Cadbury shakes up beverage biz

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Cadbury Schweppes' Americas Beverages unit meetings with agencies last week for its lead 7UP brand is only the beginning of a complete overhaul of the unit's marketing strategies.

With about six weeks under his belt as the top marketer for Cadbury Schweppes' Americas Beverages unit, Randy Gier, exec VP-marketing, is conducting a comprehensive portfolio review that includes scrutinizing everything from the marketing strategies to the brand teams.

Last week Mr. Gier appointed regional leadership for the marketing team, following an intense interview process in recent weeks, confirmed Steve Jarmon, VP-partner marketing. Six executives assumed new brand responsibilities (See sidebar, P. 81).

"Every single department has gone through the exact same process," Mr. Jarmon said. "We're going through a complete reorganization and restructuring and marketing is no different than any other department in the company. We want to understand the existing strengths of personnel as well as our agencies and suppliers.... Is change possible? Yes, but that's not our intent."

The move echoes last year's shakeups in the sales and operations groups where Cadbury's three beverage units were combined under the Americas Beverages unit. In November, Cadbury launched its "fuel for growth" cost-cutting effort aimed at drawing out monies to fund "marketing and innovation." It announced plans to shed 10% of its workers and one-fifth of its factories and gain $400 million per year.

Mr. Gier joined the Plano, Texas-based division on March 22, reporting to Gilbert Cassagne, president-CEO as part of a plan to create a "growth-driven total refreshment beverage company."

In the last year, reports have surfaced that the marketer is considering a sale of part or all of its soft-drink business, an option reiterated recently by executives close to the company.

no sale

"I don't know what the ultimate strategy will be, but I'm sure there's not a buyer out there for the brands," said an executive close to the company. "They've created an organization that will work well focused on a couple of big brands. When you have one sales force selling everything, they can only sell so many things, so when you finally get down to Clamato and Stewart's and Yoo-Hoo, it seems like strategically they ought to get rid of them."

However, Mr. Jarmon batted back the idea of a sale, saying, "We've been told there is no plan to spin the beverages off. "The team is really looking forward to turning the corner, having the restructuring behind us, getting to our new location and starting our new venture together."

On April 5, Andrew Wood, analyst for Sanford C. Bernstein, downgraded Cadbury shares on the poor performance of the Americas Beverages unit. He pooh-poohed management's blaming trade destocking for poor Snapple sales as an "easy excuse, frequently rolled out to detract attention from other, more fundamental business issues." Mr. Wood wrote, "the fact that the whole business is being reorganized in 2003 and new management has come on board and may be cleaning house, is perhaps a better explanation for the ills of the Americas Beverages business than trade de-loading."

Total Snapple revenue fell 4% in 2003, according to Beverage Marketing Corp.

`competition'

The unit has begun to reach out to agencies beyond WPP Group's Y&R Advertising for ideas on its 7UP brand. A company spokesman denied the marketer was running an agency review but declined to clarify the situation, calling it "an internal business matter." Mr. Jarmon reiterated that it is not a formal review but a "competition" for a new 7UP campaign. "The account is not in jeopardy at Y&R," he said. "We're going through our current resource and also asking others for ideas on it."

Of Cadbury Schweppes' $216 million in 2003 domestic media spending, roughly half was allocated to its beverage brands, according to an analysis of TNS Media Intelligence/CMR data.

Cadbury beverage sales were hurt in 2003 by declining soft drink sales and PepsiCo's coup to have its bottlers replace 7UP with its own Sierra Mist brand. Share of volume for the Uncola fell 27.8% in 2003, while Sierra Mist surged 89.3%, according to Beverage Marketing Corp. Dr Pepper fared better, but its volume fell 3.9%. Volume for the Dr Pepper/Seven Up unit for 2003, which ranks No. 3 in the U.S., fell 4.2%, while Coca-Cola share was down by 0.2% and PepsiCo share grew 1.8%.

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