Cadbury Schweppes Plc reportedly is planning to reformulate its fledging 7-Up brand to better compete in the U.S. against Coca-Cola Cos lemon-based soft drink Sprite.
Cadburys U.S. subsidiary Dr Pepper/Seven Up Inc will announce the change, which will make the drink less sweet and give it a more pronounced lemon taste, at its bottlers meeting in San Antonio next Monday, according to newspaper reports. A company spokesman in Dallas declined to comment on the reformulation, saying only the company typically outlines new marketing plans at the meeting.
Analysts liked the idea of 7-Ups aping Sprites formula, but take a wait-and-see attitude of whether the brand can stop its steady slide in the markets lemon-lime segment.
Its a good idea; they have a drink thats losing market share and they are trying to stop it, said analyst Roy Burry of Oppenheimer & Co in New York. Burry expected the change may cause more young people to buy 7-Up, which now sells mostly to middle-aged consumers.
The brands share of the $54 billion-a-year U.S. soft drink market has been eclipsed by its main competitor, Sprite. Last year, 7-Up sales made up 2.8 percent of the market, down from 4.0 percent in 1985 and less than half Sprites 5.8 percent share, according to industry publication Beverage Digest in Bedford Hills, N.Y.
Sprite has been succesful at going down the demographic scale, said analyst Martin Romm of Credit Suisse First Boston.
While Sprites Obey your thirst campaign has been very successful to entice youngsters, 7-Up always has had a higher-aged demographic skew, Romm added.
Still, Cadburys recent efforts to go after the younger segment of the market by putting youthful graphics on the bottles and hip advertisements may already start to pay off. The brands sales increased 3.7 percent to capture a 2.5 percent share of the take-home soft drink market in the first six months of this year, according to Beverage Digest. Sprite, however, increased sales by 13.8 percent to corner 4.7 percent of the market over the same period.
The Dr Pepper/Seven Up spokesman attributed the sales rise to intensified marketing. He added the company increased its 7-Up advertising budget by 25 percent this year, but declined to give dollar figures.
But it remains to be seen whether increased advertising and reformulating the drink can stop the brands slide in the U.S.
Well have to see how consumers are going to like it, Credit Suisses Romm said. He didnt have a strong opinion on where the brand is going but noted the Dr Pepper brand is much more important to Cadbury than 7-Up.
The cherry-based soft drinks take-home volume increased seven percent to capture 4.8 percent of the U.S. soft drink market in the first half of this year, according to Beverage Digest.
Romm did not foresee 7-Ups reformulation causing a public outcry similar to the one Coca-Cola experienced when it tried re-make its best selling drink into New Coke in 1985.
Were not going to see the human cry over not being able to have your old 7-Up, Romm said. He did say reformulation in the U.S. could create problems for the brand overseas.
