An overhaul of its American beverages business has helped Cadbury Schweppes take market share from its bigger rivals

For Jim Johnston, executive vice-presi­dent of sales for Cad­bury Schweppes Americas Beverages, there is an easy way to measure the company's transformation over the past two years: visit the local Wal-Mart.

Touring the soft drink sec­tion of the retailer's Plano, Texas, branch, near the headquarters of CSAB, Mr Johnston proudly shows off an entire aisle dedicated to the company's brands.

The company, part of UK- listed Cadbury, Schweppes, provides a case study for how a disparate collection of under-performing brands can be restructured into a powerful competitive force.

Today, CSAB is among the best-performing companies in the US beverage indus­try, gradually stealing mar­ket share from its big­ger rivals Coca-Cola and PepsiCo.

CSAB's success represents a sharp turnround from two years ago, when revenues and earnings were both in decline.

Reviving the company was crucial for Cadbury because it is the group's biggest source of profits - providing more than 40 per cent of the total last year - and second biggest source of sales, after European confectionery.

''Before recovery could be attempted, the group first had to identify the cause of CSAB's malaise. It con­cluded that there was little wrong with the company's products but their potential was being wasted by an inef­ficient business structure and poor execution.

The restructuring, com­pleted this year, has given the company greater bar­gaining power with retailers and given its brands access to a bigger, more powerful salesforce. Individually, most Cadbury brands are min­nows compared with those of Coke and Pepsi; together, they create a formidable portfolio.

Restructuring has brought increased efficiency, with cost savings projected to reach $120m a year. Headcount has been reduced by at least 250 and several surplus factories and offices have closed. Advertising spending has been cut by $35m by replacing multiple agencies with a single contract.

Perhaps the biggest bene­fit of restructuring, however, was the opportunity it pro­vided to change the culture of the company and shake up an underperforming man­agement. The overhaul was led by Gil Cassagne, pro­moted from head of the group's Asia-Pacific business to president of CSAB. "Of the company's top 160 managers, 60 are new to their positions," he says. "Restructuring has allowed us to set new standards in terms of performance and expectations."

In Mr Cassagne's first full year at the helm, sales increased by 2 per cent and operating profits by 5 per cent - and the positive trends have accelerated this year.

Despite its progress over the past two years, CSAB still faces tough challenges. Although Snapple has returned to growth following three years of stagnation, the brand continues to lose share of the iced tea market. And sales of 7-Up are still declining although the pace has slowed. The company is attempting to inject fresh life into both brands through increased advertis­ing and new, health-oriented products, including 7-Up Plus, a reduced-sugar drink with added fruit juice and vitamins.

Cadbury's strengthening of CSAB contrasts with its withdrawal from beverages elsewhere in the world. Last month, it sold the remainder of its European soft drinks business for?1.85bn ($2.2bn) to a private equity consor­tium led by Blackstone Group and Lion Capital. Cadbury had already sold much of its non-US beverage interests to Coca-Cola seven years ago. Following the lat­est disposal, the group remains active in only four drinks markets - the US, Canada, Mexico and Australia.

Some analysts have pre­dicted that Cadbury may eventually withdraw from beverages altogether, freeing the group to focus solely on confectionery - in particular its fast-growing chewing gum brands.

But, while ruling nothing out, Todd Stitzer, group chief executive, says he has no plans for more disposals. Selling the European bever­age business, which ac­counted for just 10 per cent of group sales, made sense, he argues, because it lacked the scale to compete effec­tively with Coke and Pepsi.

CSAB, in contrast, has a powerful 12 per cent of the $95bn US non-alcoholic bev­erage market and 17 per cent of the soft drink segment.

"Our European beverages are a good business but they need more critical mass and more investment," says Mr Stitzer.

"We already have that crit­ical mass in the US. The money we would have had to invest in Europe would be better invested in Amer­ica, where we can do it more efficiently."

