Soft Drinks | Brands create and acquire healthier soft drink options
Water outsells colas for the first time
For the first time, bottled water outsold colas in the US, and sales of carbonated soft drinks (CSDs), which have historically defined the soft drink category, declined for the 12th consecutive year in the US. Alternative dairy drinks, flavored seltzers, and other sparking options increased in popularity. Colas still dominated the category in volume, despite their steady decline, which slowed a bit, according to industry publication Beverage Digest.
The diet segment was especially impacted. Consumer caution about product ingredients that they ingest or put on their body impacted the soft drink, fast food, and personal care categories. But the consumer reaction was complicated, particularly among millennials, who wanted drinks with fewer ingredients but more benefits.
Energy drinks performed well, with Monster rising 15 percent in value, leading the BrandZ™ Soft Drinks Top 15, which registered no change in value following a gain of 1 percent a year ago. The coffee brands Nescafé and Nespresso rose modestly in value, and Folgers joined the ranking for the first time. Consumers also turned to tea brands, like Lipton.
In response to pressure on the category, the major soft drink brands acquired or developed healthier beverages and added changes to packaging and communications. To build, or rebuild, emotional connection with the brands, they associated cola drinking with special occasions and explored ways to increase at-home consumption.
Brands also promoted smaller portion sizes to both reduce calories and lift margins. Although the leading brands were not assaulted by craft alternatives, as in the beer category, many startup craft brands attempted to fulfill the desire of millennials for soft drinks with taste and health credentials. The major brands countered with their own offerings.
As part of what the company calls its commitment to “Performance with Purpose,” PepsiCo purchased a line of sparkling probiotic drinks called KeVita. It also distributed IZZE Fusions, a variation of juice and sparkling water that it acquired several years ago. These more natural low-calorie drinks, aimed at younger consumers, were intended to meet the objections to diet beverages and artificial ingredients.
Tropicana, a PepsiCo brand, launched Tropicana Essentials Probiotics, a line of juices with probiotics. PepsiCo also launched LIFEWTR, a bottled water that will depend on artistic packaging to earn a premium price and compete with Smartwater, Coke’s premium water entry.
Coke’s Venturing and Emerging Brands (VEB) group continued to identify disruptive brands and help them achieve scale. The VEB group includes brands such as Honest Tea, Peace Tea, and Zico Coconut Water. Coke acquired some of the brands from Monster in 2015, when Coke transferred its energy brands to Monster and Monster shifted its non-energy drinks to Coke.
Dr. Pepper Snapple Group purchased Bai Brands, a natural drink startup. It marketed a sparkling flavored water call Bai Bai, made from the fruit that surrounds coffee beans. The drink is marketed as healthy because it contains antioxidants, and socially responsible because it supports the livelihoods of Indonesian coffee farmers. A Super Bowl commercial featured Justin Timberlake, an original Bai investor, and Christopher Walken.
Pepsi created Pepsi 1893, commemorating the brand’s birth year. Called “a bold spin on an original cola,” the craft cola is made with real sugar and is positioned to be consumed as a mixer or on other occasions that call for a cola. Pepsi also added new flavors, Citrus and Black Currant. Coke reintroduced two craft brands formerly owned by Monster, Blue Sky and Hansen’s.
To better understand the factors driving consumer love for the Coca-Cola brand, the company conducted expensive market-by-market analysis to explore how love was influenced by each of three dimensions: the consumer perception of the brand; the dynamics of the category; and the reputation of the corporation.
Early in the year, Coke launched its “One Brand” marketing strategy, unifying four variants—Classic, Diet, Life, and Zero—under the Coca-Cola brand and adopting a global campaign focused around the experience of drinking a Coke, called “Taste the feeling.”
The Coca-Cola Super Bowl ad attempted to strengthen emotional connection by pairing the brand with eating occasions. Flashing the headlines “Coke and Food” and “A classic love story,” the 30-second spot showed people preparing and sharing food and enjoying friendship. It featured Coke Classic, Life, and Zero available in small cans, glass bottles, and logo glasses.
Consistent with its association with pop music, Pepsi sponsored the Super Bowl halftime show featuring Lady Gaga. And reflecting its emphasis on digital rather than traditional advertising, it ran no Pepsi spots, and instead aired a commercial, with music by John Legend, to launch Life Water, its new premium water.
The “Break out a Pepsi” campaign emphasized drinking occasions and featured vignettes of small life triumphs, like fixing an office copy machine, that call for modest celebration. Illustrating the risk brands face when they take a stand on sensitive social issues, Pepsi released, and then immediately retracted, an ad intended to celebrate diversity. In the ad, the mood of demonstrators turns from protest to celebration when Kendall Jenner hands a Pepsi to a police officer. Critics argued that the ad mirrored, and trivialized, the Black Lives Matter movement.
Several of the brands with fruit flavoring, like Sprite and Fanta, owned by Coca-Cola, increased in value, despite health concerns. Consumption of both brands increased in the US, according to Beverage Digest. Similarly, the energy drinks remained strong. Pepsi continued to position Gatorade as the brand for serious athletes, and it launched an organic version of the drink.
Celebrating its thirtieth 30th anniversary, and available in 171 countries, Red Bull continued to build the leading energy drink brand with strategic sponsorships and relevant content. It broadcast, on its own TV channel, programs featuring extreme sports and feats of daring aimed at a community drawn to adventure.
The energy drink Monster entered China and planned to enter India, with aggressive international expansion plans hinged on its distribution arrangement with Coca-Cola. That relationship may help Monster also expand its shelf presence in the US, where it competes with brands like the PepsiCo-owned Mountain Dew, which does a good job of communicating with its core audience of high-energy male millennials.
Brand-Building Action Points
1. Be clear about purpose
Help consumers be clear about the role of the brand, its functional purpose. From that clarity, the brand can build a strategy. Then ask, where are the opportunities beyond the next three to six months? Look out at trends over the next three to five years.
2. Target carefully
Target to insight. Have strategies to deliver against the top two or three target audiences. It is not just about young people.
3. Rekindle love
In a world of turmoil, there is strength in a heritage brand that can be progressive, unpretentious, and universal. This is an authentic place for the brand to be. The purpose is in the brand’s roots, which is why people initially fell in love with it.
4. Communicate well and often
Having a communication strategy is vitally important. The brands need to understand how to communicate effectively to younger consumers and get them excited about the products.