INTRODUCTION

Cadbury beverages is the beverage division of Cadbury Schweppes, a major

soft drink and confectionery marketer. In 1989 they had worldwide sales of $4.6 billion,

produced from 110 countries. Their headquarters is located in London, England and their

worldwide headquarters are located in Stamford, Connecticut. Schweppes the world’s first

soft-drink maker and was started by a Swiss national Jacob Schweppes in 1789, producing

artificial mineral water. In 1960 they diversified into food products. Cadbury was a major

British candy maker started by John Cadbury who started by making coca in Birmingham,

England in the 1830’s. In half a century they expanded their presence all over England and

eventually all over the world. In 1969 Schweppes merged with Cadbury in the year 1989 and

Cadbury Schweppes was one of the world’s largest multinational firms and was ranked 457 th

in the business week’s global1000. Beverages accounted for 60%of their worldwide sales and

confectionery items accounted for 40% of their worldwide sales. In Jan 1990 the marketing

executives at Cadbury Beverages, began the challenging task of re launching the Crush

brands which was purchased from Procter & Gamble in Oct 1989.

INDUSTRY ANALYSIS

Soft drinks are gradually overtaking hot drinks as the biggest beverage sector in the

world, with consumption rising by around 5% a year according to a recent report from Zenith

International. But while the US remains the biggest market for now, Asia is likely to be the

main driver of sales growth in the future. To understand the soft drink industry, one must first

look at the beverage industry as a whole. In recent years, the beverage industry has been
6 faced with new opportunities and challenges. Changing consumer demands and preferences

require new ways of maintaining current customers and attracting new ones. Amid ever-

increasing competition, beverage companies must intensely court customers, offer high-

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 quality products, efficiently distribute them, ensure safety, and keep prices low – all while

staying nimble enough to exploit new markets by launching new products. In this

environment, success depends on a company’s ability to quickly capitalize on emerging

opportunities. The major competitors for the soft drink industry are Coke, Pepsi, and Dr.

Pepper. Revenues are extremely concentrated in this industry, with Coke and Pepsi, together

with their associated bottlers. In fact, one could characterize the soft drink market as an

oligopoly, or even a duopoly between Coke and Pepsi, resulting in positive economic profits.

To be sure, there was tough competition between Coke and Pepsi for market share, and this

occasionally hampered profitability. Cadbury Beverages is in the monopolistic market in soft

drink industry. The S&P Industry Survey has shown the soft drink industry profit margin to

be on a steady incline over in 1980’s were near 14%, while as of year-end 1995 the projected

growth would be over 20% and expected to flatten a bit. This flattening effect may be an

indication that fixed costs are on the rise due to expansion of the industry.

In order to survive in this environment, companies must consider the market trends that

will likely shape the industry over the next few years. Market trends for the soft drink

industry can be summarized by six fundamental themes:

• Changing consumer beverage preferences, featuring a shift toward health-oriented

wellness drinks.

• Growing friction between bottlers and manufacturers in the distribution system.

• Continually increasing retailer strength

• Fierce competition

• Complex distribution system composed of multiple sales channels

6

• Beverage safety concerns and more-stringent regulations

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 Three main actors participate in manufacturing and distribution of carbonated soft drinks in

the United States: concentrate producers, bottlers, and retailers. The concentrate producers’

and bottlers’ roles and margins of are different for regular and diet drinks. There are

approximately 40 concentrate manufacturers in the US, but only three of them (Coca-Cola,

PepsiCo, and Dr. Pepper/7Up) account for 82% of industry sales. In the United States there

are around 1,000 bottlers they may be either owned by concentrate producers, or franchised.

Franchised bottlers are usually given the exclusivity rights for a certain territory, but they

cannot sell a directly competitive brand. Concerning retailers, those are supermarkets (40

percent of carbonated soft drink industry sales), convenience stores and small retail outlets,

vending machines, and fountain service. And supermarkets are claimed to be crucial in the

company’s distribution net. The environmental trend that is consumption behavior, buying

pattern, life style changes, etc.

Consumption behavior: Concerning consumption behavior, the soft drink buyers seem to be

very responsive to different advertising and promotion techniques especially to coupon

promotions, in-store displays Eg: End-of-aisle displays and other promotions in the place of

sale Eg: shelf tags. Also, it appears that the purchase of soft drinks (mostly in supermarkets,

accounting for 40% of carbonated soft drink industry sales) is often unplanned. The Per

capita consumption in the East South Central states of Kentucky, Tennessee, Alabama, and

Mississippi was highest in the US in 1989. The US customers drink more soft drinks than tap

water, the average American consumes 46.7 gallons of carbonated soft drinks per year (in

1989 compared to the 23 gallons in 1969). The typical customer purchasing soft drinks is a

married woman with children under 18 years of age living at home. 1980s was a decade of

6 inflation and unemployment was rising. It was a common culture in US to drink soft drinks

instead of water.

