The beverage business blog from Olly Wehring
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Coke – you can’t use that word anymore
25 Jul 2006 13:53
Any casual Coca-Cola observer must have noticed that the drinks giant gets more than its fair share of critics. Barely a week goes by without a lawsuit or an accusation targeted at the company.
Coke’s take on the matter? Responding to yet another legal challenge last week, a spokesperson for Coke described the company as an “easy target” for attention-seeking claims.
The latest attack on Coke, however, strikes me as just a shade over the top. The company has come under attack for using the word ‘psycho’ in one of its adverts for new drink Coke Zero. The campaign, which suggests that life would be easier if there were fewer downsides, includes the phrase “blind dates without the psychos”.
Mental health campaigners in Scotland have attacked Coke for their use of the word ‘psycho’, calling it “extremely derogatory” and have claimed it increases the stigma around mental illness. “It is used to trivialise serious mental illness and as a shorthand for horrendous crime,” said the director of campaign group See Me.
“It was never our intention to offend people,” a spokesperson for the company told The Scotsman.
It strikes me that Coke often offends people whether it intends to or not.
Modelo & Constellation - Everyone's a winner, baby?
24 Jul 2006 14:28
The news last week that Grupo Modelo has teamed up with Constellation Brands to beef up its presence in the US has been greeted positively by industry observers.
The two companies have signed a 10-year agreement to form a joint venture that will import and distribute the Modelo stable across the US. The venture will go live from the beginning of next year.
Modelo has a golden goose on its books in the form of the Corona brand. In as consolidated a beer market as the US, imported bottled beer is bucking the trend and performing startlingly well. This category is led by Corona to such an extent that one analyst maintains that “Grupo Modelo is one of the finest operating stories in global beer.”
The joint venture provides a favourable outcome for the Mexican brewer. Modelo has a strong brand but limited operational capability in the US on its own, but can now look forward to additional post-tax profit from the move of around US$150m. At the same time, the two can focus on gaining national scale for Modelo’s brands while making the most of back office synergies.
Everyone’s a winner then, right? Constellation - who previously had held the distribution contract for only the west of the country - certainly seems to think so. “It provides Constellation with a guaranteed profit stream from the western US states for 10 years and, from its position in the joint venture, provides us with potential incremental profits from the growth of the brands in the east,” a spokesperson said last week.
While Modelo is probably the happier of the two, it seems that everyone’s pretty chirpy. Including, I presume, Anheuser-Busch, which owns half of Modelo. However, while I’m certain A-B would have known what was going on before the deal was sealed, could this not be seen as an opportunity missed for the US brewing giant?
What's in a name?
18 Jul 2006 15:27
A press release came through to me late last week that caught my eye - but I worry that it may have been for the wrong reasons.
Am I alone in raising an eyebrow to the name of this UK company? While I hope I'm not, I also hope, for their sake, that I am.
Pepsi v Coke - a week Coke'll want to forget
17 Jul 2006 17:49
The difference in fortunes of fierce rivals Coca-Cola Co. and PepsiCo has looked pretty marked in the last week, especially if looked at in a global context.
In the last seven days, it’s been revealed that Coke could buy out a local bottling partner in the Philippines as sales slide, while the company has parachuted in a top executive to try and revive its struggling business in Japan. PepsiCo, meanwhile, posted a set of impressive first-half numbers last week, with its international business proving a key engine to sales and earnings growth.
While Pepsi saw profits from its international operations surge 21% and volumes rise 10%, Coke has moved to tackle problems in key overseas markets, which is especially critical in Japan which is said to generate around a fifth of the company’s profits.
Sure, a company the size of Coke could hardly expect to see each of its markets perform perfectly at all times. However, it must irk some in Atlanta that Pepsi seems to be enjoying solid growth in a number of markets, including China, Thailand and Russia.
Combine that with the sour news of an extortion plot against Coke in South Korea and it all adds up to a bit of an unsatisfactory week in the Coke empire. We await their first-half numbers next week with interest.
