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Dallas-based Dr Pepper (1982 sales: $516 million) is among the firms that could be squeezed. Dr Pepper has a near cult following in places like Waco, Texas, where it was invented in 1885. Waco's 100,000 residents each knock back an average of more than 300 bottles a year. But the company has enjoyed little success making Dr Pepper a national brand. The firm lost $4 million in the fourth quarter and finished 1982 with a $12.4 million profit, down nearly 60% from 1981. It hopes that two new decaffeinated Pepper Free brands will help push 1983 profits above last year's.
Royal Crown (1982 sales: $469.8 million) shares the frustrations of other small soft-drink firms. The Atlanta-based company introduced the first diet and decaffeinated brands, but it has lacked the muscle to win a substantial market share for itself. Still, Royal Crown's $16 million 1982 profit was 3% above the 1981 result. The firm attributed the gain to the growth of caffeine-free RC100, which it brought out in 1980. Says Cola Division President Fred Adamany: "We're attracting new customers and brand switchers to this market. If there's a problem, it will be in not having enough decaffeinated cola to meet demand."
Although Royal Crown discovered the marketing potential of decaffeinated soft drinks, Philip Morris (1982 sales: $11.7 billion) turned caffeine-free soda into a national craze. After acquiring Seven-Up Co. in 1978, the tobacco and beer firm initially had little luck. Ad campaigns proclaiming that "America is turning 7Up!" could not keep the lemon-lime drink from falling behind Dr Pepper in market share. But last year Philip Morris seized on rising public fears about caffeine and proclaimed that 7Up "Never had it. Never will." The company also launched Like, the second decaffeinated cola after Royal Crown. Recalls Seven-Up Vice President Guy Smith: "Since 60% of the soft drinks are colas, Philip Morris wanted to be where the action is."
The Seven-Up campaign pushed the lemon-lime drink ahead of Dr Pepper and stunned Coke and Pepsi, which insist there is nothing wrong with normal levels of caffeine. Last July, however, Pepsi introduced decaffeinated versions of regular Pepsi and Diet Pepsi, and both have done well. "They have gone far beyond our wildest expectations," says Rick Sharp, marketing manager of Pepsi-Cola Bottling in Los Angeles. Pepsi now has 50% of the decaffeinated cola market, which reached about $200 million last year.
Coca-Cola knows it has some catching up to do in that market, and so it is trying to introduce its three brands into 80% of the U.S. by December. If successful, that would be the fastest soft-drink launch ever.
Coca-Cola's ad campaigns for the new products will downplay any possible health benefits of caffeine-free drinks to keep them from luring too many soda quaffers from its regular brands. Says Malcolm MacDougall, president of SSC&B, the New York ad agency that is handling the campaign: "We are not really making a big thing of it. We are telling people that decaffeinated cola is here if they want it."