INTERNAL ANALYSIS

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 The company’s financial performance was exceptional even during the stock market

crash during October 1987 and continued to go about its business and continued its pursuit of

the U.S. soft drink market by acquiring Crush International from Procter & Gamble for $220

million. Cadbury Beverages controlled a 3.4% market share in the United States. In a sense,

the takeover speculation surrounding Cadbury Beverages was a tribute to its success over the

last decade. Cadbury Beverages increased its share of U.S. soft drink sales almost fivefold

and improved its financial situation significantly. But perhaps the most interesting aspect of

Cadbury Beverages was the fact that it remained a family-run business even though it had

also become a major corporation.

Chart showing correlation between Market coverage and Market share

Exhibit 1

From the above we can see that it appears to be a positive correlation between marketing

coverage and marketing share, which means that if the market coverage increases, the
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corresponding market share increases too.

SWOT ANALYSIS OF CRUSH BRAND

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 To complete the analysis of a Crush competitive position in the orange soft drink

category as well as within the soft drink industry, we employed the SWOT analysis scheme.

The major strengths, weaknesses, opportunities and threats are presented below:

STRENGTHS
♦ Financial performance
♦ Established Customer Franchises
♦ Crush brand has high name awareness with
consumers
♦ 4th largest marketer in the US
♦ Leading positioning in orange category
WEAKNESSES
♦ Low market share and low market coverage
♦ Limited bottler networks
♦ Under developed diet segment
♦ Limitative advertising
♦ Risky positioning: Cannibalization with
Sunkist

OPPORTUNITIES THREATS
♦ International development in long term ♦ Huge competition
♦ Increase in sales for diet soft drink ♦ Competitors heavy advertising expenses
♦ Increase of consumption ♦ Unplanned soft drink purchase

ANALYSIS OF STRATEGIC ISSUES/PROBLEMS

The Strategic issues in the case are:

1. Immediate efforts were needed to rejuvenate the bottling network for the crush soft

drink brand.

2. Had to sought out through and figure out what the crush brand equity is how the

brand was built and develop a base positioning.

3. New advertising and promotion program for crush had to be developed, including

6 setting objectives, developing strategies and preliminary budgets.

Case Study Report on: Cadbury Beverages |

 The wrong distribution system adopted by Proctor & Gamble in 1980’s (when had the

possession of the Crush soft drink brand) let to the fall of sales of Crush. P&G’s decision to

test the distribution system for selling crush through warehouses rather than bottlers. This

action, which centralized bottling in the hands of a limited no of bottlers that shipped product

to warehouses for subsequent delivery to supermarkets and other retail outlets, had let many

in the crush bottler network to question their future role with Crush. An outgrowth of this

action was that Crush had the lowest market coverage of orange category sales potential

among major competitors. Therefore when Cadbury Beverages Inc. acquired the Crush brand

from P & G they had to first set right the bottling network to capture back the market.

There were some positioning issues and the effect of the first positioning issue were, since the

company already marketed Sunkist, questions arose concerning the likely cannibalization of

Sunkist sales if a clearly differentiated position for Orange Crush in the market place was not

developed successfully. The second positioning issue were relative emphasis on regular and

diet Crush with respect to Mandarin Orange. The third positioning issue was that viable

positions had to be considered that did not run contrary to previous positioning and would

build on the customer franchise currently held by Orange Crush.

The bottlers were the main reason for promotion. But the sales came

Case Study Report on: Cadbury Beverages |

 down because of the breakdown of bottlers’ network. Cadbury beverages had to think of

advertising and promotion program for the successful and effective re launch of the crush

brand. Therefore they needed to set objectives for advertising and promotion and also

communicate that to the advertising agency that would represent the Crush Brand. The types

of trade and communication had to be determined. Their preliminary budget had to be

prepared. Thus the promotional strategy adopted by should give them which give them a

competitive advantage and pave way for them to become a market leader in the extremely

competitive market for the specific product line. Analyze the brand and brand equity which it

had when it was the product of P&G and develop a base positioning. The impact of adopting

wrong distribution strategy by P&G led to lowering the market coverage of the Crush Brand

compared to its major competitors in its orange category i.e., Sunkist, Madarin Orange Slice

and Minute Maid, from the year 1985 – 1989.

