Cultivating more consumers who buy more, more often, & tell their friends!
The carbonated soft drink (CSD) business is reeling. Volume at both Coke and Pepsi has dropped for years and there’s no light at the end of the tunnel. Most point to two causal factors. One, “sodas” have become a prime PR target of the health movement against high calorie, unhealthy food and drinks. Second, soft drinks have lost significant business over the years to waters, teas, and energy drinks. Consumers have many more options and freely avail themselves of them.
While there’s no question that these are key factors, both are actually derivative of a more fundamental brand strategy issue. CSD’s have (somewhat passively) allowed themselves to be repositioned in negative ways by competitive interests. It’s largely marketing - or the lack thereof - that has hurt the soft drink business. Despite the billions spent marketing to them in this category, young people now just don’t think that colas are cool. Where Coke and Pepsi have been staples of the American diet for generations, millennials today favor more contemporary products that they see as more for them.
While, of course, there are health related realities about the category, health has never been a determining factor of the success of a product. We consume all manner of things that we know aren’t good for us; some that we know will even kill us. Yet we buy nevertheless.
Consider guns. Even amidst the horrific mass shootings and the tsunami of negative publicity from gun deaths that logically should have deeply hurt gun sales, over the last 20 years that business has grown dramatically. The industry doesn’t track total gun sales, but insiders suggest a close proxy is the number of background checks done each year. They have exploded from 893K in 1998 to 16.9 million in 2012. Empowered by the efforts of their industry lobby, the NRA, gun companies have actually figured out how to use these devastating events to their advantage. You’ll remember that after Newtown, there was a shameless cry from the NRA for more guns in schools!
Consider big tobacco. Although cigarette sales are down significantly in this country - the percentage of Americans who smoke has fallen from 42% in 1965 to 18% in 2012 - one might wonder how they have any sales whatsoever. Over 6 million people worldwide, and 500,000 Americans, die every year from smoking according to Tobacco Atlas. Despite that, global cigarette revenues approach a half trillion US dollars annually.
So, this begs the obvious question: if two of the most socially obnoxious consumer products, guns and cigarettes, can overcome their rather obvious marketing challenges, what’s up with carbonated soft drinks? Compared to profound national tragedies and to the millions who have died from smoking, should a few extra calories and high fructose corn syrup really be that challenging? Shouldn’t Coke and Pepsi, both considered among the best marketers on the planet, be able to effectively manage this existential crisis?
All of this provides interesting context for Coke and Pepsi’s recent new product launches that seem squarely directed at these challenges. Pepsico executed a one-two punch, launching Pepsi True - which boasts “no high fructose corn syrup, no artificial sweeteners, low calories, and less sugar” than regular Pepsi. They also are testing Caleb’s Kola - a “craft” cola in the spirit of small beer microbrews.
Caleb’s uses rich language and imagery to position itself squarely in the middle of the smaller, more natural, healthier circle with descriptors like: craft, quality ingredients, batch, Fair Trade, kola recipe, cane sugar, brown spices, citrus notes etc.
Both Pepsi newcomers address the functional health issues head on.
Coca-Cola seems to be taking a more focused approach by leveraging its iconic brand and company moniker on its new Coca-Cola Life product. All decked out in green, Coca-Cola Life similarly boasts lower calories (35% fewer) and “natural” sweeteners - the same combination of cane sugar and Stevia in Pepsi True.
This tack hopes (bets?) that consumers will embrace the Coca-Cola branding in this more contemporary (and green) offering. While the Coca-Cola brand carries the immense power of the global leader in soft drinks, for this new product - is that really a good thing? Could the overwhelming weight of the Coca-Cola branding (for better or worse) overwhelm this new, evolved product and brand positioning?
For example, think about if McDonald’s were to roll out a more healthy, all natural line. Even if the packaging was in a different color, could the core brand’s positioning credibly stretch to include this new product? Can consumers’ brains expand wide enough to consider, say, a locally sourced vegan McDonald’s burger? I don't think so.
One can debate which approach has the greatest chance for success. The fact that Pepsico and The Coca-Cola Company are so different probably makes the exercise a bit like comparing apples and oranges. Coke is a beverage company with the overwhelming bulk of its business in the carbonated soft drink category. As I’ve written before, they have no choice but to broaden the positioning, perception, and appeal of their core Coca-Cola brand so as not to be solely associated with "unhealthy". They seem to be “going for it” with Coca-Cola Life.
Pepsico seems to be experimenting. As a broader food company with only 17% of its overall business in CSD's, perhaps they don’t feel as “stressed” about the consumer sea changes in soft drinks. Pepsi True is clearly a direct competitor to Coca-Cola Life. Neither will likely steal consumers from the other brand camp - instead cannibalizing volume from traditional, diet and other low calorie beverages from within the same brand family.
Either way, as a veteran of the ‘Cola Wars’, it's exciting to observe the strategy, new products, and big brand bets being placed for the future of the companies. Creating new, healthier products is a must. The marketing also has to do more as well!
McDonald’s, itself dealing with similar health struggles, may be onto something with an ad they have out now. It pokes fun at foodie-esque aspects of contemporary health culture while unapologetically presenting itself. It celebrates a Big Mac, in all its masculine, 1970’s-esque splendor, as something unpretentious and American. It doesn't dance around the issue of what it is. It boldly "owns" its identity and heritage. Maybe the Colas can learn something from this approach.
In contrast, last year Coca-Cola ran an ad that encouraged consumers to be more active. Unfortunately it challenged viewers to “Live Like Grandpa Did”.
Does anyone think that young people, almost all of whom are doing their absolute best to carve out their own identity and sense of style apart from their their elders, really want to do much of anything the way older generations did? Will that approach (and message) really inspire millennials to drink more Coke?
Obviously critique is always “Monday Morning Quarterbacking”, but even beyond the admonition for young people to act like old people, doesn’t this ad (and others like it) also - effectively - underscore and reinforce why many are turning away from colas? I understand the logic behind the spot, but the impact doesn’t seem to empower consumers to want to drink more colas. It admonishes them to exercise more (something that not everyone wants to do). It places both a physical and an emotional obstacle to cola consumption; to drink soda, they're being told to exercise more. Now, the advice is correct, but its like your mother telling you to eat your vegetables. Is that really the most compelling way to drive that behavior? :-/
Perhaps the traditional cola brands should simply adopt a more honest - maybe even brazen - approach to their messaging (a la the McDonald's spot above). Communications that deliver an idea like this (not these words) - “it tastes great, you’ve been drinking it forever, and in the scheme of things, it’s not really all that bad!” - might resonate with consumer sensibilities. Certainly the growth of energy drinks - which seem to double down on caffeine, sugar and who knows what else - indicates that health isn’t all that some consumers care about.
So in the end, new product innovation is a must for every consumer product to remain relevant. At the same time, the brand must evolve similarly. The 100,000 foot answer is to always identify a brand positioning that carves even greater emotional mindspace with consumers. Find out what's important to them and craft your product and brand/emotional offering in a way that satisfies their aspirational self; that makes them feel good about themself. And then market the heck out of it!
To explore the strategy and tactics of innovation for your brand, please get in touch!