Coca-Cola Enterprises, which recently changed its name from Coca-Cola & Schweppes Beverages, continues to lead the way in Britain's £7 billion soft drinks market.

The name change really clarifies a situation which has existed since February 1997, when Coca-Cola & Schweppes Beverages (CCSB) was acquired for £1.2 billion by US-based Coca-Cola Enterprises, the world's largest bottler of Coca-Cola products. Based in Atlanta, Coca-Cola Enterprises is the biggest bottler in the US and has also established a strong presence in northern Europe, including leadership of the British soft drinks market.

Coca-Cola & Schweppes Beverages, as its name suggests, was established in 1987 as a joint venture between Coca-Cola and Cadbury Schweppes when both companies pooled their British soft drinks interests. Since then, the company has steadily increased its share of Britain's soft drinks market and now controls over a quarter of volume sales, while it has also been hugely instrumental in growing consumption by about 27% during the last decade. Indeed, throughout the 1990s soft drinks have been the fastest growing category within the British commercial beverages market and now account for a quarter of all beverages consumed, out growing tea which has a 23% share of throat.

Development of Coca-Cola Enterprises

Coca-Cola Enterprises was created in 1986 following consolidation of a number of Coca-Cola bottling franchise holders in the US, and floated on the New York Stock Exchange. It was later merged with Johnston Coca-Cola Bottling Group, the second largest bottler in the US. Following a radical restructuring of the enlarged business, Coca-Cola Enterprises turned its attentions to expansion in northern Europe in 1993 by acquiring Coca-Cola Beverages Nederland - Coca-Cola's Dutch bottling operations. It later strengthened its position in continental Europe by acquiring the majority of Coca-Cola's bottling operations in France and Belgium in 1996. The acquisition of CCSB gave Coca-Cola Enterprises a dominant position in a band of territories on either side of the English Channel. France and the UK are respectively the second and fourth largest soft drinks markets in Europe and Coca-Cola brands account for over half of carbonated soft drinks sales in the former and for a third in the latter.

Having been created as a vehicle for consolidation in the US soft drinks market, Coca-Cola Enterprises has been encouraged to expand in northern Europe by Coca-Cola's strategy of retreating from bottling and distribution in order to focus on brand building, marketing and franchising. The US soft drinks giant has done this by devolving its bottling interests to a number of large 'anchor' bottling partners in which it retains a significant shareholding. This was the case in the UK, where Coca-Cola sold its stake in CCSB to Coca-Cola Enterprises but still maintains its brand marketing role through Coca-Cola Great Britain. Coca-Cola owns 44% of Coca-Cola Enterprises, its largest anchor bottler, and so the fortunes and performance of the two companies are closely bound together.

Cadbury Schweppes' rationale for selling its half stake in CCSB was to concentrate its efforts on developing its confectionery business globally and its US soft drinks operations. Indeed, realising that it lacked the necessary scale to compete with Coca-Cola and PepsiCo globally in soft drinks, Cadbury Schweppes attempted to sell its non-US interests to Coca-Cola. However, this deal had to be scaled back because of objections from various competition authorities in different countries.

Overseas development is central to maintaining Coca-Cola Enterprises' growth momentum and reducing its reliance on the relatively mature US soft drinks market. Coca-Cola Enterprises operates a decentralised operating structure, which allows the company to maximise local market opportunities and to react swiftly to competitive pressures. The idea is to shift decision making as close to the point of transaction as possible - an approach which Coca-Cola itself is now taking on board since the arrival of new chief, Douglas Daft (see "Daft Approach at Coca-Cola - Globalisation through Localisation" in this issue).

Clear Leader in Soft Drinks

Coca-Cola Enterprises' UK operation is now a £1 billion turnover business, and achieved pre-tax profits of £138.5 million in the year ending December 1998. Armed with its powerful portfolio of brands which encompasses the ubiquitous Coca-Cola and Diet Coke, as well as Fanta, Lilt, Sprite, Schweppes and Dr Pepper, Coca-Cola Enterprises dominates the British soft drinks market and is nearly double the size of its nearest rival. As such it plays a key role in expanding soft drinks consumption in tandem with Coca-Cola Great Britain. Indeed, Coca-Cola is the overwhelming leader of Britain's top 20 soft drinks brands and the company's other carbonate brands occupy a further five places (see Table).

