CASE VERNORS, Schweppes and Royal Crown Cola. Dr Pepper

CASE
ABSTRACT

Dr Pepper Snapple Group
(DPSG) is a major integrated brand owner in soft drinks industry. Currently,
DPSG perform well with their soft drinks beverages brands and holds strong
positioning in the US, Mexico and Canada. DPSG were the fourth of the largest
non-alcoholic beverage in the US after soft drinks, sport drinks and bottled
water. Furthermore, DPSG can rapidly adapt in the market changes and grow
faster in the manufacturing and distribution coverage. DFSG company’s end of
year 2010 statement of financial, competitor information and organizational
charts includes the comprehensive strategic management case. To enable students
to evaluate current strategies, the company sufficient internal and external
data are provided and recommend a three-year strategic plan. DFSG common stock
is publicly traded under the ticker symbol DFSG at their headquarters located
in Plano Texas. DFSG company produce and distribute the soft drinks beverage in
North America including Canada, Mexico and US. Non-alcoholic drinks likes flavoured,
carbonated and non-carbonated soft drinks, teas and juices are offered by the
DFSG. The non-alcoholics brands that are famous are Dr Pepper Snapple, Hawaiian
Punch, A Root Beer, Mott’s, VERNORS, Schweppes and Royal Crown Cola. Dr
Pepper Snapple soft drinks are at number three rating in the soft drinks
beverages industry, number one famous brands are Coke, followed by Pepsi. DFSG
is a leading producer of flavoured soft drinks in Caribbean and North America
with more than 50 brands total and also have 6 non-cola soft drinks of top 10
soft drinks. Sunkist, 7UP, soda, Crush, Clamato, Rose’s and Mr & Mrs T
mixers are DFSG famous soft drinks beverages. Now, DPSG want to grow and they
want to introduce new brands which is energy drinks into the market to expand
their portfolio.

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VISION
(Proposed)

Our vision is to become the best soft drinks beverages
in the world.

 

MISSION
(Actual statement)

1.      To
become a leader in soft drinks beverages industry.

2.      To
produce high quality soft drinks beverages to our customers.

3.      To
show respect to every employee and give them the best chance to be successful.

Competitive
Profile Matrix (CPM)

 

 

 

 

 

 

Dr.
Pepper

Pepsi

Coke

No.

Critical Success Factors

Weight

Rating

Score

Rating

Score

Rating

Score

1

Price Competitiveness

0.10

4

0.40

3

0.30

2

0.20

2

Top Management

0.04

2

0.08

3

0.12

4

0.16

3

Product Quality

0.09

4

0.36

3

0.27

2

0.18

4

Customer Loyalty

0.09

1

0.09

3

0.27

4

0.36

5

Market Share

0.08

1

0.08

3

0.24

4

0.32

6

R

0.06

4

0.24

3

0.18

2

0.12

7

Employee Dedication

0.07

2

0.14

3

0.21

4

0.28

8

Vending Locations

0.10

2

0.20

4

0.40

3

0.30

9

Customer Service

0.09

4

0.36

2

0.18

3

0.27

10

Market Penetration

0.06

1

0.06

3

0.18

2

0.12

11

Advertising

0.12

3

0.36

2

0.24

4

0.48

12

Financial Profit

0.10

2

0.20

4

0.40

3

0.30

 

Totals

 

 

1.00

 

2.57

 

2.99

 

3.09

 

EFE
Matrix

No.

Opportunities

Weight

Rating

Weighted
Score

1

Due to weak US dollar

0.03

2

0.06

2

Sports drink like Gatorade, Powerade
and others which is use coconut water become popular

0.03

1

0.03

3

In the beverages market, energy
drinks hold 62% of the functional

0.03

1

0.03

4

Each day about 25% people in US eat
fast food

0.05

2

0.10

5

In the China, food and beverages
consumption is forecasted to grow rapidly

0.06

2

0.12

6

Customer nowadays are concerning
about their health

0.05

2

0.10

7

Eastern Europe, India and Brazil
offer good long term

0.06

2

0.12

8

Customer is preferred flavoured soft
drinks over colas likes Dr. Pepper and Sunkist

0.07

4

0.28

9

Flavoured teas and bottled water are
expected to grow 24% and 9%

0.06

4

0.24

 

 

 

 

 

 

 

 

No.

