PepsiCo and Coca-Cola may owe their global power and heritage to their world famous fizzy drinks but, in today's market, the exciting growth is coming from non-carbonated beverages. Ben Cooper investigates  how both companies are addressing this trend.

The recent creation by PepsiCo North America (PCNA) of a separate sales division dedicated to non-carbonated beverages underlines the strong growth and further development potential this sector has to offer. These brands are no longer useful ancillary products for the majors but priority growth centres in their own right.

The reason behind the move in the US is simple. Non-carbs represent 15% of the company's North American sales but according to some estimates accounted for as much as 75% of the growth in 2001.

"While carbonated soft drinks (CSDs) represented by far the biggest part of our total Liquid Refreshment Beverage volume in 2001, non-carbs played a critical role in driving our growth and are projected to increase in importance this year," a PCNA spokesperson told just-drinks. "We're no less committed to CSD growth, yet we're putting a sharper focus on non-carbs, reinforcing our leadership position in the fastest-growing part of the business."

"Until now, our non-carb sales efforts were managed primarily on a brand-by-brand basis. The new non-carb sales team pools the talent, resources and capabilities of individual brands within one non-carb group, creating a unified sales team with an extraordinary amount of depth and experience." The key non-carbonated drinks in the PCNA portfolio are Aquafina, Dole, Frappuccino, FruitWorks, Lipton and SoBe.

The picture for Coca-Cola in North America is not dissimilar from PepsiCo, with non-carbonated beverages accounting for much of the company's growth. In 2001, non-carbonated beverages grew by as much as 22%.

Coca-Cola's principal non-carbonated brands in North America are Dasani Water, Powerade Sports, Cool from Nestea Tea, Nestea Tea, Minute Maid Juices, Mad River Tea, Planet Java Coffee, Fruitopia Juice Drinks and KMX Energy. At Coca-Cola there is also some organisational division between non-carbonated and carbonated beverages.

"Non-carbonated beverages represent an excellent growth opportunity for our business. Dasani and Powerade, for example, are the fastest-growing brands in their respective categories," a spokesperson for Coca-Cola North America said. "As consumers continue to look for a variety of beverage options, we will continue to offer them brands that connect with their tastes and lifestyles."

Analysts increasingly believe that the company must look to non-carbonated elements in its portfolio for growth not only in North America but in key markets worldwide where the trend towards non-carbonated drinks is also being seen.

For Coca-Cola in Europe a key development has been the appointment of Robert Foy as director of new beverages. In this role, Foy is charged with developing the sales of non-carbonated brands in Europe, Eurasia and the Middle East. It is a role Foy has already undertaken for Coca-Cola in the Far East so there is no lack of expertise and understanding in this specialised field.

Foy predicts between 30% and 40% growth for Coca-Cola's non-carbonates in the region this coming year. As so much of this market represents uncharted waters for the majors, Foy believes taking a creative and original view towards marketing as vital. "You have to be slightly smarter and more creative about your marketing because it is such a dynamic and fast-moving segment," Foy said. "That means being more creative with the message and ensuring that everything you do is totally integrated."

The most developed non-carb markets in Europe are Germany, Spain, Italy and France, all of which are over 1.5 billion unit case markets. Coca-Cola says it is focusing primarily on the top 10 markets in the region with special priority being given to the big four.

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Among its brand priorities is Bonaqua water, which the company is looking to develop into a pan-European water brand in much the same way Dasani has become the company's pan-American water brand.

In the juice market, Coca-Cola has Minute Maid, which is available in Spain, Russia, Belgium, Italy and France, and Cappy which is well established in several markets including Germany, Turkey, Poland, Hungary, Romania and Austria. The company also believes there is significant potential in Europe for the Disney juice range which has already been successfully launched in the US.

Coca-Cola also has two prominent players in the sports drinks category in Aquarius and Powerade. Powerade goes head-to-head with PepsiCo's Gatorade brand and while Gatorade holds sway in the US, Coca-Cola claims that Powerade outsells Gatorade outside the US by two to one. Coca-Cola is also looking to add a daytime energy drink to its portfolio.

In spite of all this brand activity, the sheer scale of the non-carbonated market means that Coca-Cola's share is still minimal. The company estimates that it has around 1.4% of the total ready-to-drink non-carbonated beverage market in the region, a figure which falls to 0.9% if dairy is included.

PepsiCo is also bullish about the international potential for its non-carbonated brands. The key non-carb brands internationally for PepsiCo are Gatorade, Tropicana juices, Aquafina and So Be which are all marketed through the PepsiCo Beverages International (PBI).

Organisationally, the company has taken account of the particular potential for non-carbonated beverages with a functional beverage team within the existing PBI structure. "Having seen the growth of noncarbs in the US, a focus has also been placed on the non-carb sector in international markets," PepsiCo's Charles Nicolas told just-drinks. "It's a growing sector and it is something that we definitely want to be part of as it grows. All of our global regions have staff in place or are planning to put in place teams dedicated to non-carbs."

So while the non-carbonated boom appears to be most pronounced in North America it is clear that the trend can be seen in other markets and that both Coca-Cola and PepsiCo are firmly committed to replicating on a global basis the success they have achieved with non-carbs at home.