During the long National Day holiday, Coca Cola was on the “hot spot” after the Wall Street Journal said it would stop production of coconut water brand Zico within the year and planned to cut down more than 200 brands.
Apparently, Coca Cola, the world’s largest beverage company, seems to be shrinking its battle lines. However, the reason why the beverage giant with 500 brands wants to slash more than half of its brands is to build its product portfolio into a more streamlined “trump army”.
A few days ago, by consulting Coca Cola and sorting out the latest strategic statements of its international executives, snack agents tried to restore this wave of “confusing behavior” in the eyes of the industry.
Coca Cola’s coconut water brand Zico
Zico will follow the plan in China
It’s true that Zico, who was attacked this time, is indeed the coconut water sold in the Chinese market.
In response to the inquiry from the snack agent, Coca Cola headquarters replied: “as one of our measures to optimize the product mix, Coca Cola plans to stop its coco water brand Zico worldwide in the next few months. At present, Coca Cola is highly focused on meeting the needs and needs of consumers, and at the same time, it focuses on large-scale growth in its whole category portfolio. “
In other words, according to Coca Cola’s plan, the brand will gradually end its business in China, and Chinese consumers will no longer be able to buy Zico coconut water by next year. At present, the sales channels of the brand include retail channels such as Shangchao and Coca Cola tmall flagship store, as well as some catering channels such as chain fast food restaurants (as shown in the figure below).
Today, in a well-known fast food chain, Zico coconut water is still selling
Today, the snack agent learned from Coca Cola that Zico coconut water is not produced locally in China. All the products currently sold on the market are imported products. Tmall shows that its origin is Thailand.
News spread, some people in the beverage industry lamented to the snack food agent: “coconut water is a popular product in recent years, and its taste is relatively fresh. We think it’s a vent. We didn’t expect Coca Cola to stop production. Just give us the brand. “
In fact, the second largest coconut water brand in the United States has been in the Chinese market for four years. Coca Cola bought a minority stake in Zico for $15 million in 2009 and then fully pocketed it in 2013. In the Chinese market, the brand mainly targets light eaters and fitness people, and its biggest competitor in the past few years has been Vita coco, which is operated in China by Huabin.
Coca Cola didn’t disclose Zico’s sales data in China to snack agents. Only by comparing the sales of tmall’s official flagship stores, we can see that only taco is far ahead. Besides the original flavor, there are also green coconut juice and coconut water with pineapple flavor.
One of the reasons why Coca Cola’s announcement is surprising is that in the current Chinese market, this segment of the beverage track continues to attract more players into the game. Just recently, a domestic refrigerated beverage giant has just launched a new product with imported coconut water, with low-temperature fresh drinks and short-term insurance as selling points.
However, a careful analysis shows that the dilemma Zico faces in the United States, its home base, is “fatal”. It has become a “sample” for Coca Cola to evaluate the fate of a brand.
According to the Wall Street Journal, at the time of Coca Cola’s acquisition, coconut water was a small but growing segment in the United States, and Zico was the second largest brand. However, sales of coconut water in the United States have declined in recent years, and Zico has never caught up with the number one brand.
Retail sales of coconut water in the United States fell to $528 million in 2019, down 22% from 2015, according to Euromonitor. Last year, Zico was the second largest coconut water brand in the United States, with a market share of about 20% in retail stores by sales. According to Coca Cola, its market share has dropped to 4% this year. Cheaper coconut water brands and some private brand products have seized part of the market.
In the eyes of this giant company with annual revenue of nearly 250 billion yuan and numerous big brands, Zico may not be worth its efforts any more.
According to Nielsen data, coconut water sales in U.S. retail stores showed an upward trend during the outbreak, up 4.4% so far this year. But according to Coca Cola, Zico’s sales fell 46% over the same period, mainly due to the fact that Coca Cola lowered its product priorities and shifted to “higher demand products” such as smartwater and powerade.
At present, Coca Cola operates more than 20 brands in China. Today, xiaoshidai searches Coca Cola’s official website in China to see that Zico’s figure does not appear in the “brand family”.
Coca Cola brands in China
There are only 200 “elite soldiers” left in the future
Zico is just the latest microcosm of the decision.
The Wall Street Journal recently quoted people familiar with the matter as saying that some brands of Coca Cola are also under evaluation, including diet coke with feisty cherry flavor, coke life, a low calorie version of coke life, which uses stevia, and some regional soda brands in the United States, such as Northern Neck ginger ale and Delaware punch.
