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Dr. Pepper / 7 Up, Case Study
By
Squirt is a brand of grapefruit flavored soda that has seen flat growth in recent
years. While it is still the best selling brand of grapefruit flavored soda in the
U.S. market, it has recently lost ground to offerings from both Coca-Cola and
Pepsi Co. The brand manager wants to write a new Marketing and Advertising
plan for the brand in order to stimulate growth.
Summary
Three companies with 90% of the market share control the carbonated soft drink
industry in the United States. These companies include in order of market share
size, Coca-Cola, Pepsi Co, and Dr. Pepper/7Up. These three companies also
represent the top ten selling brands in the United States market. In a given year
the average American drinks more carbonated soft drinks than tap water. The
industry is divided into three major participants; concentrate producers, bottlers,
and retail outlets. The concentrate producers design the products and are
responsible for national marketing efforts; while the bottlers are responsible for
distribution and packaging of the products, and regional marketing efforts, and
in store displays. The retail outlets are where the product is sold to the end
consumer. Soft drink marketing efforts spend heavily on consumer advertising.
Individuals who consume the most soft drinks in the United States are between
age 20 and 49.
•
Five Squirt bottlers account for 50% of sales. These bottlers are located in Los
Angeles, Chicago, Detroit, San Diego, and Portland. A total of 100 bottlers
account for half of the Squirt case volume with these bottlers located
predominantly in the Western U.S. California alone is responsible for 38% of
the total Squirt Case volume.
•
Squirt is the primary brand with two brand extensions. These extensions include
Diet Squirt and Ruby Red Squirt. These extensions have both been successful
and account for 20% of Squirt Sales. Diet Squirt was the first carbonated drink
to be sweetened with Nutri-Sweet.
•
Squirt's direct competition comes from two Coca-Cola brands. These are Fresca
and Citra. Fresca is a caffeine free diet soft drink targeted to adults over age 30.
Citra is sugared caffeine free version of Fresca targeted to teens and young
adults. Squirt outsells Citra and Fresca combined by case volume.
•
Squirt's advertising has used a variety of media including newspapers,
television, and radio. Overall Squirt spends less on advertising and promotion
than its competitors. Squirt also enjoys the highest brand awareness in the
carbonated grapefruit drink category.
•
Squirt is currently positioned as a, "spunky, lively, everyday, on the go,
sociable, colorful, and music driven" beverage. The target market is adults ages
18-34 years old. The current tag line is, "Squirt your thirst." The position has
been revisited in 1999 and 2000, however no changes were made.
•
Foot, Cone & Belding made a full review of positioning strategy and made a
few recommendations in mid 2001. They concluded that Squirt was more thirst
quenching than refreshing, and that it was not seen as either hip and young or
not so cool and hip. They recommended that Squirt also be targeted to a
younger demographic, especially the 18-24 year old range. They reasoned that
this age group is a large consumer of soft drinks, and that the "thirst-quenching"
attribute of the product would appeal to them.
•
Squirt has also been looking into the growing Hispanic population in the U.S.
Squirt is one of the larger selling brands of soda in Mexico, and Squirt has large
brand recognition there. According to the Squirt census data the Hispanic
population is one of the fastest growing groups in the U.S. Within this group
25% were under the age of 18. Cities such as Los Angeles, El Paso, San Diego,
San Jose, and San Antonio are over 25% Hispanic.
Problems and Opportunities
•
The U.S. has seen a large growth in the Hispanic population. Experts predict
that Hispanics will overtake Blacks as the largest minority in the U.S. The term
Hispanic encompasses many different cultures and traditions. The majority of
this Hispanic population is from Mexico.
•
The brand Squirt is sold in Mexico with great success by a different company.
With such a large Mexican population in the U.S. offering Squirt to them should
be a natural transition. However has this already driven sales in the U.S. or can
this be harnessed still?
•
To whom in this new Hispanic population should Squirt be targeted?
•
How should Squirt be positioned to the additional target markets?
•
Squirt needs to be targeted in a way that does not cannibalize the current loyal
customer base.
