UPFRONT 1997: Beverages

Soft-drink makers to burn calories aplenty on diet and sports-drink products segment

From the looks of major soft-drink brands’ marketing strategies, the trick to converting fickle consumers may have less to do with painstaking image advertising than with promotional gimmicks and merchandising tactics. So while the beverage category may see more ad spending in the coming months behind diet drinks and, to a lesser degree, new products, Coca-Cola and Pepsi-Cola aren’t expected to add a lot more incremental dollars to their overall media plans.

Coke, in fact, is likely to reduce spending compared to the $287 million it anted up in 1996 to support its Olympic Games sponsorship. Instead, the category leader will unspool its “Always Coca-Cola” campaign around a seasonal calendar with five annual consumer promotions to connect more closely with consumer lifestyles. Its upcoming “Incredible Summer” event, for example, will equate cash with summer freedom by seeding millions of MasterCard debit cards valued between $20 and $100 into soft drink packages. Pepsi, which is countering with Year Two of its well-supported “Pepsi Stuff” continuity program, is deciding whether to pour a sizable part of third-quarter spending behind its $50 million sponsorship commitment to Major League Baseball.

On the diet front, both companies will look to reverse flattening sales with new ads, promotions and packaging. Compared to the 3.6 percent volume growth in sugared soft drinks, diet entries gained a paltry 0.3 percent last year, according to Beverage Digest/Maxwell Report figures. Diet Pepsi recently got its first ad campaign in over two years, themed “This is Diet?” Should the Food and Drug Administration approve a much-delayed new sweetener, acesulfame-K, there could be more impetus for exciting diet drink news.

Major soda firms and a host of smaller franchisers have been active on the new-product front, with Pepsi’s FruitWorks and Coke’s Surge and Citra brands commanding modest media budgets in test markets. But as distribution remains a tougher hurdle for non-cola entrants, there’s ample argument for devoting more marketing funds to trade spending rather than ads. Triarc’s Royal Crown, for one, has scrapped nearly all of its national ad plans through early next year for the sake of more targeted, account-specific marketing deals with individual retail chains. Speculation has also been high that

Cadbury Schweppes’ Dr Pepper/Seven-Up unit will boost spending behind its vast non-cola portfolio, even if only to defend its A&W Root Beer from rivals’ onslaughts. Barq’s, owned by Coke, climbed 2.9 percentage points to a 16.9 percent share through early March, while Pepsi’s Mug was up 5 points for a 13.7 share share; A&W was up 1.6 points to 28.9 percent but down from its 29.7 percent share in 1995.

Among new-age entrants, bottled water appears to be the biggest category gainer, while a cavalcade of fruit drinks, guarana-laced energy boosters and so-called functional drinks with added vitamins, nutrients and amino acids have gained attention. But most are modest entries, not likely to get national TV support right away.

On that front, one big question will be whether Snapple’s new owner, Triarc, about to close on that deal, maintains a commitment to heavy broadcast spending, particularly on a

national level. There had been much debate during the regime of current owner Quaker Oats over whether the brand is truly national or primarily “bicoastal,” and the presence or absence of significant network-TV spending will be regarded as a litmus test by many distributors.

Meanwhile, Quaker can be expected to continue to spend heavily to support its successful Gatorade sports drink, and Coca-Cola and Pepsi-Cola will spend at least modestly on continued support of their generally less successful new-age entries: the likes of Lipton teas, Fruitopia juices, PowerAde and All Sport sports drinks.

Meanwhile, the initial success of such brands as Snapple, Arizona and Mistic has taught major juice marketers that there’s gold to be mined in the the so-called “cold box” of delis with deftly packaged, single-serve versions of their core brands, line extensions and original entries. Thus, a number of deep-pocketed multinationals may be ready to spend national TV money on their entries: Procter & Gamble on Sunny Delight, Nestle on a flock of chocolate, iced-coffee and nectar brands, Campbell Soup on its new V8 line extension, Splash. -Karen Benezra and Gerry Khermouch


* Thirst for new products proliferates

* Coke and Pepsi revive diet category

* Consolidation squeezes smaller brands

OVERALL: Spending up modestly

DARK HORSE: Will new owners keep Snapple on national TV?

Copyright ASM Communications, Inc. (1997) ALL RIGHTS RESERVED