Is Coca-Cola losing its fizz, or can it restore itself to former glories?

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Coca-Cola has lost its place as one of the world’s top 10 most valuable brands. Jessica Goodfellow and Rebecca Stewart report on what this means for the soda giant and what it can do in a health conscious society to help make customers thirsty for its product once more.

Coca-Cola is no longer a top 10 global brand, a sign of the harsh realities the brand along with its peers faces as the falling value of the fizzy drinks category paints a bleak outlook for the brand. Earlier this week, the soda giant dropped five places to be named number 13 in the BrandZ list, a long-running annual ranking of the world’s most valuable brands compiled by WPP and Millward Brown.

Despite the shock of Coke’s exit, it was a long time coming; the brand has failed to grow since 2000, and the company has missed its own three to four per cent annual volume growth target since 2013.

In 2015, worldwide concentrate sales volume and unit case volume both grew only two per cent compared to 2014, while 2014 and 2013 yielded similar results.

Those declines have sparked countless reports that Coke has ‘lost its fizz’ as relentless pressure from public health groups over its contribution to rising obesity rates in markets like the UK and US. Everyone from Jamie Oliver to politicians has slammed the brand for the perceived damage it, along with its peers, is causing to people’s health.

So how can Coke restore itself to former glories?

The brand is trying to address this issue with revamped marketing. It recently realigned its campaigns and redesigned the packaging for all variants in an effort to maximize saliency.

For all the negativity around the brand, Coke’s marketers do claim to be learning from their mistakes. At a British Retail Consortium event last month, Leendert den Hollander, vice president and general manager, of Coca-Cola Enterprises, outlined how the business is trying to get the brand (and sales) back on track.

“Every single day 46 million people enjoy a soft drink yet if you type ‘soft drinks and health’ into Google you’ll get 37 million hits so there’s clearly something going on and it is something we have to tackle,” he said.

Like its competitors at PepsiCo, the company has also taken steps to introduce ‘healthier’ alternatives to its sugary drinks, targeted at health-conscious millennials.

Coca-Cola Life has been billed as containing considerably less sugar than regular Coke because it’s sweetened with stevia – a plant extract – and is clearly directed at people with concerns about the effects of artificial sweeteners.

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Everything about Life has been designed to counter what the company has been defined as; a sugary drinks provider. It moves away from its iconic red labelling, instead packaged in a green can, to give the appearance of being healthier than drinks in other colours.

However, its calorie and sugar count don’t compare favourably with its other products, which contain next to no sugar or calories. It may not be as artificially manufactured as Coke’s other products, but it’s certainly not a ‘healthy’ drink, and consumers aren’t buying it.

Since its launch in September 2014, Coke Life’s sales have steadily declined, dropping by over £3m to £1m in the four weeks to 5 December last year. While the company spent big in the NPD, the drink remains a small part of its business.

In an attempt to turn around the flat sales the brand has been battling over the last few years Coca-Cola has heavily hinted that it will phase out the colours associated with its product variants as it looks to assimilate its brands under one umbrella.

The drinks giant trialed the ‘one brand’ strategy in the UK last year to leverage the Coca-Cola name and boost sales of sugar free variants such as Coke Zero and Diet Coke. It has since taken that strategy global, recently announcing in the UK plans to double its investment in sugar free variant Coke Zero to raise consumer awareness of its ‘health benefits’.

Yet despite undergoing the biggest marketing shift in a decade, Coca-Cola’s sales fell for the fourth straight quarter as demand for its products declined in Europe by one per cent, its third biggest market. While sales of Coke Zero rose seven per cent in the quarter ending April 1, Diet Coke sales slumped five per cent as consumers switched to other choices. When one rises, another falls.

Coke’s losing its ‘cool’

Growing global concerns around sugar, particularly in the US and the UK where Coke could soon face a levy on its sugar-sweetened products at the rate of 18 or 24p a litre, are exacerbating its decline in sales.

