You are on page 1of 49

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]

Created in 1969 by a merger of Schweppes PLC (1783, London, the first worlds soft drink maker) and Cadbury (1830, Birmingham, a major British confectionery manufacturer).

In 1989 C/S worlds 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

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

By CocaCola

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

East South Central States


o

Mountain states
o

Kentucky, Tennessee, Alabama, and Mississippi consumption - 54.9 gallons


Montana, Idaho, Wyoming, Colorado, New Mexico, Arizona, Utah and Nevada consumption - 37.1 gallons

National consumption average 46.7 gallons

1.

Concentrate producers

82% of industry sales accounted for by Coca-Cola, PepsiCo and Dr.Pepper/7UP

1.

Bottlers
owned by concentrate producers or franchised to sell brand

1.

Retailers
Supermarkets account for 40% of market

Regular Soft Drinks


Actors
Carbonate Producers Bottlers

Functions
Manufacture the basic flavors Add sweetener to carbonated water, package in bottles and cans

Gross Margin
86% 46%

Net Margin
16% 15%

Diet Soft Drinks


Actors Carbonate Producers Functions Manufacture the basic flavors & Include an artificial sweetener Add carbonated water & package in bottles and cans Gross Margin 87% Net Margin 30%

Bottlers

43%

12%

Brand Market 1. Coca-Cola Classic 2, Pepsi-Cola 3. Diet Coke 4. Diet Pepsi 5. Dr. Pepper 6. Sprite 7. Mountain Dew 8. 7-Up 9. Caffeine-free Diet Coke 10. Caffeine-free Diet Pepsi

Share 19.8% 17.9% 8.9% 5.7% 4.5% 3.7% 3.6% 3.2% 2.5% 1.6%

Cola 65.7 % Lemon-lime 12.9 % Orange 3.9%

Root beer 3.6% Ginger Ale 2.8% Grape 1.1%

Top Ten Brands: Colas: Regular Diet Other Brands

71.4%
56.4% 37.7% 18.7% 28.6%

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

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

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)

3.6 3.9

2.8

1.1

10.0 65.7

cola lemon-lime Orange Root Beer Ginger Ale

12.9

Grape
Other

Brand Name

Leader

% of Sales

Canada Dry
Sunkist Crush Schweppes

Ginger Ale, Soda, Seltzer


Orange flavored carbonated soft drinks Tonic Water

39%
22% 20% 17%

20.8% 43.3%
Mandarin Orange Slice (PepsiCo) Sunkist (Cadbury) Minute Maid (Coke) Orange Crush (Cadbury) Other Orange Brands

14.4%

7.5%

14.0%

Brand Sunkist (Cadbury) Mandarin Orange Slice (PepsiCo) Minute Maid (Coke) Orange Crush (Cadbury) Total top 4 Orange Brands Others

1985 32% NA NA 22 54 46

1986 20% 16 8 18 62 38

1987 13% 22 14 14 63 37

1988 13% 21 13 11 58 42

1989 14% 21 14 8 57 43

Families (ages 13 39) Household size: 3-5 people Position based on Superior Orange Flavor Package sales mix: 5%
31% 64%
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

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.

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-ofaisle 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

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

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.
100
90 80 70 60 50 40 30 20 10 0 Crush Sunkist Regular MOS Diet MMO 71.3 82.1 49 53.1 28.7 17.9 51 46.9

100 90 80 70 60 50 40 30 20 Market Share Coverage

10
0 1985 1986 1987 1988 1989

100 90 80 70 60 50 Market Share Coverage

40
30 20 10 0 1 2 3 4 5

100 90 80 70 60 50 Market share Coverage

40
30 20 10 0 1 2 3 4 5

100 90 80 70 60 50 40 30 20 10 0 1985 1986 1987 1988 1989

Market Share Coverage

Exactly how buyers are informed and actual message communicated of: 1. Availability 2. Unique benefits 3. Where and how of obtaining & using Managers have elements at their disposal: 1. Advertising 2. Personal selling 3. Sales promotion

The blending different elements in mutually reinforcing ways. Attention is directed to: 1. Which activity should be emphasized 2. How intensely applied 3. How communication activities are most effectively combined and coordinated

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

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

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.

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

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

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

Brand Mandarin Orange Slice Sunkist Crush

Total Sales $11,388,100.00 $2,301,900.00 $1,853,600.00

Market Share 0.21 0.14 0.8

Cases Sold 26460000 17640000 10080000

Advertising Spent Per Case $0.04 $0.01 $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

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]