For the latest on Pepsi’s figures, click here.
How to offend a nation without really trying
14 Jul 2006 16:27
The landlady of a pub in the south-west of England has been the target of hate mail recently for upsetting the Welsh. Angie Sayer, of the New Inn in Wedmore, Somerset, has received letters and answerphone messages accusing her of racism.
Ms Sayer used a Welsh flag in a rather peculiar way when celebrating St George’s Day on 23 April. The English saint, of course, was famous for slaying a dragon, so Ms Sayer used the Welsh flag – which has a dragon on it – for locals to fire arrows at in the pub’s skittle alley.
“The whole incident has been blown out of proportion,” she told trade magazine the Publican. “We needed a dragon to shoot at and happened to use the flag.”
Not all's fair in love and (cola) war
10 Jul 2006 11:13
It’s pleasing to see that a little honour still exists in today’s dog-eat-dog corporate world.
PepsiCo has won well-deserved praise for its refusal to accept alleged secret information about Coca-Cola, and even told its arch-rival about the plot.
Late last week, it emerged that three people in the US - including a Coke employee - had been charged with fraud along with stealing and selling trade secrets, which included a sample of a new drink being developed by Coke. The trio tried to sell the information in deals worth US$1.5m. Coke learned of the theft and the attempted sale of the “very detailed and confidential information” from Pepsi - and alerted the FBI.
Pepsi could have taken the information and used it to gain an edge over the nearest competitor. After all, the two companies have been in fierce competition for well over a century, a battle that has become all the more intense as consumers shy away of fizzy drinks in favour of healthier beverages.
Admittedly, there may have been a degree of self-interest involved on Pepsi’s part. If Pepsi was caught either accepting the information or not reporting the approach, legal repercussions and/or bad publicity would have landed at the company’s door.
However, it was satisfying to hear that the message from Pepsi was: we play hard - but we play fair.
And let us be clear - there is no end in sight to ‘The Cola Wars’.
Pepsi has been quick to take a swipe at Coke’s launch of Coca-Cola Zero in the UK, embarking on an aggressive ad campaign for Pepsi Max. The campaign’s strapline: “Max Taste, Zero Hype” leaves little doubt that the rivalry is alive and kicking.
Diageo - huge, but still growing
04 Jul 2006 11:11
Resilience, reliability, durability - not characteristics guaranteed to set the heart racing, are they? But these were exactly the credentials on display at Diageo last week as the UK drinks giant issued a buoyant trading update ahead of its full-year results next month.
Some analysts, however, were unconvinced. They were disappointed that, after hefty marketing investment, Diageo would only say that growth in operating profit was in line with its previous forecast. However, earnings growth of 7% and sales growth of 6% are figures not to be sniffed at for a consumer goods juggernaut like Diageo.
Premium spirits sales in North America and growth from emerging markets, particularly in Latin America, have been behind the strong performance. The company also seems to have breathed new life into key brands, notably Guinness, which has seen sales in the UK rise on the back of a popular campaign that showed man’s evolution leading to a pint of the black stuff.
Sure, Diageo still has work to do. It needs to up its presence in other emerging markets particularly in India and China, where global rival Pernod Ricard was faster to recognise the potential of the market and has carved a very strong position in the premium spirits category. Diageo has also warned that European markets remain “subdued” but CEO Paul Walsh said the company would continue to invest more in marketing in an attempt to drive sales.
In the US, where the thirst for premium spirits shows no sign of abating, the drinks giant holds a strong position. Add to this a growing focus on emerging markets and a willingness to flex its marketing muscle to revitalise sales in a stagnant Europe, and Diageo seems set to post similar numbers in the months and, maybe, years ahead.
What’s more, Diageo is less exposed than some of its rivals to the grape glut in Australia and the resultant debilitating effects of price wars in major wine markets. Excess wine and falling prices weighed on profits at Constellation Brands last week, while Foster’s also announced that it was set to offload three wineries as it looks to trim back its business post-Southcorp.