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“Sugar has become the new evil and Coca-Cola is clearly suffering as a result,” Nick Fox, founding partner at Atomic London told The Drum.

“Couple that with the speed and ease at which competitive offerings can be launched in today’s retail climate, and Coca-Cola has a real problem. Arguably Coke is no longer ‘cool’, with people finding niche food and drink brands more fashionable,” he added.

To an extent, this is part of the problem. As with the alcohol industry there’s an emerging number of independent soda players, a movement that Joanna Franchin, vice-president of cultural Insight at Added Value, said “could see the major brands riding the coattails of some of the craft brands until the trend stalls,” during a session on the future of brands convened by BrandZ.

While Fox conceded that Coke is diversifying its business by snapping up the likes of Innocent, he added that an overwhelming number of consumers still associate the company name with a red can of Coke – a perception he thinks will be “almost impossible” to shift.

“A healthy lifestyle and education on sugary products should undoubtedly be at the heart of its marketing strategy, but maybe it’s time to bring a healthier new ‘hero’ brand to the fore?,” he mused.

Little wonder then that the brand’s lofty reputation no longer justifies its position alongside the likes of Google, Apple and Amazon as the world’s most valuable. While saliency kept the brand afloat before, times have moved on from the big budget TV ads that reached everyone and were iconic of their time.

“A saliency model is more difficult and expensive to maintain than ever with the spiralling decline in traditional advertising consumption and fractured media channels” said Matt Bennett, chief creative officer at creative agency ZAK.

The mantra of branding used to be “Don’t compete on features”. But increasingly that’s how modern businesses succeed, because that’s how customers choose in the era of the internet. The promise alone is not enough. People want proof.

Technology businesses, who are genuinely involved in creating new, unique products and services and immersive experiences for their customers are different to Coke, which is still largely a static single product plus advertising play.

However, as such, the branding, the brand strategy and the Coke brand is a far more important contributor to profit generation than your average technology driven company’sbrand, like Google or Apple, because the brand is the only reason to choose it over rivals, argued Julian Dailly, head of strategy at strategy and research firm Morar Consulting.

The decline of Coke reminds us the world is changing. It also signals the decline of the league tables and the brand valuation concept being presented,” he added.

“The latest results remind us that the way we think about the contribution of brands and branding must also keep moving to stay accurate, relevant and useful to modern business. Nothing lasts forever, regardless of how confident and indestructible it once seemed.

Still in the ‘major league’

It’s not just Coke being affected by this attitude though, while the overall the value of the soft drink industry rose by one per cent according to BrandZ, consumer concerns about health meant all carbonated brands in the study lost a portion of their value. However, with a cool value of $80bn the red can maker is still worth more than the rest of the soft drinks firms combined.

High ranking tech companies like Amazon and Facebook, which both made it into the top 10 for the first time this year, also contributed to fizzy drinks falling down the BrandZ ladder.

Peter Walshe, global BrandZ director at Millward Brown – which undertakes the BrandZ research – puts Coke losing some value down to a variety of factors including the “resurgence of technology-based brands,” but praised the fact that despite its age it still ranked among some “major league performers”. Millward Brown is part of WPP, which also owns the agencies leading Coke’s brand revamp.

To put things in perspective, the Coca-Cola brand is 124 years old and is still counted as one of the top 15 most valuable brands on the planet.

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On the rise of Facebook et al, Walsh said he believes that tech companies have the power to create more multi-functional consumers to meet their needs in many different ways, whereas Coca-Cola is very much more of a single (“albeit hugely valuable”) product.

“If somebody goes up its like squash ladder – the others obviously have to go down,” he said.

Finally, Coca-Cola has been investing in innovation and technology to help it reach new audiences through its one brand strategy; something Walsh thinks will pay off dividends for the advertiser.

“The brand has never been stronger,” he noted, “if there’s any brand that can disassociate itself or get less connected an unfavourable trend, ie health and obesity-type trends, then Coca-Cola’s the one to do it.”