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Coke has followed the less than successful US launch of its no-cal variant Coke Zero with a rather more rewarding Australian debut. David Robertson reports on how Coke learned some important lessons and got things right second time round.

Coca-Cola is a marketing powerhouse that owns the most valuable brand in the world but last year it made a rare error and faltered with the underwhelming launch of Coke Zero. However, Coke appears to have learnt its lesson and when the company, together with its Asia-Pacific bottler Coca-Cola Amatil (CCA), launched Zero in Australia two months ago it was an instant success.

According to CCA, 25m litres of Zero were consumed in the first three weeks after its Australia Day launch on 26 January. In its first five weeks, Zero had taken 13.4% of carbonated soft drinks (CSD) sales in supermarkets and 6.9% in convenience store sales. The product had also found its way into 16.7% of Australian homes, which, according to AC Neilsen, is a record for a new beverage, confectionery or personal-care product.

By contrast, when Coke Zero launched in America last June it took just 0.9% of supermarket CSD sales in its first month and this has now slipped back to about 0.7%. Coke continues to insist that Zero's launch in the US has not been a disappointment (the company might be able to learn from its mistakes but is apparently less willing to admit them). Coca-Cola claims it is pleased with Zero's performance despite the product failing to reach a market share of 1.5%, thought to be its initial projection.

Part of the problem was Coke's muddled marketing campaign for Zero which left consumers confused about what the product was. In a play on its famous 70s tagline "I'd like to teach the world to sing", Zero's advertising featured young people singing "I'd like to teach the world to chill."

But Coke, possibly the greatest exponent of marketing in the TV era, forgot the number one marketing rule: tell your customers why they need the product. There was no mention of what Zero actually is: a zero-calorie drink that tastes like Classic Coke.

Not only did Coke ignore the product's main selling point but it also launched Zero at around the same time as a number of other new variants, including Coke Splenda and C2 - a half-calorie option. There are now seven diet versions in the US and Zero, with no message to make it stand out, became just another new bottle on the shelves.

Nicholas Ridis, head of marketing consultancy Avodka and a director of the Australian Marketing Institute, said: "The target market they are going for is Generation Y and these kids are used to seeing lots of new products and they are quite cynical. Coke had to make more effort to say that this wasn't just an old product given a slight change."

A couple of months after last year's launch Coke added a new tagline: "Real Coca-Cola Taste, Zero Calories, No Compromise". More ads have since driven home this message but Zero looks stuck with a sub-1% market share.

However, when it came to launch Zero in Australia, Coke made sure it didn't make the same mistakes twice. "It is really hard to make comparisons between the US and Australian markets but the experience of the US launch did let us take certain things from them," said Gareth Edgecombe, managing director of Coca-Cola Australia.

For a start, Coke Australia made sure nobody mistook Zero for just another bottle on the shelves and the A$18m marketing campaign is the biggest Coke launch in Australia since Diet 22 years ago.

Coke then flooded distribution outlets with the product and developed a toe-curlingly "hip" viral campaign that used graffiti, spam and blogs to promote the "Zero Movement", which caused a big media fuss and handed Zero yet more publicity. The formulation has also been slightly adapted for the Australian market.

But the key change has been to define what the product is and focus squarely on its target market. There was no more "Teach the world to chill" vagueness; everything about Zero is aimed at just one consumer group: young men.

After 22 years of pitching Diet Coke to women, it is perhaps not surprising that virtually the only young men who drink the product are the male models shooting the ads. But today there is a lot of pressure on young men to look good in a pair of Speedos, and sugar-rich Classic Coke is not the ideal drink for that.

By developing a marketing strategy that targets these consumers directly, Coke has been able to carve Zero a segment of the market that looks solid and permanent. "Zero has been big because we have been really clear in our targeting of the consumer group we want," Edgecombe said. "What underlies all markets is that if you are targeted and approach specific groups directly that builds success."

Nicholas Ridis agrees: "The lesson from the US launch was that you have to make the product part of the consumer's lifestyle. Zero's launch here has been successful because it is well targeted, hitting guys who are becoming more health aware."

Of course, there is a danger Zero's early gains will retreat once the buzz starts to fade, which is why Coke is about to introduce a second wave of marketing linking Zero with "manly" sports like rugby and Aussie rules football.

Coke believes that having identified a specific consumer group, Zero's prospects are better than other recent launches. Edgecombe said: "When we launch a new flavour we see a high peak in sales initially but that peters out after a while. We think Zero's long-term growth is more viable because it has identified a consumer need."

Financial analysts seem to agree. In a research note, Morgan Stanley said it estimated Zero would boost Coca-Cola Amatil's CSD volumes in Australia by about 3.5% in 2006. So, it appears that in Australia at least, zero is the number to watch.

Sectors: Soft drinks

Companies: Coca-Cola Amatil

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