Threats

Weight

Rating

Weighted
Score

1

Tax sugary drinks are imposed by the
governments

0.05

2

0.10

2

Among cost conscious customers,
private label products and store brand still have great appeal

0.06

2

0.12

3

In the soft drinks industry, the
sales for Coke and Pepsi is 63%

0.08

3

0.24

4

Reduce the number of companies and
increase bargaining power is consolidated by the retailers

0.06

2

0.12

5

In the winter month, the business
sales is slower

0.06

2

0.12

6

The concern about health and wellness
are increase among consumers

0.05

4

0.20

7

In the poorer economic times, soft
drinks are not perform well and considered as discretionary product

0.08

3

0.24

8

Commodity price in tin and sugar are
high

0.12

3

0.36

 

TOTALS

 

 

 

1.00

 

2.58

 

 

Internal
Audit

Strengths

·        
DPSG markets is more on non-carbonated
drinks

·        
DPSG make an agreement with COKE to
distribute DR. Pepper and Canada Dry in the US for about 75 million dollar

·        
DPSG indicate the health benefits on the
bottle label

·        
In 2011, National launch of Sun Drop

·        
6 of the top 10 non-cola soft drinks are
owned by Dr. Pepper

·        
In Beverage Industry Magazines, CEO of
DFSG Larry Young was named 2010 beverage executive of the year

·        
DPSG are able to increase the 28%
dividends, pay down their debt and repurchase shares in the 2010 sales

Weaknesses

 

·        
Revenues
comes from the United States are about 89%

·        
Revenues
comes from the carbonated soft drinks sales are about 80% only

·        
Net
sales generated through bottlers not owned by DPSG

·        
The
sales declined in 2010 for 7UP, A and Sunkist.

·        
DPSG
do not have vision and mission

·        
In
2010 Coke and Pepsi revenue growth over 13% while DPSG profit were lower

·        
Less
advertisement for brands like A, Canada Dry and Mott’s

 

 

Financial
Ratio Analysis

 

Growth Rate
Percent

DPS

Industry

S&P 500

Sales (Qtr vs year ago qtr)

4.90

30.50

14.50

Net Income (YTD vs YTD)

NA

NA

NA

Net Income (Qtr vs year ago qtr)

6.90

7.90

47.50

Sales (5-Year Annual Avg.)

11.95

9.85

8.27

Net Income (5-Year Annual Avg.)

1.63

14.68

8.68

Dividends (5-Year Annual Avg.)

NA

9.67

5.68

 

 

 

 

Profit Margin
Percent

 

 

 

Gross Margin

58.4

56.1

39.9

Pre-Tax Margin

14.1

23.2

18.1

Net Profit Margin

9.4

19.3

13.2

5Yr Gross Margin (5-Year Avg.)

57.5

58.2

39.8

 

 

 

 

Liquidity
Ratios

 

 

 

Debt/Equity Ratio

1.16

0.94

1.01

Current Ratio

1.0

1.2

1.4

Quick Ratio

0.8

1.1

0.9

 

 

 

 

Profitability
Ratios

 

 

 

Return On Equity

22.8

34.6

26.0

Return On Assets

6.1

14.3

8.9

Return On Capital

7.2

20.3

11.8

Return On Equity (5-Year Avg.)

10.8

32.0

23.8

Return On Assets (5-Year Avg.)

3.9

15.2

8.0

Return On Capital (5-Year Avg.)

4.5

20.9

10.8

 

 

 

 

Efficiency
Ratios

 

 

 

Income/Employee

29,000

67,398

126,213

Revenue/Employee

308,105

338,900

1 Mil

Receivable Turnover

11.0

9.7

15.7

Inventory Turnover

9.0

7.5

12.4

 

 

Internal
Factor Evaluation Matrix (IFE Matrix)

 

No.

