of company worldwide sales and 53 percent of operating income in 1989. Their brand name is operating in over 60 countries. The brand is well known for all walks of life, and for the urban people to the countryside or rural people. For young and old people, high awareness of Cadbury has made people easily recognized the product and distinguished it with other brands.
• Third Largest Soft Drink Marketer Cadbury Schweppes PLC is the world’s third-largest soft drink marketer behind Coca-Cola and PepsiCo. The company has achieved this status through consistent marketing investment in the Schweppes brand name and extensions to different beverage products such as tonic, ginger ale, club soda, and seltzer in various flavors. In October 1989, the company acquired all the Crush brand worldwide trademarks from Procter & Gamble for $220 million.
• High Financial Strength. Based on Compact Disclosure (Information Database), Disclosure, Incorporated, Cadbury Shcweppes’s total current assets in 1988 is $1,552,800, increase to $2,128,800 in 1989 and keep increasing to $2,362,400 in 1990. While its net income is $168,900 in 1988, increase to $173,000 in 1989. In 1990 Cadbury Schweppes are able to achieve $179,400 for its net income.

Weaknesses

• Low Market Share Four brands captured the majority of orange-flavored soft drink sales in 1989. Mandarin Orange Slice marketed by PepsiCo was the category leader with a market share of 20. 8 percent. Sunkist, sold by Cadbury Beverages, Inc., and Coca-Cola’s Minute Maid Orange had market shares of 14. 4 percent and 14 percent, respectively. Orange Crush had a market share of 7. 5 percent. Other brands accounted for the remaining 43. 3 percent of the sales of orange-flavored soft drinks.
• Low Market Coverage Major competitors also differ in terms of market coverage in 1989. Sunkist was available in markets that represented 91 percent of total orange category sales. By comparison, Orange Crush was available in markets that represented only 62 percent of orange category sales. Mandarin Orange Slice and Minute Maid Orange were available in markets that represented 88 percent of orange category sales.
• Relatively Low Ads & Promotion Based on Crush Marketing Research Staff Report on publications and industry sources, Mandarin Orange Slice by PepsiCo and Minute Maid Orange by Coca-Cola accounted for 84 percent of all advertising expenditures in the orange category. Although both brands were advertised on network and cable television and both used spot television commercials in local markets, their advertising differed in other respects.

Minute maid Orange used outdoor billboards and network radio for advertising, but Mandarin Orange Slice was advertised in magazines and newspapers, but Minute Maid Orange was not. It is shown that Crush and Sunkist spent less on advertising and used fewer advertising vehicles than did Minute Maid Orange and Mandarin Orange Slice. Crush was promoted most frequently on spot television, in newspapers, and on outdoor signage. Sunkist used newspapers, spot television, outdoor billboards, and some syndicated television.

Opportunities

Research Sources: Soft Drinks: Euromonitor from trade sources/national statistics the sales of soft drinks are keeping increasing from year to year. As in 2007, the sales recorded $412,578. 4, but it jumps to $493,739. 3 in 2012. This shows that Cadbury Schweppes has much opportunity to penetrate into the soft drinks industry as it will gain greater income for their financial statement.

• Increase in Consumption

The huge increase in soft drink consumption is a direct link to the bottom line profit that is generated for the soft drink corporations. Coca Cola, for example, has set the goal of raising the consumption of its products in the U. S. by at least 25 percent per year to do that. To meet that goal they have increased the size of the drinks from 61/2 ounces in the 1960s to the 20-ounce bottle of today. This escalation number of consumption of soft-drink, especially from the younger generation is a great opportunity for Cadbury to promote its products to the exact target market.

• Variety of Advertising Channels

As the world is getting globalized, the medium of advertising is increasing. Aside from traditional media like advertising in newspapers and magazines, Cadbury Schweppes can promote Crush through social network site such as Facebook and Blog, make a fan page, promote through YouTube, Instagram, and many more. By using social media to attract more consumers, it is an advantage for Cadbury to get direct feedback from consumers and they will make themselves close to consumers, aside from saving costs.

In addition, advertising through various channels may spread positive word-of-mouth communication from a good advertising approach.

