Can anyone take on Coke in the take home market?

The Britvic Soft Drinks report is out: 2008’s sales dip – thanks to the weather, the banks and the health police – has been reversed. Sales of soft drinks reached an historic high of £8.56bn in 2009 – a shade over the previous best in 2007 of £8.49bn.

Coca-Cola bottles
Coca-Cola bottles

The big brands have, once again, outperformed the market, thanks largely it appears to consumers guzzling up aggressive promotions.

Within the take-home sector, promotions on later consumption formats (bigger bottles etc) increased 3% to 49%. Quite a staggering jump. Indeed, as Murray Harris, sales director at Britvic says, the marketing of soft drinks as value for money has been “aggressive” and has helped sales hold up well.

Indeed, the soft drinks category is nothing but resilient – especially cola, which increased the gap at the top of the soft drinks table with 4% growth (£1.354bn).

Unsurprisingly, that meant Coca-Cola and Pepsi did pretty well. The former’s sales in the take home category remain nothing short of staggering at just over £1bn. But though Pepsi lies three places and over £700m behind, Coke didn’t have it all its own way.

Pepsi Max was heralded as a “star Performer” by Britvic with sales value rising 9%. Soft drinks expert Jonny Forsyth, from Mintel, suggests “sparkier marketing and more extreme positioning” has helped the product succeed where Coke Zero has, undoubtedly, not.

Mid-2007 and a year after Coke Zero’s launch, a headline on Coca-Cola’s website claimed the success of the product had resulted in sugar-free sales being “on the brink of overtaking original Coke”. Just under three years, and tens of millions of investment, and sales of Coke Zero have reportedly stagnated.

However, the thirst for healthier treats is certainly here to stay. Last week, PepsiCo launched a wide-ranging set of commitments to put health at the heart of its business. The plans are impressive: they include a pledge to make 50% of its savoury snacks baked or include “positive nutrition” by 2015. However, it may have its work cut out winning the hearts of the nation.

“It has a huge task ahead of it in taking consumers through this journey, largely because the categories in which some of its brands operate are perceived as unhealthy,” says Michael Benson, consultant at global brand agency The Brand Union.

One that is already in the health camp is Tropicana. Intriguingly, the Britvic report has Pepsi Cola and Tropicana switching places in the Top 10 brands for the take home market – the cola at £271m and the juice at £270m.

That Tropicana has been squeezed out during the recession is unsurprising – smoothies have suffered a similar fate with sales plummeting 27%. However, Britvic’s Harris says he is surprised by research in the report suggesting that consumers were trading down from juices to low calorie colas.

He says: “[The findings] highlighted a number of unexpected switches that consumers have made over the last year. Who would’ve thought that pure juice consumers would be switching now to low calorie cola?”

But more pertinent is what this means for PepsiCo, which owns Tropicana and Pepsi Cola. It’s already committed to keep the moratorium on advertising regular Pepsi in place, with the no-sugar alternatives like Pepsi Max and Diet Pepsi the focal points of any marketing. But what will it do with Tropicana? Will it wait until the economy recovers? Will it try and rebrand (ahem)?

The shift should not give Pepsico any significant worry, says Kate Waddell, MD for consumer brands at Dragon Rouge. “It’s only to be expected that a premium juice brand would suffer at the hands of own brand or from a shift to cheaper carbonates. It need not derail any health vision commitments as these cover the entire PepsiCo portfolio and in many ways one could argue, give PepsiCo a higher profile brand platform upon which to deliver enhanced health, given carbonates’ less healthy associations.”

That consumer spending habits have changed during the recession is undoubted. What brands and marketers for soft drinks will be attempting to decipher is: how will they change coming out of a recession. Conjecture is ripe, though one common consensus seems to be that consumers have got used to value – and they’ll continue to look for it. Cue more aggressive promotions, perhaps?

Brand consultant and former Britvic director, Andrew Marsden, says “yes”. However, Dragon Rouge’s Waddell is less certain. “I would anticipate that promotions would start to slow in favour of more brand building or innovation initiatives. The question will be whether the retailers will be as happy to move away from price promotions which present a big pull factor for their customers.”

Of course, in a World Cup year, there will be no shortage of cash for campaigns – at the 2006 tournament FIFA raised €1.9bn (£1.7bn) in marketing revenue and €700m (£622m) in sponsorship from official partners alone.

Soft drinks brands will head the queue. Coca-Cola says to expect a “number of fantastic promotions” – it’s already run a daily draw throughout February on its Powerade brand.

Fellow sports drink Lucozade, will be hoping its sponsorship of ITV’s World Cup coverage will revive sales after a disappointing 2009. Though still second only to Coca-Cola in the top brands in the take-home market, sales dipped 3% to £339m, according to Britvic’s report.

Sports drinks in general hit the wall last year with Gatorade and relative newcomer Euroshopper Isotonic the best performer – that latter’s low price point being key.

But while drinks offering stimulation for sport may have lost sight of the ball, the market for glucose and stimulant drinks is buoyant. The 7% sales increase might have been down on the 12% achieved in 2008, but it is still “healthy”, says Britvic.

“In 2009’s price conscious environment, maintaining growth for this high-ticket subcategory was also a marketing challenge. One key to success was a 20% uplift in promotional support, raising the proportion of sales on promotion by a third to 42%. The big stimulus was provided by Monster and Relentless.”, the report says.

TOP TEN BRANDS (Nielsen, MAT 26 December 2009)

Value %change
1. Coca-Cola £1,018m +4
2. Lucozade £339m -3
3. Robinsons £307m +2
4. Pepsi-Cola £271m +4
5. Tropicana £270m -6
6. Red Bull energy £92m 0
7. Ribena £75m -3
8. Schweppes £68m +4
9. Actimel £68m +7
10. Volvic £54m -7

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