How Would You Characterize the Carbonated Soft Drink Industry in the United States?

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the orange flavored category, Cadbury Beverages, Inc. already markets Sunkist Orange Soda and Diet Orange Soda. It is also necessary to have a clear distinction between both the Sunkist and Crush Orange beverages in the marketplace. Exhibit 8 showed that Sunkist and Crush target similar markets, which is teen aged 12-24 and 12-29, respectively. To reduce concern of cannibalization, we believe Sunkist should continue to target towards children and teens, because the name itself implies that teenagers would be the primary targets for this beverage as it relates to teens on the beach and drinking in the sun. When we look at the sales volume in Exhibit 6, we can see there is a huge difference between regular Sunkist and diet Sunkist. About 82% of Sunkist’s case volume sales being the regular form rather than the diet form. This can indicate that children and teenagers are not necessarily looking to drink a diet product. As for Orange Crush, there is 70% of sales were regular soft drink, and 28.7% accounted for their diet soft drink. Therefore, our recommendation for positioning Orange Crush would focus on targeting young adults ages 18-34. This would narrow the range that they target towards, and it allows Sunkist to target the younger demographic which in turn would help reduce cannibalization and help raise their market share which has been dramatically declining over the past five years. The example in Exhibit 5, shows that Sunkist and Crush dominated the orange carbonated soft drink brand in 1985. Once competitors (Mandarin Orange Slice and Minute Maid Orange) came into the market in 1986 they reduced Crush’s market share to 8%. However, targeting towards ages 18-34 would also be good for the Crush diet product, because older consumers are more likely consuming diet product. The diet beverage has a higher gross profit margin than the regular orange beverage. We believe that the first move Crush should make is to recruit more bottlers and have them establish a push strategy through retail outlets and local consumer promotions enabling their orange beverages to be more accessible to a large number of people. If the company’s product isn’t available, people cannot buy it. We can see in the case that supermarkets account for 40% of sales in the soft drink category, which will provide an ample amount of opportunity to generate revenue through in-store promotions.

5. What objectives should be set for the CRUSH advertising and promotion program? What strategy(ies) should be pursued?

The objectives which must be completed in order for Crush to have a successful re-entry into market are creating and maintaining a healthy bottler network, re-establishing trade relations with new bottlers under the clear emphasis of bolstered advertising and promotional support on the ground level for Crush. Through the use of the promotion technique called “Display Loader” Crush can incentivize retailers to display Crush promotional material and after time the premium will be paid to the retailer for supporting the Crush brand at their store locations. This elevated level of promotional and advertising support at the retailer and bottler level should be focused in areas which have shown to have the highest customer awareness for Crush. These locations according to a consumer awareness tracking research include: Seattle, San Francisco, New York, Miami, Los Angeles, Chicago, and Boston. Once a clear foothold has been regained in the areas with the most consumer awareness Crush can begin to focus on expanding to more opportunistic areas suited for high-market share growth.

The recommended approach to the advertising and promotional program is to maintain the avenues in which it currently markets Crush and expand in a select few areas specifically, magazines and newspapers. The reason behind expanding to these channels are the above average levels of loyalty in the customers that Mandarine Orange Slice is experiencing by advertising through newspaper and magazines. This could be for a variety of reasons, the most clear being the subscription that the consumer has to pay for the magazine or newspaper already predisposes him to be higher levels of brand loyalty to any brands which are advertised on their magazine or newspaper of choice. The broad goal for the advertising and promotional program is to cultivate and grow a sense of loyalty to the Crush brand as the prefered orange category beverage.

6. How much should be spent for advertising and promotion to re-launch orange CRUSH?

Cadbury should look to spend around $5,000,000 on advertising, with their set promotion costs of $10,850,000 based on case sales and cost of $0.35/case sold. Previously, in 1989 only $2 million was spent on advertising for Crush, with less advertising vehicles than the other leading orange flavored brands. Brands like Sunkist looked to take advantage of syndicated television ads and use of billboard ads. Crush needs to take a larger share of the market to be successful in their re-launch. Cadbury should expand the vehicles they use for advertising Crush to reach a broader share of the market and attempt to take some of the market from their competitors.

Promotion mix is also important in the reintroduction of Crush. Since bottlers and concentrate producers split the cost of promotion. Cadbury should look to take full advantage of trade promotions and consumer productions. With these promotion techniques, Crush will be able to take a larger percent of the market from their competitors. With $0.35/case allocated to promotion, Cadbury would be able to allocate $0.20/case for shirts, cups, glasses and other promotional items with the relaunch; while also allocating an additional $0.15/case for displays and banners in centers of retail sales. With an adequate increase in advertising and proper use of the promotions budget, Cadbury would be able to take a substantial share of the market from their competitors.

7. Prepare a pro forma income statement similar in form to that shown in Exhibit 3 in the case including a forecast of total dollar sales, total expenses, and finally, a pretax cash profit for orange CRUSH.

Pro Forma Income Statement for Relaunch of Orange CRUSH

% of

Net Sales* Sales

Regular $ 15,314,000 (20,150,000) 65%

($.76/case