Dr Pepper Snapple's (NYSE: DPS) latest advertising campaign for its new product, Dr Pepper 10, plays on an old stereotype: real men don't drink diet. The company's competitors, Coca-Cola (NYSE: KO) and PepsiCo (NYSE: PEP), have run similar campaigns with much success. Does this newly traded stock have what it takes to hang with the big boys?
Men can take anything ... except the taste of diet cola
Playing on the perception that a man wouldn't touch a diet drink, Dr Pepper has launched Dr Pepper 10, in a gunmetal-gray can, hyped by a series of man-oriented ads. The company has gone so far as to give the product the tagline "It's not for women," to ensure that the new cola is seen as anything but girly.
Gender-specific marketing is frequently used with beer and other alcohol marketing. Budweiser's (NYSE: BUD) "Real Men of Genius" radio ad series is, in fact, genius. Molson Coors (NYSE: TAP) uses the tagline "Men should act like men, and light beer should taste like beer," accompanied by men being crushed by a giant beer can if they do something deemed less than manly.
The use of gender-specific marketing with a wink and a nod for those in on the joke requires a delicate touch. A perfect example of a campaign executed with pitch-perfection is Procter & Gamble's (NYSE: PG) "The Man Your Man Could Smell Like" campaign for Old Spice. The campaign was so popular it spawned a Twitter account with more than 150,000 followers, along with an online feud with Fabio to determine whether he's manlier than the Old Spice Man (as he's come to be known).
But whereas the Old Spice campaign included women in the joke, Dr Pepper 10 excludes them. Nowhere is that more apparent than on its Facebook page, which has men-only content, including a gallery where men can shoot lipsticks and high-heeled shoes. I've never seen it. I'm not allowed in.
Men of a certain age
PepsiCo and Coca-Cola didn't take their approach quite so far when they launched their guy-friendly products. Pepsi Max, launched in the U.K. in 1993, marketed to men with a campaign that said "Men can take anything, except the taste of diet cola." Pepsi Max is Pepsi UK's best-selling cola brand and the fastest-growing cola in the UK market. It's one of 19 Pepsi brands that generate $1 billion or more in annual sales.
Likewise with Coke Zero, launched in Spain in 2006 and dubbed the catchy "Bloke Coke." One of the most successful product launches in Coke's history, Coke Zero is now sold in 130 countries. In 2009, the company sold 600 million cases globally.
If Dr Pepper Snapple were a man, he'd be driving a tiny red sports car
Dr Pepper has been around for 125 years, but when it comes to trading on the stock market, it's still in its infancy.
Formed as part of a series of purchases by Cadbury Schweppes over the past 15 years, Dr Pepper was spun off with the rest of the company's beverage divisions, which include Snapple and 7UP, as well as its bottling companies. Dr Pepper Schweppes went public in May 2008. The good doctor paid its first dividend in December 2009 and has paid quarterly since then, increasing from $0.15 to $0.25 to $0.32.
Pepper's two largest rivals make the smaller company's market cap, cash on hand, and revenue look almost adorable in comparison. But at 16.8, Dr Pepper's P/E is close to Pepsi's 15.6. Since going public in 2008, Pepper has increased its cash on hand, decreased its debt, and more than quadrupled its cash from operating activities.
Furthermore, Dr Pepper recently closed licensing deals with both Pepsi and Coke, bringing in a one-time $1.6 billion payment, and more cases in their own distribution system. The company is also working with McDonald's (NYSE: MCD) and is now available is nearly all of the Golden Arches' 14,000 restaurants in the United States.
So? Are you?
Dr Pepper's a risk, sure. It may never be quite the size or scope of Pepsi or Coke. But this isn't some start-up. The main product is established, the company has secured its bottling and distribution channels, and it's aggressively, but not recklessly, pursuing growth with heavy brand-building.
Sure, the Dr Pepper 10 ads are already receiving backlash, but so have ads on everything from feminine-hygiene products to cars. Some ads are good, some ads are bad. At the end of the day, this is a company that's going places.
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