Flat colas anxiously watch Gen Yers switch

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Coca-cola classic and Pepsi-Cola, the country's top two colas, have seen market share dip or remain flat the past 10 years.

At the same time, Coca-Cola Co.'s Sprite and Pepsi-Cola Co.'s Mountain Dew -- as well as Dr Pepper/Seven Up's Dr Pepper -- have attracted increased marketing efforts and share growth.

"Those cola brands are so huge and such a big part of the business that even though Sprite and Mountain Dew are going strong, Coke Classic and Pepsi also need healthy growth," says John Sicher, Beverage Digest editor and publisher.


To that end, Pepsi-Cola launched the "Joy of Cola" campaign in 1999, and this year reprised the "Pepsi Challenge" campaign for the first time since 1974. In August, Coke started an edgier extension of its January "Enjoy" push depicting how life's special moments are ruined without Big Red.

The marketers are trying to build sales using traditional and non-traditional methods alike. With fountain sales accounting for nearly one-fourth of industry volume, Coca-Cola, Pepsi-Cola and Dr Pepper/Seven Up have begun working with fast-food marketers to improve soda sales.

Strategies include elaborate dispensing stations, new menus that push combo meals, premium cups that spur upsizing, and more prominent soft-drink signage in stores and drive-through areas. Such efforts with McDonald's Corp. lifted Coca-Cola sales from 2% to 6% per unit in the first half of this year.

The companies also are reaching out to African-American and Hispanic consumers with guerrilla-marketing tactics typically employed by alternative beverage sellers.


Each soft-drink marketer has launched a variety of street-marketing efforts to distribute soda in urban neighborhoods, aligning with hip-hop and Latin recording artists.

The aggressive nature of high-energy campaigns this year by Mountain Dew and Sprite to appeal to free-spending, free-spirited Generation Y consumers is spilling over into Coke and Pepsi ad efforts as well: For Coke, a hundredsomething matriarch explodes when she learns there's no Coke at her family reunion; Pepsi's precocious spokeskid Hallie Eisenberg disses Albert Einstein when he's vexed over his cola choice.

"The bottom line is that young consumers in recent years have been galvanized by some of the flavor [citrus] brands. I think it's a question of -- as with almost everything -- taste change and cycle," Mr. Sicher says.

Over the last decade, Coke has increased market share just 1%, and it has seen share slide or remain flat annually since 1996. Pepsi, which has lost almost 4% in the last decade, dropped market share every year in the period.

Colas represent about 60% of all soft drinks. Dr Pepper's sister brand, the neglected 7UP, has alternated losing share or staying flat every year since 1991.


According to Information Resources Inc., in the first half of this year, Coke Classic's share was down 0.3 points to 15.8% of market, Pepsi fell 0.4 points to 14.6%, and Sprite lost 0.3 points to 5.2%, while Mountain Dew was flat and Dr Pepper was up 0.1 points to 5.4%. IRI data are from drugstores, supermarkets and mass merchandisers. Soft drinks sold 9.93 billion cases last year, up just 0.5% from '98.

Mr. Sicher says Sprite's volume and share loss stemmed from not having an under-the-cap program, such as offered last year. He expects volume to pick up now that Sprite's new campaign and attendant promotions have started.

Even though flavors may draw consumers away from colas, they are good for the soft-drink category in general, says Diane Stephenson, VP-marketing and fountain/food service at Dr Pepper/Seven Up. She says when flavored soft drinks are displayed with colas and other core brands, category sales rise. Mountain Dew, Sprite, Dr Pepper and 7UP last year spent $216 million on measured media, 33% of the category's spending, according to Competitive Media Reporting. For the first five months of this year, the four competing brands already have laid out $310.3 million, or 39% of category.

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