Coke shifts strategy as Surge fizzles

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Four years after unleashing Surge, Coca-Cola Co.'s vaunted Mountain Dew fighter, the world's largest soft-drink company is retreating on the brand and instead may throw its support behind regional stalwart Mello Yello.

Although some distributors have pulled the citrus-flavored Surge or are in the process of doing so, a spokesman for the company denied Coca-Cola is discontinuing the neon-green product. The move comes as Pepsi-Cola Co. ramps up support for Code Red, its first line extension for Mountain Dew, the country's fourth most popular carbonated soft drink.

Coke executives "are saying 'Let's revisit Mello Yello,'" said one Northeastern bottler. "Surge didn't work. They've got nothing else in the hopper." Introduced in 1997 with a $13.6 million budget and hopes of defeating Mountain Dew, Surge ended up getting trounced. It sold just 41.4 million gallons in 1999 - less than half its 1997 peak - compared with 63.9 million gallons for Mello Yello, according to Beverage Marketing. Together the two brands account for less than 1% of Coca-Cola's share; Mountain Dew commands 7% of Pepsi-Cola share and sold 1.1 billion gallons in 1999.

Surge was the brainchild of 1980s and '90s Chief Marketing Officer Sergio Zyman, who also pushed the unrivaled flop New Coke. An executive close to Coca-Cola criticized Surge's aim to grab young consumers before they became Mountain Dew loyalists. "Kids that age don't have a lot of discretionary income, and they're too young to have any real buying power," he said. "It was a dumb idea."

According to one executive, Coca-Cola is considering putting more than $10 million in support behind Mello Yello, although it hasn't been decided whether that will be spent nationally or regionally. The 23-year-old Southeastern darling is available across the country, although with limited popularity. Independent Berlin Cameron & Partners, New York, handles Mello Yello, and Bcom3 Group's Leo Burnett USA, Chicago, handles Surge. Neither agency returned calls by press time.

A national push appears counter to Coca-Cola's "think local, act local" strategy. Coca-Cola said its Mello Yello strategy is consistent with "think local." Support for Surge this year should be in line with 2000's rock bottom of $244,000 in measured media on the brand for the first nine months, a huge drop from $19 million in 1999, according to Competitive Media Reporting. It's already outspent by Mello Yello, which received $774,000 in regional support for the first three quarters of last year vs. just over $1 million in 1999. By contrast, Mountain Dew, Pepsi-Cola's No. 2 seller, received $49.7 million for the first nine months of last year and $37.1 million in 1999. Omnicom Group's BBDO Worldwide, New York, is Mountain Dew's agency of record.

Mountain Dew has fared better than most drinks in the carbonated category, posting mid single- or double-digit growth. Sales, however, have slowed amid a shift to the noncarbonated likes of Snapples, SoBes, waters and teas. Enthusiasm over Mountain Dew's relative growth led to the Code Red extension planned for later this year (AA, Dec. 18).

New carbonated products have a tough time against category leaders, and even Coca-Cola's marketing heft has not given it an edge. "[Mello Yello] actually is a decent drink, but taste is not the only factor when developing a brand," the Northeastern distributor said. "It's like going against Dr Pepper. It's really hard to do. The product formulation is totally different [from colas and lemon-lime drinks]."

Copyright February 2001, Crain Communications Inc.

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