Coca-Cola Amatil banking on lift from Coke Life
After a 23-year career with Coca-Cola, Barry O’Connell has arguably swallowed more soft drinks than the average consumer.
But when the head of Coca-Cola Amatil’s Australian non-alcoholic beverages business undertook a blind taste test of the bottler’s newest product, Coke Life, he failed to distinguish between “classic” Coke and its stevia-sweetened spin-off.
“I got it wrong,” said Irish-born Mr O’Connell, who has been running CCA’s Australian operations since a management shake-up last May. “We have 15 to 20 longstanding employees who have gone through a similar challenge and the majority of people are getting it wrong, which is good, because it means you’ll get the full Coke taste with 35 per cent less calories.”
Mr O’Connell and CCA chief executive Alison Watkins are confident that the $10 million launch of Coke Life on April 7 will restore volume and sales growth to the entire Coca-Cola brand, improving CCA’s fortunes after a horror year last in 2014, when sales fell 2 per cent and net profit by 25 per cent to the lowest level for eight years.
Coke Life, the first new Coke brand since the successful launch of Coke Zero in January 2006, is sweetened with a blend of cane sugar and stevia, a plant based-sweetener 300 times sweeter than sugar, and has 35 per cent fewer kilojoules than classic Coke.
Launched in South America in 2013, sales of Coke Life fell short of forecasts because stevia’s bitter aftertaste turned off Coke loyalists. However, The Coca-Cola Co has tweaked the Coke Life recipe to make the mid-calorie cola almost indistinguishable for classic Coke drinkers like Mr O’Connell.
Stimulate the category
“A product like this has the potential to stimulate the category overall,” Ms Watkins said. “We’ve seen a fairly steady decline in the sparkling category over a period of years in volumes of 2 to 3 per cent. We would hope for people who have given it up and don’t like Coke Zero it gives them an alternative and people who only have one a week can feel a little less guilty about that.
“We certainly hope it would have the potential to get Brand Coke back into growth,” she said.
CCA, which generates two-thirds of Australian sales from carbonated soft drinks and 50 per cent of sales from Brand Coke, is leaving nothing to chance.
The bottler has been working for more than eight months with The Coca Cola Co, big supermarket chains, fast food and convenience store chains and small retailers to ensure that sales of Coke Life meet or beat ambitious expectations.
Mr O’Connell said pre-sales had exceeded forecasts and big retailers, which had been urging suppliers to invest more in product innovation, had embraced the launch – providing extra shelf space and promising to promote the new brand with gondola ends, point-of-sale promotional material such as fridge stickers and offering free samples during peak shopping periods.
“It gets us back to the markets and customers talking about Coke and driving growth within the category, which has been needed for quite some time,” Mr O’Connell said.
Nationwide marketing campaign
The launch will be backed by a nationwide social and mainstream media marketing campaign created by the same agencies that delivered CCA’s Colour Your Summer campaign over Christmas.
Some analysts, such as Morgan Stanley’s Tom Kierath, believe that any jump in sales and volume is likely to be short-lived and that negative soft drink consumption trends are likely to return.
“My expectation is that they do get a near-term bump, but it’s not long-lasting and people will not permanently increase their cola consumption,” Mr Kierath said.
However, Citigroup analyst Gino Rossi said Coke Life could exceed market expectations, because awareness of stevia had increased since Pepsi launched its mid-calorie cola, Next, several years ago and Coca-Cola has had time to tweak the recipe.
CCA also had a larger base of full-sugar cola drinkers who were more likely to switch to a mid-calorie product, Mr Rossi said.
Ms Watkins said: “Pretty much everyone in Australia will want to try Coke Life. The important indicator for us is repeat purchase and that will take a little while to play through and become evident. But it’s a reason to be trying Coke again and it very conclusively demonstrates that Coke is absolutely moving with the times.”
CCA plans to launch other stevia-based drinks, such as Sprite, in the next six to 12 months. The price of Coke Life will be in line with that of other Coca-Cola products, making it 40 to 50 per cent more expensive than Pepsi Next.