Coca-Cola Company to Buy North America Bottlers

This past week Coca-Cola announced they will buy their North American bottling operation.  In exchange for taking control of the North American bottling operation, Coke will relinquish its 34 percent stake in CCE, worth $3.2 billion, and assume $8.88 billion in CCE debt.

This announcement comes on the heel of Pepsi finalizing their bottler acquisition.  Seeing that Pepsi has finalized a deal where $600 million of savings has been produced, Coca-Cola can not sit still and must find a way to reach cost savings themselves.  The deal will help the world’s largest soft drinks maker cut costs and increase flexibility in distributing its beverages, which include Sprite, Minute Maid juices, vitaminwater and Powerade.

With this announcement and major industry change, what are some of the market implications?

Coca-Cola will see cost savings, but not as much as Pepsi’s.  Coca-Cola is only a beverage manufacturer, while Pepsi handles both food and beverages.  Thus Coca-Cola will still have to partner up with another company (ie. Kraft, Con Agra, General Mills) to run a promotion for food and beverage, whereas Pepsi can already run such promotions due to their business units in Frito Lay and Quaker.

Another benefit of the acquisition is that niche beverages take advantage of the distribution network to further their reach.  Both Coca-Cola and Pepsi will see cost savings in this area, as both companies are trying to grow their beverage portfolios and will want to promote new products more.

It’s still too early to tell if Coca-Cola’s acquisition will be approved or not, but if the deal is approved, the beverage industry will see plenty of new products and better food/beverage promotions.  BevWire will try to stay on top of this deal and keep you posted on what happens.

Red Bull Energy Shots Have Arrived in Canada

The small 2oz Red Bull Energy Shots have arrived in Canada.  Retailing for a mid-level $3.29 price point, the energy shot sells for cheaper than most other energy shots.  This is a surprising pricing strategy to take, since they are the “leader” in energy drinks.  At this price point, their profit percentage is likely to be less than that of the other energy shots.  But seriously, the energy shots are all over-priced anyway – less product and smaller packages, but the same price as 16oz energy drink.

What is interesting to note is that while Red Bull is the leader in energy drinks as a whole, they have just entered the energy shots category of the market.  The leader in this category is Living Essentials’ 5-hour Energy.

At the time of this post, the Red Bull energy shots have only entered the Canadian marketplace for about 4 weeks and have seen moderate success.  Almost all other energy shots (Happy Planet shots, Rockstar, Monster, Amped, etc) have not seen nearly as much success as Red Bull in the shots category for a product launch.  The sales numbers show that they are selling almost as much as the 5-Hour Energy, whereas other energy shots barely get off the counter and enter the consumer’s consideration set.  At the same time, Red Bull’s energy drinks have not lost sales.  Red Bull has essentially taken customers away from other energy shot drinkers or grew the shots category, without cannibalizing their current customer base for energy drinks.

An idea for the future: Red Bull should start running a “Mix and Match” 2 for $X promotion allowing customers to choose between both energy drink and one energy shot.  This will undoubtedly increase their shots sales and help the shot surge in popularity.  Whether this is a fad and is short-lived is still to be seen.  Will 5-Hour Energy retain its leadership position in this category, or will Red Bull overtake it and be the energy drink brand for both cans and shots?  We’ll have to wait and see!

U.S. Juice Market: Coke is No1, Pepsi No2

courtesy of www.adage.comAdvertising Age’s recently published article on the U.S. Juice Market Share now indicates that Coke’s Minute Maid and Simply juices have taken over the first position.  Pepsi’s Tropicana and Dole brands dipped in market share a little bit this past year, and coupled with Coke’s growth in this category the overall net effect was a switch of their positions.

Many insist that Tropicana’s package redesign contribute to the decline in sales, where consumers confuse the No1 brand with a private label.  Company executives indicate otherwise, saying the decline in sales resulted from economic downturn and thus switched consumers to private label brands instead of name brands.  There is truth to this theory as Information Resources Inc., reported that more units sold compared to a lower dollars sales.  However, there is a almost a 4% absolute change here, as Coke’s sales did increase while Pepsi’s sales decreased.  So even though private label products did sell more, even though there was an impact from the economic downtown, the package redesign has damaged Tropicana.

Over at TheDieline.com, their article by Ted Mininni here indicates that Tropicana’s redesign efforts were not very well thought out.  By updating their packaging (or as Pepsi likes to call it, “refresh everything”), Pepsi has essentially taken away the message and recognition that the consumers know so well for something similar to a foreign, control brand orange juice.  And this is important because Coke’s Minute Maid has recently undertaken a redesign of their packaging as well.

courtesy of thedieline.comTheDieline.com quotes Guy Wollaert, general manager for Coca=Cola’s global juice center, as saying, “Based on the research we’ve done, we’re quite confident we’re on target. It’s been amazing, the consistency in the brand equity cues.  The new Minute Maid packaging features fruit fresh from the trees with a sliced piece resting on top of whole fruit. The brand identity is strong and dominant. Beneath that, a vertical swath of color with the fruit variety appears. At the bottom of the front panel, a green vertical bar states: ‘100% Pure Squeezed Orange Juice’.”

Mininni gives it his stamp of approval because it provides a clear message leaving the important factors unchanged for easy consumer interpretation.

The graphics for the old package has a half-sliced orange over numerous whole fruits, in front of a rising (or setting) sun with a sky-blue background in the distance.  The old package conveys fresh orange juices – whole oranges taken from their natural element and then squeezed into juices.  Whereas the new packaging with the white background and green leaves may take some time to get used to.  It does convey fresh orange juice and 100% squeezed, but BevWire still prefers the old packaging, maybe for nostalgia.  With Minute Maid’s sales holding steady so far, it shows the package redesign is a success.

At least this hasn’t brought about the magnitude of attention and press coverage as Tropicana’s redesign.