VOCABULARY:

listed company (Syn: quoted company) – компания, акции которой котируются на фондовой бирже

case study - изучение конкретного случая; исследование на конкретном примере

turnround (turnaround) – сдвиг; благоприятный поворот (рыночной конъюнктуры, экономики в целом или дел компании (напр., поворот от убытков к прибыли)

headcount - численность персонала предприятия

overhaul – пересмотр; реконструкция

 

TRANSLATION NOTES:

…with cost savings projected to reach $120m a year - (См. часть Ш, раздел 3, § 6)

But, while ruling nothing out, … (См. часть Ш, раздел 3, § 9)

The money we would have had to invest in Europe would be better invested in Amer­ica… (См. часть Ш, раздел 3, §11)

 

 

VOCABULARY CHECK

1) Маркетинг – понятие более емкое, нежели просто реклама и продвижение (продажа) товара на рынке.

2) Компания, ориентированная на рынок, очень быстро реагирует на все потребности и изменения конъюнктуры рынка.

3) Розничные торговцы (продавцы) закупают товары в больших количествах у производителей или импортеров для дальнейшей их продажи индивидуальным клиентам или конечным потребителям.

4) Компании, не имеющие конкурентов, называются монополиями.

5) Сравнительные (конкурентные) преимущества дают возможность компаниям продавать товар по ценам более низким, нежели у конкурентов.

6) Конкурент – физическое или юридическое лицо, которое производит товары или предоставляет услуги, которые также производят или предоставляют другие фирмы.

 

SECTION 2 MARKETING MIX AND TARGET MARKETS

LEAD-IN

The word market originally meant the place where the exchange between seller and buyer took place. Today we speak of a market as either a region where goods are sold and bought or particular types of buyers.

The marketing mix is often summarized as the so-called four Ps: product, price, place, promotion: what to sell, to whom, where, and with what support. Some commentators will increase the marketing mix to the 'five Ps', to include people.

More recently, Bernard Booms and Mary Bitner built a model consisting of seven P's. In addition to product, price, promotion, and place, they included people, physical evidence, and process. "People" was added, to recognize the importance of the human element in all aspects of marketing. They added " process " to reflect the fact that services, unlike physical products, are experienced as a process at the time that they are purchased. " Physical evidence " reflects the physical surroundings associated with a service encounter or retail location. Other marketing theorists include "partners" as a mix variable because of the growing importance of collaborative channel relationships.

One more P, packaging, has been added to this list by some people. The rationale is that it is very important how the product is presented to the customer, and the packaging is often the first contact that a customer has with a product.

Product: the product management aspect of marketing deals with the specifications of the actual goods or services, and how they relate to the end-user's needs and wants.

Pricing: this refers to the process of setting a price for a product, including discounts. The marketing view of pricing takes account of the value of a product, its quality, the ability of the customer to pay, the volume of sales required, the level of market saturation and the prices charged by the competition. Too low a price can reduce the number of sales just as significantly as too high a price. A low price may increase sales but not as profitably as fixing a high, yet still popular, price. As fixed costs stay fixed whatever the volume of sales, there is usually no such thing as a 'profit margin' on any single product.

A product may be seen as expensive or cheap, but ‘expensive’ may imply ‘too expensive’ and ‘cheap’ is often used to show disapproval of poor quality. A way of getting round this is to say that something is high-priced or low-priced. Similarly, things may be mid-priced.

A product may have an ‘official’ list price, but this price may in practice rarely be charged because of discounting by sellers who offer a lower price by giving a discount.

When prices are reduced, there are price cuts. When a business sells a product at a lower price than its competitors, it undercuts them.

Companies responding to each others’ price cuts by repeatedly cutting prices engage in price wars.

When a foreign company is believed to be selling products at less than what it costs to make them, or at less than the price it charges in its home market, it is accused of dumping.

Placement (or distribution): this refers to how the product gets to the customer; for example, point of sale placement or retailing getting the product to the customer. Decisions have to be made about the channels of distribution and delivery arrangements.

Promotion: presenting the product to the customer. Promotion involves considering the packaging and presentation of the product, its image, the product name, advertising and slogans, brochures, literature, price lists, after-sales service and training, trade exhibitions or fairs, public relations, publicity, and personal selling, where the seller develops a relationship with the customer. Every product must possess a unique selling proposition (USP) - features and benefits that make it unlike any other product in its market.

