Canada Dry's Domestic Marketing Activities - Research Paper Example

Canada Dry” Executive Summary The constant focus on innovation, experimentation and differentiation has made Canada Dry a successfully venture and asignificant 4% contributor in sales growth of Dr Pepper group of companies (Annual Report, 2010). Indeed, people across USA have higher Per Capita Incomes as well as have an inclination to eat out, try new food recipes and beverages. Therefore, USA is a lucrative option for Canada Dry because of similarity in tastes and preferences of Canadian and US consumers. Indeed, this sector is regulated by government authorities and strict product quality standards have to be followed by Canada Dry, which also received a notice for not offering what it had promised its customers in the energy drinks (Perrone, 2010). Canada Dry does offer a large variety of top quality beverages to customers from different market segments (teenagers, adults, middle-aged and elderly) at affordable prices. This strategy has made it one of the most recognized and successful brands with excellent reputation in the marketplace. The price structure is flexible as prices are negotiated with distributors and store owners. Cost-plus, value-based, penetration, competitive and psychological pricing strategies are used by Canada Dry. The company has established an efficient distribution and supply chain network. The chief distributor of Canada Dry is known as Canada Dry Bottling Company that has also signed agreements with Skinny Nutritional, Frontier Beverages and Clearly Canadian distribution firms for supplying beverages across North American markets. However, the underlying weakness of Canada Dry is that it does not produce in New Jersey; rather it has assigned responsibility to Pepsi Cola to produce some flavors on limited scale. The researcher has recommended the strategic planners of Dr Pepper Group to establish production facilities across New Jersey and produce beverages on a wider scale as they have immense business potential. Chapter # 1 - Introduction to Canada Dry Canada Dry was initially a small beverage producer that initiated its operations by a pharmacist and chemist known as John J. McLaughlin in 1890 in Canada. John was proficient in production of soda that he used to supply to pharmaceutical industry. Indeed, the soda was used as an ingredient in production of beverages such as flavored and fruit juices. Unequivocally, John was a creative person who believed in experimentation and innovation, which later enabled him to develop a unique recipe during early 1900s for beverage known as ‘Pale Dry Ginger Ale’. The developer of recipe then expanded its operations to USA and starting offering its beverage in the New York City. A manufacturing plant was also established so that Canada Dry could cater the growing demand in highly lucrative U.S. markets (Dr. Pepper Group, n.d). As far as international success story of Canada Dry is concerned, it should be highlighted that the Cadbury Schweppes of London purchased business operations of Canadian beverage producer in 1986; however, the Cadbury later sold the company to Dr Pepper Snapple Group, Inc. in 2008, which today owns and manages all business activities of Canada Dry. It is worthwhile to mention that Dr. Pepper is a famous beverage company that markets more than 50 brands across USA and global markets. Ginger Ale beverage has, indeed, given Canada Dry the recognition as the company is still famous because of the aforementioned brand, which enjoys considerable share in sales volume (Dr. Pepper Group, n.d). Chapter # 2 - Target Markets and Segmentation Canada Dry has a very broad target market, which comprises of customers from all the classes and age groups. In fact, the group targets health conscious customers from elite, upper – middle, middle – middle and lower – middle social classes that demand top quality beverages at affordable prices. For instance, Canada Dry Group also markets its products to teenagers, young adults, middle – aged and elderly customer groups and market segments. Without any doubt, the main products of the company are beverages, which are greatly appreciated and demanded by customers from above mentioned segments. However, the energy products, flavored and fruit juices, carbonated soda drinks are more popular among the customers between age bracket of 15 – 35. For instance, the tonic water drinks are mostly demanded by middle-aged and elderly customers that are between age bracket of 40 - above (Cole, 2010). Geographic Segmentation The Dr. Pepper group has been targeting its goods and services to consumers in different geographic regions such as North America (Canada and USA), Mexico, Asia (India and other emerging nations with tremendous business scope) and Europe. Nonetheless, the Canada Dry products are offered all across USA such as New York, New