SBHD: As the cola market becomes saturated, the war has moved to a new theatre: `alternative’ soft drink flavours. However, the public’s willingness to sample US products does not mean they will naturally like them.
Considering that it is a blend of water, sugar and flavourings the average soft drink attracts a lot of attention.
It made front-page news when Cindy Crawford agreed to back Pepsi. It dominated the business pages when Cadbury Schweppes acquired Dr Pepper and Richard Branson’s Virgin Cola made it onto News at Ten.
Last week Quaker agreed to sell its petfood business to Heinz for $725m (Ãº484m) to allow it to focus its future growth on its drinks Snapple and Gatorade brands. And this week Coca-Cola launched Fruitopia, its “new age” soft drink, backed by a Ãº3.7m launch campaign. The range of six flavours – which include Apple and Tangerine Dream and Blackcurrant Babylon – have been specially formulated for the UK market. Each bottle bears a Fruitopia “life message” – “The apples don’t fight the tangerines in Fruitopia, people could learn a lot from fruit”. Media and public attention are guaranteed. But commercial success in the cut-throat UK market may be harder to find.
Superficially, it appears that the UK soft drinks market is a mirror image of the increasingly crowded US market where the race is on to develop non-cola products as the cola market becomes increasingly saturated. Consumers in the UK are receptive to brand extensions such as Tango’s apple, lemon and blackcurrant flavours and are willing to experiment with quirky US newcomers such as Snapple.
“The UK market is very amenable to new flavours. The punters are quite happy to test things out,” says Steve Kay, director of marketing with Britvic Soft Drinks.
Richard Hall, chairman of drinks analyst company Zenith International, adds: “British consumers are remarkably receptive to new ideas. They are greater than average travellers and pick up new habits from other parts of the globe. American-style drinks and new launches have a lot more chance here than in other European countries.”
But US success will not necessarily translate directly to the UK. In a recent analyst briefing Cadbury said that despite the acquisition of Dr Pepper, it would not automatically mean that the company will build the brand in the UK.
Cadbury bought the brand (and the rights to distribute 7-Up in the US) to increase significantly its presence in the soft drinks arena and to take advantage of newly-emerging markets. It is now the world’s third biggest supplier of soft drinks after Coca-Cola and PepsiCo.
A Cadbury spokeswoman says: “It is major step forward for us,” but adds that any plans for the brand in the UK have still to be formulated. “Clearly one of the benefits of the deal is that we will be able to look at the brand internationally but deciding which markets we will concentrate on will be a long process,” she says.
Dr Pepper, which has a fairly low profile in the UK, is currently marketed and distributed through Food Brokers but neither Food Brokers nor Cadbury will comment on when, or if, Cadbury will take responsibility for the product.
Analysts say Dr Pepper faces a cultural barrier in the UK. The British may try out US products, but that does not necessarily mean they will like them. “Perhaps the best way of describing the Dr Pepper brand is to say that it’s a peculiarly American taste. It’s a taste that is highly unlikely to amount to much in the UK,” says Henry Blythe, a soft drinks analyst with Gilbert Eliot & Co. Another analyst puts it more bluntly: “Dr Pepper just tastes awful. It may be big in Texas but, like iced tea, it’s a taste that does not suit the UK.”
Apart from the taste factor there are other problems for non- colas in the UK. According to market research firm Mintel, the traditional cola market is growing faster, than other soft drinks. Between 1989 and 1993, colas managed to increase their hold of the carbonated drinks market from 42 per cent of the UK market by volume to 44 per cent.
In the US and mainland Europe sales of orange drinks are increasing – orange is a flavour which is acceptable across all markets – but Nielsen figures show that in the UK the orange market is in decline. According to January 1993 figures the UK orange market was worth Ãº130m in 1992, but this month’s figures indicate that the 1994 market value dropped to Ãº116m. This decline, according to Kay, is one of the reasons Tango has extended into other flavours.
Even if the UK non-cola market is not expanding at the same rate as cola, launching in this sector still makes sense, say analysts. “It’s not easy to find success in the market but this sector consists of premium-price drinks with high profits,” says Stephan Buck, research and marketing expert with Taylor Nelson AGB. He believes increasing leisure time will also boost the market for health and energy drinks.
The non-cola sector also has the advantage that it is not as saturated as the cola market, says Buck. “The cola market is already swamped with own-label brands and prices are falling as a result. There is more opportunity in the non-cola sector.”
However, Paul Stobart, chairman of Interbrand Europe, claims US-born drinks can succeed in the UK, but must first find a niche. “It is not enough to be American. Soft drinks need to find a corner nobody else owns. Tab Clear was nothing like a mainstream success because it was considered to be apeing Crystal Pepsi. But Pepsi Max worked because it had a definitive position. It had energy and zest.”
Advertising agencies agree. Banks Hoggins O’Shea, the agency behind the Snapple TV campaign, says the quirky US fruit drinks were accepted in the UK because they were differentiated from the mass of other available products. “We were told that if the ads looked like a soft drinks ad then they’re wrong, they didn’t want any pretty people,” says partner Ken Hoggins. Although the ads played on the US roots of the brand with an American voice-over, “we wanted it to appear as a drink you would discover, rather than something from a large US conglomerate,” says Hoggins.
Likewise, Britvic says that Tango and its extension into apple, lemon and blackcurrant flavours was successful because of its Ãº12m marketing campaign. “It was high-profile advertising. Tango has a clear market – young adults – and it is advertised in an innovative way,” says marketing director Steven Kay.
Cultural barriers are unlikely to obstruct Fruitopia’s progress, given Coca-Cola’s marketing might. The future looks bright for the soft drinks market. According to Mintel figures, the market is expected to grow by six per cent between 1994 and 1998.
But if British fussiness proves too much for Dr Pepper and Fruitopia, they can take heart from the fact that the British find it hard to transfer some of their enthusiasms abroad – Marmite, for example, failed in the US.