How the 'UnColas' Win With P-O-P

Third place usually gets you a bronze medal or a pat on the back. But being the third largest producer of soft drinks in the biggest soda-guzzling country on earth is far more lucrative. The soft-drink industry gushes hard cash (more than $49 billion at retail last year, according to Beverage Digest magazine), and Dr Pepper/Seven Up Corp. owns an 11.4 percent market share.But take a look at its competition. Coca-Cola USA owns a whopping 41.1 percent market share, and Pepsi-Cola isn't too far behind with 30.8 percent. At times, the marketing managers at Dr Pepper/Seven Up must feel like the biblical David, except they face two Goliaths.Actually, the notion of soft-drink marketing "wars" overstates things. The cola Goliaths often do slug it out with advertising and promotions, but Dr Pepper/Seven Up has learned, by necessity, to co-exist peacefully with both of them.Keeping Bottlers HappyLike other soft-drink manufacturers, the Dallas-based company's direct customers aren't consumers or even retailers. They are the 750 licensed bottlers who purchase the concentrates, extracts and syrups that Dr Pepper/Seven Up produces. What's more, these bottlers constitute the promotional lifeline because they buy, distribute and install the lion's share of the company's P-O-P materials.In many cases, however, the right to bottle Dr Pepper and/or 7 UP is placed in the hands of an area's primary Coke or Pepsi bottler. If a Dr Pepper P-O-P display were to knock the colas, these bottlers probably wouldn't use their co-op funds to buy it and install it in the field."It's a very complicated market," concedes Tom Bayer, director of corporate communications for Dr Pepper/Seven Up. "The irony is that although we compete with Coke and Pepsi, Coke and Pepsi also are two of our biggest customers."Bayer says that while negative promotions have happened, "they are rare and unusual. Quite frankly, from a competitive perspective, there is no real future in trying to compete against Coke and Pepsi. We have a niche and we try to excel in that niche."The Dr Pepper/Seven Up niche is being the premier noncola marketer in the soft-drink business. In that sense, all of the corporation's brands really are "UnColas," the famous marketing theme that the Seven Up side of the company revived two years ago.The prime brands are Dr Pepper and 7 UP, as well as their various diet and cherry-flavored versions. The company also owns Welch's fruit-flavored carbonated drinks, IBC Root Beer and IBC Cream Soda. The company's foodservice division is licensed by Cadbury Beverages to distribute Canada Dry, Sunkist and Tahitian Treat soft drinks.Although some of its brands are more than a century old, the company is relatively young. Dr Pepper/Seven Up was formed in May 1988 as the result of a merger of two holding companies. The company later went public in January 1993. Last year, it achieved total sales of $707.4 million. More significantly, it was the fourth consecutive year that the company's sales growth outpaced industry averages.Purchasing CloutAt Dr Pepper/Seven Up, the sales and marketing of the primary brands are managed by separate divisions. One group of promotion managers develops Dr Pepper bottle/can P-O-P materials; another handles 7 UP bottle/can P-O-P; and yet another is in charge of foodservice division projects. These promotion managers work with the company's in-house design agency as well as outside artists. But they rarely, if ever, work together.However, they all turn to Richard Lee Hilton, purchasing manager, Dr Pepper/Seven-Up, to handle the procurement of graphically produced materials, including P-O-P merchandisers, for all the brands. Christi Lowin, sales promotion manager, explains the system: "We work with the design companies and then rely completely on Richard, because he has the experience working with all the suppliers. He knows what he's doing, so we let him do it."Hilton, who works with a four-person procurement staff within the 20-person purchasing department, is a 35-year veteran of the graphics field. His department has a working relationship with all suppliers, he says, including those who are authorized to sell P-O-P materials directly to bottlers.While not directly involved in the creative development of a project, Hilton says the procurement staff sits in on planning sessions to offer cost-control advice and guidance. He stresses that the department "bids all projects to receive the best value to the company and our franchise bottlers."New suppliers contact him every day, "all day long," but Hilton says he's primarily interested in talking to companies that have new techniques that fit soft-drink industry needs. While he works with dozens of suppliers throughout the country, he is reluctant to single out any for special mention. "I don't want to name them," he jokes. "Today they may be my favorite, but tomorrow I may want to get rid of them."Does the Doctor Order P-O-P?While the Dr Pepper bottle/can division is the company's biggest, it's arguably the least active in terms of P-O-P promotion. Paul Krauland, director of sales promotions, says Dr Pepper rarely gets an exclusive display in stores. "Typically, we are aligned with a Coke or Pepsi bottler. In most cases, we are displayed as part of a Coke or Pepsi piece. Those bottlers are going to spend their funds on the Coke- or Pepsi-brand point-of-sale before they are going to spend it on a Dr Pepper sign."Another factor is the growing pressure on the bottlers' field personnel. "Bottlers have kept