No football does not a football-free just-drinks blog make
28 Jun 2006 14:01
It’s the first day for over two weeks that we’re World Cup football-free, but not here at just-football, I mean, just-drinks.
The following announcements should help to calm withdrawal symptoms.
Germans are making a killing from football fans with a taste for beer - but no idea about the country’s deposit laws. Thousands of savvy Germans are collecting discarded glass and plastic bottles and aluminium cans and turning them into a healthy profit.
“Just today, I’ve made EUR80 (US$101),” Joseph Werwa, 72, told Associated Press this week as England and Sweden fans toasted their teams’ draw. “It is, simply, easy money.” Empty cans earn EUR0.15, while glass bottles are worth EUR0.08 to whoever returns them.
Meanwhile, those England fans among you who have found your national team’s performance as dull as I have, may like to see the matches repeated, courtesy of The Juice Doctor, by fruit. The grape’s injury two minutes into the game against Sweden, as well as the tall man up front (a banana, naturally) is pretty priceless.
Coke must look outside of CSDs
26 Jun 2006 17:53
You don’t get appointed to lead the world’s largest drinks company if you’re not confident that you can take the business forward.
Neville Isdell returned to Coca-Cola Co. two years ago to rescue the US soft drinks giant from declining growth and failed product launches. Isdell has urged company executives to draw up sharper marketing campaigns to revitalise the Coca-Cola brand and to focus more on innovation to reduce dependence on a declining carbonated soft drinks segment.
To some extent, Isdell’s strategy has worked. In April, the company posted a 10% rise in first-quarter profits with non-CSD volumes up 11%. Coke has been far more active on the innovation front, enjoying success with Coke Zero in Australia and, for the first time in the company’s history, testing and launching a new product - Coke Blak - outside the US. And with the launch of media campaigns including “The Coke Side of Life” earlier this year, the company is working hard to re-engage with consumers presented with more and more choice.
But has Isdell’s success caused him to set one target too far? Speaking at the World Food Business Summit in Paris last week, Isdell said the company would aim to double the brand value of Coca-Cola to account for half of the company’s sales by 2015. Growing Coke’s “core” CSD sales was one of “six strategic growth paths” to achieving that aim, Isdell insisted, with “enormous opportunities” in the category - and not just in emerging markets.
However, with consumers turning away from full-calorie, sugary soft drinks in favour of healthier options, Coke is sure to find it tough to drive value from its flagship brand. As the company posted in its most recent figures, volumes in North America, its largest market, were propped up by other brands, including Powerade and Dasani.
Just one indication of the work that needs to be done is the future of its drinks venture with Nestlé. The two companies have been reported to be in talks over the future of the venture, Beverage Partners Worldwide, which markets Nestea iced teas and coffees worldwide. US reports said that Nestea sales had slumped in the first quarter of the year, in stark contrast to a buoyant bottled teas category. Meanwhile, Coke is suffering from falling volumes in key overseas markets like Japan and the Philippines.
The company would be better off giving more attention to the ‘non-Coke’ parts of its portfolio. Health drinks, teas and juices are the growing segments of the soft drinks category and Isdell needs to address these areas if he wants to take the company further.
35+? Check. Lust for Life? Check. Affluent...?
23 Jun 2006 08:58
I went to a Chivas Brothers’ tasting down at their London offices yesterday.
The Pernod Ricard unit’s flagship brand - Chivas Regal - seems very proud of itself at the moment, with last year’s total sales of 3.8m cases continuing its upward trajectory.
I couldn’t help feeling slightly inadequate as I left proceedings, however. All the talk of targeting affluent, 35+ consumers with a desire for life ticked all my boxes, I felt. Clearly, I thought, I’m just the type to live ‘The Chivas Life’.
Although the parting gift of a Chivas wallet designed to hold up to 16 credit cards convinced me that I still had some way to go on this front.