New marketing, technologies, packaging – Coke takes on private labels

The largest army in the cola war is back with fresh equipment to fight off the incursions of the latest and most successful market raider.Coca-Cola Beverages has rolled out new marketing, technologies and packaging to outmanoeuvre private label cola bottlers, particularly...

The largest army in the cola war is back with fresh equipment to fight off the incursions of the latest and most successful market raider.

Coca-Cola Beverages has rolled out new marketing, technologies and packaging to outmanoeuvre private label cola bottlers, particularly Cott, of Toronto, which has captured considerable amounts of supermarket cola sales.

Easy Paks

At a recent press conference in Toronto, Coca-Cola’s president, Tony Eames, introduced the company’s 24-can cube-shaped cases called Easy Paks, which Coke will discount with $1-off coupons.

Coke also has a newly designed bottle whose contours make it easier to handle.

Coca-Cola says the Easy Pak drinks are stacked 12 on 12, acting like a vending machine in the consumer’s refrigerator and driving per capita consumption.

Also, the new packaging is easier for the consumer to carry and open.

Eames said Coca-Cola has new marketing in the works, too, with its focus moving to tactical advertising to satisfy consumers’ interest in value and information about products.

He says this tactical shift will target women aged 35 or older who are the principal soft drink shoppers, rather than the younger drinkers.

But despite the new advertising from McCann-Erickson in Toronto, Coke will continue to use image ads to promote the soft drink, the company says.

As for technology, Coca-Cola is introducing an intelligent inventory tracking system that will use satellite communications to pinpoint customer locations.

Mainframe computers in six centres across the country will be employed to analyze data to create profiles of each retail customer.

Coke also says it will bring in a new just-in-time distribution system based on trailer trains and ‘cross-docking’ sales centres.

(A 1992 Harvard Business Review article identified cross-docking as key to the success of Wal-Mart, the Arkansas-based retailer that just bought 120 Woolco stores in Canada.

(Much simplified, in the Wal-Mart cross-docking system, merchandise is continuously delivered to Wal-Mart warehouses where it is selected, repacked and sent to stores, often without sitting in inventory.

(As a result, goods go from one loading dock to another in 48 hours or less.)

36% share

Coca-Cola has about 36% of the Canadian market, with Pepsi-Cola holding a shade under 35%.

Private labels have about 18%, but, at the supermarket level, the private labels have a 30% share, just behind Pepsi’s 31%, but ahead of Coke’s 26%.

The best known private label bottler in Canada is Cott, which supplies the President’s Choice brand, among others, and whose low cost has been key to its success.

However, that cost advantage may not be enough any longer, as Pepsi has announced consumers will be able to buy the drink at lower retail prices more often and its retailers will be able to make more profit even at those reduced prices.

Pepsi factor

It has been reported one analyst thinks Coke may have to respond to Pepsi’s lower prices, although at the Toronto press conference Eames said the company is not in business to compete just on price.

It has also been reported a Cott spokesman says he sees no evidence the competition will offer retailers higher profit margins.

At press time, Cott shares had dropped US$2.12 to close at US$24.87 on the Nasdaq Stock Exchange.