- All Best Essays, Term Papers and Book Report

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

Essay by   •  April 4, 2016  •  Case Study  •  3,396 Words (14 Pages)  •  2,243 Views

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

Report this essay
Page 1 of 14

1. How would you characterize the carbonated soft drink industry in the United States?

The carbonated soft drink industry is one of the largest industries within the United States. Americans consume more soft drinks than tap water. This by itself is an astounding statement that displays the important standing that soft drinks hold in American society. In 1989, the average American drank an average of 46.7 gallons of carbonated soft drinks. This was double the average amount consumed by Americans in 1989. With this level of consumption and with the large population growth, there was an estimated $43 billion of sales in the United States in 1989.

Within the soft drink industry, there are three major participants who produce and distribute soft drinks throughout the United States. These three major players are the concentrate producers, bottlers, and retail outlets. The concentrate producers create the flavor concentrate which they sell to the bottlers, who add sweetener and carbonated water, and then sell that to the retail outlets. Of the 40 concentrate producers in United States, there are three producers who make up 82% of all concentrate production. Coca-cola, PepsiCo, and Dr. Pepper/Seven Up are the three largest producers of concentrate and their brand names receive large recognition all across America. After the concentrate producers, there are about 1,000 bottling plants in the United States. Many of the bottling plants are owned by the concentrate producers or are franchised by the concentrate producers to sell their brands. Finally, retail channels sell the soft drinks to American consumers. The main retail channels for soft drinks are supermarkets, convenience stores, vending machines, fountain service, and thousands of small retail outlets. The soft drinks are mostly sold in bottles and cans as well as in fountain drinks at restaurants. Supermarkets sell the most soft drinks in America, making up for 40% of the sales. Due to this, supermarket sales are essential to the success of a soft drink brand.

To get their brands in the hands of American consumers, soft drink producers market highly. They use advertising, selling, and promotion in order to sell as much product as they can. Concentrate producers are the ones who are usually responsible for developing marketing campaigns. Due to the amount of competition and because of the control that the big three producers of concentrate have on the market, the soft drink industry is difficult to stand out in. With the top 10 brands of soft drinks controlling 71.4% of the market share, new brands have a difficult time gaining much of the market share.

2. How would you describe changes in the orange category during the period 1985 to 1989? What can be learned from these changes?

In 1989, the orange-flavored carbonated soft drink category recorded 126 million cases in sales. This trumps the sales numbers from prior years which only hovered around 100 to 102 million cases. This increase in sales was due to a variety of factors. In the mid-eighties, Pepsi released a new flavor, Mandarin Orange Slice, and Coke introduced Minute Maid Orange. In addition, they increased the distribution of these new products as well as heavily increasing their advertising budget. In return, consumers once more became interested in the orange-flavored carbonated soft drink category and sales increased. Year-over-year sales in supermarkets from 1984 to 1988 substantially increased by approximately 28.4%.

With the introduction of new products and brands into this specific category, four brands captured the majority of the market share in 1989. Interestingly enough, Pepsi and Coke stole a large portion of the market share from Sunkist. In 1985, Sunkist held 32% of the orange carbonated soft drink market share, which was quickly reduced to 14% by 1989. To capture more of the market share and set themselves in a unique position, each brand began to take on a certain image and emphasize different things. Minute Maid Orange emphasized its flavor whereas Sunkist differentiated themselves by focusing on the teen lifestyle. Furthermore, Orange Slice and Minute Maid tried to categorize their drinks as a healthy alternative to say, Sunkist.

Lastly, the advertising budget for carbonated orange-flavored soft drinks substantially increased in 1989. In total, over $26 million was spent in 1989 on advertising by the top four brands. Unsurprisingly, Mandarin Orange Slice and Minute Maid Orange accounted for 84% of these advertising expenditures because they were trying to penetrate into a new market. In terms of pricing, all four brands priced their products at nearly the same price, generally no more than a one-cent difference. During the course of this 5 year span, it is interesting to see how different marketing strategies accounted for an increase or decrease in market share as well as large increase in revenue for the carbonated orange-flavored soft drink category. Pepsi and Coke, with the inclusion of their new products, were able to revitalize the carbonated orange-flavored soft drink category. They were also able to steal a substantial chunk of the market share from Sunkist. In addition, it is also important to note how emphasizing different attributes for the products also accounted for varying levels of sales.

3. What is Cadbury Beverages relative competitive position in the U.S. soft drink industry? In the orange category?

Cadbury was the fourth largest soft drink marketer in the U.S., and held 3.4% of the soft drink market share. Their products though, are often market leaders in their categories, such as Canada Dry being the leader in the ginger ale market. Canada Dry accounts for 39% of Cadbury’s sales while Sunkist, Crush, and Schweppes accounts for 22%, 20%, and 17% of US sales respectively. Cadbury’s biggest competition is Coca-Cola, Dr Pepper/Seven Up and PepsiCo.

In the Orange category, Sunkist and Crush are positioned for consumers between the ages of 12-29 and are generally most popular around summertime. Mandarin Orange Slice and Minute Maid Orange are Cadbury’s largest competitors in the orange drink market and are both positioned around the same age group as Cadbury’s. Mandarin Orange Slice is the industry leader, accounting for 20.8% of the market. Minute Maid Orange had a market share of 14.4% and the rest of non-Cadbury products occupied 43.3% of the market. That leaves Cadbury’s Crush and Sunkist at 7.5% and 14.4% of the market, respectively. So in the Orange market, Cadbury’s products have not been industry leaders.

4. Based on your assessment of the soft drink industry; the orange-flavored category; and the competitive situation of Cadbury Beverages and orange CRUSH; what is your recommendation for positioning orange CRUSH?




Download as:   txt (14.8 Kb)   pdf (127.5 Kb)   docx (13.2 Kb)  
Continue for 13 more pages »
Only available on