Introduction Cadbury Schweppes Americas Beverages is a an integrated business company of PLC-Dr Pepper/Seven Up, Inc; Snapple Beverage Group; and Mott’s. The integration of the three business units had a special significance for Hawaiian Punch. By 1999, Cadbury Schweppes/PLC acquired all rights to Hawaiian Punch from Proctor & Gamble. Since the acquisition, Dr Pepper/Seven Up, Inc. , the third largest soft drink manufacturer in the United States, distributed the brand through its bottler network in the carbonated soft drink aisle or location of the supermarkets and other retail outlets.
Hawaiian Punch was the only brand marketed by Cadbury Schweppes that employed two distinct and separate manufacturing, sales, and distribution networks to stock and serve an identical beverage for the same retail customer. Problem Definition To prepare the 2005 Hawaiian Punch business marketing plan. Analysis As mentioned before, Cadbury Schweppes employs two distinctively different networks. Before preparing such marketing business plans, we must evaluate the differences among the two different networks.
First we will evaluate the Finished Goods (FG) network and then the Direct-Store-Delivery (DSD) network. The finished goods network operates as follows. Cadbury Schweppes manufactures the juice drink, and then packages the product into 1-gallon, half gallon, and 6. 75 ounce single-serve pouches. After the packaging is complete, the product is then shipped to warehouses and distribution centers for delivery to supermarkets and other retail outlets for sale in the juice aisle of supermarkets. The Direct-store delivery (DSD) manufacturing, sales, and distribution networks for Hawaiian Punch operate as follows.
A bottler that is outsourced from the organization buys the concentrates, in which it is combined with sweeteners and water, packaged in bottles or cans, and then sold to retailers. The bottler’s primary sales contact is with a retailer’s soft drink buyer. Contrary to the finished goods network, bottlers in a DSD network typically deliver the shelve drinks in the soft drink aisle or location in supermarkets and other retail outlets in their exclusive territory, rather than using warehouses or distribution centers. Bottlers do no service the juice drink aisle.
Hawaiian Punch sells six different flavors through the DSD network with principal package sizes, 2-liter bottle, 20-ounce bottle, and 12-ounce can. Hawaiian Punch is the top-selling fruit punch drink in the United States, contributing to the ninety-nine percent brand awareness among U. S. consumers. The product line in 2004 consisted of eleven flavors, with the original Fruit Juicy Red flavor being the most popular brand with a wide margin. A Hawaiian Punch light version of Fruit Juicy Red was recently introduced with sixty percent less sugar.
At first, the traditional focus of Hawaiian Punch was centered towards children; however, the company now wants to refocus its positioning statement. Another brand consideration is the innovation of a new flavor into both finished goods and direct store delivery networks. The third concern is to address allowances relative to innovation in Hawaiian Punch finished goods and Direct Store Delivery (DSD) networks and to media advertising. Give the previous considerations; we have developed new marketing proposals for future marketing decisions.
For our first marketing strategy, we would like to introduce a new compact size of Light Fruit Juicy Red into the finish goods networks. The recently introduced Light Fruit Juicy Red was only sold in the 1-gallon bottle. Part of this planned strategy is to add an additional size of 6. 75-ounces of the recently added flavor to the marketing depth. In exhibit 6, you can find the 12-month income statement ending June 30, 2004. The finished goods COGS (cost of goods sold) represents seventy-eight percent of net dollars sales amongst finished goods and are eighty-two percent of total net sales volume.
It also contributes fifty-six percent of gross contribution before marketing and fifty-nine percent after marketing. The costs of adding a new flavor or bottling size would be 2. 8 million dollars, but do not require sales controlled marketing fees. Fifty-eight percent of Hawaiian Punch buyers shop the juice aisle (See Exhibit 7). We feel that introducing the new size in this aisle would benefit advertising the most. We chose to introduce the new 6. 75-ounce light red flavor because this aisle is shopped more by households with children less than six to twelve years old age group.
Also, the smaller sizes were popular for occasions away from home such as sporting events, etc… The second part of our marketing strategy is adding a new flavor of mango to the product depth. This will satisfy the need for a new flavor innovation for both DSD and finished goods networks. The new flavor in the finished good network will focus on the Souht-East regions and be bottled in the common one gallon container. As mentioned before the cost of incurring the new size would be 2. 8 million dollars for the shelf space and a local advertisement fee of $139,571 (ref. Exhibit 2, Avg. advertisement cost).
The reasoning behind this decision is because the gallon sized container is the most common package size shopped by fifty-two percent of all shoppers within supermarket juice aisle (Ref. Exhibit 3-perferred size). The South-East region focus is based on the juice aisle, which is shopped more frequently by consumers. Adding this additional flavor will also be beneficial to Hawaiian Punch if the flavor is added to the DSD network. Adding the flavor will not induce the 2. 8 million dollar shelving cost, as seen in finished goods. The bottlers assumed the cost of packaging which includes new volume sizes.
Even though the cost of packaging is eliminated, the advertisement costs are extremely high compared to the finished goods network, $712,243 (ref. Exhibit 2, Avg. advertisement cost). The DSD network distributes to the soft drink aisle, (Exhibit 7) which twenty-seven percent of Hawaiian punch consumers shop exclusively. Advertising in the DSD network will allow the introduction of multiple sizes in other retail outlets in their exclusive territories. The third marketing proposal satisfies both the organization’s flavor innovation objective and the new position marketing.
Introducing the new mango flavor, as well as the Light Fruit Juicy Red, into the finished good network will allow the Hawaiian Punch organization to satisfy Hispanic as well as non-Hispanic cultures, while keeping a healthy alternative for mothers. Issuing the new mango flavor into the DSD will allow promotion of different bottle sizes to focus on urban and multi-cultural teens through flavor variety. This introduction declines the total cost by allowing the company to promote different size offerings without incurring the $2. 8 million dollars for cost of packaging. Recommendation: Our suggestion is to implement the third marketing strategy.