Grapefruit Soft Drink

Case analysis DP7UP/Squirt

As a brand under the Dr Pepper/Seven Up, Inc, Squirt is a caffeine-free, low-sodium, carbonated grapefruit soft drink. It is unique and seems to "squirt onto the tongue just like squeezing a grapefruit". However, some data shows Squirt's market appeal has recently been stolen by its competitors Coca-Cola and Pepsi Co. Kate Cox, the brand manager, is reconsidering Squirt's market targeting and product positioning and wants to inspire the ardor to claw back market share. Squirt's advertising agency, Foote, Cone & Belding (FCB) provided some suggestions through investigation and study. After careful consideration of all related factors, I think a new marketing plan should be tied with the growing American Hispanic community and Mexico market. And two editions of advertisement need to be shot: One is for the nation and the other is for Hispanic market.

The US soft drink industry is facing complicated situation which can be analyzed by SWOT:

Strengths:

Industry research indicates carbonated soft drink market is considerable large and profitable. Retail sales reached $60.3 billion in 2000. Average American can consumes about 2.3 servings of carbonated soft drink per day. Coca Cola Co., Pepsi- Cola and DPSU are the top three companies which owe the top ten brands and account for 90 percent of carbonated soft drink sale in American market.

Although colas are the mainstream flavor in the U.S carbonated soft drink market, some customers are shifting to emerging flavored soft drinks. Squirt is the biggest non-cola soft drink enterprise in North American market and is the best-selling grapefruit flavored soda in United States for recent years. DPSU is also the largest division of Cadbury Schweppes PLC which is #3 on the list of world's most prestigious companies. DPSU owns two of the top ten brands: Dr. Pepper and 7UP. And except national brands, it also has some popular regional brands including Sundrop and Vernors and so on.

Squirt has good reputation and the highest consumer brand recognition in American category market. Moreover, as two brand extensions, Diet Squirt and Ruby Red Squirt have been successful and reach 20% of Squirt sales.

Weaknesses:

The soft drink industry is low technology and easily copied by competitors. Major competitors Coca-Col and Pepsi-Cola Company are very strong, with 44.1% market share and 31.4% market share respectively while DPSU only has 14.7% market share. Therefore, large market share gap mean DPSU has not created enough profits to afford as much advertising promotion through bottlers to retail outlets as its competitors. In this case, it is more difficult for Squirt to get enough advertising budget from DPSU because the other two brands, Dr Pepper and 7up are more important for DPSU.

In category market, Squirt faces directly to Coca-Cola's Fresca and Citra. Yet, Citra users, mostly 18-74 year olds, did not think Squirt's positioning and advertising reflect vividly their current lifestyle. And the diversity of nationalities makes it harder to produce a nice advertisement to content all customers.

Opportunities:

According to the US census 2000, a distinct demographic change is the fast growing Hispanics who has soared to 12.5 percent of the U.S population, or 3.6 million people. It is time to change traditional ideas because African American has not the largest minority, which is exceeded by Hispanics. Furthermore, compare to 25.7 percent of the U.S. population under 18, Hispanic population is relatively younger because 35 percent of Hispanic was under 18 in 2000 and they consume more grape fruit soda than older adults. Although the Squirt census shows African American account for 15% of Squirt consumption while 12% for Hispanics. In the long ran, Hispanic consumers will bring a potential larger market to stimulate Squirt declining sales.

Threats

The major means of soft drink marketing rely heavily on advertising. However, considering competitors' huger advertising budgets and Squirt's declining sale, it is a big challenge to maintain brand reputation and market share.

Concentrate producers, bottlers and retailers constitute major participants in the industry of carbonated soft drinks in United States. Their roles in manufacturing and distribution process are as follows.

Coca Cola Co., Pepsi- Cola and DPSU are the major three concentrate producers. There are about 500 bottlers in the United States. From the above graph, we can see bottlers assume important responsibility for distribution. However, as exhibit 2 shows, their CFGS and selling and delivery expenses are much higher than the one of concentrate producers and thus matintain