Jersey, Delaware, southeastern Pennsylvania, eastern Maryland etc. Indeed, Canada Dry has adopted a mix of globalisation, adaptation and localization marketing strategies so that it could entice customers from all US states towards its brands. It should be highlighted that Canada Dry offer product that are widely available as well as beverages that have limited supply in the markets. This will be discussed in detail when I provide the product section of Marketing Mix (Cole, 2010). Demographic Segmentation The group does consider the demographic factors such as age, gender, marital status, education level etc. before developing and marketing existing and new beverages across chosen markets. For example, the group is targeting teenagers and young adults (between 15 – 22 years) by offering energy drinks, lemonades, carbonated drinks, Seltzer Water (Orange, Lime, Raspberry, Cherry), Golden Cockerel Ginger Beer and flavored juices etc. to the customers that heavily demand the above mentioned products. Indeed, the demand of beverages for every segment is different because of certain age differences (Annual Report, 2010). Psychographic Segmentation The company has also segmented its customers after analysing their tastes and preferences, standards of living and life styles, level of health consciousness and other psychographic factors. For example, the teenagers and young adults demand more flavored juices, colas, carbonated soda and energy drinks because they spend time on sports and other recreational activities. Hence, their calorie consumption is much higher because of play activities as compared to consumption of any middle – aged or elderly customer. As far as life styles are concerned, the beverage producer supplies its products at all major retail outlets in main US markets (different states) so that customers from elite and upper - middle classes (who demand convenience, comfort and luxury) could easily make purchases and enjoy their desired drinks / beverages (Annual Report, 2010). Behavior Segmentation Behavior segmentation overlaps (to some extent) with psychographic segmentation because it also includes consideration of consumer behaviors, life styles, perceptions, attitudes, beliefs etc. Hence, marketers at Canada Dry are also involved in behavioral segmentation because they design and market specific products to consumers with different background experiences, education level, standard of living, beliefs and attitudes. Tonic water is one of the evident examples usually offered to health conscious customers (Annual Report, 2010). Chapter # 3 – Marketing Mix 3.1 - Product Canada Dry has been well aware of the fact that potential US customers appreciate its Canadian beverages because of resemblance in tastes and preferences. Hence, the international beverage / drink seller has been offering almost all of its Canadian beverages (recipes) including flavored and fruit juices, colas, carbonated soda, tonic water, soft drinks etc. in the American market. Indeed, the company has also used adaptation and localization strategies if some products do not really meet core American tastes and thus may fail to attract maximum customers. The food beverages offered by Canada Dry have relatively inelastic demand for consumers that only desire purchasing the company’s beverages. Indeed, it is a proven fact that customers of Pepsi and Coca Cola have become addicted to the cola and white beverages produced and marketed by two supranational organizations. Thus, a large of customers become loyal to their products and does not switch to any other company. Similar is the case with Canada Dry as customers who purchase and drink Ginger Ale do not shift to any other company because of unique taste and premium quality of Canada Dry’s beverages. For instance, the producer also does not face still competition in the marketplace because no other company has so far launched a product with such outstanding taste that could compete with Dry and Diet Ginger Ale. As far as the product classification is concerned, it should be pointed out that these beverages offered by Canada Dry fall in the category of Convenience products because they could be purchased from any food outlet, commercial or retail store. However, the products do not require any comparison about taste and quality because beverages available at all selling points have homogenous taste and packaging. Indeed, they are not shopping and specialty products because food beverages have relatively inelastic demand, they could be considered as a necessity as are being demanded by every individual (Bev Net News. 2009). As far as the product portfolio of Canada Dry is concerned, it should be noted that the beverage producer has relatively extensive brand portfolio comprising of products such as “contains citrus soda, tonic water, sparkling water and other flavored beverages such as bitter lemon, pineapple