Cadbury Schweppes' Strategic Dilemma of Trebor Bassett
Cadbury Schweppes is a UK-based beverage and confectionary group founded in 1969 with the merger of two English groups (Cadbury and Schweppes). This family-managed group grew and flourished through the years. It became an international major player in the late 80s and was admired by its peers for such an ascent.
In 1990 the group bought two little entities from the same business and merged them into a single unit: Trebor Bassett. The CEO of this unit soon became the CEO of the group (1993) and he then realized that the success of the past years was seriously in danger and that a real turn needed to be taken. John Sunderland (CS’CEO) and John Stake (Human Resources Director) decided to spend time trying to understand the problem and finding the adapted solutions.
Let us see how to change from a budget-driven strategy to a sustainable value-driven strategy.
The following pages will try to show how the precedent success was in fact a satisfactory underperformance of CS, then how a real change in the way of seeing the business helped to recover and finally what became the challenge in 1999.
I. Cadbury Schweppes in 1996: a satisfactory underperformance
1. An admired company
Cadbury Schweppes, born after the merger of two major companies in 1969, was an admired company in 1996. Indeed thanks to Sir Dominic Cadbury’s governance from 1983 to 1996, based on an international development and several strategic acquisitions, the company had become a truly global player: the financial company turnover increased by 30% between 1990 and 1996, the operating profit by 144%. This performance was underlined by the Most Admired UK Company Prize, awarded by the representatives of Britain’s top 250 publicly traded companies and 10 leading investment dealer companies.
In 1996, Cadbury Schweppes gathered activities in two major fields, both consumer-oriented: confectionary and beverages. The beverages branch was highly competitive, all the more so as few giant players operated on the market. Cadbury Schweppes owned international bottling and partnership operations and sold products in 149 countries. The company, divided into five divisions in 1996, had a varied product portfolio, based on international brands such as Schweppes or Dr. Pepper/Seven Up, acquired by the group in 1995. As for the ...
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...“over deliver” (= Game playing)
- The Group was too far away from the BU and markets to appreciate the complex strategy issues
- Strategy of achieving market volume and exploiting scale economy in order to protect short-term revenues
“Grow bigger through steady volume increases”
> price discounts in an attempt to protect volumes
> irrational brand and packaging size proliferation with no real
marketing strategy (and risk of cannibalisation)
- No Piloting tools (managers’ comments : “A lot of data, not a lot of good facts”)
Opportunities Threats
- Fragmentation of the market
- Long term potential of the sugar confectionary business
- Total sweets market was stagnant
- Low end market : private labels had already captured 20,000 tons owing to the strength of British major retailers
- New competition entering the market in its most profitable niches
- Raw material prices shooting up
- Price competition
EXHIBIT 2: COMPETING ENVIRONMENT OF THE BRITISH SUGAR CONFECTIONARY MARKET
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Wheelen, T. L., & Hunger, J. D. (2010). In Concepts in Strategic Management and Business Policy Achieving Sustainability, Twelfth Edition. Pearson Education.
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