Coca-Cola has had a difficult couple of years. Consumers are increasingly moving away from sugary drinks, and the announcement of a UK tax on soft drinks, which will come into force in 2018, as well as the Government health committee’s damning childhood obesity report, have put renewed pressure on the soft drinks industry.
Total UK cola value sales for the six months ending 2 July 2016 were £756.8m, down 4.3% on the same period last year, according to Nielsen.
If you look specifically at the Coca-Cola brand, the figures are even worse. Total UK Coca-Cola ‘classic’ value sales for the same period were down 7.8% to £267.5m. Diet Coke, Coke Zero and Coke Life all saw sales fall by 5.4%, 3.4% and 54.5% respectively. Even though volume sales were not supplied, thereby making it unclear how many promotions were held, the figures clearly show less Coca-Cola is being bought.
And this trend is not only in the UK. At Coca-Cola’s second quarter results yesterday (27 July), global net revenues fell 5% year-on-year. The brand has also downgraded its organic revenue growth prediction for 2016 from between 4% and 5% to 3%.
“The fact that the Government announced plans for a tax on select sugary soft drinks has impacted the carbonated soft drinks market in the UK. The tax drew attention, again, to the sugar content of various drinks, including carbonated soft drinks, which is likely to have dampened demand,” says Kiti Soininen, head of UK food, drink and foodservice research at Mintel.
In response to the Nielsen value sales figures, Coca-Cola claimed its own data shows that the cola category grew 0.6% for the year to 26 December 2015, compared with 2014. And volume sales across the Coca-Cola range were up 0.4% on the previous year. However, these figures date from before the Taste the Feeling campaign launch.
‘One Brand’ goes global
It is clear that Coca-Cola is trying to adapt to changing consumer habits. In January, Coca-Cola’s global CMO Marcos de Quinto addressed the issue head on by acknowledging that the “food and drinks industry is facing a challenge” battling the over-consumption of sugar. To ensure the future of the company it rolled out its ‘One Brand’ strategy, which was piloted in the UK last year, on a global scale.
The strategy sees its four variants – Coca-Cola, Diet Coke, Coca-Cola Zero Sugar and Coke Life – placed under one ‘master brand’. Any marketing activity will focus on the overall brand, without creating different personalities for its variants.
The hope is that the new strategy will ensure the company can adapt more quickly to changing consumer needs. It will do this by making consumers more aware of its low- or no-calorie variants, while strengthening the overall brand.
Speaking on an investor call, however, chief operating officer James Quincey admitted the effect of the One Brand strategy has yet to be felt.
He explained: “The roll out started in January. That sort of marketing innovation takes time to take effect. We will keep pressing away with innovation. It’s too early to call it a success, we can call that at the end of the year.”
Battling declining sales
Coca-Cola is using its marketing might this summer with the hope it can counter the downturn. It has sponsorships deals with UEFA for the European Championship and the Rio Olympics. The brand also launched CokeTV to build deeper relationships with young adults.
And it is pushing its lower calorie options. It has revamped Coca-Cola Zero Sugar as part of a £10m campaign, marking the company’s biggest marketing investment in a new product in a decade. That move comes after Coca-Cola discovered half of consumers did not know it contained no sugar.
When asked about Coca-Cola’s recent sales performance, its UK marketing director Bobby Brittain denied the brand was struggling, arguing that current innovation around sugar-free beverages is leading to a “reinvigoration of the sector”.
“I don’t think it’s in a tough place at the moment at all – the amount of innovation we are seeing [in the wider sector], we welcome that activity.”
Bobby Brittain, UK marketing director, Coca-Cola
He added that the One Brand strategy is also shifting consumer metrics in the right direction and that he is “very pleased” with the results so far.
“The brand affinity scores, which we track with Millward Brown, and the tracker we have on the brand campaign, all of those results give us great encouragement and also gave us the confidence to use the One Brand’s ‘Taste The Feeling’ framework for Coca-Cola Zero Sugar,” he said.
However, YouGov BrandIndex figures tell a different story. Master brand Coca-Cola’s brand index score, which measures a range of consumer perception metrics including value, reputation, satisfaction and quality, dropped 4.1 points to 4.3 over the past year, a ‘statistically significant’ decline, and placing it eighth on a list of 27 soft drinks brands. Purchase intent, meanwhile, dropped one point to 8.5.
It seems the sugar tax and public health concerns have also tarnished its reputation, dropping 5.4 points over the past 12 months. However, it is still placed fifth in a list of 27 competitors. With regards to whether consumers would recommend the brand, it is placed 16th out of 27, scoring -2.9.
This year the fizzy drinks brand also fell out of the top 10 in Millward Brown’s annual list of the world’s 100 most valuable brands for the first time.
A focus on premium products
Coca-Cola faces a cocktail of challenges it must adapt to including changing consumer behaviour and growing public health concerns. That makes its focus on quality and premium options the right choice.
David Lancaster, senior account manager at analysts CGA Strategy, explains: “Even though volume sales are largely flat, more brands are focusing on quality and launching low-calorie options, so there are some green shoots within the sector and there is an opportunity for growth.”
“For the more traditional brands that have been out in the market for a while, it will be more difficult to reinvent themselves than it is for new players.”
David Lancaster, senior account manager, CGA Strategy
Nick Liddell, director of consulting at branding agency The Clearing, adds the soft drinks brand’s decision to communicate its non-sugar variants more clearly is an “entirely appropriate response”, but that it will come down to the company’s dedication to push these healthier options to sustain its success.
He comments: “It is clearly moving away from a [marketing strategy] that leads people to associate the Coca-Cola brand with a single product. Ultimately, it will depend on the success of the other variants in the portfolio to boost the overall brand. There is definitely a place for them in the world.”
With Coca-Cola pushing its low- and no-sugar strategy, it seems clear the brand is eager to change brand perceptions. However, it has to continually promote its healthier options if it wants to keep up with changing consumer preferences and manage falling sales. And in the end that still may not be enough to keep the Coca-Cola brand fizzing.
To learn more about brand and creative, why not attend the Festival of Marketing, which is running on the 5 and 6 October at Tobacco Dock, London. For more information about the event, including how to book tickets, click here.