CADBURY AWAITS ROOT BEER BLITZ;COCA-COLA'S BARQ'S, PEPSI'S MUG EXPECTED TO FIZZ UP $1.8B CATEGORY

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The cola wars are one thing, but Cadbury Schweppes is bracing for a root beer D-Day.

The nation's leading root beer marketer is going to be attacked by the two soft-drink superpowers: Coca-Cola Co. and PepsiCo.

Coca-Cola's $50 million acquisition of Barq's root beer in August sparked the conflagration in the $1.8 billion category. The acquisition put Pepsi in the position of having to pump some life into its root beer, Mug.

The result: Cadbury, which in recent years has outspent Barq's and Mug by a wide margin in advertising, is going to be outgunned in '96. In addition, it will lose some key bottler relationships.

Cadbury owns three root beer brands: A&W, the market leader at 31% by unit volume; Hires, No. 4 with a 5.4% share; and IBC, a specialty brand that has grown 40% in the past year.

"When one of your key bottlers [Pepsi-Cola Co.-Owned Bottling Operations] decides to drop one of your core brands [A&W] and one of the major players in the industry [Coca-Cola] decides to compete in the same category, life obviously becomes more interesting and challenging," said John Brock, CEO of Dr Pepper/Cadbury North America. "We have an aggressive plan for A&W .*.*. that anticipates those changes and will maintain A&W's leading root beer position."

A&W is spending about $10 million on advertising this year and plans to increase that amount by 25% in '96. Barq's and Mug combined will spend less than $5 million this year.

But if history is any guide, and Coca-Cola and Pepsi are as serious as they seem to be, they will easily outspend A&W in '96. Root beer is a larger category than sports drinks or New Age juice drinks, and Coca-Cola has been spending $20 million to $30 million a year supporting new brands in each of those categories.

Cadbury will be working with a number of new bottlers in 1996. Many Coca-Cola and Pepsi bottlers distribute Cadbury brands such as A&W, but with Coca-Cola acquiring Barq's, that is changing.

Pepsi, which had distributed Barq's in a few markets, decided to align its system behind Mug, giving notice last month to company-owned bottlers that they can't sell A&W after this month.

"Coke kind of forced our hand," said C.J. Fraleigh, marketing manager for flavored soft drinks at Pepsi. Noting that Mug is very strong in some markets-No. 1 in New York with a 28% share-he said Pepsi is confident the bottler realignment will turn Mug into a strong national brand. It has a 5.8% national share today, making it No. 3.

Todd Stitzer, chief operating officer of Cadbury Beverages North America, noted that franchise bottlers for Coca-Cola and Pepsi can choose to stick with A&W. "We plan to make their decision easier by significantly increasing both our national and local-marketing investment behind the brand," he said.

Mr. Fraleigh declined to discuss '96 marketing plans for Mug, which until now has received only modest point-of-purchase and radio support. But he said, "We are going to put a major push behind Mug next year."

BBDO Worldwide, New York, handles Mug's advertising.

Coca-Cola, too, plans a big push. "We bought Barq's to make it the largest root beer in the country, and we're going to pursue that goal relentlessly," said a spokesman. "With our marketing muscle, we think we can grow the category and grow our share."

Though Barq's is currently distributed only in about two-thirds of the U.S., it is the No. 2 root beer with a 14% national share.

"Coca-Cola's aspiration is that everybody in the country can get it, whether in stores or at fountains," the spokesman said.

To that end, Coca-Cola will replace its regional root beers Ramblin' and Fanta in the U.S. with Barq's in stores and at fountains. That could give Barq's a tremendous edge, because Coca-Cola has an impressive list of fountain contracts, including a national one with McDonald's Corp.

Coca-Cola recently awarded Barq's ad account to Wieden & Kennedy, Portland, Ore. Before the acquisition, Barq's handled advertising in-house; recent efforts included several TV campaigns.

With private labels garnering 29% of the category, there's room for national brands to grow at their expense. Private-label brands have only 12% of the total soft-drink market.

And IBC Brand Manager Wendy Bateman said there are distribution voids that offer big opportunities.

Cadbury can take solace from the fact that Quaker Oats Co.'s Gatorade has been able to fend off a two-pronged attack from Coca-Cola and Pepsi in the sports-drink market. Though Gatorade's share has declined, the category has grown and so have Gatorade sales.

Cadbury executives also like A&W's "Fanatic" ad campaign from Messner Vetere Berger McNamee Schmetterer Euro RSCG, New York. The effort generated some of the highest copy-testing scores in the soft-drink category as measured by Millward Brown International, a Fairfield, Conn., advertising research company.

Andrew Wallenstein and Jeanne Whalen contributed to this story.

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