by Andy
November 6, 2015
The cola war is no longer between Coke and Pepsi, but arguably between Coke and consumers. Growing sentiment is that cola significantly contributes to obesity and the subsequent health issues that ensue (diabetes, heart disease, etc.). As Coca-Cola enjoys higher brand awareness and consumption than Pepsi, The Coca-Cola Company (TCCC) has become the unfortunate poster child for this category-wide issue.
Back in the 80s, most will recall Pepsi effectively altered the mindset by which colas should be judged – from Americana to flavor – and Pepsi tasted better. To meet this new flavor requirement, Coke moved away from its 100-year-old secret formula and introduced New Coke. The uproar was instantaneous and within three months, Coke Classic was back on the shelves. Loyalists clearly stated it was not an assault on the taste buds that pissed them off, but an assault on the brand.
It was not about what was in the can, but what was on it.
Today’s consumers are concerned about obesity and point to Coca-Cola as the culprit. Even Diet Coke and other low- or no-calorie carbonated options are getting lumped in. Considering TCCC changed its namesake product once before — and was royally burned — we cannot expect them to try that again. And reducing SKU sizes, on-premise portion sizes, and/or distribution in low-income regions destroys the bottom line.
All this puts TCCC into a very interesting pickle. Making light of their concerns was the first mistake (much like their response to Pepsi’s growing preference 30 years ago). Now, it’s ballooned and TCCC fights an onslaught of criticism while enduring a 10-year slide in carbonated soda sales (source: Beverage Digest). This puts Coke at a similar inflection point it faced in 1985. Unfortunately, the current issue is not about either or. But neither. The whole category is in the can, and consumers are looking to Coca-Cola to fix it. Something big and bold must be done to re-establish beverage category direction. TCCC must take on this challenge.
The problem is that the old rules no longer apply.
- Consumer tastes have changed
- Consumer media habits have changed
- Consumer priorities have changed
- Consumer knowledge has grown – thanks to always available information
- Consumer distribution channels have changed
The battle is not just about share, but about vision from which new products, portion sizes and channels must emerge. While Coke is still winning the battle over Pepsi, it could be losing the war. It may be time to remember, remind and re-invent what Coke stands for — rather than how it’s made. Then, communicate this in a relevant, meaningful manner in formats that are current, flexible, and compelling.
Very insightful read Andy. Unfortunately for Coke, and numerous other processed food manufacturers, I don’t know if there is a way clear for their “core” brands of the current consumer surge for un or minimally processed whole foods (the actual foods not the ubiquitous grocery chain). This may be a case where companies like Coke will be forced to bite the bullet, accept they will lose some sales on their original brands which no longer appeal to these consumers, and develop or aquire alternatives that fit the changing taste.
Andy,
I think Pepsi has had a huge win with the “10” product line. In particular, Dr. Pepper 10 with its quircky ads, is a very good tasting low calorie soda that has changed the flavor profile by adding just a pinch of high fructose corn syrup to remove the hard edge of a strictly no-calorie soda. I like sweet sodas, but my 55 year old waistline will continue to expand if I drink sweet sodas, so Dr. Pepper 10 is a reasonable compromise for me. Good article.
HG
TCCC is trying to replace lost profit on cola sales with other products. A new “Coca Cola” vending machine in our office has five shelves, with nine product slots on each shelf. Only half the machine holds colas. The rest of the shelf space is occupied by bottled water, iced coffee, Power Aid, five kinds of juice, and four different energy/caffeine drinks. Good observations, Andy, and the question is whether these other product offerings can rejuvenate the cola companies or whether they will retrench and become less relevant.
I really enjoyed this article! I am currently working on a research team to effectively reposition a ready-to-drink tea company and it seems like they are having similar challenges. With consumers trending towards healthier options, Coca Cola and other food/beverage companies have to figure out the balance of remaining true to their brand while meeting the growing demand of consumers.
This type of discussion always takes me back to Theodore Levitt’s Marketing Myopia article. HBR reprint R0407L.
The railroads serve as an example of an industry whose failure to grow is due to a limited market view. Those behind the railroads are in trouble not because the need for passenger transportation has declined or even because that need has been filled by cars, airplanes, and other modes of transport. Rather, the industry is failing because those behind it assumed they were in the railroad business rather than the transportation business. They were railroad oriented instead of transportation oriented, product oriented instead of customer oriented.
TCCC challenges have crossover to those faces by McDonald’s. It will be interesting to see how their strategies track over time. And whether their responses to market pressures broadly differ between advanced and developing economies.
Great piece Andy,
As I sit here and drink my daily can of morning coke, I was wondering if this strategy might apply to other industries as well, maybe the oil industry?