Cadbury Beverages, Inc.: CRUSH Brand

Presenters: Luke, Sandi, Raeleen

• What concepts are relevant to this case? Define and explain (Chapter 6)

• Communication mix• Integrated marketing Communication Mix (ICM)• communication (advertising/sales promotion) objectives• factors to be considered in developing an IMC mix• organizational capacity and break-even analysis for comparing

independent reps and company sales force• push and pull strategies• advertising, sales promotion budget allocation• sale force budget allocation [NS = (NC x FC x LC) / TA]

Synopsis Factors

• Created in 1969 by a merger of Schweppes PLC

(1783, London, the first world’s soft drink maker) and

Cadbury (1830, Birmingham, a major British confectionery manufacturer).

Synopsis Cadbury Beverages

 Inc.

• In 1989 C/S world’s third largest soft drink marketer• Worldwide sales of $4.6B, in 110 countries• Beverages = 60 % of sales/53 % operating income• 4th biggest soft drink marketer in the US - 3.4 %, & the

market leader in some specific soft drinks categories

History

How would you characterize the carbonated soft drink industry in the United States?

1 2 3

• 900+ brands • 10 top brands:

• Marketed by the big 3 • Account for 71.4% of US market• Top Six are colas accounting for 56.4% of market share

Brands

Major ParticipantsREVITALIZED ORANGE SODA

By Coca-Cola

By PepsiCo

Both utilize:• Widespread Distribution• Heavy Advertising & Promotion

• The typical customer purchasing soft drinks is a married woman with children under 18 years of age living at home

• Unplanned purchase of soft drinks - mostly in supermarkets, account for 40% of carbonated soft drink industry

• US customers drink more soft drinks than tap water

Who, When, How Much?

• East South Central Stateso Kentucky, Tennessee, Alabama, and

Mississippi consumption - 54.9 gallons

• Mountain stateso Montana, Idaho, Wyoming, Colorado,

New Mexico, Arizona, Utah and Nevada consumption - 37.1 gallons

National consumption average 46.7 gallons

Regions

1. Concentrate producers • 82% of industry sales accounted for by Coca-Cola, PepsiCo and

Dr.Pepper/7UP

2. Bottlers• owned by concentrate producers or franchised to sell brand

3. Retailers• Supermarkets account for 40% of market

Industry Structure

Regular Soft DrinksActors Functions Gross Margin Net Margin

Carbonate Producers Manufacture the basic flavors

86% 16%

Bottlers Add sweetener to carbonated water,

package in bottles and cans

46% 15%

Industry Structure

Diet Soft DrinksActors Functions Gross Margin Net Margin

Carbonate Producers Manufacture the basic flavors & Include an artificial sweetener

87% 30%

Bottlers Add carbonated water & package in bottles

and cans

43% 12%

Brand Market Share1. Coca-Cola Classic 19.8%2, Pepsi -Cola 17.9%3. Diet Coke 8.9%4. Diet Pepsi 5.7%5. Dr. Pepper 4.5%6. Sprite 3.7%7. Mountain Dew 3.6%8. 7-Up 3.2%9. Caffeine-free Diet Coke 2.5%10. Caffeine-free Diet Pepsi 1.6%

Brand Market and Share

• Cola 65.7 %• Lemon-lime 12.9 %• Orange 3.9%

Flavors and Market Share• Root beer 3.6%• Ginger Ale 2.8% • Grape 1.1%

Top Ten Brands: 71.4%

Colas: 56.4%• Regular 37.7%• Diet 18.7%Other Brands 28.6%

Top Ten Brands

How would you describe changes in the orange

category during the period 1985 to 1989? What can be

learned from these changes?

