Coca-Cola battens down the hatches

Coca-Cola’s plan to slash up to $500m (314m) in global costs over the next three years and undertake a major rationalisation of its agency rosters (MW last week) may seem like the act of a company on the defensive. But if its UK business is anything to go by, it remains well placed to weather the economic storm.

coca-colaCoca-Cola’s plan to slash up to $500m (£314m) in global costs over the next three years and undertake a major rationalisation of its agency rosters (MW last week) may seem like the act of a company on the defensive. But if its UK business is anything to go by, it remains well placed to weather the economic storm.

Last week, Coca-Cola Enterprises (CCE), the largest bottler of Coke’s products, reported a 5.5% volume growth in the three months to September 26. The rise has been in part credited to mid single-digit growth in Great Britain and was driven by a 7.5% increase in its cola portfolio, which consists of its flagship Coca-Cola brand, Diet Coke and Coke Zero.

In fact, the UK carbonates market seems to be standing up better than its US counterpart. According to AC Nielsen, the carbonates sector grew 1.9% in value in the year to July 19 compared to the previous 12 months. This upward trend has been driven by the cola market, which recorded a 3.3% year-on-year increase in value (MW July 31).

In the case of Coke, it has enjoyed a volume rise of 4.6% in the year to September 20, while Diet Coke has risen 2.2%.

Not that it has all been good news in the UK. Coke’s big hope in the functional drinks category, Diet Coke Plus, has not delivered the sales the company had hoped for (MW August 7) and a company spokesman says the brand is now being phased out.

But as Simon Stewart, marketing director of Coke’s main competitor Britvic, has said, Coke has to be commended for its willingness to try new things and be “brave” even if not everything goes to plan.

The rising stars 

Coke GB marketing director Cathryn Sleight says the company has developed its portfolio in recent years, and she points to rising stars such as its energy drink Relentless, launched in 2006; its sports drink Powerade; and newcomer Glaceau, a vitamin water which it acquired for $4.1bn (£2.1bn) in May last year.

It has also this month announced it will be distributing the energy drink Monster in regions including parts of Europe. And, parrying industry scepticism that its positioning is too similar to Relentless (MW October 16), Sleight says that far from cannibalising share, Monster will increase the energy drinks category by attracting new consumers.

There’s more to Coke 

Zenith International market intelligence director Gary Roethenbaugh agrees that Coke has evolved into a “multi-beverage” company in the past decade. “If you look back over the past ten years, Coke as a business has fundamentally changed. During the late Nineties Dr Pepper was picked up, Powerade in 2001, then Coke launched a range of Fanta variants that helped drive the flavoured carbonates industry. There have also been Coke variants such as Vanilla Coke,” he says.

This year the attention has turned to vitamin waters, with Glaceau and Britvic V Water battling head on. As it stands, says Roethenbaugh, it is still anyone’s game.

Sleight believes there is room for further growth for Coke’s bottled water brand Malvern because of still “unexploited” marketing opportunities over its association with the Schweppes family. As for the company’s juice-based offering, its Minute Maid brand underwent a major revamp in September last year, with the introduction of new variants, packaging and a £1.3m TV campaign.

Sleight says Coke will continue to invest heavily in all its brands in the coming year, signalling a “slight increase” in marketing spend. “Strong brands that are well supported come out stronger at times of economic adversity and our plan for 2009 is investment behind our brands that is even stronger than this year.”

Camille Alarcon

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