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7UP Trying to Regain Share of Market

September 24, 2003

GRAPEVINE, Texas (AP) _ The venerable lemon-lime soda 7UP is under assault by new competitors and is having a hard time placing its familiar green cans and bottles on grocers’ shelves.

Supermarket sales of 7UP have fallen 22.5 percent this year after a 7.8 percent drop in overall sales last year _ the weakest performance by any of the top 10-selling sodas in 2002. Weak soda sales were blamed for a drop in first-half profits at parent Cadbury Schweppes PLC.

Many of its biggest bottlers now make and distribute a rival soda, Sierra Mist.

Against that backdrop, hundreds of 7UP bottlers from around the country met this week near Dallas to hear company officials explain how to reverse the drink’s decline.

7UP, the No. 8 soda, has seen its share of the market slip to 1.7 percent, according to Beverage Digest, an industry publication.

That’s about one-fourth as large as the leading lemon-lime soda, Coca-Cola Co.’s Sprite, which overtook 7UP in the mid-1980s and captured 6.2 percent of the market in 2002.

``It’s got to stabilize and improve or we’re in big trouble,″ said Kevin Lahey, vice president of sales for one of the largest 7UP bottlers in the country, based in Birmingham, Ala.

Lahey said bottlers must do a better job of reliably delivering their product to stores, and the parent company must negotiate with big national retailers to make sure 7UP has a place on shelves and is advertised with catchy in-store displays.

Executives at Plano, Texas-based Dr Pepper/Seven Up Inc. call 2003 a transition year. The company was forced to find many new bottlers after most Pepsi-Cola Co. bottlers who had made 7UP dropped the product and switched to Pepsi’s Sierra Mist.

In the ensuing confusion, some stores stopped stocking 7UP or would carry only regular but not diet and Cherry 7UP. That hurt because sales of Diet 7UP have been rising _ up 4.5 percent last year, the company said.

Regular 7UP is carried by fewer than two-thirds of the mass retailers, drug stores and convenience stores, according to Dr Pepper/Seven Up Inc. Sprite is in nearly 100 percent of stores.

Officials said they would push hard to get 7UP in more convenience and drug stores. Mike McGrath, president of sales for North America, said 7UP has successfully negotiated to place its soda in Wal-Mart Stores Inc. locations and will seek to do the same with other retailers, such as Safeway, that have been less accommodating.

In the Midwest, Dr Pepper/Seven Up is testing kiosks called ``Poptopia,″ in which consumers can build their own 8-packs by mixing and matching the company’s soda flavors. The company is also sharing the cost of upgrading bottlers’ equipment, although officials declined to give figures. And the company plans to increase spending on advertising.

McGrath said the company would also increase spending on 7UP advertising ``incrementally″ in 2004. In the first half of this year, it spent $20 million advertising 7UP _ almost entirely on television, according to TNS Media Intelligence/CMR, a New York research firm.

``A lot of people outside this room don’t believe we can turn 7UP around,″ Gil Cassagne, chief executive of beverages in North America for 7UP’s parent, U.K.-based Cadbury Schweppes, told the bottlers. ``I believe, and I know you believe, that they’re wrong.″

Although the Pepsi bottlers that formerly handled 7Up were bigger _ and might have carried more weight with retailers _ Cassagne said it will be a plus to use independent bottlers instead of Pepsi bottlers whose first loyalty was to Pepsi-owned products.

``7UP is now a truly independent brand with its destiny in our combined control,″ he said. ``It’s now getting the commitment and support it deserves.″

John Sicher, the publisher of Beverage Digest, said Sunkist orange soda and A&W root beer _ two of Dr Pepper/Seven Up’s other brands _ both recovered and grew after being spun away from Coke and Pepsi bottlers, and 7UP could do the same. But in the short run, he said, 2003 will go into the books as another bad year for 7UP.

``The real test of 7UP’s brand strength will come in 2004,″ he said.

The bottlers saw a special screening of four television advertisements to air next year on WB, UPN, ESPN, Cartoon Network and other youth-oriented networks. The spots, starring a young comedian named Godfrey, use physical humor to appeal to core soda drinkers _ ages 12 to 24.

``The advertising is great,″ said Jim Turner, head of the country’s largest 7UP bottler, based in Irving, Texas. ``2004 will be a much more stabilizing year for regular 7UP. This brand is strong. It’s going to do fine.″

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