Table showing market coverage of orange category by major competitors, 1985-1989

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Table 1

YEAR
BRAND 1985 1986 1987 1988 1989
CRUSH 81% 81% 78% 78% 62%
Case Study Report on: Cadbury Beverages |
 SUNKIST 95% 83% 70% 86% 91%
MANDRAIN ORANGE SLICE 10% 68% 87% 88% 88%
MINUTE MAID ORANGE 10% 60% 87% 88% 88%

Chart showing market coverage of orange category

Exhibit 2

Due to lack of effective and efficient advertising and promotion, the market share of the
Crush Brand gradually decreased over the years compared to its competitors as illustrated
below:

Table showing Orange carbonated soft drink brand market shares, 1985-1989(rounded)

Table 3

YEAR
BRAND 1985 1986 1987 1988 1989
SUNKIST 32% 20% 13% 13% 14%
MANDARIN ORANGE SLICE NA 16 22 21 21
MINUTE MAID ORANGE NA 8 14 13 14
6 CRUSH 22 18 14 11 8
TOTAL TOP FOUR BRANDS 54 62 63 58 57
OTHERS 46 38 37 42 43

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 In order to restore the brand name and also to maintain and enhance the firm’s

reputation the marketing department of the firm had to find ways to resolve the issues as its

impact was clearly felt by the company as sales volume went down. The market share was

showing decreasing trend because of less promotions and advertisements given by Cadbury

beverages. If this exceeds, the brand image of Cadbury beverages will be affected. So, the

other products like Sunkist, Hires sales will also be affected. And so they should spent more

in promotional activities and advertisement. The effect of the issue was so influential that,

even though the orange flavour was one of the most preferred flavours by the US consumers,

the market share of Crush had reduced by 14% within a period of just five years i.e. 1985 to

1989 and the market coverage also reduced by 19%. Demise in any of the marketing

activities will result in the competitors’ quick response to the fall by taking over the market

position enjoyed by the product. Sunkist had 14% market share in the 1989 and 91% market

coverage in the same year, whereas Crush had only 8% market share and 62% market

coverage in the year 1989 (much lower than that of its competitors) till it was acquired by the

Cadbury firm. The reason for it was that the issues the product faced. Thus if one product of

the firm ( Cadbury Beverages Inc.) in this case the Crush acquired by the firm, fails it will

affect the reputation of the firm and ultimately the sales of the firm’s other products.

The short term ramification for the issue is that the sales of the Crush brand of soft drink will

trim down and the long term consequence is that the product will go out of market and which

would surely affect the firm’s reputation and goodwill.

STRATEGIC ISSUES & KEY PROBLEMS:

6 Definition:

Case Study Report on: Cadbury Beverages |

 In the beginning, the marketing executives intended to focus on re launching the Crush brand

on the soft drinks market. As a result, the main issue need to be tackled is to rebuild a

cooperative relationship with bottlers.

SERIOUSNESS OF THE PROBLEM

The re launch of crush brand soft drink was the most serious issue in this case as the

sales of crush brand soft drinks were declining due to the removal of bottler network. So it

might affect the sales and brand image of other soft drink products owned by Cadbury

beverages. The following recommendations will help to successfully re launch the crush soft

drinks in the market.

RECOMMENDATIONS:

REBUILDING A COOPERATIVE RELATIONSHIP WITH BOTTLERS:

 In soft drink industry bottlers, one among three participants in the production and

distribution of carbonated soft drinks in the US, usually take the lead in developing

trade promotions to retail outlets and local consumer promotion. They are also

responsible for selling and servicing retail accounts, including the placement and

6 maintenance of in-store displays and the restocking of supermarkets and convenience

store shelves with their brands. This is reason why P & G’s test of a new distribution

system for selling Crush through warehouses rather than through bottlers failed. So re

Case Study Report on: Cadbury Beverages |

 establishing the trade relation with bottlers is an important step. Establishment of

trade relation with 136 new bottlers will increase the potential market coverage of

orange category from 62% to 75%

 Crush can give additional advertising and promotional support to bottlers as expected

by them. Usually the concentrate producers and bottlers will split the advertising costs

50-50. Now at the phase of re launch the concentrate producers can take the major

share of the advertising and promotion expenses and reduce the burden of these

expenses for bottler network. For example, if 1 million dollar were spent for

television brand advertising $700,000 would be paid by the concentrate producers and

$300,000 would be paid by brand’s bottlers. It will enhance the trade relations

between the concentrate producers and the bottlers.

 Crush has to enter into a deal with big bottler group of Pepsi which will help to

double up the market penetration.

