Case 1 Dr. Prepper/Seven Up, Inc. Chapter 5

Background   Kate Cox Brand Manager   2001 began drafting the brand’s annual advertising and promotion plan.   Squirt is a caffeine-free, low-sodium, carbonated soft drink brand and distinctive blend grapefruit Juice.

Background   Squirt is the best selling carbonated soft drink brand in the US.   Cox believed that the market targeting and product position might require attention early in Squirt’s advertising and promotion plan development.   Both topics were highlighted in June 2001

Positioning Strategies 1) 1)Attribute or benefit 2) 2)Use or application 3) 3)Product or brand user 4) 4)Product or service class 5) 5)Competitors 6) 6)Price or quality

Attribute or benefit Is the strategy most frequently used. Toothpaste BenefitschildrenTeensFamilyAdults Flavor/ Color/ Whiteness of teeth/ Fresh breath/ Decay Prevention/ Price/ Plaque prevention/ Stain Prevention/ Principle Brands for each segment Aim, StripeUltra Brite, McClean Colgate, Crest Topol, Rembrandt

Background Contract was given Foot Cone & Blending Brand Agency. Coca-Cola and Pepsi-Cola was the major competitors and the company (Foot Cone) took this into consideration. Dr Pepper/Seven up are consistently ranked among the top-ten soft drink brand in the US.

Carbonated Soft Drink Industry in the US   U.S. consumers drink more carbonated soft drinks than tap water.   In 2000 Americans consumed 53 gallons of soft drinks per person compared with 47 gallons in   $60.3 billion carbonated soft drinks in 2000.

Industry structure   Three major participants in the production of CSDs: 1) 1)Concentrate Producers 2) 2)Bottlers 3) 3)Retail Outlets   The Coca-Cola Company, the Pepsi-Cola Company & Dr Pepper/Seven up, INC are the three major concentrate producers in the U.S.

Industry structure   Three major participants in the production of CSDs: 1) 1)Concentrate Producers 2) 2)Bottlers 3) 3)Retail Outlets   Bottlers convert flavor concentrate into carbonated soft drinks.   There are 500 Bottlers in the US.

Industry structure   Classification of Bottlers: 1) 1)Own or have an equity 2) 2)Franchise their brand 3) 3)Independent bottlers.

Industry structure   Retail Outlets: 1) 1)supermarkets, 2) 2)conveniences stores, 3) 3)vending machines, 4) 4)fountain services, 5) 5)mass merchandisers and 6) 6) thousand of small retail stores

Industry structure   Soft drinks are typically sold in bottles and cans except McDonalds which mixes syrup with carbonated water for immediate consumption by customers

Competition in the Soft Drink Industry The three command 90% CSD sales in the US. Coca-Cola Company leads the industry with 44.1 market share Pepsi-Cola 31.4% Dr Pepper/Seven up 14.7%

Competition in the Soft Drink Industry RankCompaniesMarket Share % Share Change Volume % Change 1Coca-Cola Co.44.1flat+0.1 2Pepsi-Cola Co.31.4flat+0.1 3Dr pepper/Seven up Cott. Crop National Beverage2.1flat+4.2 6Royal Crown Big Red0.4flat Seagram0.3flat+7.2 9Monarch Co.0.1flat Private label/other Total Industry Top-Ten CSD. Companies and Brand in 2000 Top Ten SDC

Competition in the Soft Drink Industry RankCompaniesBrand Owner Market share % Market share Volume % Change 1Coke ClassicCoca-Cola Pepsi-Cola Diet CokeCoca-Cola Mountain DewPepsi-Cola SpriteCoca-Cola Dr PrepperDr Pepper/7 up6.3flat+0.1 7Diet PepsiPepsi-Cola upDr Pepper/7 up CF Deit CokeCoca-Cola Barq’s Root BeerCoca-Cola1.1flat+3.0 Total Top-Ten72.9 Top-Ten Brand. Companies and Brand in 2001 Top Ten SDC

Soft Drink Marketing Soft drink marketing is characterized by:   Heavy investment in consumer advertising and promotion,   Selling and trade promotion to and through bottlers to retail outlets   Consumer price discounting   Concentrate producers usually assume responsibility for: - developing national consumer advertising and promotion programs - Product development and planning - Marketing research

Soft Drink Marketing Comparative Income Statement for the typical flavored concentrate producer & soft drink bottler in the us (per standard twenty-four 8-ounce bottle case Concentrate producerSoft Drink Bottler Net sales100% Cost of goods sold-17-57* Gross profit83%43% Selling & delivery228 Advertising & promotion 392 General & administration exp 134 Pretax profit29%9% Packaging represent the major element of bottler’s cost of goods sold

Brand and Flavor Competition   More than 900 registered brand name for CSD in the US.   Changing composition of the U.S. population has been an important factor in the growing popularity of flavored CSD.