Strengths

Weight

Rating

Weighted
Score

1

DPSG markets is more on
non-carbonated drinks

0.12

4

0.48

2

DPSG make an agreement with COKE to
distribute DR. Pepper and Canada Dry in the US for about 75 million dollar

0.15

4

0.60

3

DPSG indicate the health benefits on
the bottle label

0.05

4

0.20

4

In 2011, National launch of Sun Drop

0.04

3

0.12

5

6 of the top 10 non-cola soft drinks
are owned by Dr. Pepper

0.15

4

0.60

6

In Beverage Industry Magazines, CEO
of DFSG Larry Young was named 2010 beverage executive of the year

0.02

3

0.06

7

DPSG are able to increase the 28%
dividends, pay down their debt and repurchase shares in the 2010 sales

0.08

4

0.32

 

 

 

 

 

 

 

 

No.

Weaknesses

Weight

Rating

Weighted
Score

1

Revenues comes from the United States
are about 89%

0.08

1

0.08

2

Revenues comes from the carbonated
soft drinks sales are about 80% only

0.06

2

0.12

3

Net sales generated through bottlers
not owned by DPSG

0.05

2

0.10

4

The sales declined in 2010 for 7UP,
A&W and Sunkist.

0.05

2

0.10

5

DPSG do not have vision and mission

0.03

1

0.03

6

In 2010 Coke and Pepsi revenue growth
over 13% while DPSG profit were lower

0.08

1

0.08

7

Less advertisement for brands like
A&W, Canada Dry and Mott’s

0.04

2

0.08

 

TOTALS

1

2.97

 

 

SWOT Strategies

SWOT analysis
is a useful technique and often used by many company as part of their strategic
planning to better understand the strengths and weaknesses, and to identify the
opportunity and threat the company faced. The strengths and weaknesses are
identifying from the internal factors of the organization. The opportunities
and threats are determining from the external factors of the organization. The
strategic planning using the SWOT analysis comprehend the company from
competitors. This strategy also helps the company to develop good strategy to
compete with competitors in the industry. The strengths analysis of DFSG are
they have strong brands portfolio throughout North America. DPSG also have
integrated business model policies which helps the company to maintain the
quality of production and distribution of the products. Moreover, DFSG are the
experienced management, holds strong market position and customer relationship.
The broader line of products by DFS Group assured the consistent growth of cash
flow and revenue. The weaknesses of DFSG are the company received their 70% to
85% revenues from North America that includes Canada, USA and Mexico only. The
DFSG have two major competitors which are Coca Cola and Pepsi Co. and DFSG are
considerably small when compared to both companies. Moreover, the sales of
drinks are to depends on the few markets only and lack of international
exposure. The opportunities that DFSG has are the rapid growth of production of
bottled water to meet the need of market. The soft drinks markets are rapidly
growth. They have opportunities to expands business and transform in the new
market categories. Unfortunately, in the business, there must be a threats. So,
in the DFSG company, they experience some threats, which is the price for sugar
and tin is high. They also know that soft drinks are actually not good for
health and wellness among the customers. The sales during the winters season
are slower compare to others season. Other than that, the sales in the soft
drinks industry are monopoly by Coke and Pepsi. Both company get 63% sales in
the industry. Furthermore, the governments are imposing the tax for sugary
drinks.

SPACE MATRIX           

Internal Analysis:

 

External Analysis:

 

Financial Position (FP)

 

Stability Position (SP)

 

Sales

5

Rate of Inflation

-2

Debt/Equity

4

Technological Changes

-2

Current Ratio

4

Healthy Options

-4

ROE

4

Competitive Pressure

-6

ROA

2

Barriers to Entry into Market

-3

Financial Position (FP) Average

3.8

Stability
Position (SP) Average

-3.4

Internal Analysis:

 

External Analysis:

 

Competitive Position (CP)

 

Industry Position (IP)

 

Market Share

-3

Growth Potential

4

Product Quality

-2

Financial Stability

5

Customer Loyalty

-1

Ease of Entry into Market

5

Product Variety

-3

Resource Utilization

5

Control Over Suppliers and
Distributors

-4

Profit Potential

5

Competitive Position (CP) Average

-2.6

Industry
Position (IP) Average

4.8

 

 

Grand Strategy Matrix

 

 

Quantitative Strategic Planning Matrix (QSPM)

 

STRATEGIC
1

STRATEGIC
2

Develop
new type of flavours

Build a
new bottling factory

No.