In promoting a product, the attention of potential customers is attracted and an interest in the product aroused, creating a desire for the product and encour­aging customers to take prompt action (AIDA).

 

For a marketing plan to be successful, the mix of the four "p's" must reflect the wants and desires of the consumers in the target market. Trying to convince a market segment to buy something they don't want is extremely expensive and seldom successful. Marketers depend on marketing research to determine what consumers want and what they are willing to pay for. Marketers hope that this process will give them a sustainable competitive advantage. Marketing management is the practical application of this process.

When companies try to identify or appeal to specific groups of customers, they talk about segmenting a marketin a process of segmentation.

Market segmentation is the process of grouping a market into smaller subgroups. It is derived from the recognition that the total market is often made up of submarkets (called segments). These segments are homogenous within (i.e. people in the segment are similar to each other in their attitudes about certain variables). Because of this intra-group similarity, they are likely to respond somewhat similarly to a given marketing strategy. That is, they are likely to have similar feelings about a marketing mix comprised of a given product, sold at a given price, distributed in a certain way, and promoted in a certain way

Market share is the proportion of sales that a company or a product has in a particular market. The market leader is the company or product with the biggest share.

A product or business generating a lot of profit is a money spinner.

A cash cow is a profitable product or business with high market share in a low-growth market, but it is also used to mean any profitable product or business generating a steady flow of sales revenues.

A loss leader is a product that has a price set below the operating margin. This results in a loss to the enterprise on that particular item, but this is done in the hope that it will draw customers into the store and that some of those customers will buy other, higher margin items

Market growth is the rate at which the overall market is growing (or not, as the case may be).

 

VOCABULARY

marketing mix	- комплекс маркетинга, маркетинг-микс: набор основных компонентов маркетингового воздействия, поддающихся контролю со стороны фирмы и используемых ею при продаже товара в стремлении вызвать желаемую ответную реакцию со стороны рынка; выделяют 4 основных компонента комплекса маркетинга: товар, цена, место распространения и методы стимулирования
four P's of marketing	- четыре P маркетинга: четыре основных элемента маркетинга: продукт (product), цена (price), место (place), продвижение (promotion)
promotion	- содействие, поощрение, стимулирование, раскрутка, продвижение, рекламирование: процесс воздействия на рост или развитие чего-либо (компании, продаж товара) в положительном направлении
physical evidence	- вещественное доказательство
market saturation	- насыщенность (насыщение) рынка: ситуация на рынке, когда весь имеющийся на рынке спрос на определенный товар полностью удовлетворен
high-priced low-priced	- дорогостоящий - недорогой
discounting	- предоставление скидки
price cutting	- снижение цен
undercut	- сбивать цены; продавать по более низким ценам (чем конкурент)
price war	- ценовая война: конкуренция производителей, основанная на агрессивном снижении цен
dumping	- демпинг: продажа товара на внешнем рынке по ценам ниже себестоимости или ниже средней цены данного товара на внутреннем рынке
point of sale	- место продажи, пункт продажи, место покупки (напр., магазин, касса магазина, торговая точка, офис дистрибьютора)
unique selling proposition	- уникальное торговое предложение (УТП) (теория, разработанная американским специалистом рекламы Россером Ривсом; УТП предусматривает обязательное наличие в рекламе трех составляющих: реклама должна предлагать потребителю конкретную выгоду, предложение должно быть уникальным в данной сфере, предложение должно быть актуальным и достаточно привлекательным)
AIDA (Attention + Interest + Desire + Action)	- формула рекламного воздействия на аудиторию: привлечь внимание, вызвать интерес, вызвать желание воспользоваться рекламным предложением, побудить к покупке (по первым буквам английских слов " внимание ", " интерес ", " желание ", " действие ")
target market	- целевой рынок: сегменты рынка, на которых фирма сосредоточивает свои основные усилия
market research marketing research marketing analysis	- маркетинговое исследование, маркетинговый анализ: сбор данных о нуждах потребителей, о конкурентах, о характере товара на рынке для разработки новых идей и стратегий маркетинга
market segmentation	- сегментация (сегментирование) рынка, рыночная сегментация: разделение рынка на отдельные группы покупателей, обладающие сходными характеристиками или сходным уровнем потребностей, отличными от характеристик и потребностей других сегментов
segment	- сегмент: группа покупателей внутри рынка, выделенная по каким-либо признакам
market share	- доля рынка: удельный вес компании в общем объеме рыночных продаж
market leader	- лидер рынка, рыночный лидер: компания, занимающая самую большую долю рынка
money spinner cash cow	- товар или бизнес, который дает непрерывный приток наличных денег, или надежная и очень доходная компания
loss leader	- убыточный лидер: товар, предлагаемый в убыток (по цене ниже себестоимости) в расчете на привлечение в магазин большого количества покупателей, которые, попав туда, вероятно, будут приобретать и другие, более дорогие товары
market growth rate	- темпы роста рынка

