Brand Health Check: Coca-Cola - CSD dip dogs Coke's Thai leadership fight

Despite a four-year lead on the competition, Coca-Cola trails rival Pepsi in Thailand, one of just a handful of markets globally where it does not have the upper hand.

The world's most popular soft drink was trumped by its rival early in the 50-year cola war by a pricing scheme that offered more Pepsi at lower prices; and by its competitor's strategy of flooding rural markets and sponsoring local events, while Coke stayed focused on the big cities.

"Coca-Cola is now everywhere in Thailand, and a few years ago, it adopted a 'Think Local, Act Local' strategy, but the problem is that Pepsi was there first - it was first at the temple fairs, first doing local charity work, and first to reach the consumer," said a source.

Coca-Cola is typically tight-lipped about competitive data, but Pepsi claims a 63 per cent stake in the cola category. It also claims to have increased its stake by a percentage point last year, which was celebrated as 'The Year of Coca-Cola'.

Even as they clash, the two rivals recognise that the more serious threat is the growing shift toward healthier choices. Beverage industry analyst Canadean reports a steady erosion in CSD's share of throat to 25.4 per cent last year from 39.1 per cent in 1995.

In a move to add fizz to the market, Coca-Cola launched Vanilla Coke last year, its first brand extension in four years. The attempt to accelerate soft drink growth via a flagship brand extension makes sense since the colas control 60 to 70 per cent of the CSD market, itself the second largest beverage segment after bottled water. Coke is also branding itself a leader in innovation. "In Thailand, Coca-Cola was the first to launch the can, PET bottle and contour PET bottles. In terms of product innovations we launched Vanilla Coke to provide a popular new flavour for Thai consumers," a spokesman pointed out.

Coke also recognises that the shift toward alternative beverages is here to stay. Over the last three years, it launched Namthip water, Qoo fruit juice, Nestea and most recently, RTD coffee Zu. Brand Coca-Cola, however, continues to be the company's core product, contributing an estimated 60 per cent to revenue.

VITAL SIGNS

Thailand carbonated soft drinks

% share of all drinks consumption by vol. 1995 1997 1999 2001 2003

Carbonates 39.1 34.1 27.8 27.5 25.4

SOURCE: Canadean

DIAGNOSIS

SASIE VADHANAPANICH, Chief ideation officer, A Dolphin Society

Coke is a well-known household brand in Thailand. Although it is not a national icon as it is in the US, I do believe that the brand stands for 'youthful spirit', 'cool' and 'hip' to Thai consumers.

But for many years (five to seven years) now, Coke has fallen out of the loop, it hasn't woken up the market or consumers whether through new product innovations or impactful breakthrough campaigns. Coke seems to be drifting further from the young and especially the cool scene.

We may have seen many attempts to reconnect with the young but the impact is so short-lived. The brand communication seems to lack consistency and continuity.

In the beverage landscape, two trends have emerged which have changed the competitive environment. One is the healthy lifestyle trend (the green tea phenomenon) and the second is the consumers' need for 'alternative drinks'.

But as one of the leading brands in beverage, Coke has not been making noises in either trend, its Vanilla Coke was not that successful from both a product and a brand point of view.

In a nutshell Coke has become passe; the brand is losing its leading role in terms of youthful spirit and hip. It is becoming a less exciting brand.

GEORGE ROMANYK, Chief executive officer, Creative Inhouse

Coca-Cola has endured its share of branding blunders in the 119 years since it was first bottled. But the challenges that face the brand now are likely to prove as stern a test as it has ever faced, both locally and globally. In Thailand, Pepsi claims leadership of the cola category, having firmly positioned itself as the youth generation's drink through endorsements with pop stars and football heroes.

Pepsi has made a big recent push into brand extension, launching Pepsi Twist and now Pepsi Blue, which Coke countered with Vanilla Coke. The danger is getting drawn into a brand extension war that could further erode Coke's status as the original and classic cola drink, especially when Pepsi has demonstrated a willingness to substantially best Coke's local advertising spend.

Historically, trying to out-Pepsi its rivals has proven disastrous to Coke, such as the infamous New Coke debacle of the 1980s, launched in response to the Pepsi Challenge, in which consumers in blind tests almost always favoured Pepsi. Another huge challenge facing the brand in maintaining market share and relevance is the shift to greater health consciousness in many markets, and the impact of low-carbohydrate, low-sugar diets such as Atkins and South Beach, and the growing popularity of bottled waters, green teas and fruit juices.

TREATMENT

SASIE'S PRESCRIPTION

- Coke needs to be 'fast and furious' in its product and communication by rolling out more new products that respond to market trends or even leading these trends, and a truly differentiating advertising campaign. Gutsier brand communication to show the brand still 'with it'.

- Coke should also look at creating an ownable big ticket event of its own or a co-brand campaign with a brand or brands that are strong in lifestyle segment such as in telecom in order to become more dynamic.

ROMANYK'S REMEDY

- Stay true to the brand's greatest strength, its heritage, and remind the new generation that Coke, not Pepsi, is 'the real thing".

- Beware a brand extension war. Remember what Jack Trout wrote in The New Positioning: "The more variations you attach to the brand, the more the mind loses focus". On the other hand, creating a genuinely new category, as with Diet Coke, would be a huge boon. Perhaps a low-carb Coke to be first to target Asia's growing Atkins segment, an insight targeted research may support.