4 Threats

1. Huge Competition There are some number of competitors in soft-drink products, and tough competition from huge soft-drink producers such as Coca-Cola and PepsiCo. Competitors have greater international experience. Cadbury has traditionally been strong in Europe. The brand is new to the U. S market because possible lack of understanding of the new emerging markets compared to competitors. Coca-Cola and PepsiCo have penetrated their soft-drink products into the Asian market for a long time, while Cadbury is just known for its cholocate products in Asian. To enter new markets will resort Cadbury to face stiff competition from huge competitors.
2. Heavy advertising expenses As the cost of advertising is becoming expensive, Cadbury has reduced its budget on Crush’s advertising expenditures for broadcast and print media. In 1985, Cadbury spent $4,731,200. In 1986, they spent $7,154,900, increase of $2,423,700. In 1987, they cut the budget on this advertising to $4,296,700, but have increased to $6,841,100 in 1988. Unfortunately in the year 1989, it shows a huge drop of advertising expenditure on Crush, which it is only $1,853,600. By comparison to Crush’s competitors on advertising expenditures for broadcast and print media in 1989, Mandarin Orange Slice spent $11,388,100, Minute Maid Orange spent $10,463,100 and Sunkist spent $2,301,900.
3. Social changes Nowadays, people are more aware of obesity and consumer’s obsession with calorie counting is rising. People are searching for healthier products and more nutritious to be consumed. Advice from the experts not to consume soft-drink may affect the demand for soft-drink because soft-drink is known to contain high sugar content. People are told too much of sugary intake daily may resort to chronic illnesses such as diabetes and high blood pressure. This shows that nutrition and healthier lifestyles affecting demand for Crush.

• Issue 1: Rejuvenate Bottling Network

First, the management needs to arrange new bottling agreements which would increase the market coverage for Crush in the orange category in time for the Crush re-launch. The company’s marketing and sales executives need to immediately embark on an aggressive effort to recruit bottlers for the Crush line. The Crush bottling network had gradually eroded in the 1980s due in part to Procter & Gamble’s decision to test a distribution system for selling Crush through warehouse rather than through bottlers. This action, which centralized bottling in the hands of a limited number of bottlers that shipped products to warehouses for subsequent delivery to supermarkets and other retail outlets, had led many in the Crush bottler network to question their future role with Crush.

An outgrowth of this action was that Crush had the lowest market coverage of orange category sales potential among major competitors. Therefore, to arrange new bottling agreements was the immediate first step. Secondly, the company management needs to priorities a rapid and substantial broadening of their cooperation with bottlers. This effort was to rebuild a cooperative relationship with bottlers. The management team of Crush brand needs to maintain great communication and cooperation with the bottlers in order to increase the productivity of the Crush brand.

The efficient distribution network with bottlers and retailers is one of the key success factors in the soft drink industry. This is one of the ways to increase the Crush brand market share in the orange soft drink category. Moreover, the company needs to set an objective of 10% market share for Crush alone in the orange drink category at the end of 1990 (an 8% market share was recorded in 1989). In the process of recruit new bottlers or rebuild the relationship with bottlers, the company’s management team can employ the push strategy, which means using the distribution channels to obtain the largest possible market share.

With these efforts, the company will be able to re-launch the Crush brand successfully.

• Issue 2: Crush’s Brand Equity and Positioning

Crush positioning (base positioning) The Four Major Brands Positioning Strategies, 1989s. Teens & young adults Orange taste Family with children at home Crush Mandarin Orange Slice Minute Maide Orange Sunkist Concerning our positioning recommended for Crush we decided to reposition this brand on the family with children market segment (to differentiate from Sunkist “families with teens” to avoid cannibalization effect. Moreover, we recommend to position Crash 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 a healthy, natural, dynamic lifestyle. This would enable a strategy that would be more consistent with the consumption profile of diet drinks consumers.

Crush Brand Equity

Crush brand would move back to its traditional message and away from Sunkist. Through its history, the Crush brand has been marketed to an all-family target, ages 13-39, using a position based on superior orange taste.

This positioning and target had achieved a 22% market share in 1985. It even was able to hold its ground against Minute Maid and Orange Slice in 1986 with an 18% market share. In the same year, Sunkist went from 32% to 20%. There is already high brand awareness so the company would use limited advertising but emphasize both the push strategy through merchandise promotion (end-of-aisle displays) and pull strategy of consumer promotion (coupons).

• Issue 3: Crush’s Advertising and Promotion Program Advertising Internet

People continue to increase time spent surfing the Internet while spending less time watching TV and reading magazines and newspapers. The Web lets people socialize with friends, consume news and other information, enjoy entertainment like videos, and shop. This change in consumer behavior creates new challenges and opportunities for marketing managers as they try to target specific customers or segments through Internet advertising. Here we’ll explore the Web as an advertising medium and later in the chapter examine how it works to support publicity efforts.

