Schweppes Case

Schweppes wants to introduce the SRGA products as the line extension to its current products portfolio. The company expects that this can also be an ideal way to bridge the gap between the company’s image as a marketer of mixers and its desire to be a mainstream soft drink company. Of course, it is also aimed to bring additional profits to the Schweppes. The new product, SRGA, is also consists of carbonated water, sugar syrup and ginger flavour while it is expected to create the new flavored versions of the established adult soft drink markets by its entrance into the market. It is aimed to have distinctive personality to change Schweppes traditional perception. SRGA is targeting at the mainstream soft drink markets. The test market indicated that it has a unique appealing taste and many of those tried it felt it was fascinating new soft drink that can be consumed for all occasions.

The overall market – Customers Generally speaking, there are three basic segments of beverage market. The largest one is the general soft drink that is dominated by Coca-Cola and Pepsi Cola. Then comes the lemon-lime. Another segment the adult soft drink that includes beverages that were used as mixers with alcoholic beverages as well as others that were consumed as general soft drink. Adult soft drinks consist mainly of ginger ale, club soda, tonic water, bitter lemon, unsweetened, manufactured, and natural sparkling waters and sweetened sparkling waters.

For most consumers, Schweppes products, especially the ginger ale, are perceived as the upper mixer image that limited their growth potential and isolated the company from the vast soft drink market. The soft drink market is dominated by Coke and Pepsi-Cola while there are many others competing for the rest. But the adult soft drink market is more or less dominated by Schweppes and Canada Dry while the market itself has less potential compared with other categories. Among the adult soft drink market, soft drink has a much larger market than the mixer. But from the consumer research conducted by the company, Schweppes has a distorted image of being considered as the marketer of mixers.

Schweppes is one of the largest British companies dealing in confectionery and soft drink companies. Its business covers over 100 nations around the world. In North America, all Schweppes products are distributed by CBNA. CBNA’s specific subdivisions are responsible for the each brand. Each brand, with Schweppes as one, was operated independently in the global market. SRGA was introduced to market in January 1991 throughout the US as planned and the six months market performance of the product was reviewed by the management team to conduct future course of actions. There came one major problem. Though the sales stayed at 15.6 million cases for the first 6 months, there is certain cannibalisation effect of SRGA upon other existing products of the company. Management has to decide how to penetrate the product in the market immediately for the coming competition on the high potential market.

Overall, the soft drink market expended dramatically in 30 years time. Between 1965 and 1990, the soft drink share of the average per capita consumption of all liquids increased from 17.8 gallons to 48.0 gallons per year. In the United States, the population increased from 194 million to 250 million in the same period. And the total soft drink consumption increased from 2490 million cases to 7940 million cases per year. On the other hand, the upper mixer market has a relatively small and stable market share. It’s potential is not obvious, though Schweppes is one of the major player in the market. Therefore, it has larger market share in the mature industry. From the long-term point of view, therefore, the company should cash in on the mixer market and introduce new products to compete on the general soft drink market.

By dramatic changes in its product strategy, the company can also bridge the gap between the company’s image as a marketer of mixers and its desire to be a mainstream soft drink company. The critical issue here, I think, is how to change consumer’ previous perception of Schweppes. It is important to re-shape Schweppes’ brand image. Distribution Network Distributors like bottlers play a very important role as to the sales of the new products of the company.

There are also various kinds of retailers in the industry, such as supermarkets, drug stores, retail chains, convenience stores, gas stations, vending machines, and other outlets for soft drinks. Bottlers usually sign exclusive agreements with soft drink companies that make them solely responsible for distributing the soft drinks in their assigned territories. A majority of agreement also prevent the specific bottlers to distribute competing products. Therefore, while all kinds of soft drinks are competing with each other for a share of consumers stomach, the company also compete for their share of bottlers. Also at each retailing outlet, there are limited shelf space and display space. Both have their unique role in generating sales. Both are also very important retailers, bottlers, and the soft drink companies alike.

Cannibalisation Whenever a company carries out line extension by introducing new products, there is probably cannibalisation among its product portfolio. And that was also what actually happened when the company conducted a consumer survey to compared actual purchase of various brands during the first six months of 1990 with the first six months of 1991. Though much the percentage increase in SRGA’s sales came from the competitors, management was still concerned about cannibalisation between the existing products and SRGA. It is problem for the company when SRGA can not bring profits to the company while the sales of existing products was declined.

The critical point for Schweppes, I believe, is how to change consumers distorted image of its products. Therefore, I suggest the company to use another brand rather than Schweppes for the new product while Schweppes serves as the umbrella name. In this way, it will be easier to establish new product image and brand name which will be suitable to enter into the main stream soft drink market. By analysing the following consumer decision-making process, we know that the whole process basically starts from 3 fundamental sources of products characteristics, consumer characteristics and environmental characteristics.