and wild cherry” (Internet: Dr Pepper Group, n.d). The following product list has been obtained from www.canadadry.com and http://www.drpeppersnapplegroup.com/ Canada Dry Ginger Ale Canada Dry Diet Ginger Ale Canada Dry Green Tea Ginger Ale Sussex Golden Ginger Ale Cranberry Ginger Ale Diet Cranberry Ginger Ale Canada Dry White Tea Ginger Ale with Raspberry Lemon Ginger Ale (retired) Canada Dry Tonic Water Canada Dry Diet Tonic Water Canada Dry Club Soda Canada Dry Lemon Soda Canada Dry Bitter Lemon Canada Dry Tahitian Treat Canada Dry Golden Cockerel Ginger Beer Canada Dry Spur Cola, Hi-Spot, Apple, Tutti (cherry and fruit punch), Wink, and Orange Canada Dry Flavored Sparkling Seltzer Water (Orange, Lime, Raspberry, Cherry) The above mentioned products are those that are widely available all across USA and North America. In addition, Canada Dry has also produces and offers beverages of which supply of some flavors is kept limited, despite the fact the demand for such drinks has always there. It should be noted that Canada Dry has partnered with Pepsi Cola, which is USA’s most famous national beverage producer, well – established, globally recognized and accepted brand name. Indeed, Pepsi Company has established a production facility at Pennsauken Township, New Jersey, which not only produces Pepsi’s own products but also manufacture beverages for Canada Dry on a limited scale. The list of beverages, which are produced by Pepsi Cola on a limited scale for Dr Pepper’s beverage company, is as under: Pineapple Canada Dry Peach Canada Dry Black Cherry Wishniak Island Lime Wild Cherry Source for above products - www.canadadry.com and http://www.drpeppersnapplegroup.com/ It is worthwhile to mention that Canada Dry Green Tea Ginger Ale is the most famous beverage offered by the company because of unique taste and improved packaging. Canada Dry offers beverages in different sizes i-e from 100 ml to 10 litre bottles. The prices are charged accordingly. For instance, the recipe of Ginger Ale has become famous among households because it has a “crisp and light taste without any usage of caffeine”. The beverage company pays special attention to value addition, value proposition, differentiation, positioning and branding of its products because this enhances the credibility of product and helps in fetching higher prices for the same product. 3.2 - Place The company has established its dealership network by choosing the dealers that supply products across densely populated cities and commercial cities of United States. Indeed, this is an attempt of Canada Dry to attract maximum customers towards its brand and increases sales and business profits. Also, the new dealers are also inducted in the distribution network with the passage of time so that Canada Dry could increase its reach in the market and ensure Utility of Place and Time. In simple words, the Canada Dry company makes sure its beverages demanded by teenagers and young adults are available at most of the retail stores so that sales volume and monetary gains could be increased. In other words, the marketers of beverage producer formulate and implement strategies to ensure efficient supply, availability, accessibility, convenience, reliability, greater variety and freedom of choice. According to Clearly Canadian (2004), “Canada Dry Bottling distributes soft drinks and alternative beverages in the five boroughs including, the Bronx, Brooklyn, Manhattan, Queens and Staten Island as well as Long Island, Northern New Jersey, Westchester and portions of Upstate New York.” It should be pointed out that the major distributor / supplier of Canada Dry is known as Canada Dry Bottling company that works under guidance and supervision of its owner Harold Honickman. Indeed, Honickman initiated the business operations of its distribution firm in 1981 and today has also been involved in production of various ‘soft drinks and alternative beverages’. The firm is involved in distribution of Canada Dry beverage company products to four main destinations / markets across USA that are named as Maryland, New Jersey, New York, Michigan and Virginia. The company had not only a large and organized sales network but also had established over ‘6 production units and 17 warehouse facilities” during 2004 (Clearly Canadian, 2004). The distributor of Canada Dry is also a major supplier of top beverage brands such as Pepsi Cola Company and Cadbury Schweppes (which was the initial owner of Canada Dry). In addition, Canada Dry has also formed an agreement with Pepsi Company of which one of the plants is located at Pennsauken Township, New Jersey. According to this agreement, Pepsi would produce and supply some beverages and flavors to Canada Dry that will then be distributed in southern New Jersey, Delaware, southeastern Pennsylvania, and eastern Maryland by Canada Dry Bottling Company. In other words, the Canada