Cadbury Schweppes is a major player in the American soft drink market. Consumers in America have a higher preference for soft drinks compared to tap water. The estimated retail sales in 1989 reached $43 billion, which can be attributed to population growth and increased per capita consumption.
However, data on trends shows that the growth of carbonated drink sales during the 1980s was mainly driven by diet drinks. Supermarket sales played a crucial role in successfully marketing soft drinks. Despite being the fourth largest soft drink marketer in the United States, Cadbury Schweppes only accounted for a small portion of the total market share. Coca Cola, PepsiCo, and Dr. Pepper/7up held a combined share of 71.4%.
Cadbury has dominated the non-cola sector of the soft drink industry by being the market leader in various specific categories. Upon acquiring Crush, they gained control of 22% of the orange soft drink market, alongside Sunkist. The orange category holds the third largest share at 3.9%. To increase market share for Crush without conflicting with its existing brand image or negatively impacting Sunkist sales, Cadbury executives had to reorganize the Crush brand.
Restructuring will take place by revitalizing the bottling network, establishing a brand position, and implementing a new advertising and promotion program. During the analysis and evaluation phase, Cadbury found that when they acquired Crush in 1989, the brand was only available in markets that accounted for 62% of orange category sales. This was due to Proctor & Gamble’s choice to distribute their product through warehouses instead of bottlers. Consequently, many bottlers sought business elsewhere, resulting in a decline in the number of bottlers distributing the Crush brand.
By analyzing Tables 1 and 2, which present the market shares and market coverage of orange carbonated drinks from 1985 to 1989, it becomes clear that there is a positive relationship between these two factors. An instance of this can be observed with Mandarin Orange Slice, which possesses a market coverage rate of 88% alongside a market share of 21%. Figure 1 exhibits comparable associations between market share and market coverage for the other brands. It is worth mentioning that the quantity of bottling distributors has a direct impact on market coverage. As a result, in order for Crush to expand its market share within this industry, an increase in the number of bottlers is necessary.
It is crucial for Cadbury to actively participate in promotions in order to establish recognition of the bottlers’ role in Crush’s re-launch. The amount of advertising and promotional support that Cadbury would provide is being assessed by the bottlers. Table 3 and Figure 1 demonstrate a correlation between market share and advertising expenditure. For example, Mandarin Orange Slice, which holds a 21% market share, spends $11. million on advertising while Crush, with only an 8% market share, spends $1.8 million on advertising. Typically, concentrate producers and bottlers collaborate in implementing soft drink marketing strategies that combine media advertising (such as television commercials and magazine ads) with merchandising and consumer promotions. Merchandising promotions aimed at retailers are crucial for increasing market share since supermarkets account for 40% of soft drink sales. An industry analyst has observed that if a brand cannot secure end-aisle displays, it is excluded from 60% of the supermarket soft drink volume.
End of aisle displays cost concentrate producers approximately $0.20 per case to bottlers who participate in these retail promotions. These displays, placed near the register and at the end of aisles, have a significant impact on unplanned soft drink purchases in supermarkets. Consumer price promotions are also crucial marketing tools as these purchases are often unplanned. Concentrate producers offer bottlers anywhere from $0.05 to $0.25 per case to support these promotions. Additionally, concentrate producers occasionally provide distribution incentives ranging from $0.5 to $0.25 cents per case based on desired effort levels. In the case of Crush, which aims to rebuild relationships with bottlers, these distribution incentives can be highly beneficial in demonstrating Crush’s understanding of their importance for a successful re-launch. Cadbury’s goal is to position Crush in a way that increases market share without affecting Sunkist sales. Currently, Crush is targeting the 13-29 age group, while Sunkist focuses on the 13-24 segment.
We recommend that Cadbury positions Crush as a “refreshing, nutritious soft drink (possibly by adding vitamin C to the beverage).” This would appeal to the typical supermarket shopper, a married woman with children, and would align with their existing brand image of being thirst-quenching. Such positioning would also distinguish Crush from Sunkist, thereby reducing the chances of internal competition. Moreover, by targeting an older demographic and highlighting the health benefits of Crush, it may be possible for Crush to expand its distribution of diet soda beverages.
The increased sales of diet drinks, which have a higher price per liter compared to regular soda, would positively impact Crush’s profitability. Minute Maid and Mandarin Orange Slice have a wider distribution of diet soda, which could be attributed to their targeting of an older demographic since older buyers tend to prefer diet sodas. To sustain and expand their market share, Crush should allocate more resources towards their diet soda production, considering the significant growth of the diet soda market within the industry.
To capture an older audience and prevent competition within their product line, Crush should consider integrating a health component into their advertisement. This will aid in driving sales for their diet options. Additionally, we recommend incorporating distribution promotions as well as consumer and retail promotions.
Our proposal entails increasing Crush’s advertising budget to $7 million, with the concentrate producers being responsible for $3.5 million of it. Moreover, we suggest the following promotions: (1) offering $0.20 per case for end aisle displays, (2) providing $0.15 per case for consumer price promotions, and (3) granting $0.15 per case for distribution incentives.
The proposed changes will result in fixed costs of $3.5 million and variable costs of $21,099,708. This will lead to a new break-even level of 48,360,800 cases, which will require a market share of 15%. However, the company expects that the higher costs for bottling and advertising will help them achieve this increased market share. We believe that achieving a 1% total market growth and increasing our market share to 12% is a conservative estimate. Nevertheless, we are highly confident that these targets can be met through improved advertising strategies, promotional efforts, and broader coverage in the market.
By increasing these variables, Mandarin Orange Slice was able to significantly increase their market share in 1986 and 1987. We believe that the increased advertising and promotions make this achievable. Furthermore, Crush’s support and willingness to implement promotions will receive positive feedback from the new bottling companies, leading them to allocate more bottling capacity to Crush products and influence other bottlers to collaborate with Crush in the future. Since market coverage has a strong impact on market share, these actions will contribute to an overall increase in Crush’s market share.
