Colas Challenged By Growing Altbevs

Brandweek, June 19, 2000 by Theresa Howard, Gerry Khermouch

Coca-Cola's woes since last fall stand as good metaphor for the general state of standard-issue coals, which continue to show slow growth while flavors once again dominate in the what's-hot category.

With the archrival entries Mountain Dew (from Pepsi) and Sprite (from Coke) still showing solid growth, the flavor category overall is up. Even long-languishing 7 Up, with an assist from the in-your-face "Make 7 Up Yours" ad campaign, has started to show improvement, although the brand's investment still lags that of Dew and Sprite.

And although year-to-year comparisons indicate that volume is down for 7 Up, sales through the start of 2000 are showing improvement, with sales through February up 2.6%, per Nielsen scanner data. The brand garnered some added attention when ABC refused to allow the beverage marketer to air what probably was the campaign's most irreverent spot on the Super Bowl.

Coke garnered some unwanted publicity of its own throughout the year, although not of the kind that creates a helpful buzz. In Coke's case, the news involved a sweeping staff cutback and reorganization, the launch of a long-awaited ad campaign, "Enjoy," to a mixed response, the abrupt departure of a key marketing exec, and the challenge of growing a mature product in a category that is undergoing price increases. All this at a time when the category continues to lose share to such non-carbonated "new age" beverages as bottled water, sports drinks, teas, juices and "nutraceuticals."

Despite receiving little marketing support since a 1998 global ad campaign centered around the theme "Live your Life," Diet Coke held onto its No. 3 position with slightly positive growth. If the brand can grow with little support, perhaps it will show a more significant gain later in the year when a celebrity-based ad campaign breaks just ahead of a packaging makeover.

Pepsi, meantime, trying to pounce on Coca-Cola while it was down but showing only nominal gains for its core brand, resurrected the Pepsi Challenge for its big summer 2000 promotion. Although the program put Pepsi on the map back in the day, bottlers contend that this latest, greatest iteration of the famed comparative push will not have the same impact this time around, thanks to the filtered-down approach that came of having third-party marketing companies develop the program, in contrast to the in-the-trenches independent bottlers who had orchestrated the program in its 1970s heyday. Still, some say the Pepsi challenge is inherently a category-building enterprise that benefits all colas, and perhaps it will have an impact in slowing the erosion of both big colas to alternative beverages, even if it does not yield much in the way of market share snatched from Coke.

Among the independents, 7 Up's Cadbury Beverages stablemate Dr Pepper continues to demonstrate incredible perseverance, holding on to its No. 6 spot and posting a 4.8 jump in volume over 1998 levels. An upbeat, musically inspired ad campaign seemed to be helping to refresh the brand with teens.

As for those new age beverages, they continued to show brisk growth, and at an attractive price premium--with the exception of some of the preservative-laden, "cold-filled" tea and juice entries mustered by Coke (Fruitopia, Nestea Cool) and Pepsi (Lipton Brisk, Fruitworks). All told new age beverages grew by 15% to $6.13 billion at wholesale, according to researcher/consultant Beverage Marketing, New York.

With the Snapple comeback well under way, thanks to a succession of nifty promotions and consumer-intriguing extensions such as Whip-per Snapple and Elements, parent company Triarc Beverage turned its attention to the sick sister, Mistic, with a line of vitamin-enhanced fruit drinks, Zotics, whose dramatic proprietary packaging and exotic ingredients seemed to be drawing the attention of consumers.

For Triarc as for most of its key rivals, functionality seemed to be a lure for consumers and the trade. Thus, AriZona marketer Ferolito, Vultaggio & Sons, after a period of some drift, finally jumped on the bandwagon it had helped initiate years back with the Rx line of functionally reinforced drinks, which seemed to draw interest from both consumers and the Food and Drug Administration. And fast-growing startup South Beach Beverage, rocketing to $190 million in 1999 sales at wholesale, per Beverage Marketing, continued to throw additional sublines into the fray, including even a sports drink, as it moved toward conclusion of a buyout by J.W Childs. Given the segment's flush margins and burgeoning interest among consumers, there were few clouds on the horizon, aside from the FDAs growing scrutiny of some of the implicit health claims being made on packaging and POP.

Meanwhile, Quaker Oats sought to generate additional growth for its powerhouse Gatorade brand with lighter-formulated Frost and the more intensely formulated Fierce extensions, then moved to fill other consumption occasions with a vitamin-reinforced water called Propel and an "energy juice drink" called Torq. All told, Gatorade sales grew 11% in 1999 to $1.45 billion at wholesale, while Coke's challenger, PowerAde, grew 16% to $138.6 million and Pepsi's All Sport actually declined, per Beverage Marketing data.