Freed from Cadbury in 2008, it has been cutting costs while building up brands and sales

In the soda wars, Dr Pepper Snapple Group (DPS) (DPSG) has long run a distant third to Coca-Cola (KO) and PepsiCo (PEP). But the beverage maker is experiencing a surprising renaissance. Its stock is up 154% since March, compared with a 33% climb for Coke and a 32% rise for Pepsi. Sales of its flagship brand, Dr Pepper, are bucking the industry trend, rising almost 3% in the first half of this year while overall soda consumption dropped by that much, according to Beverage Digest. Analysts expect the company to post a $498 million profit this year, up from a $312 million loss in 2008.

For CEO Larry D. Young, the turning point in DPSG's fortunes came with the Plano (Tex.) company's spin-off from Cadbury (CBY) in May 2008. That allowed Young to cut costs and invest the savings in building up long-neglected brands and distribution networks. His team no longer has to wait months for decisions to be vetted by the U.K. parent or kick up profits when London management came "dialing for dollars," as Young puts it. (Cadbury declined to comment.) Now he's focused on bringing more attention to his 58 brands, which include A&W Root Beer, 7Up, and Canada Dry, along with Dr Pepper and Snapple.


"THEY HAVE TO BE SCRAPPY"

That means more money for quirkier and more plentiful advertising, a push for new products, and wider distribution. Much of the company's efforts are focused on the austere, all-white laboratory housed on the first floor of headquarters. Here a team of 75 food scientists, chemists, microbiologists, and engineers team up to create the next generation of DPSG products. Their $17 million budget comes nowhere near PepsiCo's $388 million for research and development, but it has had an impact, with seven new products launched last year. When research showed that parents were watering down their children's juice to cut back on calories, the team created a new version of its Mott's apple juice with 40% less sugar but the nutrition of full-force juice, called Mott's for Tots. That hit a note with moms worried about empty calories, prompting Young to add new flavors and product sizes.

DPSG is also working more closely with retail partners like 7-Eleven. Young moved the research team from Connecticut to Texas partly to integrate customer feedback better. "They're aggressive, and they understand that they have to be scrappy," says 7-Eleven CEO Joseph DePinto. Another hit: Canada Dry Green Tea Ginger Ale, which boosted volume 2.6% in the ho-hum category of soda. Though Snapple sales continue to sink despite resizing the bottles to fit into a car's cupholder, a switch to sugar from corn syrup, and new advertising, Young is determined to reverse that trend: "If it's going to be in my company's name, by God, we're going to do something with it."

He has upped his marketing budget while rivals have cut back. Eric Hirshberg, president and chief creative officer at Deutsch LA, DPSG's advertising firm, argues that "Coke and Pepsi, all they have to do is remind you why you like the brand. Dr Pepper has to tell you why you should drink this more."

But the biggest key to success is distribution. Recently Dr Pepper scored a coup: a fountain spigot in McDonald's (MCD) 14,000 U.S. restaurants. And staffers like Tony English, DPSG's director of supermarket sales in Dallas-Fort Worth, where people drink more Dr Pepper than Coke, spend their days hustling from one store to the next. His team's only day off: Christmas. Young would have it no other way. "Strategy is fantastic," he says. "But execution is what brings the results in."




[businessweek]

Nestle has become the first global brand to launch a campaign that allows Twitter users post tweets into an ad unit that can appear anywhere on the web.



The brand is testing the ‘Twitter Pulse' format, developed by SocialMedia, as part of a drive to promote its Juicy Juice children's fruit drink in the US.

The ad unit appears on a range of parenting sites asking questions including ‘How do you stimulate your child's mind?' and ‘How important are vitamin enhanced foods to you?'

Users who are already logged in to Twitter can answer the questions by posting tweets directly into the ad, while those not logged in are directed to the microblog to enter their user name and password.

As well as appearing in the Juicy Juice ad unit, users' tweets also show up in their Twitter feeds with a hashtag. All comments are moderated by Nestle.

Consumers that click on the ad unit are taken through to Juicy Juice's YouTube channel, which contains a series of videos aimed at parents.

Nestle and SocialMedia are tracking a number of metrics for the Juicey Juice campaign, including views and click-through rates, as well as the number of users exposed to the hashtag via Twitter.

Pepsi is including a Twitter tag on the can of its newest line of bubbly drinks Pepsi Raw, asking consumers to log-on to the microblogging website and share their thoughts on the soda in 140 characters or less.

[brandrepublic]

As sales turn flat amid eco-concerns, water marketers are stepping up efforts to regain customers and are moving into pricey flavored waters.
 