Britvic Soft Drinks is the second largest player in British soft drinks market followed by Princes and Cott. Indeed, the top five soft drinks companies account for about 65% of sales, and the top ten hold 80% of the market.

Market Characteristics

According to Coca-Cola Enterprises, over 10.5 million ready-to-drink litres of soft drinks were consumed in Great Britain last year and the ten year compound growth rate of the market is expected to exceed 30% by 2000. The soft drinks market splits roughly evenly between carbonates, such as cola, lemonade and other flavoured fizzy drinks, and non-carbonates, including water, squash, juices and juice drinks. Cola and squash are by far the biggest drinks sectors accounting for 24.5% and 26.5% respectively of total soft drinks consumption ahead of juices/juice drinks at 14.6% and flavoured carbonates on 14.5%.

Coca-Cola Enterprises predicts that carbonated soft drinks will continue to drive growth of the overall soft drinks market. Whilst all manufacturers contributed to the growth in the soft drinks market during 1999, according to Coca-Cola Enterprises it delivered the greatest absolute growth, through continued brand and category investment.

Trade Channels

Generating 64% of total soft drinks sales, the grocery channel is the fastest growing and largest supply route to the consumer for bottlers. Impulse sales accounted for 21% of total volume last year, down from 25% five years ago, while the on premise share has slipped from 16% to 15% during this period.

Scope for Further Growth

Although soft drinks consumption in Great Britain has been rising steadily over the past ten years, Coca-Cola Enterprises and Coca-Cola Great Britain point out that the market still offers substantial scope for further expansion. "Soft drinks per capita consumption in the UK is behind other western European countries and as such although already a large and important category there is still plenty of volume growth available, especially for grocery retailers," says Paul Gordon, trading director, grocery, Coca-Cola Enterprises. "For carbonated soft drinks, we firmly believe the way to unlock this opportunity is through the dual strategy of driving average weight of purchase as well as frequency of purchase."

Although Coca-Cola accounts for half of the cola consumed in Great Britain and controls a third of the carbonated soft drinks market, the company is aggressively seeking to expand its influence still further. Indeed, Coca-Cola is competing not only with rival soft drinks brands but with other drinks categories for the overall share of consumers' throats. "People need to drink 64 fluid ounces of liquid a day to live and we supply just over two of those," points out Chris Banks, managing director of Coca-Cola Great Britain. "If you believe you have 4% of a market rather than 34% or 50%, you behave differently."

Heavyweight Advertising

Coca-Cola GB has helped to drive growing consumption of soft drinks through heavyweight consumer advertising and support, and this will continue through the current year. A new TV advertising campaign - 'Coca-Cola Enjoy' - was recently launched, which aims to remind consumers what it tastes like to drink an ice cold Coke. Pack graphics will also be changed later in the year, to convey a more dynamic image showing an opening bottle with Coke fizzing out.

Diet Coke will continue to receive heavy brand investment throughout 2000, including a new 'diet Coke Break' advertising campaign launched earlier this month. The new advert is designed to project diet Coke as a fun adult brand which delivers 'enjoyment without compromise.'

In order to maintain growth within the flavoured carbonates sector, Coca-Cola's four core brands in this category will be supported with TV advertising during the year. Similarly, the Schweppes brand, including Schweppes Lemonade, is also expected to benefit from TV advertising during 2000.

Table: Top Twenty Soft Drinks Brands, 1999

Brand Sales Change over 1998
1 Coca-Cola £620.4m +7%
2 Pepsi £184.2m -1%
3 Ribena £170.1m +11%
4 Robinsons £167.3m +10%
5 Sunny Delight £161.1m +46%
6 Lucozade £118.9m +9%
7 Tango £90.2m -5%
8 Schweppes £78.9m +13%
9 Tropicana £77.4m +24%
10 Irn-Bru £72.6m +13%
11 Lilt £55.4m +5%
12 Ocean Spray £52.2m +50%
13 Fanta £51.3m +28%
14 Del Monte £50.0m +10%
15 Dr Pepper £45.7m +52%
16 Sprite £36.3m +34%
17 7-Up £35.8m +5%
18 Evian £34.9m +28%
19 Red Bull £30.9m £30.9m
20 Virgin £28.6m -9%
Source: AC Nielsen. Audited retail outlets in Great Britain.