DEVELOPING A BASE BRAND POSITIONING CONSISTENT WITH THE BRAND

EQUITY:

 The firm has to give relative emphasis on regular and diet Crush. They should make

the case volume as 50% - 50% for regular Vs diet crush as Industry trend data indicate

that sales of diets drinks accounted for a large portion of the overall growth of

carbonated soft during sales in the 1980s. More over the major competitors Mandarin

Orange slice and Minute Maid Orange had attracted the diet segment of orange

drinkers. This will increase in pre tax cash profit per case by app 20%.
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REGULAR VERSUS DIET

Table 4

Brand Regular Diet

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 Crush 71.3% 28.7%

Sunkist 82.1 17.9%

MOS 49% 51%

MMO 53.1% 46.9%

Table showing estimated profit

Table 5

Crush Pre-tax cash Old Profit Total Recommended Projected

Type profit/Case Percentage (in millions) Orange percentage profit
Case (in millions)
Volume
Regular $0.12 71.3% $29.95 315 50% $18.9
Diet $0.27 28.7% $24.95 315 50% $42.52
Increase
$51.35 $61.42
in profit

 Effective innovation and new product introduction:

The ability to respond with agility to changing customer and consumer demands is
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essential, and it must be accomplished via the introduction of new products and formats that

are successfully planned and executed. This represents the largest single opportunity to drive

profitable growth. So Crush can introduce new flavours such Tropical Punch and Peach
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 which would give them a competitive advantage over the big players of the market. The

product has 46% of brand loyalty therefore there is no risk in achieving the sales target.

 Crush can go for graphic and digital print on their labels which have a strategic

advantage to attract more customers as effective packaging in an important

component of communication mix

 Promote crush as an eco-friendly product through appropriate offers.

“Return five empty cans of Crush and take a T-shirt back home”

To prove as an eco friendly company, crush will recycle these cans to produce new ones. This

will result in saving 95% energy consumption and will also reduce the emissions by 95%.

DEVELOPING STRATEGIES FOR ADVERTISING AND PROMOTION

PROGRAM:

 The crush consumer promotion has to be changed. Buy two get one free offer should

be given at point of purchase rather than the present strategy adopted by them i.e.

asking the consumers to fill and submit the coupons through mails. It would be a

convenient method for both the consumers and producers.

 Soft drink marketing is characterized by heavy investment in advertising, selling and

promotion to and through bottlers to retail outlets. But crush had not spent a lot in

advertisement and promotional activities compared to that of spent by minute maid

orange and mandarin orange slice (i.e.) it accounted for 84 % of all advertising

expenditures in the orange category.

6

Concentrate Producers’ Advertising Expenditures for Broadcast and Print Media for

Major Soft Drink Brands, (in thousands of Dollars) - Table 6

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 Brand 1985 1986 1987 1988 1989

$ % $ % $ % $ % $ %

MOS 17,80 60.3 32,08 62.7 29,55 67.5 15,00 41.2 11,38 43.8

9 0 6 1 8

Sunkist 7,176 24.3 4,013 7.8 911 2.1 1,719 4.7 2,302 8.9

Crush 4,371 14.8 7,155 14.0 4,297 9.8 6,841 18.8 2,020 7.8

MMO 174 0.6 7,952 15.5 9,027 20.6 12,81 35.3 10,46 39.5

1 3

Total 29,53 100. 51,20 100. 43,79 100. 36,37 100. 26,00 100.0

1 0 0 0 0 0 3 0 7

Therefore in order to compete with soft drink manufacturing giants like Pepsi and Coke, they

need to spend more on advertising and promotions. The advertising trend also favors our

recommendation because the total expenditure for print(outdoor, magazines and newspapers)

and broadcast media (network, spot, syndicated, and cable TV and network radio) declined

each year. As the market in question is very responsive to advertising and promotion, we

need to take it into consideration and implement in parallel to the push strategy the pull

strategy

 Promotional activities have to be concentrated in supermarkets as it contributes 40%

of the total carbonated soft drink sales.

 Crush should use magazines and television as the major advertising media as to

ensure its widespread reach among the product’s target market i.e. women with
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children and teens.

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  The promotional messages should be such that it can be more health concerned in

case of promoting diet crush and regular crush can promoted as an energizer and as a

“crusher of thirst”. To position Crush Diet in a different way: by focusing on young

singles and couples (above 24 years old), living in big cities (where Crush is well-

known), and associating its consumption with healthy, natural, dynamic lifestyle).

This would enable a strategy that would be more consistent with the consumption

profile of diet drinks’ consumers.

CONCLUSION

We should avoid direct competition with Coca-Cola & Pepsi Co; it could bring on a

price war. No frontal attack means that Cadbury remains a niche marketer. We avoid

cannibalization with Sunkist in positioning the Crush brand name on the family with children

at home segment. As far as diet Crush is concerned, we reposition it as a healthy and rich in

vitamins, energetic drink for young people living in big cities. We also adopted an eco-

friendly strategy in promoting the product. Finally, we have no choice but to increase

advertising & promotion expenditures in order to re launch Crush brand successfully in the

market.

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