The once red-hot bottled water industry has lost its sparkle. The $12-billion-a-year business has gotten whacked in the past year by the weak economy, an environmental backlash against plastic bottles, and competition from trendy canteens, often filled with tap water. That has left water marketers taking drastic steps to win back consumers, including a 3D Super Bowl ad and investments in the Fijian rain forest.

U.S. consumers gulped 8.9 billion gallons of bottled water in 2008, a 2.3% increase from the previous year, according to the research firm Beverage Marketing. That's a sharp decline, though, from the 8% to 12% annual growth the business enjoyed earlier in the decade, when such celebrities as Paris Hilton posed with Evian bottles and consumers drove around with cases of bottled water in the backs of their cars and SUVs.

Some of the biggest players in the industry are now reporting disappointing results. Industry leader Nestlé, owner of the Perrier, Poland Spring, and Arrowhead brands, says its water sales were flat in the U.S. through the first nine months of 2008 and down 3% globally. At Coca-Cola (KO), volumes of "still" beverages remained flat in the third quarter, due largely to declines in its Dasani brand. PepsiCo (PEP) saw its noncarbonated beverage volume fall 5% in the same period. Sales of its No. 2-selling Aquafina brand fell by double digits. The faltering economy is of course the biggest problem, as companies and cash-strapped consumers cut back on everything from trips to the convenience store to deliveries of five-gallon jugs. That has prompted a price war, with 24-bottle cases selling for as little as three-for-$10 in supermarkets.

Too Much Plastic

The environmental issue is close behind. Green activists have been agitating for years that all those billions of plastic bottles were an eco-disaster. Recently, their complaints have gotten heard. Cities such as Seattle and San Francisco have told their municipal offices to stop buying water in small plastic bottles. And high-end restaurants in New York and Los Angeles that used to fatten up customers' checks by pushing "sparkling or tap" have stopped for fear of being seen as environmentally incorrect.

Don't blame us, says Joseph Doss, president of the International Bottled Water Assn., a trade group. He's quick with stats that say plastic water bottles represent just 0.3% of the waste in landfills, and points to recycling programs such as one in Hartford, Conn., where residents get store coupons for returning used bottles. He notes that plenty of other refreshments get served in plastic. "It's just unfortunate people are turning it into a tap-water-vs.-bottled-water issue," Doss says. "Consumers are making other beverage choices, including teas, soft drinks, and juices."

That's a position Nestlé is also taking, putting messages on its bottles reminding customers that a typical 12-oz. soda contains 10 tablespoons of sugar and that substituting a bottle of water every day would eliminate 3,560 tablespoons of sugar a year. Nestlé has also been a leader in reducing the amount of plastic used in its bottles from 15 grams two years ago to 12.5 grams now. Later this year it will release a new version of its "eco-shape" bottle that will contain only 10 grams, even though the lighter bottles strike some consumers as easy to spill. "We had to teach people, flimsy is good," says Kim Jeffery, chief executive of Nestlé Waters North America.

Here Come Refillable Bottles

Other companies are also brushing up their eco-credentials. Groupe Danone, maker of Evian, is transporting its bottles by train in Europe to lesson the use of exhaust-spewing trucks. Fiji Water—which had to lay off 40% of its staff in December due to a weakened sales outlook—launched an educational Web site called Fijigreen.com and is contributing funds to reduce logging on the South Sea islands where its water is sourced. This month, Coke opened a bottle-to-bottle recycling plant in Spartanburg, S.C., that will use old bottles to produce enough plastic for nearly 2 billion new 20-oz. bottles every year.

Coke and Pepsi, meanwhile, have substantially cut back advertising for their Dasani and Aquafina brands, according to market researcher TNS Media Intelligence. Instead, the beverage behemoths are cranking up spending on flavored waters, for which they can charge higher prices. Coke paid a staggering $4.1 billion for Glaceau, maker of the Vitaminwater brand, in 2007. Since then it is heavily promoting the brand as a sports drink, with spots featuring athletes airing on the ESPN (DIS) cable networks. Pepsi, meanwhile, is featuring its SoBe Lifewater in a 60-second, 3D ad during the Super Bowl on Feb. 1.

When it comes to what's cool, though, the bottled water business must now compete with a hot new product: refillable bottles made by such companies as Sigg, CamelBak, and Kleen Kanteen. And for now, at least, the tap-water crowd has the high ground in the battle over who is greenest. "The bottled water business hasn't figured out a way to address the fundamental fact that municipal pipes are the most environmentally friendly way to distribute water," says Paul Shustak. His company, KOR Ideas, sells a reusable plastic "hydration vessel" made, in case you're curious, without any hormone-disrupting Bisphenol A.

[businessweek]