Comment - Soft Drinks & Water - Hot Ginger Ale: A Soft Drink Revolution?
Is The Coca-Cola Co's Canada Dry Hot Ginger Ale the next big thing?
Earlier this month, The Coca-Cola Co announced the release of a new product in Japan. No major surprise there, but the product in question is a hot, carbonated beverage. Richard Corbett casts his eye over Canada Dry Hot Ginger Ale and weighs up its potential for success.
Coca-Cola’s new Canada Dry hot ginger ale, set for launch in Japan on 21 October, has certainly garnered some column inches in the media around the world. The concept of a hot, fizzy drink is undoubtedly pioneering, revolutionary and - to some - an unorthodox form of refreshment.
To the soft drinks industry, the drink may even be seen as an i-Phone moment one day. It has taken four years to develop a product that challenges the conventional thinking that CSDs should be consumed cold, and the size of the investment suggests that those that have bankrolled the idea have belief in it. If successful, then we can expect to see a plethora of extensions, not just in Japan but around the globe.
It is not the actual product that is the big news story for the soft drinks marketers but the technology that allows CSDs to maintain their fizz and to be served hot. If there was a ‘Pemberton’s law’, it would probably have dictated that the higher the temperature the greater the demand for fizzy soft drinks. But, this hypothesis is now being tested.
If economics are discounted, then soft drinks consumption is generally related to climate, with consumers in warmer parts of the world drinking significantly more than in those in cooler climes. Currently, the potential for consumption in, say, San Paulo is much higher than in Moscow, but with this technology the goal posts in theory may just have moved. Building soft drinks consumption is often about increasing consumption occasions and this can will enable soft drinks players to position refreshment during cold as well as warmer times. Realistically, the impact in both the short and the long term are likely to be modest and hopes of a dramatic shift in the prospects for the soft drinks industry are very much in theory.
It will be fascinating to track the progress of the drink in its inaugural market of Japan. Coca-Cola are seemingly not alone in being confident that the concept of a hot fizzy soft drink will work: Kirin Beverage Co is set to introduce a similar product, Kirin no Awa (Hot Hojun Apple & Hop) a lightly carbonated product aimed at a similar target audience.
Imitation is the sincerest form of flattery.
With the level of press coverage, you can be assured that enough interest will have been generated for Japanese consumers to want to go out and sample the new drink. Japanese drinkers have a good track record in showing a willingness to experiment with new beverage ideas, something that is reflected in the rich assortment of new products introduced into the market annually; over 1,700 new soft drinks products were launched in 2012 alone. You can be confident that the drink will be tried but the product will be judged on the level of repeat consumption.
Hopes for the product will be helped by the fact that there is already a large number of canned hot tea and coffee drinks on the market already, they have been around for about five years. The Japanese will not be alien to the thought of buying a beverage in a self-heating can because they do it already.
Being in a can, the drink is also ideally suited to sale in vending machines, the second biggest volume outlet for soft drinks sales in the country. There is a strong tradition of purchasing drinks from vending machines and there are nearly 3m machines operating in Japan – this figure continues to rise.
In terms of taste, the drink should be a good fit too. Seasonality is very appropriate in Japan, there is a long standing culture towards buying drinks and foods that are 'in season' – this hails back to their agricultural roots. The ginger extract and apple & cinnamon flavours will be well suited to the Autumn. Health is also important among drinkers here and ginger enjoys a good reputation, most notably among young Japanese women. Spicy is very in vogue there at the moment which will go down well.
So, the flavour would seem to be right, the distribution is in place, but what may limit actual volumes is the price. An 18cl can is expected to be sold at JPY120 (US$1.20) to JPY130, equivalent to a 35cl can of Coke sold in vending machines. Will drinkers be prepared to pay the same for less refreshment? ALso, the fact that the drink is seasonal will hold back sales.
And yet, while price and seasonality may make Coca-Cola’s Canada Dry hot ginger ale quite niche, the product does tick a number of boxes and should perform well.
Whether this new drink sinks or swims, it is likely that this will be the first in a line of new products that help to gauge if there is a demand for hot fizzy drinks. If there is, then this self-heating can is likely to cross over into the great global test market of the US. If it works there, then expect to see to see fizzy hot drinks in a shop near you.
Stranger things have happened and, I expect, when iced tea first appeared over a century ago, there were many that declared that nobody would drink cold tea.
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