Three main issues:1. Rebuild a cooperative

relationship with bottlers - develop a base brand positioning consistent with the brand equity

2. Develop objectives and strategies

3. Budget  advertising and promotion program

Crush Re-Launch Decision 1/1990

• Total expenditures for print & broadcast each year

• $52.2 M spent in 1986 when MOS and MMO were introduced

• Competitors the variety of spot TV & Billboards in1986

• By 1989 in both:• broadcast media: network, spot TV, syndicated & cable

TV and Network Radio• Print Media including outdoor, magazine, and

newspapers

Advertising Trends since 1986

• 3. What is Cadbury Beverage relative competitive position in the U.S. soft drink industry? In the orange category? (targeting and competitive positioning, i.e., exhibit 8)

Q3

Relative Position in the Market

65.7

12.9

3.9

3.62.8

1.110.0 cola

lemon-lime

Orange

Root Beer

Ginger Ale

Grape

Other

Brand Name Leader % of Sales

Canada Dry Ginger Ale, Soda, Seltzer

39%

SunkistOrange flavored carbonated soft

drinks

22%

Crush 20%

SchweppesTonic Water

17%

3.4% of US Soft Drink Sales

Orange Brand Market Share20.8%

14.4%

14.0%7.5%

43.3%

Mandarin Orange Slice (PepsiCo)

Sunkist (Cadbury)

Minute Maid (Coke)

Orange Crush (Cadbury)

Other Orange Brands

Brand 1985 1986 1987 1988 1989

Sunkist (Cadbury) 32% 20% 13% 13% 14%

Mandarin Orange Slice (PepsiCo) NA 16 22 21 21

Minute Maid (Coke) NA 8 14 13 14

Orange Crush (Cadbury) 22 18 14 11 8

Total top 4 Orange Brands 54 62 63 58 57

Others 46 38 37 42 43

The Orange Brand Market Share

Families (ages 13 – 39) Household size: 3-5 people Position based on Superior Orange Flavor Package sales mix:

Target & Competitive Position

64%

31%

5%two-liter

Cans

Other

• 4. Based on your assessment of the soft drink industry, the orange-flavored category, and the competitive situation of Cadbury Beverages and orange CRUSH, what is your recommendation for positioning orange CRUSH?

• Differential position between CRUSH vs. SUNKIST

• Regular vs. diet• Previous positioning and existing brand

equity

Q4

Cadbury Schweppes brands have been synonymous with refreshment, fun and flavor for generations.

The forward strategy must reflect and build upon this position as the leading flavored beverage business in the U.S.

Positioning Orange CRUSH

• Crush brand would move back to its traditional message and away from Sunkist.

• Avoid cannibalization with Sunkist in positioning the Crush brand name on the family with children at home segment. 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%. The Company would adjust ad/promotion in order to regain traditional brand equity and market share. 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). For re=launching the Crush brand, some specific promotional techniques, such as coupons, special volume offers, contests, may be employed to attract the maximum of customers. Both are important to get the average supermarket purchaser to buy more Crush

Positioning

• The carbonated soft drink market is divided into two:• regular soft drinks • diet soft drinks.

• Diet accounts for 31% of total soft drink consumption and is higher among consumers over 25 years of age.

• Within the orange-flavored category both regular and diet drinks are present

• Regular accounts for 73.2% of category sales

Regular vs. Diet 

Possible Diet Orange Positioning

Crush Sunkist MOS MMO0

10

20

30

40

50

60

70

80

90

100

71.382.1

4953.1

28.7 17.9 51 46.9

Regular Diet

This may present an opportunity for Crush. The diet version could be repositioned as the one that is drunk by young people (singles and couples) living in big cities, in opposition to family-based positioning of Crush and Sunkist.

