This case study focuses on how Cadbury Schweppes acquired the American-based company Dr. Pepper/Seven-Up. Of particular interest is the thinking and purpose behind the acquisition, and how the acquired company will be managed in the future.
Dr. Pepper/Seven-Up is not a very familiar name in the UK, although many people will have heard of or purchased the 7-Up product. Dr. Pepper/Seven-Up owns the 7-Up brand in the USA and the Dr. Pepper brand worldwide. Created in 1885, Dr. Pepper is the oldest, nationally distributed soft drink in the US. The 7-Up brand was introduced in 1929. Within the US carbonated soft drinks’ market, Dr. Pepper/Seven-Up is one of the fastest growing companies.
In 1994 Dr. Pepper/Seven-Up brands had an 11.6 market share in the US. Sales volumes over the previous five years grew by 5 per cent per annum, more than double the industry average.
The origins of the Group go back over 200 years. Jacob Schweppes perfected his process for manufacturing mineral water in Geneva in 1783. In Birmingham, John Cadbury first started selling tea and coffee in 1824, then cocoa and chocolate, which was soon to become the main business. The two companies – Cadbury and Schweppes – merged in 1969. Since then there has been a continuous program of expansion worldwide.
The Group has undergone major changes during its development and since 1984 its structure has been based on its two business streams of Beverages and Confectionery.
The range of companies and countries through and in which the Group operates is vast; for instance, it owns Stani, a leading confectionery company in Argentina, and it has an interest in Camelot (the company which runs the UK National Lottery).
Cadbury Schweppes describes itself as a ‘British-based but internationally-focused food and drinks business operating primarily in the ‘impulse purchase’ or ‘informal consumption’ segment. Following on from this, the company has a stated commitment to:
Continue to focus operations in the market sub-sector of confectionery and soft drinks, and specifically consolidate its soft drinks position worldwide as the largest and most successful non-cola brand owner
Aim for a ‘top three’ position in the global confectionery market
Aim for profitable growth via a flexible but carefully selected use of organic development, acquisitions and alliances
Monitor positively and regularly growth opportunities in adjacent market sectors where acquisition or alliance could bring real gain through synergy.
In summary, the company is ambitious. It will achieve its aims via growth, acquisition and alliances whilst maintaining its profitability. If acquisition or alliances are deemed to be necessary, the company will look for synergy, i.e. consider the strengths of Cadbury Schweppes and the acquired/partner company to assess the benefits produced by the two merging together, the result of which must be greater than that which either of the two could achieve if they remained separate.
Acquiring a new company has a major impact, which can be seen by the change in the trading profit example figures and the source of these profits.
Cadbury Schweppes commits itself to the principles and practice of developing management talent. In this particular example, the company would take it as a matter of principle that the best person should be appointed to each job, so that the most appropriate managers from Dr. Pepper/Seven-Up would be appointed.
With the merger and the formation of the new operating structure many of the Dr. Pepper/Seven-Up employees remained in similar positions or were offered the most appropriate job and some were given very significant promotions within the new structure.
With the combined group the aim would be to realize the benefits of the merger. These would be to:
Use the critical mass with bottlers to grow brand portfolio volume.
Exploit the opportunities in the marketplace.
Realize synergy benefits in purchasing, manufacturing, marketing, selling and administration.
Develop Dr. Pepper internationally.
Maximize strong cash flow to help reduce debt.
Optimize the use of employees’ skills.
The new management team has to ensure that these benefits are achieved and that the massive investment in Dr. Pepper/Seven-Up proves to be worthwhile.
Strategic planning is often accused of being a waste of time and totally irrelevant in a quickly changing market. However, the approach used here shows that when it is undertaken with care and thought, it helps to move the company in a direction which will enhance the value to shareholders, provide a valuable product and service to customers, and help to safeguard or even create jobs and further opportunities for staff.
Even though the strategic objectives are clearly laid down, how they are to be achieved may not be so clear. With Cadbury Schweppes’ acquisition of Dr. Pepper/Seven-Up, it was not just a case of looking at the opportunities offered by the purchase of the company. It also entailed a thorough appraisal of the opportunities offered, compared to other means of achieving the objectives.
Only when research had been carried out into the suitability of Dr. Pepper/Seven-Up, the market potential, synergy benefits and future growth opportunities, could a final decision be taken. Even then, financing the deal, along with persuading others of the wisdom of the move, was necessary prior to the successful completion of the take-over.
Cadbury Schweppes’ vision is that it can become the number one non-cola beverage company worldwide, by capturing and integrating the best practices of the industry. With Dr. Pepper the challenge is to increase consumption among current users, whilst encouraging non-users to sample the product. To do this will require the market to think of Dr. Pepper as a mainstream soft drink and its availability must be ensured to take advantage of this.

1.Analyze the HRM challenges the company is facing in inclusion of Dr. Pepper/Seven-Up within the family of companies owned by Cadbury Schweppes.15 points
2.If you are the consultant, what strategies will you recommend to Cadbury Schweppes for its business development? 10 points

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