NEW YORK (AdAge.com) -- In an environment where major marketers are slashing budgets, Dr Pepper Snapple is betting on the opposite approach. The beverage company plans to increase its $360 million marketing budget by a mid-single digit percent in the first half, possibly more in the second half.
Dr Pepper Ups Marketing Spend, Readies for Growth
The strategy is a risky one, given that consumers are cutting back on discretionary purchases, particularly carbonated soft drinks. But Jim Trebilcock, exec VP-marketing, feels it's a gamble worth taking -- and CEO Larry Young is backing him up. For one, the company has well-loved brands such as Mott's, A&W and Canada Dry that haven't seen any advertising investment since the earlier part of this decade. Mr. Trebilcock, a 22-year veteran of the company who started as a brand manager of Cherry 7Up, and worked his way up through the marketing organization, and who was named to the top marketing slot last fall, thinks it's time that change.
"We have, in our portfolio, a host of brands that are very trusted, high-quality brands," said Mr. Trebilcock, 50. "And at times like these, we believe if we invest in them ... we can make a pretty significant impact on our business moving forward and actually strengthen and position ourselves for consistent growth when we come out of this economic downturn."
As for the languishing carbonated-soft-drink business, he says it's colas that are waning, not flavored soft drinks such as Dr Pepper, Sunkist and A&W. And the numbers back him up. According to Beverage Digest, Dr Pepper and Diet Dr Pepper were among the few brands to gain market share, at the expense of bigger rivals during the first quarter.
In an interview with Ad Age, Mr. Trebilcock talked about Dr Pepper's expansion at McDonald's, his rivals' upbeat campaigns and why it's not so bad to be in the soft-drink business.
Ad Age: Why are you increasing your marketing spend?
Mr. Trebilcock: Going into this year we tried to anticipate what was going on with the economy. Certainly we didn't predict the severity of the crash, but we believed we were heading into a recession. We asked our partner Nielsen to go back in time and look at the last deep recession, which was in the early 1980s, and what companies did back then that made them more successful coming out of the recession. What we found was that those brands, across multiple CPG categories, that were more successful in 1983, 1984, had one common trait: the fact that they continued to invest in their core brands.
Ad Age: Was increasing the marketing budget a tough sell to the CEO or the chief financial officer?
Mr. Trebilcock: Not really, because we're a company made up of iconic brands, and in today's world it's all about creating demand. You really have to be able to convince consumers that a branded product is a good value and something they want to be serving in their house. ... Fortunately my CEO Larry Young is a big proponent of building our brands and continuing to invest [to give ourselves an advantage] in the marketplace.
Ad Age: What shifts do you plan to make to your media mix this year?
Mr. Trebilcock: Depending on the demographic, we're allocating more online and to the virtual world. Dr Pepper is our most heavily supported brand, and we've got about 20% of the budget now in online and viral non-traditional media. ... With Sunkist this year, we're allocating the entire budget to a viral campaign targeted toward teens. That's a pretty big change for us. We were on TV last year, and now we're going full-bore to connect in a more relevant way.
Ad Age: What kind of payoff are you looking for?
Mr. Trebilcock: For us in the beverage industry it's about profitable volume growth. And we have targets in place for those figures, which I can't share. The other piece of this is we track our equity development with our brands and consumers through Ipsos. We have a national consumer tracker with that, so we're watching very closely, over time, the impact of our investments. Because at the end of the day, marketing better increase the sales of the product.
Ad Age: At what point do you retrench if those benchmarks aren't met?
Mr. Trebilcock: It probably would be an adjustment for 2010, because you already have the investment in the current year. We're looking at, depending on the trackers, either monthly or quarterly [figures]. If it's something more tactical that we could address, we would do it within the year. So far we're pleased with the results.
Ad Age: Compared to Coke and Pepsi, you still have a smaller marketing budget. How do you get noticed?
Mr. Trebilcock: First of all, you have to have the right attitude, which is you know you're going to be outspent. ... I try not to do what they do, because if I do what they're doing, I'm third, and I can almost always tell you we'll fail. If you look at our total CSD (carbonated soft drink) portfolio, they're heavily in the cola business. I'm No. 1 in flavors. That's all I worry about.
Ad Age: Both are duking it out right now with new, upbeat campaigns. Does that help you stand apart even more?
Mr. Trebilcock: I think so. I think the challenge that both of them have right now is to create differentiation within the cola world. Both campaigns are playing in the same area, so I'm not sure how that will help differentiate them.
Ad Age: As the company looks to differentiate itself, there have been a lot of unusual promotions. For example, the Chinese Democracy promotion, which didn't go exactly as planned. Has that soured you on those efforts?
Mr. Trebilcock: No. We came back with a free product giveaway on Diet Dr Pepper 30 days later. We partnered with Yahoo at that point, and they handled everything perfectly.
Ad Age: Is sampling to drive trial more important than efforts geared toward maintaining your existing audience?
Mr. Trebilcock: That's a question that we struggle with. Mott's would be less about sampling and more about product benefits and the value that we're bringing to the consumer. But take Dr Pepper, for instance. It's heavily developed in parts of the country, but in the Northeast, Northern California, Oregon and Seattle, it's maybe not so well developed. So we have a lot of opportunity there to grow, and product sampling is a big part of that. That's why we're so excited about this [new] relationship with McDonald's. We're going to be available in all McDonald's. We're picking up more than 5,000 new McDonald's outlets for fountain Dr Pepper.
Ad Age: You've been at the company for more than two decades. To what extent does that influence your decisions today?
Mr. Trebilcock: It gives me a degree of patience. This industry does ebb and flow, but it is a mainstay within the consumer mix, and that's why I think I'm probably more optimistic than maybe some others, in terms of our ability to grow. Over that period of time, I've seen the percentage of the business that colas represent go from the high 60s down to around 50%. At the same time I've seen our business on Dr Pepper almost double in size, and I've seen brands like Sunkist and A&W double in size over the last ten years.
Ad Age: Do you consider yourself a mass marketer?
Mr. Trebilcock: I'm a bit duplicitous. I wear two faces. We have to have a national presence; there are many national customers that we serve with our products. But I also believe we have a huge opportunity to invest regionally in our marketing efforts to develop the per capita consumption of our core brands.