Dry does not produce in New Jersey, yet its Ginger Ale and soda beverages, tonic water, flavored and fruit juices are available in above mentioned marketers on a large scale. However, some products and flavors that are produced by Pepsi Company have limited supply (refer to previously discussed Product section of Marketing Mix) and thus marketed on a short scale. Nevertheless, the demand of the products has been there and Canada Dry should focus on this underlying weakness in order to increase sales in many potential markets (Annual Report, 2010) & (McDonalds, 2009). Canada Dry Bottling Company has also been signing agreements and entering into partnerships with other distribution firms so that they could collaborate and enhance sales of different beverage producers. For instance, Canada Dry first reached a consensus with Clearly Canadian during 2004 – 2005 under which both companies would supply Canada Dry’s products to different locations and markets. Similarly, another agreement was signed with Skinny Nutritional in 2009 under which the both distribution firms would supply beverages of Canada Dry and other producers across North American markets (McDonalds, 2009). Another such example is the agreement between Frontier Beverage and Canada Dry Bottling that also had similar sort of conditions about distribution of beverages (Just-Drinks News, 2010). Overall, the goods are transported through road transport system and trucks are usually used for transport of products to warehouses from one city to another. The whole sellers are then provided the products in bulk quantities. The whole sellers later sell the beverages to retailers who, in turn, offer to end-users. 3.3 - Promotion It should be pointed out that Canada Dry would have not become successful if it had not adopted a strong promotional strategy across USA. For instance, the beverage producer (and marketer) has continued the concept of famous "down from Canada came tales of a wonderful beverage” advertising campaign so that it could attract new customers towards its beverages. Canada Dry uses print (Newspapers, Magazines, publications etc.), electronic (TV), radio, and internet media for publicity and promotion of products. Websites such as www.canadadry.com are specifically designed to cater US customers. In addition, the official website of Dr Pepper Snapple Group – http://www.drpeppersnapplegroup.com/ are also used for providing public information about promotional deals, location of retail stores, contact numbers etc. The Canada Dry US division website provides complete information about recipes and ingredients used in production of different beverages. For instance, the customers could approach representatives if they have any queries, suggestions, complaints or issues regarding product quality, supply and distribution related issues etc. (Just-Drinks News, 2010). Since, the acquisition of Canada Dry by Dr Pepper Snapple, the group has improved marketing campaigns and has started sponsoring the TV shows so that they could target their beverages to the mass audience. One of the most common examples of Canada Dry’s sponsorships is agreement and partnership with “Mad Men” according to which the beverage producer will sponsor entire drama serial for the current season. In addition, the partnership included the development of “custom heritage vignette” by AMC and the advertisement would be run / presented during the commercial breaks of all episodes of Mad Men show. For instance, the beverage producer had also sponsored the final grand episode of Mad Men so that it could build relationships with advertisers and celebrities that endorse promotional campaigns of Canada Dry. Indeed, Canada Dry has also adopted the similar promotional strategy prior to acquisition by Dr Pepper Snapple in 2008 (Elliot, 2010). Canada Dry had also launched a major integrated media campaign to promote its new Dry and Diet Ginger Ale. The Dr Pepper Group wanted to generate excitement around the health conscious families that demand beverages with sweet flavor. Indeed, the company had created a unique offering campaign that spoke to the way its target consumers used media resources to get awareness and know-how about different beverages and tonics (Face book Fan Page, 2010). Canada Dry’s social media department allows participation between a brand and consumers. The beverage seller has created a new layer of influencers such as mainstream media, bloggers, digital influencers, and consumers. Indeed, the company opts to use Social media press release (Embedded video, photos, logos, URLs etc) and Social media newsroom. In addition, the company has been using social networks. It has designed a page at Facebook that posts news, promotion, events, commercials and related videos. Similarly, the company uses YouTube to post commercials and other related contents such as viral videos, event coverage, and