the number of their merchandising people constant, but the number of stores that they are servicing has grown," he explains. "It is harder for them to handle the merchandising."For these reasons, Dr Pepper bottle/can managers tend to keep P-O-P efforts simple. "We provide two main types," Krauland explains. "We have what we call paper or temporary point-of-sale which, for the most part, simply conveys a price message for our bottlers. This includes items such as shelf talkers, pole toppers, static clings and posters. On the other side, we have what we call our semipermanent offerings: mainly signage, wall clocks and racks. Basically, that's it. We really don't get into elaborate display shippers and other bells and whistles."Krauland says temporary materials are being emphasized more "because they are cheaper on a cost-per-location basis. Also, [the growth of on-can promotional] packaging has replaced a lot of the point-of-sale."Every year, Dr Pepper bottle/can produces three or four national promotions that have heavy media support. During these promotional periods, the division produces larger displays for use in stores. But Krauland says his displays "aren't as fancy" as 7 UP's. "Our bottlers will not purchase over a certain [price]," he says. "They like to stay within the $11-$15 range in corrugated. The 7 UP bottler is more inclined to purchase a more expensive piece."At Dr Pepper/Seven Up, certain suppliers are authorized to sell stock P-O-P items directly to bottlers. This system is informally called "Pepper Press" or "7 UP Press" by company managers. "We try to route everything through Pepper Press so that our bottlers aren't confused," Krauland says. "Seven-Up is a little different: they get their everyday, generic point-of-sale through Seven-Up Press, but they get their promotional point-of-sale items through other printers and suppliers."Tracking results is difficult, he says. "Unfortunately, I can't give you a story such as: When we put point-of-sale in the marketplace, it increased our business by X.' We've never tested it that way. The reason is that we can't get the exclusive displays."Krauland says the bottlers' use of P-O-P displays is improving, but there are frustrations. "I've gone through some plants where they've had point-of-sale that is five, 10 years old, and it is still sitting on the racks in their warehouse," he notes. "So it is difficult to see how much really goes through the marketplace."We just make the service available and hope they use their point-of-sale," he adds. "And for the most part, it has been pretty good and much better than in the past."7 UP Papers the WorldAccording to Hilton, the biggest generator of P-O-P materials in the company is the 7 UP bottle/can division. This division sells products through supermarkets, convenience stores, gas stations and other retailers. "We'll sell soft drinks anywhere," says Frank Maher, brand manager. Elevating display activity above and beyond normal shelf space is the goal of 7 UP's P-O-P efforts. But that is a big challenge in a retail market dominated by aggressive Coke and Pepsi bottlers.Unlike Dr Pepper, which works with many Coke or Pepsi bottlers, 7 UP is on the lead system: Nearly 65 percent of its bottlers are independent 7 UP bottlers. In these cases, it can't ride on the colas' coattails for display, says Maher, so "we have to wedge our way in there. We have to be a little smarter and quicker and more creative to get our products on display. Basically, the P-O-P is a way for us to get that attention."One strategy is to rely heavily on the three national 7 UP advertising campaigns the company runs every year. During these periods, a marketing theme is coordinated across TV/radio spots, placed on the bottle and can packaging, and used in the P-O-P displays that bottlers install in participating retail stores.The summer and holiday campaigns are the biggest programs, says Lowin, lasting as long as three months. She estimates that during this summer's promotion, called UnCola Island, well over 100,000 P-O-P displays will be sold to bottlers.The centerpiece of UnCola Island is a motion display that features a large bird with flapping wings. Lowin says several thousand of these large displays will be placed during the campaign. Most will be up for at least four to six weeks, and some as long as two months."We usually try to have one big display that we can offer to bottlers," Lowin says, "plus a complementary range of smaller versions carrying the same theme. Some bottlers can't afford such a high-dollar-value item out there, or maybe their retail accounts have smaller stores." The alternate campaign elements include smaller pole signs, shelf talkers, static clings and vendor triangles, which are special static clings for use on vending machines.This summer, additional P-O-P materials were sent out as part of a massive overlay program for bottlers. It is a tie-in with the daytime soap, "The Young and the Restless," in which viewers can win an island trip.In the time periods between major campaigns, says Lowin, smaller bridge campaigns are run. Earlier this year, for example, a Super Party Center theme was used in conjunction with the Super Bowl. P-O-P displays are particularly important in these bridge campaigns, she notes, since special product packaging is not employed.Maher says that the creative process is driven by the bottlers. "We meet with the Bottler Marketing Committee four times a year, and we review everything from advertising to point-of-sale to promotional ideas," he