Yes boys and girls, today we’re talking about the beverage industry. My curiosity was piqued a month back when I was visiting Berkeley. Rishi had a case of Coke Zero rather than the Diet Coke that was his previous staple, and upon asking him discovered that he simply bought whichever was cheaper at that moment. Being the good marketer that I am, I had to ask myself why Coke would risk cannibalization and the erosion of their existing brands by adding a second diet cola without any differentiation. New Coke – today nothing more than a cultural artifact of the 80s – is a stirring reminder of what can happen when a company messes with something that works. But I remembered reading something about Coke vs. Pepsi that gave me a clue.
In Blink, Malcolm Gladwell discusses how decisions made in the blink of an eye based on years of experience differ from those decisions that we pick apart logically after much analysis. In one passage he discusses a study where a blind-taste-test between Coke and Pepsi found that people preferred Pepsi to Coke. Upon peeling the question back further, however, they discovered that in a 2nd study, when they sent test subjects home with unmarked 12-packs of each, that participants preferred Coke. The conclusion drawn was that Pepsi was designed to win in a taste-test, but that long-term soda habits come from how you respond over many experiences, and that over the course of a week and a twelve-pack of soda, participants found Pepsi too sweet, and found Coke just right.
Thus, I concluded, Coke Zero might be Coke’s attempt to outflank Pepsi. If they could create a 3rd brand that had Pepsi’s sweetness they could open up a second front against Pepsi, forcing Pepsi to compete between the existing Diet Coke with its solid base and Coke Zero which was even sweeter than Diet Pepsi. To test this theory, we decided to conduct our own blind taste test, to see how Coke Zero stacked up. We poured 3 red cups – Coke Zero, Diet Coke, and Diet Pepsi. 3 of us took the test, and we wrote down all of our initial reactions as well as our final decisions. The result was that we all guessed correctly, although interestingly we had differring opinions on which was sweeter.
In 2007 Coke Zero launched using an integrated marketing campaign that included online viral components – a new move for a company that has long invested in tv commercials. According to Jack Trout’s article Confusion in Coke Land Coke Zero played on the concept that the marketing folks at Coke were suing their counterparts in Coke Zero for “taste infringement” – suggesting that Coke Zero tasted too much like Coke, but without the calories, which was simply not right.
New York Times columnist Stuart Elliott points out the campaign
relies largely on new-media efforts like e-mail marketing, video clips posted on Web sites and digital banner advertising. The goal is to suggest through the contemporary nature of the media choices that Coke Zero is a contemporary brand.
That is important because Coke Zero is aimed primarily at soda drinkers who are ages 18 to 34, with a tilt toward men. To underscore those intentions, Coca-Cola describes Coke Zero as a “calorie-free cola” rather than a “diet cola.” “Diet” is avoided because it implies — particularly to younger men — that a beverage is meant only for older, female consumers.
Compare this with Pepsi, which in 1998 released Pepsi ONE following the FDA approval of a new artificial sweetener. Pepsi ONE was based on the formula for Pepsi Max which Pepsi had been selling internationally, but the flavor was customized to appeal to the US audience. Pepsi used commercials featuring Cuba Gooding Jr. and eventually used comedian Tom Green as a spokesperson – clearly appealling to the younger male demographic. This positioned Pepsi ONE in the young male demo, while Diet Coke continued to retain a strong base in older women. This [relatively] peaceful coexistence continued for almost 9 years until 2007 when Coke launched Coke Zero, thus sparking what some refer to as the Binary Wars of Coke Zero vs. Pepsi One.
For a peak at what might happen next, we look to Europe where the Binary Wars escalated into all-out conflict. Coke had long targeted women with Coke Light (their equivalent to Diet Coke) and Pepsi had long targeted young men with their Pepsi Max. Then Coke introduced Coke Zero as part of this marketing campaign to win share against Pepsi Max in the young men demographic. Then Pepsi responded with Pepsi Light which was designed to take share from Coke Light in the older women demographic. The below ads show how Pepsi positioned Pepsi Max and then launched Pepsi Light to further differentiate the two brands.
But the market for young men is heating up with players beyond just Coke & Pepsi. The great success of Red Bull has spawned a swarm of me-too brands and now many of the big players including Pepsi (Diet Pepsi Max in the US has added caffiene & ginseng), Mountain Dew (Game Fuel), and others are hopping on the bandwagon to produce energy drinks.
The next big thing: here in the US, we can expect to see women come front and center very soon. Last year Coke launched Diet Coke Plus – a version of Diet Coke with added vitamins & minerals making it ostensibly healthy for you. Pepsi countered with Tava a few months later. Overall, with the carbonated beverage industry growing flat, the big players will be looking to diversify and then create brand extensions. Check this article out for all the areas of growth in beverages.