Wall Street Journal: MTV Scratch Teams With Dr. Pepper Snapple Group To Launch “Sundrop” Citrus Soda Nationwide

From The Wall Street Journal

Bigger Splash Planned for a Niche Citrus Soda


Ninteen-year-old Levi Moody hauled eight cases of Sun Drop citrus soda from the Carolinas to Oklahoma State University in August so he’d have enough to last the semester.

He’s had to ration himself to two cans a day to make the 192 cans last until the holiday break. “I can’t tell you why I love it so much but I do,” he says.

Next semester, he may be able to buy it near campus. Dr Pepper Snapple Group Inc. plans to start selling Sun Drop nationwide early next year.

Sun Drop-which has been around since 1928-has a rabid following in the handful of mainly Southern states where it’s currently sold. The drink was once pitched by the Nas car legend Dale Earnhardt. Families have shipped it off to soldiers serving in Afghanistan; fans swap recipes for holiday turkey with Sun Drop glaze. Made with orange juice and packing more caffeine than Mountain Dew, it is sometimes used as a mixer with hard liquor.

Its expansion is part of Dr Pepper Snapple’s strategy to fortify consumer interest in flavored sodas, a non-cola segment of the soft drink industry in which the company specializes. Cola sales have fallen to 55.4% of the U.S. soda market in 2009 from 60.5% in 1999, according to Beverage Digest, an industry publication. At the same time, sales of Dr Pepper, Crush, and other brands Dr Pepper Snapple owns have grown.

“The American palate has changed,” said Jim Trebilcock, chief marketing officer at Dr Pepper Snapple. “If you look at media and other things, there’s so much variety out there, it drives a bit of willingness to try different things.”

Nathan Pearson of Fallston, N.C., said he buys a two-liter bottle of Sun Drop each morning to drink over the course of each day. It’s the only soda the 22-year-old military trainee drinks. “Warm, cold, it doesn’t matter,” he said.

Sun Drop’s owner is taking direct aim at Mountain Dew, the fourth-most popular soda in the U.S. after Coca-Cola, Pepsi-Cola and Diet Coke.

Mountain Dew dominates the “citrus” category with an 84.3% share, heavily marketed by PepsiCo Inc. to teens through sponsorships of extreme sports and through advertising that’s embedded into videogames. Mountain Dew’s volume slipped 3.5% last year. (The citrus category doesn’t include 7Up or Sprite, which the beverage industry classifies as lemon-lime. Orange sodas also are a separate category.)

To reach Sun Drop’s target market of 15- to 17-year-olds, Dr Pepper Snapple developed a revenue-sharing agreement with Viacom Inc.’s MTV network. MTV’s new Scratch marketing arm has designed the drink’s advertising and image, down to a redesign of the can that will be appear in January. The network also will feature Sun Drop in MTV programming, including reality shows such as “The Real World.” Dr Pepper Snapple and MTV wouldn’t say how they plan to divide revenue, saying only that it is based on sales volume.

The collaboration with MTV began in June 2009 when the network, which had a long-running advertising relationship with Dr Pepper, asked Mr. Trebilcock for a shot at turning around one of his lesser brand names. The company offered up Hires Root Beer, RC Cola and Mistic juices, but MTV latched on to Sun Drop after a quick taste test on the streets of New York. Consumers thought the drink was refreshing and bright, said Ross Martin, MTV Scratch’s executive vice president.

Dr Pepper Snapple of Plano, Texas, is a distant third in beverage sales volume to Coca-Cola Co. and PepsiCo. But its shares have outperformed its larger peers since the May 2008 spinoff from Cadbury PLC.

Mr. Trebilcock said the company spent the past two years focusing on its core brands such as Dr Pepper, Snapple, 7Up and Mott’s juices. Now Mr. Trebilcock said the company is digging deeper into its portfolio to revitalize some of its 50-plus brands, including Sun Drop.

Some analysts have cooled to Dr Pepper Snapple shares, saying the company has improved operations but has little prospect for growth, since the company long ago sold the rights to its brands internationally. In New York Stock Exchange composite trading Wednesday, Dr Pepper Snapple shares were off 14 cents to $36.59.

The company said it sees potential nonetheless in the growing appetite for its flavored drinks. “Let’s face it,” Mr. Trebilcock said. “Carbonated soft drinks is a pretty stagnant, slightly declining category. But we’re growing volumes and gaining share. It’s because we try to create differentiation.”

Copyright 2010 Dow Jones & Company, Inc. All Rights Reserved

Wall Street Journal





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