Coca-Cola Builds a Monster

Image couresty of brandchannel.com

Image courtesy of brandchannel.com

Looks like Coca-Cola realizes what it’s good at and what it isn’t good at.  Their increased stake in Monster Beverage proves as much.  With $2.1 billion invested, Coca-Cola now owns 17% equity in the energy drink behemoth, and in turns switches up their product portfolios.  Coke will give Monster their own acquired or homegrown energy drink brands, which includes Nos, Full Throttle, and Burn among many others, while Monster trades them their non-energy drink products, such as Hansen’s Natural Sodas & Juice Products, Peace Tea and Hubert’s Lemonade.  This deal brings together the world’s largest soda manufacturer and the U.S.’s largest energy drink manufacturer.  Although both sides got a great win out of this, but who needed this deal more – Coca-Cola or Monster?  Let’s start by seeing what each side actually gets out of this arrangement.

For Coca-Cola, acquiring a larger stake in Monster and then trading energy drinks for teas & juices serves as a win in itself.  With consumer habits and preferences changing, fortifying their product portfolio to keep pace with these changes was a necessity.  And with key brands generating bad press lately (think Diet Coke slogan fiasco), Coca-Cola could not afford to keep beverage products that carry high negative publicity potential.   Nos, Full Throttle, and the like most certainly qualify given the category requires caffeine content regulation following linkages to caffeine poisoning.

Energy drinks didn’t necessarily fit into the brand image that Coca-Cola wanted to sustain.  Energy drinks focus around an extreme sports lifestyle, with key sponsorships across mountain biking and motor biking.  Distancing the brand from energy drinks better promotes Coke’s image as a family-oriented product manufacturer.  Furthermore, their marketing acumen is better leveraged across Monster’s non-energy products given Coca-Cola’s existing strength across juices and teas.  Coca-Cola has already made a strong name for itself behind Minute Maid, Simply, Odwalla, Nestea, and Honest Tea.  Giving up energy to return focus to juices and teas helps Coca-Cola stay sharp and work on what they’re good at.

Hubert's Lemonade, now part of the Coca-Cola family.  Will this lemonade brand grow exponentially?  Image courtesy of hansens.com

Hubert’s Lemonade, now part of the Coca-Cola family. Will this lemonade brand grow exponentially? Image courtesy of hansens.com

For Monster Beverages, this deal unlocks a stronger global distribution network to grow their product base.  They’ve also added some larger name-brand energy drinks to complement Monster.  A strong competitor like Nos now becomes a fantastic ally.  Full Throttle owns a cult following despite Coca-Cola’s neglect and has a very good chance of being resurrected.  This arrangement gives Monster a wide assortment of products to target energy drink consumers, both locally and internationally.

Monster has also done a better job at marketing energy drinks than Coke because they’ve invested in resources to build out an entire lifestyle.  Energy drinks are more integrated into a consumer’s lifestyle than some other beverages, given their wide target in terms of drinking occasions.  The soda drink manufacturer was not prepared to build out a 24/7 lifestyle like how Monster, Rockstar, and Red Bull have.  Though Monster’s success isn’t a defined blueprint, they already have the infrastructure in place for one energy drink and this could be scaled up for other energy drinks.

It’s really hard to say who needed this more though Coca-Cola benefits more in this new arrangement.  The soda maker had more to lose because they were never going to catch Red Bull, Monster, or even Rockstar with their homegrown products.  Giving up distribution bought them expertise and healthy beverage brands.  Similarly, Monster’s true success existed in the energy drink segment, so much that they even changed their company name to halo off some brand equity.  Their strength in energy drinks would have prevented them from properly developing their nonenergy product portfolio.

Regardless of who benefited more, this only proves that larger companies must take creative approaches to keep growing.  In the past, it was about building strong brands.  Now, it’s about buying a brand that’s already been built, and making it stronger.

Another Lawsuit: Coca-Cola Company Sues Pepsico

Trop50 Carafe Bottle

Bloomberg News reported a June 2011 trial date between The Coca-Cola Company and Pepsico for trademark and patent infringement (link here).  The product in question is Pepsico’s Trop50 juices (pictured on the left), which The Coca-Cola Company claims has packaging copying their Simply juices.  The Trop50 – a low-calorie line of juices which was introduced around the same time last year as the Tropicana packaging disaster, was in the newer packaging (ie. Tropicana brand name down the side of the label, glass of juice instead of straw in orange).  Despite the newer packaging , Pepsico’s Tropicana unit ultimately decided to change up the format by converting from tetra pack carton boxes to plastic bottle packaging with a big green cap.

Coca-Cola Company lawyers said in a statement that the new packaging for the low-calorie Trop50 brand will “likely deceive consumers and dilute the quality” of Coke’s own brand of premium juices, called Simply.  Another line from the their lawyers was, “PepsiCo chose packaging that closely mimics the distinctive and nonfunctional Simply trade dress and patented Simply closure, ostensibly to revitalize PepsiCo’s fledgling Trop50 brand.”

Simply Orange Carafe Bottle

Do you consider the two different juice lines similar to one another?  Coca-Cola’s Simply juices are pictured here on the right.  I believe Coca-Cola has a strong case here, since the big green cap and the bottle’s shape are similar.  Once you have the juice within the bottle filling up the clear space, the Trop50 could legitimately pass for a bottle of Simply Orange.   It’s interesting to see that Tropicana has changed their packaging twice in the last two years.  One would think that consistency is key for consumers to recognize your product and turn it into a regular repurchase.  With the constant packaging changes in the marketplace, Tropicana risks having consumers confuse their juices with other brands of juices out there.  And in a grocery store where consumers are looking for juices based on packaging and price, they will likely choose a different product if they don’t recognize Tropicana’s juices.

This is just adds another chapter to the list of lawsuits between the two beverage companies.  BevWire last covered a lawsuit when Pepsico sued The Coca-Cola Company over sports drinks, where POWERade claimed to be the complete sports drink for rehydration.  Not sure how this lawsuit will turn out, but my initial thoughts would be that The Coca-Cola Company wins this one due to the similarities between the two juice bottles.  But I’m not a judge and I’ve been wrong a few times, so we’ll wait to find out in June 2011 to see who wins this one.

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