COMPREHENSION QUESTIONS:

1) What is a marketing mix?

2) What causes price wars?

3) What does the marketing view of pricing take account of?

4) When are companies accused of dumping and why?

5) What do abbreviations USP and AIDA stand for?

6) Why do marketers depend on marketing research?

7) What is market segmentation? Why is it important to a seller?

8) What company is called the market leader?

9) What is the purpose of creating a loss leader?

VOCABULARY PRACTICE

The marketing mix model (also known as the 4 P’s) can be used by marketers as a tool to assist in implementing the marketing strategy. Marketing managers use this method to attempt to generate the optimal response in the target market by blending 4 (or 5, or 7) variables in an optimal way.

A dairy cow is an example of a cash cow, as after the initial capital outlay has been paid off, the animal continues to produce milk for many years to come requiring little maintenance. A cash cow requires little investment capital and perennially provides positive cash flows, which can be allocated to other divisions within the corporation

As in so many other Japanese industries, the market leader at home, Toyota, is not the strongest exporter.

For all its other businesses, Gillette means one thing to consumers world-wide: shaving. Gillette dominates the business in the US with a market share of about 64%.

The introduction of the lower-priced Cadillac Cimaron model is thought to have led to declines in image and sales for the entire Cadillac division.

In the late 1990s, Internet use was doubling every 100 days. Market growth was incredible.

Women are a particularly interesting target for the Volvo V70. They are an important market segment for Volvo.

The Softco software company divides the software market into large companies, small companies, home office users, and leisure users. This is its market segmentation.

TEXTS TO TRANSLATE:

43. Saturated Retail Market Could Limit Expansion

China's retail market is becoming increasingly saturated, which will likely limit expansion opportunities for overseas retailers, according to a recent study.

China slipped one spot to No. 5 on a list of retail markets in emerging economies. India retained its position as the world's most attractive emerging market, according to the 2006 Global Retail Development Index, an annual study on emerging market by ATKearney, a global strategic management consulting firm.

It ranks the investment attractiveness of 30 emerging markets based on country risk, population, business efficiency, modern retail sales area per resident, and number of international retailers.

"Market saturation in China is on the rise as more than 40 foreign retailers have entered the market to date," said the report, mentioning foreign retailers are fueling the rapid growth of China's retail market.

China's retail sales grew 12.8 percent to 1.84 trillion yuan (US$230 billion) in the first quarter of this year after jumping 12.9 percent to 6.72 trillion yuan the year before.

Shanghai alone was home to 115 hypermarket outlets covering more than 5,000 square meters in floor space, by the end of last year. One hundred of those stores are owned by overseas retailers.

Despite growing saturation, many retailers continue to increase their market presence.

French-based Carrefour SA, the world's second-largest retailer, opened 14 stores across China last year. The company, which first entered China in the early 1990s, now has 73 outlets on the mainland.

"China remains one of the most attractive markets to us and we plan to further speed up our expansion in the rapidly developing country," said Wang Xiaozhong, a spokesman for Carrefour China.

Wal-Mart Stores Inc last month said it plans to hire up to 150,000 employees in China over the next five years - five times its current work force, to help its expansion in the country. Running about 50 stores in China including two in Shanghai, the world's largest retailer plans to add one in the city's suburban Jiading District early next year.

 

 

44. Mobile Market Expanding Rapidly in India