•
The Hispanic population does not like hard sell messages and likes messages
that are real and relevant to them.
•
Hispanics prefer to shop closer to home in mom and pop stores. The majority
would prefer ads in Spanish (50%) while 30% prefer English and the rest have
no preference.
Taking all of this into account Squirt has a great opportunity to expand its
brand. With the current target market being only adults age 18-34 they are
leaving out a large group of the population. The growing Hispanic population
also offers great opportunity to grow sales. Grape fruit soda is already popular
in Latin American countries; promoting Squirt to these buyers in the U.S.
should not be complicated. Squirt has managed to expend much less money on
advertising than its competitors and maintain its market share.
Alternative Courses of Action
1. The flat sales of Squirt need to be boosted before competing brands begin to
erode the market share enjoyed by Squirt. Squirt maintains a low budget
compared to the direct competitors, while keeping double the case volume of all
competition combined. They should expend more money on advertising,
especially in the Hispanic Spanish language markets. In order to grow the brand
they need to spend more money on promotion.
2. Considering Squirt's current position they do not have broad enough target
market. They need to target the younger teen demographic, as well as the
younger ethnic markets. Squirt's "thirst quenching" attribute is great for the
Southwestern U.S. where the year round temperatures are high. Southern
California also has an outdoor lifestyle that lends itself to a thirst quenching
drink.
3. The growing Hispanic population could be a major area of growth for the
Squirt brand. Squirt needs to advertise on the major Spanish language television
stations, Telemundo and Univision. They also need to revisit their distribution
strategies in the emerging Hispanic markets. Since Hispanics like to shop in
mom and pop markets they need to have the products available there. They also
need to make sure that the advertising message fits in with the Hispanic
preference for reality based, real world messages.
Recommended Course of Action
In order to grow sales Squirt should use a synthesis of all three courses of
action. Their current branding needs to be joined with the Hispanic marketing
effort. They also need to spend more money on advertising overall, including
the Hispanic market.
SWOT
Strengths and Weaknesses
Grapefruit soft drink leader. They also have the highest brand recognition in the
grapefruit soft drink market. However DPSU does not have the market share
and resources that are enjoyed by Coca-Cola and Pepsi Co's offerings. This
leaves them with a smaller advertising budget.
Opportunities and Threats
With a growing Hispanic population that enjoys grape fruit soda there is a large
area to grow the flat sales of the Squirt brand. The larger advertising budgets of
competitors can be a threat to maintaining market share with a brand with flat
sales.
Porters Five Forces Analysis
The bargaining power of customers
In the soft drink industry customers have the bargaining power. Soft drinks are
an elastic product, and not necessary for daily life. Customers however do not
usually want to buy in bulk, and prefer soft drinks to be located in convenience
locations. This means that Squirt is able to charge more in exchange for
convenience.
The bargaining power of suppliers
Squirt has good power over its suppliers. Considering that creating syrup
concentrate does not require a complicated process or exotic materials. Squirt
can easily substitute one supplier for another.
The threat of new entrants
The market is 90% controlled by DPSU, Coca-Cola, and Pepsi Co. These
companies also control the top 10 brands in the United States. This means that
entering into the market is not impossible, but gaining a large foothold is not
probable. However with a $60 billion dollar per year industry there is also room
for a new entrant.
The threat of substitute products
Squirt has 2 direct competitors in the grapefruit segment, and many other
competitors in the citrus category. There are also 900 registered brands of soda
in the U.S. Squirt however does not have a product that is positioned and
targeted to the same group with the same taste. In the case of the soda market
however there are plenty of other soda brands. Squirt also positioned itself as
thirst quenching. This places squirt into competition with other beverages
including water and sport drinks.
The intensity of competitive rivalry
The soft drink industry has much competition. Pepsi and Coke have been
battling over the Cola market for years. Squirt being a non-cola soft drink places
it into a different category. The major competition comes from Mellow Yellow
and Mountain Dew, and well as Citra and Fresca. The competitors are spending
large sums of money on advertising and trying to gain market share over Squirt.
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