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

Dr. Pepper/Seven Up, Inc.

SQUIRT Brand

ٱ Soft Drink Industry

The soft drink industry in the United States is a highly profitably, but competitive market. In 2000 alone, consumers on average drank 53 gallons of soft drinks per person a year. There are three major companies that hold the majority of sales in the carbonated soft drink industry in the United States. They are the Coca Cola Company with 44.1% market share, followed by The Pepsi-Cola Company with 31.4% market share, and Dr. Pepper/Seven Up, Inc. with 14.7% market share. Each company respectively has numerous brands that it sales. These top brands account for almost 73% of soft drink sales in the United States. Dr. Pepper/Seven Up, Inc. owns two of the top ten brands sold. Colas are the dominant flavor in the U.S carbonated soft drink industry; however, popularity for flavored soft drinks has grown in recent years. The changing demographics of the U.S population have been an important factor in the growing popularity of these flavored soft drinks. The possible impact of this factor will be addressed later in the case.

ٱ Squirt Brand

Squirt is a caffeine-free, low-sodium carbonated soft drink brand with a distinctive blend of grapefruit juices that gives it a tangy, fresh citrus taste. Squirt is the best selling carbonated grapefruit soft drink brand in the United States. The origin of Squirt can be traced back to 1938 when a man named Herb Bishop began experimenting with Citrus Club. Bishop created a new carbonated soft drink that required less fruit and sugar to produce compared to other sodas that were being made at the time. The new drink "seemed to squirt onto the tongue," so Bishop named the drink Squirt. Squirts sales grew during WWII because its low sugar content helped bottlers restricted by sugar rationing rules. By the mid 70's, Squirt was introduced internationally in Central and South America. In 1977 a company named Brooks Products purchased Squirt from Bishop. In 1983, Diet Squirt became the first soft drink in the United States to be sweetened with Nutra Sweet. Squirt joined A&W Brands in 1986, which was later purchased by Cadbury Schweppes PLC in 1993. Responsibility for manufacturing, marketing, and distribution of Squirt was assigned to Dr Pepper/Seven Up, Inc, which had been acquired by Cadbury Schweppes PLC in 1995. It still remains under the Dr Pepper/Seven Up, Inc. branch. The Squirt Brand remains highly competitive among the grapefruit and citrus-flavored brands in the United States. It has extreme competition from similar brands distributed by Coca-Cola and Pepsi-Cola.

The chart below shows the volume breakdown of citrus soft drinks by year compared to other competitors in the carbonated grapefruit and citrus-flavored market.

Case Volume Trend for Major Carbonated Grapefruit and Citrus-Flavored Brands in the United States: 1996-2000

Case Volume (millions) by Year

Company/Brand 1996 1997 1998 1999 2000

Coca-Cola

Fresca 28.0 26.2 25.9 25.5 24.1

Citra NA NA 21.0 26.2 15.6

Mello Yellow 59.0 46.6 42.4 41.6 45.7

Surge NA 69.0 51.8 26.7 11.8

Pepsi-Cola

Mountain Dew 605.9 683.2 748.1 793.0 809.8

Regular 535.6 605.2 665.1 705.0 715.6

Diet 70.3 78.0 83.0 88.0 94.2

Dr Pepper/Seven Up

Sundrop 19.7 20.1 20.4 20.1 20.2

Squirt/Ruby Red 55.8 55.7 54.8 56.0 54.6

Total Case Volume 768.4 900.8 964.4 989.1 981.8

*Note: 2000 Competitor case volume data represent estimated figures

Squirt's market share is calculated by dividing case volume by total case volume for the entire market. The market share for Squirt for the past years is as follows:

1996-55,800,000/768,400,000= .0726 or 7.26%

1997-55,700,000/900,800,000= .0618 or 6.18%

1998-54,800,000/964,400,000= .0568 or 5.68%

1999-56,000,000/989,100,000= .0566 or 5.66%

2000-54,600,000/981,800,000= .0556 or 5.56%

The numbers above show that the percent of market share for Squirt has slowly declined in recent years.

It is now up to Kate Cox, brand manager at Dr Pepper/Seven Up, Inc. responsible for Squirt, to make sure that this percentage does not continue to decrease and affect the success and market share of Squirt. Cox believes that attention must be drawn to Squirt's advertising and promotion plan. Both topics were addressed in a June 2001 presentation by the brand's advertising agency, Foote, Cone & Belding. Following a review of U.S. Census 2000 statistics, Squirt consumption data, and its own and Dr Pepper/Seven Up research, Foote, Cone & Belding proposed a refinement in Squirt's target market and positioning which had previously been aimed at 18- 34 year olds. Through research that featured Squirt's consumption by racial/ethnic group and age relative to carbonated soft drink users, Foote, Cone & Belding recommended that Squirt target a multicultural, 18-24 year old segment in order to tap into this heavy carbonated soft drink user segment. The total sales broken down by racial/ethnic groups can be seen below.

12% of 54,600,000(total case volume for Squirt in 2000) =6,552,000 cases were sold to the Hispanic population

15% of 54,600,000(total case volume for Squirt in 2000) =8,190,000 cases were sold to the African American population

73% of 54,600,000(total case volume for Squirt in 2000) =39,858,000 cases were sold to the Caucasian population

The suggestion by FCB to target a multicultural younger segment was supported by recent information provided by the U.S. Census 2000. According to the Census, the Hispanic population in the United States increased by 57.9% from 22.4 million in 1990 to 35.3 million in 2000. This was compared to an increase of 13.2% for the