Beverage Digest | November 16, 2001  

7UP Bottler Meeting: Executives Outline
Steps to Try and Halt Volume Decline.

At 7UP bottler meeting in Dallas, Texas on Oct. 31, Mike McGrath, COO of Dr Pepper/Seven Up's (DPSU) Cadbury/7UP unit, declares: "You made business and personal sacrifices to attend, and we thank you." DPSU CEO Doug Tough says bottlers representing 75% of 7UP volume attend session that was originally to be held in Washington, D.C. in early October and then re-scheduled after Sept. 11. Though DPSU executives continue, as in past years, to urge bottlers to improve 7UP execution, several bottlers note tone more collegial. Vs Sprite and Sierra Mist. Tough tells bottlers display of 7UP has "improved, but gaps (with Sprite) are still big." Plus, "we've seen our business suffer in Sierra Mist markets, and Sprite continues to get more execution." Declares: "The brand deserves better, (but) we are on the way to getting back on track." Adds: "I'd like to recognize your commitment and loyalty to 7UP." Next year. 2002 Dr Pepper and 7UP meetings set for San Francisco.

Growth and challenges. McGrath tells bottlers YTD through September, 7UP bottle/can is down -4% and fountain down -8.2%. September volume was down -14%. Says, "we were making good headway in July and August." Notes over past two years, DPSU "has made significant advances" with new ads/promotions, "but it hasn't translated into volume growth." Acknowledges competition has gotten "tougher" with water's growth and multiple new brands being introduced. Fair share; Pepsi and independent systems. McGrath tells bottlers, "we'll continue to support you." But urges bottlers to give 7UP its "fair share." Pepsi. Tells Pepsi bottlers 7UP "needs to be treated as a priority brand. We're asking for fair share, equal to what Coke (bottlers) provide Sprite. We know you have Mt. Dew, but we need to be competitive." Independents. Tells 7UP's 3rd-tier bottlers, "we need to close distribution gaps, increase shelf space and analyze CMAs." Ethnic potential. McGrath notes 25% of 7UP's volume from Hispanics, African-Americans and Asians. Urges: "We need to capitalize on this opportunity."

Fountain; Tricon deal. Bill Perley, senior vp/general manager DPSU fountain business: "Things could be better." Notes loss of business in past to Sierra Mist at Tricon restaurants and reminds bottlers of lawsuit vs PepsiCo (BD 10/19/01). Perley says "losses (at Tricon) continued into this year." But notes, "I'm optimistic about the future." 7UP replacing Sierra Mist. Adds "we now have a contract with Tricon and expect many Tricon restaurants to put 7UP in place of Sierra Mist." Reports 7UP recently "regained 161 (Tricon) units." Tricon has about 20,000 restaurants in U.S.

Bottle/can. Bottle/can dynamics outlined by two senior vps who oversee 7UP's split bottling system: John Tomescko for 3rd-tier bottlers and Rich Wach for Pepsi system. In Pepsi system, 7UP volume down YTD -4%; in 3rd-tier system, down -3.7%. Wach notes 7UP hurt as Pepsi bottlers shift much volume from 2-liter to 12-packs, as 32% of 7UP volume in 2-liter. Plus Pepsi system's "intensive innovation (and) new products cannibalized volume." Wach acknowledges 7UP displays are up +14%, but "good news" offset by fact that "7UP still lags" behind Sprite. Wach asks bottlers for +10% increases in displays/ inventory on display. Re independent system, Tomescko cites challenges from new products like Sierra Mist and Code Red. Says independent bottlers need more focus on C-stores and small independent grocers. Acknowledges displays are up by +74,022 and gap with Sprite "starting to close. This is progress, but we need to move faster." Urges focus on Diet 7UP, noting, "it's only getting on about 70% of displays with regular 7UP."

Sierra Mist; 'Pepto-Bismol.' Tomescko says as Sierra Mist expands into 7UP markets, "it creates (need for) Pepto-Bismol, but only for a moment." Adds in markets where Sierra Mist rolled out, DPSU has worked closely with its bottlers and 7UP has "gained share." Senior vp marketing Jim Trebilcock claims Sierra Mist "hasn't established brand awareness ... It will follow Surge, Citra and Storm." But notes DPSU does take Sierra Mist "seriously and we expect Pepsi to try and buy share in the coming months."

Advertising; ahead of Sprite; spoofs Coke. DPSU continues use of humorous "Make 7UP Yours" ad campaign but actor/comedian Godfrey replaces Orlando Jones. Chief marketing officer John Clarke reports campaign begun two years ago has increased 7UP's total advertising awareness from 38% in 1999 to 54% in 2001. Claims Sprite's is down from 66% to 59%. In April-June period this year, 7UP's ad awareness moved ahead of Sprite, 62% vs 60%, says Clarke. New spots. One new humorous add parodies Coke's classic hilltop "I Want to Buy the World a Coke" ad. Features hilltop crowd fighting and shoving. Other ad features 7UP "route drivers" as models for pin-up calendar.

Bottlers. Bottlers generally positive: 1) "It's better and more constructive. They're saying (growing 7UP volume) is all of our problem, not just the bottlers." 2) "They're still blaming us." 3) "They didn't beat up on the bottlers this year." 4) "I've been to a lot of these meetings. I liked this one. It's tough news, but I like the tone." 5) "They talk about bottler execution, but that's about people (and) more routes. It's a financial issue, not just effort." 6) "I like the new ads. They're funnier and sharper." 7) "They've got the ad thing down pat."

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