Investors Give Mixed Reviews of Coke's Big Design Change
Coca-Cola executives are counting on the soda brand's global packaging changes to stimulate greater shopper interest in stores. But investors are giving the design overhaul mixed reviews with some fearing consumer confusion, according to a poll by Sanford C. Bernstein.
The change -- which was announced earlier this week -- makes greater use of Coca-Cola's signature red color. The so-called "Red Disc" will dominate the front of cans and bottles of all Coke varieties.
Bernstein's poll gathered opinions from 65 investors across the globe. "While some respondents gave [Coke] some credit for its efforts to unify its brand, and others appreciated the simplicity of the new design, many (close to 20% of all respondents) highlighted fears around confusing the consumer," Bernstein reported. The poll asked people to rate the packaging on a scale of 1-5, with 5 being good. The mean score was 3 and the mode was 4.
The new design will hit shelves in Mexico the first week of May and roll out globally throughout 2016 and 2017. Packaging changes won't come to the U.S. until at least next year. The marketer is still deciding how to handle the design for Diet Coke in the U.S., which has long been marketed as a distinct brand.
One investor responding to the Bernstein poll praised the new look, saying "I've always thought the silver diet packaging looked too cold (not in a good way) and 'artificial.' Red is the brand, and more is better."
But another investor was not impressed, saying "those cans are terrible and going to confuse the heck out of people … The red creates a negative reaction for me as a diet drinker." Indeed, "confusion" was the a dominant phrase in a word cloud included in the Bernstein report that summarized the feedback. The word Japan appears in the cloud because some investors noted similarities of the design to Japan's rising sun flag.
Coca-Cola is counting on the use of the secondary colors to limit confusion. Coke Zero, for instance, retains a swath of black on the front of the can that extends to cover all of the back of the can. The phrase "Zero Sugar" also is spelled out on the front, while "original taste" is used for regular Coke. Also, secondary packaging makes broad use of the variant colors. Black will be heavily used for the 12-pack packaging for Coke Zero, for instance.
Coke first introduced its "one brand" strategy in January when it began running a new global ad campaign called "Taste the Feeling." Ads unite multiple varieties like Diet Coke and Coke Zero in a single campaign, rather than running disparate spots.
But the packaging changes could prove to be the biggest test of the new approach because that is where consumers come face-to-face with the product.
"Packaging is, in essence, our most visible and most valuable owned media asset," James Sommerville, VP-global design for Coca-Cola, stated in a corporate blog post. "While TV commercials, digital communication and billboards are extremely effective and important, consumers physically touch a Coca-Cola bottle or can."
He added that the new design "does not create a 'matching luggage' look. It's a modular design device that will be applied individually across all global packaging templates and adapted to all printing techniques. When you see the lineup, you see a common language, a single voice – but used in different ways depending on the treatment, environment, country and context."
Sam Becker, a creative director at WPP-owned design agency Brand Union, which did not work on the packaging, praised Coke for making greater use of the color red. "I think it makes all the sense in the world to start to own red more, which sounds crazy to talk about a brand like Coke that arguably owns red more than any other brand on earth," he said in an interview. "But they could do more and they are."
On an earnings call Wednesday, Coca-Cola executives predicted that the new design will improve in-store marketing and merchandizing. "It helps us create what we would call corporate blocking," said Coca-Cola Co. President and Chief Operating Officer James Quincey. "In other words, we execute in stores all the variants of Coca-Cola together as one big block. [It] has a much greater store impact, visual impact [and] engagement with people who are shopping the stores."
CEO Muhtar Kent said the "one brand" strategy will give the company "significant efficiencies and effectiveness." Bernstein in its report noted that the strategy "could enable some efficiencies in marketing spend." In other words, Coke could reduce media spending on individual campaigns for the variants if they are all marketed together in a single campaign.
The changes come as Coke continues to battle headwinds in the soda category that include health concerns. U.S. sales volume for the Coke megabrand fell 2.6% last year, according to Beverage Digest. In its first quarter earnings report released Wednesday, Coca-Cola stated that sparkling beverage volume in North America was flat. "Growth in Sprite, Fanta and energy drinks was offset by a decline in trademark Coca-Cola," the company stated.
Rick Shea, a former packaged-food marketing executive and president of Shea Marketing, said he does not expect the design changes to change the trajectory of Coke's business.
"Consumers still obviously have issues with the carbonated soda category," he said. "You try and put your best design element forward, but there are many other variables that are bigger impacts to your volume than the design of the packaging."