THE DOCTOR IS IN
Copy Investors at Cadbury-Schweppes decided overwhelmingly that it was time to sever their beverage business from its chocolate-centered parent company. What that vote will mean for the beverage company and the industry as a whole, though, is up for debate.
Industry Analyst Manny Goldman said he thinks the vote will bring little more than a name change to the soon-to-be Dr Pepper Snapple Group, but George Kalil, President of one of Cadbury’s largest U.S. bottlers, hopes that the restructuring will mean more.
“If it goes through in the fashion it’s supposed to go through then I think that it could be very good for everybody,” Kalil said, “for the employees and the network.”
Kalil said that high-level decisions would have to be easier when top officers can organize meetings simply by yelling down the hall of their Plano, Tex. headquarters. Currently, he said, American brass has to bring ideas to their London bosses before making any changes. That creates logistical snags, as nearly 5,000 miles, six time zones and the Atlantic Ocean separate Plano from London.
Removing those snags, Kalil said, will allow the company to more nimbly adopt new ideas, and removing the foreign ownership could buoy the morale of associated independent bottlers.
Kalil’s family has been running the Kalil Bottling Company for 60 years, and Kalil said bottlers felt more invested in the company before Cadbury Schweppes PLC and the Carlyle Group bought Dr Pepper/Seven Up in 1995.
“We all felt like we owned part of it,” Kalil said. “That’s not easy to do when you’re part of a foreign owned company.”
He said he hopes the company will take a giant cultural step back before it moves forward, and he thinks Larry Young, who will be the DPSG’s chief executive officer, is the right man for the job.
Goldman agreed that Young – who has served as the CEO of the Dr Pepper/Seven Up Bottling Group since 2005 – represents a good choice to lead the beverage company, but that’s about the only point where Goldman and Kalil agreed.
Goldman said he goes back with Cadbury “a long way,” and he believes the spinoff won’t change how the company operates. Despite its corporate ties to London, Goldman said, the division has effectively functioned as an independent company.
“The confection business and the drinks business are really separate animals,” Goldman said. “Just the nature of the business is different.”Goldman said the two divisions usually didn’t even share finances, but that didn’t mean that the two businesses didn’t have things in common.
Both companies, Goldman said, compete as “leaner and meaner” competitors in fields dominated by a handful of giants. Cadbury wrestles with Hershey and Nestle, and Dr Pepper battles for shelf space against Coke and Pepsi.
While that may be true, Cadbury took pains to streamline their drinks division before spinning it off.
Between 2003 and 2005, Cadbury integrated Dr Pepper/Seven Up, Mott’s and Snapple into one organization. Between 2006 and 2007, they bought total control of the Dr Pepper/Seven Up Bottling Group and purchased other third-party bottlers, and, last year, Cadbury cut 470 U.S. drinks division jobs ahead of the upcoming demerger.
The resulting company will command the power of a long list of beverage brands including A&W Root Beer, Canada Dry Ginger Ale, and Sunkist.
Goldman said the management team in place has done a fine job of corralling those disparate brands, and believes they’ll probably perform at least as well when spun-off. Kalil said he expects the company to experience a period of adjustment, and hopes they will emerge as a better company.ENDORSEMENT WATCH
BLUE MOON RISING
A-B LOOSENS THE APRON STRINGS
Blue Moon – brand of the year. That’s the word from IRI, which recently released its Top 30 Beer Brand Performers ranking, the result of intensive share vs. volume growth pricing in the last year.
With the top three coming from Blue Moon, the Sam Adams seasonal line and Heineken Premium Light, the real big movers of the beer category continue to be exposed: craft, craft-y and imports.
“The historic trend of consumers trading up and paying premium price for their favorite brands continued in 2007,” said Bump Williams, general manager, IRI Beer, Wine and Spirits Practice. “In fact, 20 of the top 30 Beer performers are high-end brands that include 13 imports and seven craft brands. Brewers, Distributors and Retailers are doing a phenomenal job of meeting the ever-changing tastes of consumer demands with their new product innovations. The key now is getting the proper amount of shelf space and distribution in the right stores across multiple trade channels to support these power brands.”
