The acquisiton of Dr Pepper/Seven-Up company inc
A Cadbury Schweppes case study

Page 1: Introduction

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...
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Page 2: The Cadbury Schweppes Group

The origins of the Group go back over 200 years. Jacob Schweppe 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 programme of...
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Page 3: The acquisition of Dr Pepper/Seven-Up

Knowing the strategy of the company helps to put the acquisition of Dr Pepper/Seven-Up into context. There has to be clear evidence, prior to the purchase of such a company, which shows that it will help push the group towards its intended targets. Many companies have found to their cost that the take-over of another company can lead to disaster. For instance, when the acquired company does not...
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Page 4: Researching the market

Some basic facts about the US carbonated beverage market, based on data available at the time the tender offer was announced, are contained in the table. In 1993 Cadbury Schweppes had a 4.9 per cent share of the US market, whilst Dr Pepper/ Seven-Up had 11.4 per cent. Combining these would produce a significant share of the market (16.3 per cent). It should be remembered that a 16.3 per cent...
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Page 5: Alternative strategies

Although the intention to purchase Dr Pepper/Seven-Up fitted in with the overall strategy of the company, there is always the need to look at alternatives. One clear option would be to go for organic growth, i.e. the gradual build-up of market share by using existing brands and operating competitively in the market. This was a serious option as the company had been trading in the USA for some...
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Page 6: Financing the acquisition

With the take-over helping the company achieve its goal, the next step was to organise it. This was a major project, and as with many projects it was given a code name - 'Potato'. This was devised from Dr Pepper/Seven-Up in the form of an anagram - DPSU = SPUD= POTATO! On a more serious note there are many groups to take into account before the successful completion of the acquisition. There...
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Page 7: Running the new company

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. (Table 5). The figures show the tip of the iceberg as issues relating to management structures and operational factors need to be addressed. Cadbury Schweppes commits itself to the principles and practice of developing management talent. In this...
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Page 8: Strategic purpose

The example of Cadbury Schweppes and its acquisition of Dr Pepper/Seven-Up shows the importance of corporate strategyin influencing the decision to undertake such a major investment. 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...
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