Coca-Cola’s mantle as king of soft drinks took a fresh dent last week when Waitrose became the latest supermarket to review its listing of Minute Maid (MW last week). Once a brand that could do no wrong, Coke is facing challenges on both sides of the Atlantic and observers are questioning whether the world’s biggest soft drinks company can regain its fizz.
The Atlanta-based giant is struggling with falling profits in its domestic market and an over-reliance on carbonated drinks in an increasingly health-conscious world, while industry experts are suggesting that its UK marketing strategy is ill conceived. Archrival PepsiCo, meanwhile, is planning an aggressive push on acquisitions and continues to perform well on the back of its diversified portfolio, which stretches from fruit juice to snacks with its Tropicana and Walkers brands.
One industry source says: “There was a time when PepsiCo branching out its portfolio was seen as not so clever. But it is able to introduce products much more quickly than Coke and better spread its risks.”
On the plus side, Coke’s performance in emerging markets has appeased investors and helped bolster its share price. And the launch of male-oriented sugar-free Coke Zero last year has gone some way to reviving the company’s fortunes in Europe. While Coke will not stand or fall on the performance of Coke Zero, the no-calorie variant has succeeded in drawing 18to 25-year-old men back to the market and given a boost to the cola category, which Coke continues to dominate in the UK.
But experts have accused the company of stubbornly concentrating on its fizzy drinks portfolio with the launch of countless variants of its flagship product. “Launching variants of its anchor brand is not a long-term solution. It will need to diversity into new areas and I think we will see diversification into coffee and more health-geared products,” says one.
Coke has launched a string of new drinks and variants over the past two years. Limited edition Coke Orange, for instance, goes on sale this summer in a bid to reinvigorate the declining carbonates market. The company has also teamed up with L’Oréal to develop a range of functional drinks.
The problem with minute maid
This flurry of marketing activity has been particularly evident in the UK, where Coke is looking to grab market share in high-growth sectors like pure juice and water. Coke’s main juice brand Minute Maid was launched in 1998 but has failed to have a major impact on the category.
Coke argues, though, that sales of Minute Maid are strong and points to Nielsen data which it claims shows that sales have increased to 4.8 million litres this year from 4.3 million litres for the previous 12 months. It also says that other Coke limited editions, such as Diet Coke with Lemon in 2005 and Diet Coke with lime last year, drove growth in the carbonates sector. “Coke with Orange follows the highly successful limited editions strategy of the past two years,” says a spokesman.
However, Sainsbury’s delisted Minute Maid last year and other supermarkets are understood to be reviewing their commitment to the juice drink. It currently holds just 1% of the pure juice market, according to Mintel, and is up against PepsiCo’s Tropicana, which is the dominant brand in the category with a 21% market share.
Trouble at the top
Some believe that Coke’s problems with Minute Maid are part of a wider malaise that is threatening Coke’s position as the number one choice in supermarkets and pubs in the UK. Warwick Cairns, head of planning at Brandhouse, compares Coke’s difficulties with Minute Maid with its troubles with Dasani, the water brand that it was forced to withdraw from the UK market in 2004.
Cairns says: “The question is who wants to buy Minute Maid? There are value brands in supermarkets and premium brands like Tropicana. But Coke has failed to communicate to the public what Minute Maid represents. It’s like Dasani, which would have stood up in a chemical analysis against, say, Evian. There was nothing wrong with it. It’s just that Coke did not know how to promote its origins. It had no emotional resonance and this is a bit like Minute Maid.”
Minute Maid, which has had more success in the US, is undergoing its second relaunch in the UK after a previous attempt, which cost the company £5m, failed to boost sales.
Other high-growth categories include the water sector and Coke has always maintained that, following Dasani’s failure, it would look to launch another water brand in the £600m-plus UK market at some point. Insiders say that a new Coca-Cola brand is currently being considered for the UK and French markets with a launch possible as early as next year.
The brand will pay off
Despite the Dasani debacle, observers believe that Coke will be well equipped to take on established players like Danone, with its Volvic and Evian brands which dominate the sector.
One industry expert says: “This is Coke we are talking about. It has a lot of talented people and it will not make a mistake like Dasani again.”
Further competition could come from Britvic, which has launched two water brands – Drench and Robinsons Fruit Shoot H2O – in the past year and has bought Ballygowan water as part of its acquisition of C&C Group. Britvic says it has not ruled out a major roll out of the Ballygowan brand in the UK.
Coke, though, continues to lead the UK carbonates markets with its Coke, Diet Coke, Fanta, Schweppes, Dr Pepper and Sprite brands. Marketing activity this year includes an £8m on-pack promotional drive to support its “Coke Side of Summer” campaign, a loyalty scheme targeting teenagers, limited editions to reinvigorate the brand and new products such as Schweppes Straightcut.
But questions have been raised over its scattergun marketing strategy in the UK. Mintel analyst Katie Child says: “The shear number of new campaigns may be stretching Coke too thin and smacks of desperation. Its strategy appears to be to try everything in the hope that one initiative will work, and to target everyone.”
With the decline in the carbonates market set to continue, it appears there is much work ahead for Coke.