Monday, May 31, 2004

Beverage war: update Coca Cola's new CEO has a problem. The company's profits are no longer coming from its flagship carbonated drinks (Coke, Diet Coke, Fanta, and Coke.) The big margins (according to a Business Week article ("Things Go Better With …Juice", 5/12/2003) are coming from its non-carbonated beverage line. That's a big culture shock for a company that has treated non-soda brands as "orphans." Right now those beverages are keeping the company going. While Coke is leading PepsiCo by a large margin, it is falling behind in the non-carbonated beverage area, where Pepsi brands like Tropicana and Gatorade are leaders. (Cole's Minute Maid and Powerade are lagging behind.) And while the non-carbonated area is less than half the volume of the carbonated sector, it is showing real growth, unlike the fizzy drink sector. Coke, the king odf soda, has been culturally averse to the new battleground. But enormous growth from such brands as Dasani water and Minute Maid lemonade have started to change minds. In part, resistance has come from bottlers as well as old-line executives. Coke is busy restrategizing the distribution of minor brands like Planet Java iced coffee drink, Mad River New age teas, and KMX energy drink. It's now starting to use food brokers rather than bottlers to distribute some of these specialty products. And, in spite of blunders like the Dasani (mis)introduction in Europe, its other products, like Powerade, are competing well. According to the article, "analysts think Coke will have to be a lot more creative on the products and marketing grounds to make up for lost ground." But PepsiCo has more bold moves in its arsenal. It is negotiating a deal with Ocean Spray to take over the marketing and distribution of its popular but poorly marketed juice business, If Pepsi succeeds and markets the juices half as well as its sells Gatorade, it will be even further ahead in the non-cola department than ever. 2:39:46 PM

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