says. "Essentially, the committee is a group of bottlers who speak for the system."All new Dr Pepper/Seven -Up promotions are unveiled during a slide show at the bottler promotional meeting that kicks off every selling season. Special exhibit booths are set up to debut the new P-O-P materials for each of the different brands and each large promotion. "This gives the bottlers a chance to take a closer look at everything," Maher explains.Long lead times ensure that plenty of input can be acquired. Maher says that planning for major promotions typically begins a year in advance. Work on UnCola Island, for example, began in late 1992.Maher says the company measures the effectiveness of its P-O-P materials through sales results. "We have our internal sales information, and we also have external information from Nielsen Marketing Research that tells us how we're doing vs. our competition. And then there is feedback from bottlers and our salesforce. We take that very much to heart in our planning for the coming year."Fighting for Fountain SpaceThe Dr Pepper/Seven Up foodservice division faces some unique challenges. For example, it is the one department that must juggle all of the company's brands, plus licensed lines such as Canada Dry and Sunkist. It faces the daunting task of servicing nearly 120,000 outlets that have fountain service.The majority of attention is devoted to convenience stores and quick-service restaurants, or QSRs, most notably McDonald's, Burger King, Taco Bell, Circle K and 7-Eleven. But there is a variety of other formats to contend with: traditional restaurants, bars, contract feeders such as Marriott hotels, hospitals, travel plazas, theaters and concession vendors."We have a completely different set of initiatives and priorities than the bottle/can side," says Julie Robertson, promotions manager, Dr Pepper/Seven Up foodservice. "In bottle/can, you're trying to move a lot of cases of Dr Pepper or 7 UP. In foodservice, we are being asked by the QSR chains to develop materials that sell more total soft drinks. They don't really care about selling more Dr Pepper or 7 UP than Coke or Pepsi."We're trying to communicate something positive about our products," she adds, "but we're in somebody else's environment. Our point-of-sale has to work well with what the restaurant is doing."The foodservice division is armed with a variety of materials, says Randy Brown, associate promotions manager, national accounts, Dr Pepper/Seven-Up foodservice. "We have stock promotions that are either just Dr Pepper identified or 7 UP identified. These are our added-value point-of-sale items such as counter cards, mobiles, table tents, a coupon program, a drinking cup program and sport bottles. Our salesforce can go out and talk to an account and get it shipped in a few days. It doesn't have to be customized -- it's ready to roll."Other important tools include merchandising frames. These are permanent and semipermanent P-O-P items such as light thieves, pre-sell signs, register toppers and drive-through menu extenders.In years past, Brown says, most of the P-O-P materials supplied by the foodservice division could be straightforward, soft-drink-specific promotion. "That's almost impossible to do now," he says. "Our accounts are requiring us to tie in with the meal combo deals. The odds that our generic P-O-P pieces will get put up are diminishing. Most everything we do for the big chain accounts has customized messages." In some cases, a stock item, such as a sports bottle, is customized with the chain's logo. Other times, it may mean replacing a stock Dr Pepper insert in one of the merchandising frames with a customized insert, such as a Big Mac Extra Value Meal featuring a Dr Pepper cup.Hundreds of customized promotions are developed every year, Brown estimates. When preparing custom displays, the account's image dominates. "They don't tell us to downplay Dr Pepper," he says, "but we know that it can't be screaming Dr Pepper and overshadow their product."Robertson says QSRs place extra pressure on beverage manufacturers because the margins on soft drinks are so high. "That's a huge part of their overall profitability," she says. "As the QSRs have downsized and sent more of their marketing people to the field, they are even more dependent upon our marketing department to bring them programs."What's more, the P-O-P battle is moving outdoors. "The biggest challenge today is the drive-through area in fast-food restaurants," says Brown. "Only 25 percent of the people are ordering soft drinks from the drive-through. They are taking it home and using the bottle/can product they have there."To counter this trend, Brown and Robertson developed an outdoor pre-sell sign that sends a simple message about Dr Pepper to consumers while they wait in the drive-through lane. It holds paper inserts that can be updated easily. "That sign has gotten incredible response," notes Brown. "It has been received better than anything that we've taken to them in a long time."As in the bottle/can division, all P-O-P materials are paid for by the bottlers with co-op funds. In cases where materials are sold directly to national accounts, it is deducted from their marketing funds. However, P-O-P is not a profit center. "When we develop P-O-P," Brown says, "we produce it at the very lowest cost possible and pass that savings along to our accounts and bottlers. We do not make a cent on it. They know that and appreciate it."

How the 'UnColas' Win With P-O-P

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