interviews with company’s key executives. Similarly, the company also uses Micro blogs namely Twitter as well as designed a profile at My Space (not very popular) that also provide information about promotions, new arrivals, events etc (Face book Fan Page, 2010). Another strategy that I could identify is the company’s logo and the color combination they use on beverage cans, plastic and glass bottles. The company’s name is clearly presented in an appropriate font size that enables the potential customer in easily identifying Canada Dry products. The pink and maroon (reddish purple) color combination attracts the consumers and makes the products very eye-catching (Internet: Canadadry.com). In addition to above mentioned, billboards have proven to be a very effective marketing strategy for a very long time, mostly on top of a high-rise buildings and/or in-front of a public building with a lot of daily traffic passing by. Canada Dry has been using this strategy and deployed its billboards all across targeted US markets so that the products could gain attention of maximum customers. It is worthwhile to mention that the company uses informative advertising to market new products. Also, the packaging innovations in existing products are communicated through informative and persuasive commercials at traditional media (print, radio and electronic) to maximize sales volume and business growth. For instance, the reminder advertising technique has also been adopted for even famous products such as ‘Ginger Ale’ as an attempt to retain market share. Above all, the company also uses push sales marketing strategy and its major distributor known as Canada Dry Bottling Company offers discounts to retailers, whole sellers and dealers to push customers and trigger purchases responses (Annual Report, 2010). 3.4 - Pricing The prices charged by Canada Dry are different because of change in recipes, ingredients, flavors sizing and quantity. For example, water tonics are available within a range of $1 - $20 depending upon the certain differences in the product. Similarly, the price of a 250 ml Ginger Ale beverage is different from the price of a water tonic because of change in recipes and ingredients (Internet: thefind.com). It should be highlighted that marketers of Canada Dry have used various pricing strategies some of those are as follows: 1) The first strategy is known as cost-plus pricing that refers to charging price after calculation of total product development (fixed and variable) costs and addition of a certain percentage profit. For example, if a product costs $1 to a manufacturer who has inclination to earn a 15% profit margin then marked price of product will become $1.15. The formula is, Market Price = Total Costs + Profit % of (Total Costs) 2) The second strategy is known as value-based pricing that refers to charging prices after analysing value and satisfaction (or utility) a certain product provides to buyers. The profit margin is determined after the valuation of a specific product. For example, Products such as Ginger Ale and water tonics generate greater value for customer and thus widely used. Therefore, Canada Dry uses value-based pricing strategy for premium quality products that are aggressively marketed and advertised (Pollard, 2010). 3) The third strategy used by Canada Dry is known as penetration pricing that refers to charging lower prices to increase product sales. Indeed, this strategy is widely used when the inventory at stores (or stocks) increases because their products have surpassed maturity stage and entered into declining stage. Nevertheless, the existing products are offered in existing markets at relatively lower discounted prices or throw away prices so that firms could tempt and sell to late adopters or laggards and minimise financial losses. It should not be forgotten that firms incur additional costs on storage, warehousing and advertising of products of which product life-cycle is about to end. Hence, it would be better to unload such inventories, cover maximum product costs and focus on new products with better growth prospects. For instance, I visited different online stores such as www.thefind.com and www.ebay.com and confirmed that some products were being sold on discounted prices by stores so that they could entice customers, increase sales and clear off inventories (Internet: thefind.com). 4) The fourth strategy is known as competitive pricing that refers to analysing market prices of available substitute products offered by competitors and then setting (affordable) prices to effectively compete in the marketplace. The beverage industry is extremely competitive because consumers already have close substitutes of products at their disposal. A large variety of products is already available that provides greater choice and increases consumer bargaining power. For instance, Canada Dry although does not face any real competition for its Ginger Ale products; however, it has to employ competitive pricing strategy for flavored and fruit juices, carbonated, soda and energy drinks because of cutthroat competition. 