The Top 30 Beer Brand Performers ranking is designed to highlight the brands that experienced significant year-over-year growth across total U.S. supermarkets in 2007. In addition to looking at volume and dollar sales, IRI also examined pricing, share growth and incremental volume and dollar contribution.
It’s not that the big brewers aren’t getting results – all three big light brands made the top 10. But the IRI poll shows retailers where the tastiest trends are.
Gotta wonder if there’s some dissension in the Red Sox’ ranks. No, not over anyone’s share of World Series dough, either. It’s probably over the variety of enhanced water they’re throwing into the clubhouse cooler. David Ortiz is well known as one of the big guns hawking vitaminwater for Coke, but Pepsi trucks in the Boston area now show catcher – and Sox team captain – Jason Varitek shilling for SoBe Life Water. Fenway Park is a Coke stadium, to be sure, but who can argue with the Captain? And what would Ted Williams, think, anyway? Chances are, he’d think “where’s the damned Moxie?” Maybe in the freezer with the rest of you, Ted… Meanwhile, look who else is on the ball for vitaminwater? Yep, there he is, basketball’s second coming, LeBron James. Remember the King James comic book for PowerAde? Betcha they don’t do volume two with him in a vitaminwater uniform.
Since the late ‘90s, the big boys of beer have successfully swallowed up the competition, holding wholesalers to exclusive contracts and dominating shelf space. Now that Darwinian order appears to be backfiring. Consumers want variety – read: crafts and imports – and wholesalers want to deliver it.
Anheuser-Busch, which has been under pressure from wholesalers, is trying to placate them and bring a little variety to your consumers. Distributors unable to carry A-B’s “aligned brands”—primarily InBev offerings like Stella Artois or Grolsch—because of statutory franchise laws will now be allowed to carry other beers, water or tea, but not wine or distilled spirits from companies other than A-B or its affiliates. While A-B is working to minimize competition with its own brands, the hope is that the arrangement will re-energize its relationship with distributors.
Meanwhile, A-B has looked within its own product line to capitalize on the craving for crafts, which are growing faster than the overall beer segment. Although its Michelob line has lagged in recent years, A-B is attempting to reinvent the “draught beer for connoisseurs” turning to a soon-to-be-launched Michelob Brewing Co. to foster A-B’s fuller-flavored beers. By turning the producer of products like Michelob, Michelob Porter, AmberBock into its own little unit, letting them experiment with old-style and new beers – like a dark wheat Bavarian-style, due out later this year – it might be able to promote its place as a home for better brew.
IRI TOP 30 BEER BRAND PERFORMERS IN 2007
(TOTAL U.S. SUPERMARKETS)
1. Blue Moon Belgian White Ale
2. Samuel Adams Seasonal
3. Heineken Premium Light Lager
4. Stella Artois Lager
5. Newcastle Brown Ale
6. Coors Light
7. Bud Light
8. Yuengling Traditional Lager
9. Miller Lite
10. Samuel Adams Boston Lager
11. Keystone Light
12. Corona Light
14. Guinness Draught
15. Samuel Adams Variety Pack
16. Model Especial
17. Michelob Ultra Light
18. Dos Equis XX Especial Lager
19. Samuel Adams Light
20. Sierra Nevada Pale Ale
21. Michelob Golden Draft Light
23. New Belgium Fat Tire Amber Ale
24. Grolsch Lager
25. Dos Equis XX Amber Lager
26. Steel Reserve High Gravity Lager
27. Red Stripe
28. Busch Light
29. Shiner Bock
30. Guinness Extra Stout
*Minimum of 500,000 cases sold in total U.S. supermarkets for 52 weeks ending Dec. 31, 2007.