Dr. Pepper/Seven Up, Inc.

So by targeting the Hispanic market, Squirt automatically has to simultaneously modify and redevelop its brand image to also appeal to the younger market segment. The effects of this targeting might even cause a spillover on the non-Hispanic youth market.

• According to Foote, Cone & Belding (FCB) the 18-24 age group is the heaviest consumer of soft drinks
• The thirst quenching attribute is to be reemphasized, but advertising would focus solely on 21-24 year olds to position the brand as an individualistic, exciting and spontaneous
• FCB believes that such positioning is relevant to the CSD industry, emphasizes instant gratification, freedom that young adults like and it matches Squirt's product feel
• The positive side of their recommendation is that currently, the 20-29 age group is the least segment that consumes Squirt
• Their emphasis on a multicultural young segment is of great significance

• FCB's recommendation is very relevant to market, demographic and cultural conditions
• It capitalizes on the key and opportunistic growth of the Hispanic community as well as the association that exists between the younger generation and the consumption of soft drinks
• One major aspect that FCB did not take into account was the eastern United States; even though 75% of Hispanics live in the west & south, New York is the most populous Hispanic city in the US with 2.1 million Hispanics. Chicago (in the Midwest) is the 3rd most populous Hispanic city with 753,000 Hispanics

• Squirt has the least access to the New York market and New York has the largest Hispanic population. This is a gold mine for Squirt

• Most of Squirt's consumers are Caucasian, so why should they risk losing this large customer base by modifying their ad and promotion campaign to suit Hispanic and African American tastes?
• Squirt is doing better than Coca-Cola's Citra; consumers think that it does not appeal to them and that Squirt effectively communicated to them the intended thirst quenching message
• Sales only went down from 55.8 million cases to 54.6 million cases, which is not a large decrease compared to Coca-Cola's sales decrease

• Changing the current marketing strategy might risk Squirt's advantage over Citra and in terms of sales and brand awareness, Squirt has good footing in the citrus and grapefruit category

"Squirt should target the multicultural 18-24 age group in western, southern and eastern United States"

• Squirt should now spend more on media advertising than on promotions because in order to effectively target the Hispanic community, a message must be clearly communicated
• 55% of Hispanics prefer ads in Spanish which means that Squirt should create Spanish language ads, but at the same time, create English language ads that appeal to Hispanic culture because 30% of them prefer English ads
• The nature of brands should reflect Hispanic people's preference for authenticity and clarity in messages and ads
• Hispanics like shopping close to home, Squirt can easily capitalize because of the extensive distribution network it has in the west (100 bottlers in CA)
• This also means that contracts need to be made with bottlers in the New York area in order to satisfy their preference for proximity
• In addition to creating a campaign to satisfy Hispanic preferences, the 18-24 age group must also be effectively targeted
• Squirt must now position itself not only as a thirst quenching brand (which young people like), but also as young, hip and individualistic

• This dual targeting and positioning scheme will definitely require a higher advertising budget, but the truth is, Squirt's sales volume does not reflect the potential that both the Hispanic and 18-24 segments have

Dr. Pepper/Seven Up, Inc. & The Squirt Brand

Squirt's Product Line

Situational Analysis

Squirt's Positioning

• Squirt has the regular 'Squirt' grapefruit flavored soft drink and a diet version of that

• Squirt also introduced a berry flavored extension called Ruby Red in both regular and diet versions

• Initially, Squirt was positioned as a 'cool, experiential, and incredibly exciting'. This was considered too intense and was toned down

• The current positioning became related to 'everyday, on the go experiences' that put emphasis individualistic and sociable young adults.

• Target market narrowed down to 18-34 year olds

• The original thirst quenching attribute was not changed in the new positioning scheme

• Research, however, showed that Squirt's messages were too 'juvenile' for both young and older consumers

Introduction to Dr.Pepper/Seven Up, Inc. & Squirt

SWOT Analysis

Five Forces Analysis

Buyer Bargaining Power - High

Supplier Bargaining Power - Low

Strengths

Weaknesses

• Soft drink manufacturers has an advantage over its suppliers because they only have to produce the flavored syrup, the rest of the processes are delegated to distributors.