5) The fifth strategy used by Canada Dry is known as psychological pricing that refers to charging prices that could match customers’ buying / spending limit. For example, Canada Dry charges $1.89 or $1.99 for customers that are penchant to buy products under $2 and he / she would possibly disregard any beverages priced above the stated $2 limit (Internet: thefind.com). Chapter # 4 – Recommendations The researcher would like to provide following two recommendations to the strategic planners of the Dr Pepper Groups who own Canada Dry brand. The suggestions are as follows: 1) The first recommendation is about improvement of supply side of Canada Dry, which comes under Placement section of Marketing Mix. It would be recommended that top management should establish a production facility through induction of state-of-the-art plant and machinery at Pennsauken Township or any other industrial zone of New Jersey. Indeed, this would not only reduce the dependence of Canada Dry over Pepsi Cola Company but also enable mass production of current flavors with limited supply. For instance, the short – term investment costs will (although) be higher but the long run benefits will be much greater obtained in the form of decline in cost of production of beverages, economies of scale and efficient supply / distribution of beverages in potential business markets such as in southern New Jersey, southeastern Pennsylvania, Delaware and eastern Maryland etc. Hence, the sales volume will increase in near future that would definitely contribute in business growth and sustainable development. 2) The second recommendation is about improvement of “product packaging”, which is viewed as an essential part of Marketing Mix. At present, the company offers its disposable products in ordinary plastic pet bottles of different sizes. It would be recommended that top management should offer disposable beverages in biodegradable packaging mainly because the pet bottles could be recycled and are environment friendly (does not contribute in environmental pollution). Also, Canada Dry could recycle biodegradable pet bottles; thereby using them as a cheaper raw material to produce new pet bottles. In this way, total costs will be reduced due to reuse of pet bottles while profits profit margin increase. Bibliography Clearly Canadian News (2004). Clearly Canadian and Canada Dry Bottling Company of New York Enter into Distribution Arrangements. Clearly.ca [Online] Available at http://www.clearly.ca/news/050304.pdf Pollard, Garland (2010). Canada Dry Wink Fans Please Speak Up. Brand Land USA [Online] Available at http://www.brandlandusa.com/2010/09/20/canada-dry-wink/ No author (2010) “Canada Dry Cranberry Ginger Ale” Eat Like No One [Online] Available at http://www.eatlikenoone.com/canada-dry-cranberry-ginger-ale.htm Wall Street (2010). Earnings Cheat Sheet: Dr. Pepper Snapple (DPS) Impresses the Street on Strong Snapple Sales. Wall Street Cheat Sheet [Online] Available at http://wallstcheatsheet.com/tag/canada-dry Dr. Pepper Group (n.d). Tales of a Wonderful Canadian Beverage. Dr. Pepper Snapple Group [Online] Available at http://www.drpeppersnapplegroup.com/brands/canada-dry/ Cole, Sean (2010). Canada Dry. Close and Far [Online] Available at http://www.closeandfar.org/?p=474 McDonald, Don (2009). SKINNY NUTRITIONAL CORP. AND CANADA DRY BOTTLING COMPANY OF NEW YORK ENTER INTO DISTRIBUTION AGREEMENT [Online] Available at http://www.skinnywater.com/images/uploads/press/canada_dry_press_release.pdf Hatch, Denny (2010). Famous Last Words: The Ad That Built Factories. Target Marketing [Online] Available at http://www.targetmarketingmag.com/article/the-ad-that-built-factories-416125/1 Bev Net News (2009). Canada Dry Bottling Company of Lansing Brings drank to Michigan. Bev Net [Online] Available at http://www.bevnet.com/news/2009/3-31-2009-drank_canda_dry_michigan Perrone, Matthew (2010). FDA warns Canada Dry, Lipton about green-tea claims. USA Today [Online] Available at http://www.usatoday.com/money/industries/food/2010-09-07-canada-dry-lipton-green-tea_N.htm Just-Drinks News (2010). US: Canada Dry to distribute Frontier Beverage’s ‘Unwind. Just Drinks [Online] Available at http://www.just-drinks.com/news/canada-dry-to-distribute-frontier-beverages-unwind_id101641.aspx Elliot, Stuart (2010) “Commercials in ‘Mad Men’ Style, Created for the Series” New York Times [Online] Available at http://www.nytimes.com/2010/08/04/business/media/04adco.html Annual Report (2010). Dr Pepper Group Annual Report 2009. Canada Dry Web Sources Canada Dry’s Face book Fan Page (2010) www.thefind.com www.ebay.com www.canadadry.com http://www.drpeppersnapplegroup.com/ Read More