Advertising on the Internet takes a variety of forms, but the purpose is usually to attract the interest of people in the advertiser’s target market so they’ll click through to the firm’s Web site. This is not as easy as it sounds since many people try to ignore any advertising. To get the attention of Web surfers, Internet advertisers have created many different types of ads. Banner ads are small rectangular boxes that usually include text, graphics, and sometimes video to get attention and hold interest.

Because banner ads can be easy to ignore, advertisers turned to pop-up ads that open in a new browser window (and block what the Web user is trying to view—until they’re closed). A variation is the pop-under ad, which opens under the Web page being viewed, so it usually isn’t noticed until after closing a browser. Most people find these ads very annoying and many use software to block them. Yet some advertisers still use them because they get responses. In this case, Cadbury can advertise its crush beverage on the internet; since the internet is the advertising tool that increasingly important in the market.

This is because users of the internet are increasing rapidly and this can increase the awareness of the product easily.

Television

For the same reason, Cadbury can come out with the television advertising. Its target audience is the consumer who 5’s to 60’s years old. We assume at that time 7 pm to 11 pm its target audience was ready at home. Mostly they going back from working or school at 6 p. m. and take their rest by watching television or doing something else. At the 8 p. m. most its target audience will take their time to watch News on the television.

So, we think that the company may put the advertisement at that time as frequently within the commercial break and the News. During this time which is 4 hours that we indicate are the most people watching on television. And mostly, working peoples that were its target market will take sleeping before 12 a. m. 30 seconds – after 30 minutes of the TV show. Mostly, in 30 minutes there are having 8 minutes for the commercial break. 30 seconds is a common duration and is easier to slot the advertisement. Moreover, we set up for the 30 seconds to tell a complete brand story.

Early research by TV Dimension has shown that 30-second spots generate up to 75 – 80% of the recall ability that 60s spot does but at half the cost. For instance, TV3, TV9, TV1, Astro Prima, Astro Ria and etc. Sales promotion To increase the sale of this product, Cadbury can adopt different measures like a sample, gift, bonus, and many more. These are known as tools or techniques or methods of sales promotion.

• Free samples: We might have received free samples of shampoo, washing powder, coffee powder, etc. while purchasing various items from the market. Sometimes these free samples are also distributed by the shopkeeper even without purchasing any item from his shop. These are distributed to attract consumers to try out a new product and thereby create new customers. Some businessmen distribute samples among selected persons in order to popularize the product. For example, in this case, free samples can be distributed among shoppers at the market by setting a booth.
• Premium or Bonus offer: In this case, Cadbury can give out 30% extra in a pack. This is the example of a premium or bonus given free to consumers with the purchase of a product. This is effective in inducing consumers to buy a particular product. This is also useful for encouraging and rewarding existing customers.
• Price-off offer: Under this offer, products are sold at a price lower than the original price. This type of scheme is designed to boost up sales in the off-season and sometimes while introducing a new product in the market.
• Coupons: In this case, coupons can be issued by Cadbury either in the packet of a product or through an advertisement printed in the newspaper or magazine or through the mail. These coupons can be presented to the retailer while buying the product.

The holder of the coupon gets the product at a discount. Budget For advertisement on television we estimated the cost of 30 seconds for monthly is RM350000. So the cost is RM1500,000 (RM35000 x 5 x 6 month). Many Web sites charge advertisers a fee based on how frequently or how long an ad is shown. However, competition for advertisers has prompted pay-per-click advertising, where advertisers pay only when a customer clicks on the ad and links to the advertiser’s Web site. Pay-per-click advertising is a big shift from traditional media where firms pay for ads based on an estimate of how many people will see the ad.

So we estimate it is RM1000,000 Sales promotion, we estimate the cost is RM2000,000

1. Free samples = RM500,000
2. Premium or Bonus offer = RM500,000
3. Price-off offer = RM500,000
4. Coupons = RM500,000

Total cost: RM4500,000

Conclusion

We find out that Crush should maintain trade relations with bottlers. Crush should align with Pepsi bottling which decided to use bottles of Dr. Pepper and 7 Up in the year 2009. In our opinion, Crush should also state a clear position to differentiate themselves from their competitors.

With that, a new image should be also developing so the customers can see a new image of Crush. A new bottle should create to enhance a new image of crush aligned with Crush New positioning. Last but not least, a new tagline should be developing to enhance crush branding. A good tagline will able to enforce the memory of that particular product which can help to boost up sales.

References

1. http://www.crushsoda.com/
2. http://en.wikipedia.org/wiki/Cadbury
3. http://en.wikipedia.org/wiki/Schweppes
4. http://en.wikipedia.org/wiki/Dr_Pepper_Snapple_Group