• As a result, Squirt can more easily switch from one supplier to another.

Key Industry Facts

• Consumers control the bargaining power when it comes to the soft drink industry because soft drinks are not a necessity for every day life.

• However, they don’t purchase large quantities and they favor such drinks to be placed in locations that are convenient to them.

• This means that Squirt can be priced at a higher premium due to it being placed in convenient locations.

Overview of DPSU

History

•Squirt is the bestselling carbonated grapefruit soft drink brand in the US

•DPSU has a 14.7% market share of $60.3 billion = $8.86 billion

•Squirt available in 83% of bottler markets

•FCB research showed that Squirt was the most thirst quenching brand

•Media advertising for Squirt less than competitors

•Consumer research showed that consumers considered Squirt advertising to be too juvenile

•Perceptual map of citrus flavored CSD's showed Squirt neither young nor not-so-young

•73% of consumers of Squirt are Caucasian

How Squirt can overcome these threats using its strengths

Squirt's Current Marketing Tactics

Even though Mountain Dew poses a threat with its enormous control of the citrus flavored CSD (carbonated soft drink) market share, the perceptual map plots Mountain Dew only hallway through the thirst-quenching & refreshing paradigm.

• The whole carbonated soft drink industry (CSD) sales figure in 2000 was $60.3 billion, however, in recent years sales growth has slowed.
• The production and distribution of CSD's is simplified as follows:

Competitive Rivalry - High

Threat of Substitutes - High

Squirt joined A&W which was eventually bought over by Cadbury Schweppes

How Squirt can overcome its weaknesses to capitalize on opportunities

This means that if Squirt positions itself as young and hip, it has an upper hand in not only reaching Mountain Dew’s position, but reaching its position armed with the additional attribute of being thirst-quenching.

Squirt’s weakness of failing to appeal to the young can be countered by a new double barreled campaign that is aimed at young Hispanics. Hispanics have a median age of 25 and 35% of them are below the age of 18.

In 1938, the Squirt beverage was created by Herb Bishop from Arizona who recreated a non carbonated drink called Citrus Club. He used less sugar and fruit to create the carbonated version of it

Squirt faces a number of competitors that includes Coca-Cola’s grapefruit soft drink brands which are Fresca and Citra. It also competes with Mello Yello, Surge, Pepsi Cola’s Mountain Dew, and Sundrop. These competitors are trying to obtain Squirts market share by focusing more on their advertising.

Opportunities

Threats

• Coca-Cola introduced its international brand, Fanta, with with different flavors to Southern California. Other flavors are a dangerous substitute

• Squirt is free of caffeine, consumers might substitute non-caffeinated beverages with caffeinated ones (such as Mountain Dew)

The bottler adds a sweetener (sugar or artificial sugar) to carbonated water and package the mixture in bottles and cans

The concentrate producer, such as Squirt, manufacture the basic flavor (in this case grapefruit)

The bottlers are responsible for distributing the units to retailers and are also responsible for some local marketing activities

• Dr. Pepper/Seven Up is the largest division of Cadbury Schweppes PLC.

• World’s third largest soft drink company.

• Squirt is DPSU's ninth largest brand after Dr. Pepper, Seven Up, Canada Dry, A&W and others

• Squirt is the best selling brand in the grapefruit carbonated soda category.

• It also competes in the citrus carbonated soft drink category with Mountain Dew and Coca-Cola citrus brands

1986

1975

1938

1995

•Flavored soft drinks growing in popularity

•Hispanic communities, who favor non-cola flavors are fastest growing population segment

•Squirt is the 8th largest carbonated soft drink brand in Mexico and 58.5% of Hispanics in the US are Mexican

•Soft drink consumption in general has slowed

•Coca-Cola taking advantage of changing soft drink trends: Tab & Manzana Mía

•Pepsi’s Mountain Dew controls about 82% of the citrus flavored CSD market and spends $50 million in advertising

Threat of New Entrants - Low

The international expansion of Squirt was in the 1970's and it happened that the first international markets were Central & South America (a foreshadowing perhaps)

