Introduction Cadbury Schweppes Americas Beverages is an integrated business company consisting of PLC-Dr Pepper/Seven Up, Inc., Snapple Beverage Group, and Mott’s. The merger of these three business units was particularly significant for Hawaiian Punch. In 1999, Cadbury Schweppes/PLC gained full ownership of Hawaiian Punch from Proctor & Gamble. Since the acquisition, the brand has been distributed by Dr Pepper/Seven Up, Inc., the third largest soft drink manufacturer in the United States, through its bottler network in the carbonated soft drink aisle or section of supermarkets and other retail stores.
Cadbury Schweppes marketed Hawaiian Punch using two distinct networks for manufacturing, sales, and distribution. The objective is to develop a marketing plan specifically for Hawaiian Punch in 2005. However, before proceeding with the plan, it is crucial to examine and comprehend the disparities between these two networks.
Firstly, we will examine the Finished Goods (FG) network and then proceed to the Direct-Store-Delivery (DSD) network. The procedure for the finished goods network is as follows: Cadbury Schweppes manufactures the juice drink, then packages it in various sizes including 1-gallon, half gallon, and 6.75 ounce single-serve pouches. Once the packaging process is completed, the product is shipped to warehouses and distribution centers. From there, it is delivered to supermarkets and other retail outlets where it is sold in the juice aisle of supermarkets. The Direct-store delivery (DSD) manufacturing, sales, and distribution networks for Hawaiian Punch function in a similar manner.
The organization outsources a bottler that purchases concentrates and combines them with sweeteners and water. The bottler then packages the mixture in bottles or cans and sells it to retailers. The main point of contact for the bottler is the soft drink buyer of the retailer. In a DSD network, bottlers deliver the bottled drinks directly to the soft drink aisle or designated location in supermarkets and other retail outlets within their exclusive territory. They do not use warehouses or distribution centers. It’s worth noting that bottlers do not provide service to the juice drink aisle.
Hawaiian Punch offers six different flavors through the DSD network in three different package sizes: 2-liter bottle, 20-ounce bottle, and 12-ounce can. It is the leading fruit punch beverage in the United States, with ninety-nine percent brand awareness among U.S. consumers. In 2004, the product line included eleven flavors, with Fruit Juicy Red being the most popular by a significant margin. Recently, a light version of Fruit Juicy Red was launched, which contains sixty percent less sugar.
Initially, Hawaiian Punch primarily targeted children for their products. However, the company now aims to redefine its positioning statement. Additionally, they are considering introducing a new flavor across their finished goods and direct store delivery networks. Another important aspect is addressing allowances for innovation in both Hawaiian Punch finished goods and Direct Store Delivery (DSD) networks, as well as in media advertising. Taking into account these factors, we have formulated new marketing proposals to guide future decision-making.
As part of our marketing strategy, we will introduce a new compact size of Light Fruit Juicy Red to our finished goods networks. Currently, this flavor is only available in a 1-gallon bottle. To further expand our marketing depth, we plan to add a 6.75-ounce size option. For the 12-month income statement ending June 30, 2004, please refer to exhibit 6. Amongst finished goods, the cost of goods sold (COGS) represents seventy-eight percent of net dollar sales and eighty-two percent of total net sales volume.
Fifty-six percent of gross contribution before marketing and fifty-nine percent after marketing is contributed by it. Adding a new flavor or bottling size would cost 2.8 million dollars but does not require sales controlled marketing fees. The juice aisle is shopped by fifty-eight percent of Hawaiian Punch buyers (See Exhibit 7). We believe that introducing the new size in this aisle would maximize advertising benefits. The decision to introduce the new 6.75-ounce light red flavor was made because households with children less than six to twelve years old age group shop in this aisle more frequently.
Furthermore, smaller sizes of our product have gained popularity for various occasions outside of the home, such as sporting events. In addition to this, as part of our marketing strategy, we intend to introduce a new mango flavor to expand our product line. This will cater to the demand for innovative flavors in both the Direct Store Delivery (DSD) and finished goods networks. Specifically, the finished goods network will focus on the South-East regions and utilize the standard one-gallon container for bottling. It is important to note that implementing this new size will incur costs of approximately 2.8 million dollars for shelf space and a local advertisement fee of $139,571. These figures are referenced in Exhibit 2 and represent the average advertisement cost.
The decision to add an additional flavor to Hawaiian Punch is based on the fact that the gallon sized container is the most commonly purchased size by 52% of all supermarket juice aisle shoppers. This decision is specifically focused on the South-East region, where consumers frequently shop in the juice aisle. If this new flavor is added to the DSD network, it will also benefit Hawaiian Punch. The cost of shelving, which amounts to 2.8 million dollars in finished goods, will not be incurred as the bottlers have assumed the packaging cost for new volume sizes.
Despite the elimination of packaging costs, the advertisement expenses are significantly high in comparison to the finished goods network, amounting to $712,243 (ref. Exhibit 2, Avg. advertisement cost). The DSD network is responsible for distributing to the soft drink aisle (Exhibit 7), which is exclusively frequented by twenty-seven percent of Hawaiian punch consumers. Advertising within the DSD network enables the introduction of various sizes in other exclusive retail territories. This third marketing proposal successfully fulfills both the organization’s objective of flavor innovation and the new position marketing.
Introducing the new mango flavor and Light Fruit Juicy Red into the finished goods network will satisfy both Hispanic and non-Hispanic cultures, while also offering a healthy option for mothers. By introducing the mango flavor into the DSD, the company can promote different bottle sizes and cater to urban and multi-cultural teens through flavor variety. This strategy reduces costs by eliminating the need to spend $2.8 million on packaging. Our recommendation is to implement the third marketing strategy.
