Lucozade has launched a cola and brand owner GSK has asked its retailers to stock the new Lucozade Energy Cola “next to the Coke selection where possible”. According to Lucozade Energy’s brand manager Matt McKie: “Lucozade is becoming renowned for launching category changing new product development, and Lucozade Energy Cola is set to strengthen this reputation”.
There are very few points of absolute certainty in the nebulous world of marketing. But one of them is that Lucozade is never going to have any meaningful impact on the cola category. That will be a double blow for GSK. First, because the time and money invested in it will not produce any substantial return. Second, because it’s subsequent failure will undermine, rather than strengthen, GSK’s FMCG credentials.
Failure will prove particularly troubling for GSK because it has just completed a much trumpeted strategic consolidation of its consumer healthcare and nutritional health divisions to create the world’s first “fast moving consumer healthcare” company. What better way to demonstrate the new group’s synergy than by launching a hybrid line extension combining the consumer attraction of cola and the health credentials of Lucozade?
But what looks good on paper doesn’t look so good in the aisles. GSK has fallen into one of the oldest marketing pitfalls: launching a cola.
GSK’s new product is predicated on four strategic observations. First, the company has a track record of creating genuinely successful new lines – Lucozade Energy Blackcurrant was a genuine sales triumph for example. Second, Lucozade is a big brand with £120m in annual sales and ever deeper pockets. Third, the cola category is the biggest single drinks category in the UK worth £3bn annually and hugely attractive as a target category. And fourth – GSK has probably produced a cola that is testing extremely well, with a large proportion of consumers preferring it in taste tests over the two traditional cola giants.
GSK has fallen into one of the oldest marketing pitfalls: launching a cola
We’re big. We’re successful. We believe we have a superior cola product. And we think we can grab a big share of a very big category. It looks like a recipe for success, so why will the results be so poisonous?
There is a reason that Coke and Pepsi own 90% of British cola sales between them. But it’s certainly not related to product performance. There have been hundreds of blind cola taste tests over the years, and almost all have been united by two fundamentally crucial results: most consumers cannot tell the taste of their favourite cola from the rest and, usually, Coke and Pepsi finish well down the league table of preferred colas.
Yet despite this, both Pepsi and Coke continue to dominate. That’s because they hold the ace card in the cola category – brand equity. Both have long heritage, enormous brand awareness and imperious brand associations. Combine that with marketing expertise and very big global budgets and you begin to see why they will retain their share and why Lucozade has no chance of winning any of it.
Study the long history of cola and you’ll see the same ultimately flat result. In 1993, Virgin and Canadian soft drinks manufacturer Cott claimed, quite correctly, that they could produce several colas that tested better than either Coke or Pepsi. Emboldened by the same four factors that now drive GSK, Virgin launched its Cola in 1994 to much Branson-fuelled fanfare. After encouraging launch sales and a target of 10% share by year end, the brand gradually faded to a cameo role on Virgin’s various vehicles.
More recently, Red Bull fell for the same four factors and launched Red Bull Cola from the top of a skyscraper in 2008. Once again the brand had to admit defeat two years later.
It’s the same story north of the border where AG Barr enjoys legendary success in its domestic Scottish market with its Irn Bru brand – the only beverage in Europe to outsell Coke can for can. But when the Scots manufacturer attempted to take on Coke, its Barr Cola fell flat.
Even our usually invulnerable private labels have struggled with cola. Both Tesco and Sainsbury’s have store brand colas, but both take less than 25% share in store and do so at a 50% discount from their branded rivals. British retailers expect these two figures, but traditionally the other way round: their main private label lines usually enjoy 50% of the category share at a 25% price discount from the national brand leaders.
You could even argue that the big two cola players have struggled to innovate their own category with new line extensions. Pepsi Raw fizzled to nothing in less than three years, and Coca-Cola famously screwed up with its better-tasting but brand-defying New Coke launch in 1985. More recently, it has failed to build UK sales of Coke Zero beyond a miserly 3%.
The cola category appears closed to even the incumbent brands that dominate it. So what hope Lucozade? None.
On the brighter side – at least Lucozade is a brand built on recuperation.