Demographic of Soft Drink Consumption   30% increase in sales from 1990 to   849 eight-ounce servings of carbonated soft drinks annually.   Consumed by American who are b/w 20 to 49 years.   years, It is the largest segment of the US population.   Diet soft drinks is more pronounced among over 25 years.

Demographic of Soft Drink Consumption   Conventional wisdom In the soft drink industry hold that teens are the primary audience for soft drink marketing, since the taste and brand preferences are formed between the age   Higher consumption of soft drinks is among Hispanic and African American.   More among teens than adults.

Squirt Brand Heritage & Marketing   Has been marketed by Dr prepper/Seven inc. since   Brand’s origins are found in the Great Depression of the 1930s.

Squirt Marketing   Squirt sales since 1995 have exceeded reacquisition levels due to a broadened bottling and distribution network   Increased marketing attention and investments.

Squirt Marketing Squirt Unit Sales Volume (millions of Cases)

Squirt Marketing Squirt Product Line and Competitive Brand Consists of: 1) 1)Regular and diet squirt 2) 2)Regular and diet Ruby Red Squirt

Squirt Advertising & Promotion Expenditures Media include: 1) 1)Newspapers 2) 2)Spot of television 3) 3)Cable television 4) 4)Spot radio 5) 5)Retail 6) 6)Consumer 7) 7)Trade promotion

Squirt Advertising & Promotion Expenditures Coca-Cola and Pepsi-cola spend more on media advertising and promotion than does Dr Prepper/Seven.

Squirt Positioning Squirt positioning was addressed after Cadbury PLC acquired the brand. In 1994, Foote, Cone & Belding recommended and Brand management agreed that squirt should be the dominant positioning dimension.

Target Market & Positioning Recommendation 1995 Foote, Cone & Belding was asked to revise it is creative strategy. The reason was the execution “was a bit too intense to fit with brand” The target market was narrowed to adults, Fun relief when you, re dry Squirt Positioning and Creative execution was revisited again 1999 following the introduction of Citra by Coca-Cola

Target Market & Positioning Recommendation Based on new research results featured Squirt’s consumption by racial/ethnic group and age in 2000, Foote, Cone and Belding recommended: Squirt be targeted at multicultural, years old.

The Hispanic Market Opportunities Demographic of Squirt Consumption

The Hispanic Market Opportunities Demographic of Squirt Consumption

Target Market & Positioning Recommendation   Kate Cox met the brand management.   The meeting concluded with an assignment given to Jaxi Stollenwerck, the associate brand manager for Squirt.   The assignment to prepare a profile of Hispanic and African American consumers in the United States from recently released U.S. Census 2000 data and other relevant sources The Hispanic Market Opportunities

Target Market & Positioning Recommendation   Hispanic population increased by 57.9% in   22.4 million in 1990 to 35 million in   58% Mexican origins   9.6% Puerto Rican   3.5% Cuban   8.6% central or south American   19% Hispanic Origins not classified Jaxie’s Report

  Hispanic accounted for 12.5% of the American population.   African Americans accounted for 12.3% of the US population   More than 72% of the Hispanic live in the south   35% were under 18 years while in the states 25.7   Median age for Hispanic 25 years while 35.3   55.4% of Hispanic prefer to see & hear ads in Spanish   Strong brand link with heritage among Hispanic   Hispanics don’t like hard sell approaches   Prefer shopping close to home Jaxie’s Report

  In mid-summer 2001 Kate Cox Assembled the team.   They begin drafting the annual advertising and promotion plan.   The plan would be formally presented to senior management for review and approval. Squirt Advertising and Promotion Plan Development