UK: Coke must change tack, say analysts
Marketing ventures such as its recent tie-up with SONICblue will not be enough to reverse Coke's recent poor fortunes, according to a report by industry analysts, Datamonitor,.
The venture, producing co-branded digital audio players, is aimed at improving the brand's image among young consumers. But on its commentwire.com service, Datamonitor contends that with earnings in decline since 1998, Coke must increase investment in the more profitable non-carbonated soft drinks markets.
Although Coke sales have picked up since 1999, PepsiCo has continued to gain over its larger rival. Coke's comparatively weaker performance can be attributed to two areas, says Datamonitor: weak marketing and over-dependency on carbonated products.
According to a Morgan Stanley survey of some 25,000 consumers, Coke hasn't been as vulnerable among young consumers for 16 years. At the same, time PepsiCo's marketing, involving stars such as Britney Spears, has bolstered its position.
Furthermore, according to Datamonitor, Coke has been slow to react to the growth in non-carbonated drinks sector currently growing twice as fast as the carbonated market. PepsiCo has made more progress in the non-carbonated sector with brands such as Tropicana and newly acquired Gatorade.
However, Coke is looking to reverse its fortunes under new CEO, Doug Daft, with a strategy focused on product innovation and marketing, boosting its US$7.7 billion marketing budget by US$300m. It agreed a £150 million global tie-up with Warner Brothers for the Harry Potter movie. Addressing its other perceived weakness, last October the company acquired the California-based alternative beverage maker, Odwalla, and is in the process of re-launching its Dasani water and Powerade brands.
Coke has managed to dislodge its rival from Burger King restaurants in the US agreeing an exclusive deal with the chain last December. But Datamonitor concludes that Coke still has much to do to avoid another year of losing ground to PepsiCo. It says the brand needs to find a globally relevant slogan and must avoid further strategic blunders like its failed joint venture with P&G and its unsuccessful acquisition attempt of Gatorade.
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