Soft Drinks

Bubble Bursting for Colas but Other Beverages Flow

Health concerns remain key issue

Cola brands promised to deliver the trifecta of hydration, refreshment and taste. But consumers in developed markets wanted more. To fit the needs of their over scheduled lives, they expected the brands to multitask, adding functional benefits, like an energy boost to the basic thirst quenching proposition. And consumers continued to worry about the healthiness of carbonated soft drinks (CSD).

The new, more inclusive definition of the BrandZ™ non-alcoholic beverage category recognizes these trends. The highly valued juice, coffee and tea brands that now appear in the ranking reflect both the attitudes of consumers who prefer these drinks and those who select them as alternatives to carbonation. CSD sales were especially challenged in markets like Western Europe, with an aging population and sluggish economy. To balance slacking demand, Coca-Cola and Pepsi looked to fast growing markets, like China and India, where consumers are less likely to have a soda drinking habit and tea is a more traditional drink.

Among strategies implemented by the beverage brand leaders were:

Shopper marketing

Brands continued heavy investment to win share, especially in the flat cola sector.

Pairing with food

They attempted to increase volume by marketing connected to meal occasions.

Brand extension

Brands added new options to meet consumer desire for healthier and more functional beverages.

Marketing to win share

Facing these growth challenges in both the developed and developing world, brand leaders Coca-Cola and Pepsi remained locked in a market share battle, with Coca-Cola positioned as the timeless iconic brand and Pepsi as the brand focused on the immediate excitement.

Coca-Cola continued its "Open Happiness" campaign, using viral social media to communicate the international exploits of a Coca-Cola truck that delivered Coca- Cola, food and good feelings. Pepsi launched its first global campaign called "Live for Now," connecting the brand with pop culture worldwide, an iteration on the successful "Pepsi Generation" positioning of the 1960s.

Pepsi was the official drink of Major League Baseball in 2012. In a dramatic expression of its ability to leverage its Power of One philosophy, Pepsi signed these brands—Pepsi, Quaker, Tropicana, Gatorade and Frito-Lay—to a 10-year sponsorship deal with the National Football League (NFL).

Not surprisingly, the most daring marketing effort last year came from Red Bull with its sponsorship of Felix Baumgartner, who gained the world's attention with a 24-mile free-fall to earth from the edge of space. Red Bull moved ahead of Pepsi as the third most valuable brand in the category.

Linking drink and food

Coca-Cola paired the brand with food, including snacks. In supermarkets, it displayed beverages near pizza, for example, merchandising Coca-Cola brands as part of a meal solution.

Coca-Cola also opened its Shopper Innovation Experience Center during 2012, a laboratory for testing crosscategory sales drivers. Pepsi developed liquid meal replacements, combining its Pepsi expertise with the corporation's Quaker brand.

The high proportion of drinking occasions associated with breakfast helped drive consumption of tea and juices, including brands like Tropicana, Minute Maid and the Nestlé offerings linked by the brandlike prefix Nes—Nescafé, Nespresso and Nestea. The focus on coffee quality, innovative coffee machines and personalized customer service offerings enabled Nespresso to consolidate its foothold in Western Europe and expand its success to almost 60 countries worldwide.

Although breakfast is not a time usually associated with carbonated drinks, Mountain Dew, a Pepsi energy drink brand, recently launched Mountain Dew Kickstart, a caffeinated—and carbonated—breakfast drink aimed primarily at Millennials.

The attempt to link drink and food relates to larger trends, such as the increase in at-home entertainment, which influences when and where consumers drink and eat. The trend affected beer brewers as well, as all beverage producers depend on driving liquid volume.

Meeting health and energy concerns

Soft drink brands responded to the growing consumer focus on health with new juices, smoothies and enhanced waters, including coconut water, which enjoyed wide distribution in the UK and parts of the US.

The leading brands marketed cola products intended to improve healthiness without compromising taste. Pepsi Max and Coca-Cola Zero are both aimed at male drinkers who want good taste, fewer calories but not the diet label. Dr Pepper Snapple Group launched Dr Pepper Ten in the last quarter of 2011, with the slogan "It's not for women."

With the launch last year of Pepsi Next, the brand attempted to find a mid-calorie position that reduced calories, while maintaining taste. In most markets, Pepsi Next was promoted as containing 60 percent less sugar. Coca-Cola replaced Sprite, in the UK, with a reformulated version using a natural sweetener. Introduced early in 2013, the new Sprite addresses obesity concerns by reducing the calorie count of the lemon-lime drink by 30 percent.

Coca-Cola, owner of Minute Maid, is developing an orange juice not from concentrate, and investing in the technology to create consistent taste despite the variations that occur naturally. Pepsi addressed the healthiness issue with its 1998 acquisition of the Tropicana brand of orange juice not made from concentrate.

The interest in additional energy benefits drove the performance of Red Bull. Gatorade marketed Gatorade G Series Pro Carb Energy Chews, gum-like squares intended for chewing prior to and during athletic exercise. But desire for functional drinks also included products to reduce energy and encourage relaxation, so-called dream water to manage stress.

Insights BrandZ BigData™

Strong character buoys brands

The recession has been a cathartic experience for many brands, forcing a rethink in terms of their relevance. Soft drinks faced a simultaneous challenge— the increasing consumer concern with health. It is noticeable that this category on average is much less “meaningful” (appealing and meeting needs), but is still very “salient,” meaning that it’s famous and stands out in the mind of the consumer.

The high profile has been maintained partly by greater definition of brand character. The overall character "clarity" score (the depth and distinctiveness of brand personality) has increased 24 percent since the recession, compared with an increase of just 8 percent for all brands. Three notable exponents of character building are Coca-Cola, Nespresso and Red Bull.

Action Points

1 .Be transparent

Being clear and straightforward is important as Millennials—more informed about food and health issues than their parents—move into household and family formation life stages.

2. Be proactive

Address consumer health concerns head-on. If customers are raising questions about sugar or caffeine, for example, then take a position. Communicate about reducing the levels of those ingredients or acknowledge them as an acceptable indulgence in moderation.

3. Be strategic

Discounts and promotions have conditioned consumers to time purchases for when a product is offered at what seems to be the lowest price. Develop a merchandising ladder that explains the value at rising price levels.

Soft Drinks Up 5%

The soft drink category was expanded this year and includes these non-alcoholic ready-to-drink beverages: carbonated soda drinks (CSDs), juice, bottled water, functional drinks (sport and energy), coffee and tea (hot and iced).

BrandZ Top 100 2013

BrandZ Global 2013 Report Top 100 Report

Top 100 Chart

2013 BrandZ Top 100 Infographic

BrandZ 2013 Infographic

Methodology and valuation by Kantar Millward Brown

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