Coke, Pepsi trying to regain market fizz
By Laura Petrecca
USA Today
Decisions, decisions, decisions.
Soft-drink seekers stopping in at Michael's Delicatessen in the beachside town of East Quogue, N.Y., must choose from among Coke Classic, Coke with Cherry, Coke Cherry Zero, Sprite, Tab, Mountain Dew, Mountain Dew Code Red, Diet Pepsi Wild Cherry, Caffeine Free Diet Pepsi — and more than a dozen other options just from the Coca-Cola and Pepsi-Cola companies alone.
The number of soft drinks in the market "seems to expand a little more every year," deli owner Michael Hegarty says. "But in the last few years, it seems to have really exploded, especially from the big guys like Coke and Pepsi."
Next up from Coke and Pepsi, which together offer about 100 carbonated products in the United States: the launch this year of rival "functional" no-calorie soft drinks beefed up with vitamins and minerals and positioned as "better-for-you" choices.
"The single-biggest trend impacting sales in the beverage industry is health and wellness," says Gary Hemphill, managing director at consulting firm Beverage Marketing. "People want products that are healthier for them."
But neither company expects the new drinks to dominate sales. Rather, they are meant to serve segments of the market.
"The beverage industry has reached an area of specialization," Hemphill says. "We'll likely see a growing assortment of brands and choice — more niche brands and fewer megabrands."
Driving the proliferation of soft drinks is the hope by Coke and Pepsi that they can revitalize sales of carbonated soft drinks. Bubbly beverages have lost ground to choices such as bottled water, noncarbonated drinks such as teas and juices, sports drinks and "functional" drinks laced with nutritional supplements.
Coke and Pepsi have products in those areas, but a large chunk of their sales remain in carbonated soft drinks, which are struggling. In 2006, U.S. volume sales of the Coke Classic brand fell 2 percent to 1.8 billion cases, according to the newsletter Beverage Digest. The flagship Pepsi brand dropped 2.5 percent to 1.1 billion cases.
To replace those sales, the carbonation kingpins are deploying new products, revamped packaging and fresh ad campaigns. Among their strategies:
This spring, Coke is launching Diet Coke Plus, a no-calorie drink fortified with vitamins and minerals such as B12 and zinc. This fall, Pepsi will roll out Tava, a caffeine-free, calorie-free drink with added vitamins, including B3, B6 and E.
As an image booster, Coke now refers to drinks as healthier-sounding "sparkling," rather than "carbonated," in press releases, earnings reports and other communications.
"We've gotten better at listening to consumer needs and responding faster," says Katie Bayne, who was just named chief marketing officer for Coke North America. She says there was a desire for a soft drink such as Coke Zero, which is designed to taste like Classic Coke.
Calorie-conscious consumers, however, will continue to have familiar Coke choices, such as Diet Coke and Diet Coke Sweetened with Splenda.
As part of Coke's plan to play up a healthier angle to its no-calorie drinks, it's running new Diet Coke print ads, including one that reads: "99 percent water. 100 percent taste."
Pepsi has its own expanding arsenal of artificially sweetened products. In June, it will launch Diet Pepsi Max, a no-calorie soft drink with the popular supplement ginseng and extra caffeine. Also in the lineup with the familiar Diet Pepsi and Pepsi One are Jazz (diet cola) and successful diet versions of Mountain Dew.
