Soft Drinks

Health and energy drinks fizzed, but cola remained flat

Coke talked about happiness. Pepsi emphasized refreshment. Both cola leaders described their drinks as sparkling rather than carbonated, a word the public associated with obesity and unhealthiness.

These consumer concerns continued to moderate carbonated soft drink sales, which declined 1 percent in the US, according to Beverage Digest. Diet Coke remained number two in market share, ahead of Pepsi and behind Coke, a position it achieved in 2010. Mountain Dew, a Pepsi brand, was fourth in US market share. Red Bull and other major US energy drink companies gained in volume and share, as did Gatorade.

Although immediate economic concerns may have somewhat diminished health as a consumer priority, the issue didn’t disappear and remained a long-term strategic challenge for soft drink marketers as more consumers expect beverages that are healthy without any compromise of flavor. Cola’s weakened popularity, even among teens and other core customers, also could be attributed in part to the widening choice of non-carbonated alternatives including juices, performance drinks, tea and water with fruit flavors.

The issues of health and obesity, especially significant in the US and UK, received increased attention in Continental Europe (Please see Spotlight on page 86). Late in 2011, Denmark and France imposed taxes on fatty foods. The French legislation targeted sugary drinks but exempted zero-calorie beverages, which will create a price differential. The cola leaders both reacted to these concerns and continued to aggressively market their brands.

Coke celebrated 125 years

Coke celebrated its 125th anniversary with a global campaign organized around a heritage dating to 1886. It also produced special events that included transforming its Atlanta headquarters skyscraper into a dramatically illuminated digital outdoor billboard and streaming a free concert from Atlanta, featuring stars of the TV show American Idol, which Coke sponsors.

The brand expanded its “Open Happiness” campaign, noted for viral videos in which a Coke machine dispenses Coke as well as fun surprises, such as flowers and balloons. Last year, Coke converted large red trucks into vending machines and sent them into neighborhoods worldwide to “deliver happiness.” The trucks became mobile outdoor ads serving free Coke and drawing appreciative crowds. Coke also planned its advertising and social media presence for the London Olympics and the European Football Championship during the summer of 2012.

Pepsi recalibrated marketing

Pepsi recalibrated its marketing. Having ceded the second place market share position to Diet Coke a year earlier, Pepsi increased investment in the Pepsi brand, raising its 2011 total ad spending to $197.8 million, up 33 percent from $149.1 million in 2010, according to Kantar Media. The brand dramatically increased its presence on network TV for Pepsi and Diet Pepsi, spending a total of $56 million in 2011, compared with $10.2 million a year earlier, all dedicated to Pepsi.

Pepsi did not abandon its long-term strategy to provide healthier drink and food options, but it balanced that mission against the immediate imperative of driving sales and share. It continued the Pepsi Refresh Project in which the brand makes financial grants to charities selected by online voting. At the same time, Pepsi also reemphasized its connection to music, using the line, “Where There’s Pepsi, There’s Music,” and featuring performers like Elton John and Melanie Amaro, a winner on “X Factor,” a Pepsi-sponsored program.

Health concerns continued

In the search for healthier alternatives, both Coke and Pepsi attempted to develop other beverages including coconut water, which is gaining popularity in North America. Among Pepsi’s alternative drink brands are SoBe (teas and fruit juices) and Izze (sparkling juice). Coke’s portfolio includes Honest Tea and Vitamin Water.

Pepsi promoted the low-calorie Pepsi Max brand, its competitor to Coke Zero, with a campaign of humorous ads and $66.5 million in media spending, according to Kantar Media. The Snapple Group introduced Dr Pepper Ten, a low-calorie drink aimed at young men. In a social media campaign called FanDewmonium, Mountain Dew asked consumers to select a new diet flavor by voting for one of two candidates.

Both Coke and Pepsi proved relatively resistant to store brands, even in difficult economic times, because of their distinctive tastes, deep consumer loyalty and affordability. Retailer promotions drove volume at the expense of margins. And private label remained a threat for the soft drink category overall with the improvement in store brand quality.

Experience mixed worldwide

Other carbonated drinks, such as Fanta and Sprite, competed across the world, but facing multiple national brands, their acceptance varied by country. Mountain Dew, which is strong in the US, and Dr Pepper, faced a similar situation. These brands tend to appeal to a younger audience.

Meanwhile, soft drink brands responded to changing shopping habits in the European grocery channel as consumers sought price and convenience. Like other brand manufacturers, Coke and Pepsi increasingly were listed by European discounters whose ranges until recently focused almost exclusively on private label.

Even with a presence in the discount channel, cola sales are likely to stay flat in North America and Europe, compared with the developing markets. As Coke and Pepsi expand in all regions of the world, brand market share varies by country. Coke is strong in Brazil while Pepsi leads in India and the brands are close in China, according to TGI. Many Indian cola drinkers prefer Thums Up, a spicy tasting local brand with a macho image. Coke purchased Thums Up in the 1990s. Sprite also is popular in India because its lime flavor appeals to local tastes.

BrandZ Top 100 2012

BrandZ Global 2012 Report Top 100 Report

Top 100 Chart

Methodology and valuation by Kantar Millward Brown

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