Previous Positioning: Sunkist

1985 1986 1987 1988 19890

10

20

30

40

50

60

70

80

90

100

Market ShareCoverage

Crush

1 2 3 4 50

10

20

30

40

50

60

70

80

90

100

Market ShareCoverage

Mandarin Orange Slice

1 2 3 4 50

10

20

30

40

50

60

70

80

90

100

Market shareCoverage

Minute Maid Orange

1985 1986 1987 1988 19890

10

20

30

40

50

60

70

80

90

100

Market ShareCoverage

Brand Equity

Exactly how buyers are informed and actual message communicated of:

1. Availability2. Unique benefits3. Where and how of obtaining & usingManagers have elements at their disposal:4. Advertising5. Personal selling 6. Sales promotion

Communication Mix Objectives

• The blending different elements in mutually reinforcing ways.

• Attention is directed to:1. Which activity should be emphasized2. How intensely applied3. How communication activities are most

effectively combined and coordinated

Factors for Integrated Marketing

•  Clearly defined different advertising /promotion techniques needed for Crush and Sunkist

• Soft drink buyers as a whole are very responsive to  advertising and  promotion techniques such as:• Coupon promotions• In-store displays • End of aisle displays • Shelf tags, etc. in store

• .

To minimize cannibalization of Sunkist sales:

Recommend combination of:• Direct store delivery • Warehouse delivery supported by:

Recommendation: Distribution

• Manufacturing centers • Distribution centers • Third-party bottlers and

distributors

• Increase presence in high margin channels and packages. focus on improving product presence in high margin channels, such as convenience stores, vending machines and small independent retail outlets, through increased selling activity and investments in coolers and other cold drink equipment. Also increase demand for high margin products like single-serve packages for many of our key brands through increased promotional activity and innovation.

Solutions

• Leverage an integrated business model. to reduce costs by creating greater geographic manufacturing and distribution coverage to be more flexible and responsive to the changing needs of large retail customers by coordinating sales, service, distribution, promotions and product launches.

• Strengthen route-to-market through acquisitions. The increase of Bottling distribution centers should strengthen the route-to-market for products. Possibly add more bottlers through acquisitions of regional bottling companies can broaden geographic coverage and enhance coordination with large retail customers.

• Improve operating. the integration the Bottling distribution should improve manufacturing, warehousing and distribution operations.

More Solutions

• 5. What objectives should be set for the CRUSH advertising and promotion program? What strategy(ies) should be pursued?

• Brand image vs. sales volume• Push vs. pull strategy

Q5

• Cadbury needs to use a mix of push and pull strategies

• Comprehensive Marketing Plan• “Where Do You Crush”

• TV, Online, In-Store, Vendor Promotions

• Objectives• Successfully re-launch Crush with clear positioning• Increase market share to 20% over 3 years• Increase case sales through vendor and bottler

promotions

Promotion & Advertising

• 6. How much should be spent for advertising and promotion to relaunch orange CRUSH? (providing a rationale for spending proposals both for advertising and promotion).

• Calculating media advertising $/cases = advertising expenditures per brand per year (case Exhibit 9) / supermarket case volume x 2.5 (case footnote 4) x brand market share/year (Exhibit 5).

• Consider current spending and future spending, justify the reasoning and objective

• Relationship between incremental advertising budget and incremental sales volume

• How to balance pull vs. push strategy• Prepare an advertising and sales promotion budget

Q6

Industry Advertising

Brand Total Sales Market Share Cases SoldAdvertising Spent Per

Case

Mandarin Orange Slice $11,388,100.00 0.21 26460000 $0.04

Sunkist $2,301,900.00 0.14 17640000 $0.01

Crush $1,853,600.00 0.8 10080000 $0.06

Minute Maid $10,436,100.00 0.14 17640000 $0.03

• Proposed Budget: $.50 per case sold • Total Budget: $8,820,000• Per Case Allocation

• $.20 – Dealer Promotion• $.15 – TV Advertisements• $.10 – Internet Design/Advertisement • $.5 – Billboard and Display Advertisement/Promotions

Proposed Budget

• organizational capacity and break-even analysis for comparing independent reps and company sales force

• push and pull strategies

• advertising, sales promotion budget allocation• sale force budget allocation [NS = (NC x FC x LC)

/ TA]