• The major retail channels for CSD's are supermarkets, convenience stores, vending machines, fountain services, mass merchandisers and small retail outlets. Restaurants buy a syrup and they add to it carbonated water, so they do the 'bottling' process.
• Flavored soft drinks have grown in popularity

Squirt's Distribution

Squirt's Advertising & Promotion

After Cadbury Schweppes bought DPSU, it assigned to it the responsibility of the Squirt brand in 1995 in the United States

The market in which Squirt is in is 90% controlled by Dr. Pepper/Seven Up inc, Pepsi-Cola Company, and The Coca-Cola Company. These companies also manage the top 10 soft drink brands in the US. This indicates that trying to gain a large market share is not feasible but trying to enter the market is not impossible as well.

• There are 500 bottlers in the US, 250 of them bottle and sell Squirt beverages
• These bottlers have access to 83% of the US bottler market that represents 85% of the total soft drink volume, which is $1.2 billion
• The Los Angeles bottler market alone represented 30% of Squirt Sales
• There are 100 Squirt in the western US and accounted for half of Squirt's Sales
• California alone represented 38% of Squirt sales

• Squirt's media advertising include inserts in newspapers, spot & cable television and radio
• Promotions are used with retail channels, consumers, trade channels and cooperative ads with bottlers
• Highest brand awareness in the grapefruit category due to advertising
• Squirt spends more on promotions than on media advertising
• Total advertising and promotion expenditure was 25% of sales, which is $390,000

NY is the largest market without a Squirt bottler

55.3% of Mexicans

CA accounted for 38% of case sales volumes

11 million Hispanics in CA

77% of Hispanics are Mexican

LA alone accounted for 30% of case sales volume

San Diego

El Paso

6.7 million Hispanics in TX

San Antonio

43.5%

31.7% of Mexicans

75% of Hispanics live in Western and Southern US

32.8%

What Can Squirt Do?

The brand manager of Dr. Pepper/Seven Up, Inc. (DPSU) responsible for the 'Squirt' brand, needs to draft the company's new advertising and promotion plan. Before proceeding, she needs to first redevelop the company's positioning and identify what target markets to pursue.

Adopt FCB's Recommendation

A Mix of East & West

The 'Mexican Connection'

• Mexico is the 2nd largest CSD market in the world, and Squirt is 8th largest CSD brand in Mexico

• The grapefruit CSD category is the second largest in Mexico, after the cola category, and within that category Squirt comes second

• More than half of America's Hispanics are Mexican and 77% of California's Hispanics are Mexican which also happens to be Squirt's largest market

• FCB's recommendation, as a result, is aligned with geographic opportunities and conditions

She considered these 3 factors to be the most important in developing the advertising & promotion plan:

Maintain the Current Strategy

Implications of a growing Hispanic community

Competitor activity by Coca-Cola & Pepsi-Cola

Squirt's decreased sales volume

• Coca-Cola launched Fresca and Citra. Fresca is targeted at adults while Citra at the young generation. Squirt outsells both brands combined

• However, Coca-Cola's advertising & promotion budget is a future indicator of worry because it is higher than Pepsi Cola's; $18.6 million and $16 million respectively.

• Pepsi' Mountain Dew should be given the most attention: it is the leading brand in the citrus CSD category and its growth rate surpasses all competitors by far.
• Mountain Dew is the 4th top soft drink brand in the US

• Hispanic population size grew by 57.9% from 1990 to 2000 (35 million)

• 58.5% of Hispanics in the US are Mexican

• Hispanics represent 12.5% of total US population

• 75% of Hispanics live in the western and southern United States

• More than 50% of Hispanics live in California and Texas

• From the top 9 Hispanic cities, 7 cities are in the west and south

• 1996: 55.8 million cases out of a total of 768.4

• 1997: 55.7 million cases out of a total of 900.8

• 1998: 54.8 million cases out of a total of 964.4

• 1999: 56 million cases out of a total of 989.1

• 2000: 54.6 million cases out of a total of 981.8

• Their sales volume grew from 605 million in 1996 to 809 cases in

2000

Mountain Dew also spent $28.9 million in 1996

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