Opportunities

Weight

AS

TAS

AS

TAS

1

Due to weak US dollar

0.03

1

0.03

4

0.12

2

Sports drink like Gatorade, Powerade
and others which is use coconut water become popular

0.03

3

0.09

2

0.06

3

In the beverages market, energy
drinks hold 62% of the functional

0.03

4

0.12

3

0.09

4

Each day about 25% people in US eat
fast food

0.05

0

0.00

0

0.00

5

In the China, food and beverages
consumption is forecasted to grow rapidly

0.06

2

0.12

4

0.24

6

Customer nowadays are concerning
about their health

0.05

4

0.20

2

0.10

7

Eastern Europe, India and Brazil
offer good long term

0.06

2

0.12

4

0.24

8

Customer is preferred flavoured soft
drinks over colas likes Dr. Pepper and Sunkist

0.07

4

0.28

2

0.14

9

Flavoured teas and bottled water are
expected to grow 24% and 9%

0.06

4

0.24

2

0.12

 

 

 

 

 

No.

Threats

Weight

AS

TAS

AS

TAS

1

Tax sugary drinks are imposed by the
governments

0.05

4

0.20

2

0.10

2

Among cost conscious customers,
private label products and store brand still have great appeal

0.06

0

0.00

0

0.00

3

In the soft drinks industry, the
sales for Coke and Pepsi is 63%

0.08

2

0.16

4

0.32

4

reduce the number of companies and
increase bargaining power is consolidated by the retailers

0.06

0

0.00

0

0.00

5

In the winter month, the business
sales is slower

0.06

4

0.24

2

0.12

6

health and wellness concern are
increase among consumers

0.05

4

0.20

2

0.10

7

In the poorer economic times, soft
drinks are not perform well and considered as discretionary product

0.08

0

0.00

0

0.00

8

commodity price in tin and sugar are
high

0.12

2

0.24

1

0.12

 

 

 

 

 

No.

Strengths

Weight

AS

TAS

AS

TAS

1

DPSG markets is more on
non-carbonated drinks

0.12

3

0.36

2

0.24

2

DPSG make an agreement with COKE to
distribute DR. Pepper and Canada Dry in the US for about 75 million dollar

0.15

1

0.15

4

0.60

3

DPSG indicate the health benefits on
the bottle label

0.05

0

0.00

0

0.00

4

In 2011, National launch of Sun Drop

0.04

0

0.00

0

0.00

5

6 of the top 10 non-cola soft drinks are
owned by Dr. Pepper

0.08

0

0.00

0

0.00

6

In Beverage Industry Magazines, CEO
of DFSG Larry Young was named 2010 beverage executive of the year

0.02

0

0.00

0

0.00

7

DPSG are able to increase the 28%
dividends, pay down their debt and repurchase shares in the 2010 sales

0.08

0

0.00

0

0.00

 

 

 

 

 

No.

Weaknesses

Weight

AS

TAS

AS

TAS

1

Revenues comes from the United States
are about 89%

0.08

1

0.08

4

0.32

2

Revenues comes from the carbonated
soft drinks sales are about 80% only

0.06

4

0.24

2

0.12

3

Net sales generated through bottlers
not owned by DPSG

0.05

1

0.05

4

0.20

4

The sales declined in 2010 for 7UP,
A and Sunkist.

0.05

1

0.00

0

0.00

5

DPSG do not have vision and mission

0.03

0

0.00

0

0.00

6

In 2010 Coke and Pepsi revenue growth
over 13% while DPSG profit were lower

0.08

0

0.00

0

0.00

7

Less advertisement for brands like
A, Canada Dry and Mott’s

0.04

0

0.00

0

0.00

 

TOTALS

3.72

3.80

 

 

RECOMMENDATIONS

There are some
recommendations and alternatives for DFSG to increase their company revenue. The
market targets, product lines, channel for the markets, promotion, advertising
marketing, and its pricing strategy are needed in making good decisions for the
company. Instead of developing a soft drink, DFSG can increase the R&D by
200 million dollars for developing a new energy drinks. Others alternative are
DFSG can allocate 100 million dollars’ budget for building a new bottling factory
in Croatia. 100 million dollars advertising budget for produce tea and juice
products and 200 million dollars marketing budget for Snapple teas. DSFG can
allocate budget for about 100 million dollars for developing a flavoured drinks
without sugar since people nowadays are concern on healthy life.