CATEGORY DEFINITION: The soft drink category includes these non- alcoholic ready-to-drink beverages: carbonated soda drinks, juice, bottled water, functional drinks (sport and energy), coffee and tea (hot and iced)
Brands introduce new products and marketing
Brand leaders introduced new products, packaging innovations and marketing strategies to build sales, despite the consumer health concerns that challenged the soft drinks category worldwide.
Avoidance of artificial sweeteners or chemical ingredients slowed consumption of diet colas and energy drinks, although most consumers regulated their intake instead of rejecting soft drinks completely.
In the US, Pepsi reclaimed the number two spot in volume consumed, having ceded it to Diet Coke in 2010. Pepsi now ranks in between Coke and Diet Coke
in consumption, according to the trade publication Beverage Digest.
Greater awareness of health and obesity issues also touched growing markets like China, India and even Mexico, where cola has been a popular beverage for a long time.
Sensing a possible opportunity, smaller brands introduced craft cola drinks
that emphasized naturalness, although the calorie count could be significant. Meanwhile both Coke and Pepsi updated their respective strategies.
Coca-Cola unified four Coke variants under the masterbrand and revised its “Open Happiness” slogan to “Choose Happiness.” The strategy attempts to sustain the brand by embracing consumer concerns and providing options.
Pepsi, which refreshes the brand with each successive generation, launched an updated version of the “Pepsi Challenge,” featuring contemporary entertainment and sports stars on social media.
While working with regulators and adjusting product ingredients, the major brands also took steps to protect brand reputation with acts of positive corporate citizenship, such as revising manufacturing and supply line practices to become carbon neutral.
Addressing health concerns Coke introduced Coke Life in the US and UK, having launched it first in Latin America. The brand attempts to satisfy consumers seeking a mid-calorie cola without artificial sweetener.
Soon after the introduction of Coke Life, Coca-Cola announced plans to unify its four Coke variants – Coke, Diet Coke, Coke Zero and Coke Life – under the Coke masterbrand, starting in the UK.
Coke Life derives its sweetness from a blend of cane sugar and extract of the stevia leaf. Pepsi launched its version of a stevia-sweetened cola on Amazon, in an effort to
target consumers who might prefer a naturally sweetened mid-calorie drink. Called Pepsi True, the drink also comes in a green can.
In another effort to address health concerns, Coke introduced a milk product. A joint-venture brand called Fairlife, the milk is positioned as a healthy and premium drink, produced on dairy farms that use sustainable practices. It fits with Coke’s entry into other beverages, such as teas, coffees, juices and waters. Like some of these other entries, Fairlife will not be branded as Coke.
In China, colas experienced increased competition from milk drinks that are sometimes carbonated. Chinese consumers are concerned not just with reducing
sugar, but also with increasing nutritional value. Juices are growing in popularity with Chinese consumers for that reason.
Health concerns also drove an increased interest in tea drinks. The heritage Lipton brand, owned by Unilever, appeared in the BrandZTM Soft Drinks ranking for the first time.
PepsiCo cross-marketed its portfolio of snack and beverage brands. In one example, it packaged Mountain Dew and Doritos together as a “Dew and Doritos” promotion intended for noshing video gamers.
Connecting with the food brands in the PepsiCo portfolio enhances the Pepsi brand to consumers and also improves the overall corporate image, positioning PepsiCo more like a consumer products conglomerate than a pure beverage company.
Pepsi marketed numerous flavors of its Tropicana orange juice brand to reach more consumers and to expand occasions beyond breakfast. Pepsi created a breakfast occasion when it introduced Mountain Dew Kick Start, a lightly carbonated energy drink with juice.
In China, Pepsi created a digital campaign connecting the Chinese New Year, a time for family reunions, with a campaign called “Bring Happiness Home”.
Coke and Pepsi also attempted to build more occasions and gain share in food service and vending. As vending machines become digitized, they enable the brands to make the experience more interesting and engaging or playful. The machines also become another point for interacting with consumers and collecting customer information, potentially personalizing the offer.
Responding to trends
To exploit the interest in personalization and experience, both Coke and Pepsi experimented with countertop machines for making cola drinks at home, Coke in partnership with Kurig, and Pepsi with SodaStream. Both brands face a similar challenge – achieving taste consistency.
Pepsi introduced its own craft cola called Caleb’s Kola, to counter the influence of craft colas, which offer local provenance and genuineness, although the calorie counts – the prices – can be higher than Pepsi or Coke.
Caleb’s Kola comes in a glass bottle and is named for the inventor of Pepsi Cola. Ingredients include natural sugar and Kola nut extract. The stealth entry contains no Pepsi branding.
Both Coke and Pepsi offered drinks in smaller bottles, in an effort to provide a refreshing indulgence but limit the calorific impact. While the strategy doesn’t boost consumption, higher margins help profitability at a time of declining consumption. Per capita consumption of carbonated soft drinks declined to 674-eight ounce servings per year, the lowest level since 1986, according to Beverage Digest.
Sprite and Fanta, Coca-Cola brands that offer a carbonated juice-flavored alternative to cola, both increased in US volume according to Beverage Digest. So did
two brands pitched to younger drinkers, Mountain Dew and the energy beverage Red Bull, which owns a Formula One team and continues to create content associating the brand with extreme sports.
BRAND BUILDING ACTION POINTS
1. Be honest with consumers. Taking action to address their concerns about sugar and naturalness will help build sustainable brand value. But take actions in ways that don’t disconnect consumers from the brands they love.
2. Demonstrate concern. Show that the world’s biggest brands do care about the planet and are taking important leadership steps to be environmentally responsible. It’s part of the story of provenance, about how the product got to the shelf.
Top 10 value doubles, dominated by Coca-Cola
Despite pressure on the category because of consumer health concerns, the BrandZTM Soft Drinks Top 10 more than doubled in Brand Value over the past 10 years
Coca-Cola’s Brand Value grew 114 percent, nearly matching the brand value appreciation of the Top 100. Coca-Cola is worth more than the value of the next 9 soft drinks brands put together and has never forfeited the number one spot in the soft drinks category since the BrandZTM rankings began.
The biggest loser from Coca-Cola’s dominance is Pepsi, which has slipped from number two in 2006 to number four today, passed by both Diet Coke and Red Bull.
The BrandZTM Soft Drinks Top 10 also increased in being seen as Different, mainly due to Coca-Cola (founded in 1886) and younger entries since 2006, including Red Bull (founded 1987) and Nespresso (founded 1988).
The brands seen by consumers as Different are those with the most vibrant and distinctive personalities. Consumers see Coca-Cola as the most desirable, fun and in control, and Red Bull as hugely adventurous and brave.
Consumers view Nespresso as particularly creative, reflecting its innovative delivery system, and sexy persona, underlined by its advertising featuring George Clooney.
Tropicana and Gatorade also entered the soft drinks Top 10 since 2006, alongside Red Bull and Nespresso. This change reflects Brand Value changes and also the widening of the BrandZTM soft drink category definition.
Key brands seen as Different
Consumers see Coca-Cola as very desirable and full of fun, Nespresso as equally sexy and creative, and Red Bull as uniquely adventurous and brave.