“Coca Cola is in the process of screening, hoping to reduce the number of brands and retain those that can be large-scale.” A spokesman for Coca Cola was quoted as saying. Earlier in July, Coca Cola had already made a move, saying it planned to cut down its juice brand, oddwalla.
Coca Cola’s fruit juice brand oddwalla
Overall, the beverage giant plans to cut more than half of its brands recently.
In his speech at the global consumer goods conference held last month, Mr. Zhan kunjie, CEO of Coca Cola, learned that Coca Cola currently has 500 wholly-owned or partially owned brands in the world. This means that Coca Cola will have 200 large-scale brands left in the future. It is revealed that the revenue of those small brands together accounts for only 2% of Coca Cola’s overall revenue.
Obviously, Coca Cola will focus more on core categories and brands in the future.
– bottled water, sports, coffee and tea
· nutrition, juice, milk and plant drinks
As introduced by the snack agent, Zhan kunjie pointed out at the above meeting that Coca Cola had not been disciplined enough in “focusing on some winning products in the category”. This means that Coca Cola’s policy will lean towards big brands and spend resources on “cutting edge”.
“We know very well what is an effective strategy for Coca Cola – when we have a product that has a leading position in the brand or category, it can bring scale and profit.” He said, “so we’re going to speed up action in this area. We now have 500 brands. We need to be more focused in the future. “
Zhan kunjie, CEO of Coca Cola (information photo)
A large-scale “elimination competition” is already underway
This is not the first time Coca Cola has phased out products on a large scale.
In 2018 and 2019 alone, Coca Cola killed more than 1300 products. Zhan kunjie once said in February this year that innovation has significantly increased the gross profit margin of Coca Cola company. In 2019, it will contribute 29% to the index. At the same time, more than 600 “zombie” products have been eliminated, that is, those products that have been listed but failed. Their existence, he said, would quickly “clog up” the entire innovation system.
In 2018, Coca Cola also eliminated more than 700 “zombie” products to deploy resources in areas where more growth opportunities can be seen. Zhan kunjie pointed out last year that he analyzed about 2000 kinds of beverage products launched by Coca Cola company in the past five years, and found that 30% of the drinks accounted for only 1% of the sales.
This year’s global epidemic has accelerated the elimination process of this product. Zhan kunjie has previously said that in the short term, it is obviously easier for customers to manage SKUs with fewer supply chains due to the epidemic. For Coca Cola, this is also a “golden opportunity” to speed up product portfolio management.
Some products of Coca Cola in China
In line with the world, Coca Cola company is also carrying out product innovation and elimination in the Chinese market.
Snack agents learned that the products that have been cut off in recent years include Coca Cola’s local juice product “meizhiyuan US Japan Qinghuo” launched in 2018, and the imported soft drink product cherry flavor Coca Cola introduced into the Chinese market in 2017.
On the other hand, the company is also constantly listing new products. In the second quarter of this year alone, the company launched more than 10 new products, including Costa ready to drink and capsule coffee products, innocent fresh fruit, etc.
As for Coca Cola’s latest plan to eliminate more than half of its brands, it is not clear how it will be implemented in the Chinese market. Coca Cola in China today did not disclose to the food agency which brands and products will be adjusted in addition to Zico.
However, one thing is certain, that is, the “survival standard” of the brand: Coca Cola emphasizes to the snack food agent that in fact, in recent years, it has been continuously promoting the strategy of large-scale products, focusing on “brands with scale effect” to speed up business growth. “And a reasonable number of products will accelerate the process of this strategy.” The company said.
Innocent fresh fruit
Pondering over a new formula
In the rapid elimination of “zombie products”, the beverage giant also began to become more “targeted” for product innovation.
“What do we need to do when we talk about innovation?” Zhan kunjie asked questions last month. He believes that Coca Cola needs to attract new drinkers, attract existing drinkers to consume more frequently, or need to do something about the price“
One of the ways for the beverage giant to innovate quickly and cautiously is to make prudent use of the scale and resource advantages of the existing big brands to launch “subversive” and scale-up potential innovations.
“I think our innovation now is not only to introduce more flavors, but also to be truly subversive, breaking the boundaries of brands or categories and bringing new things to consumers.” ‘the risk of innovation is that it may have done a lot, but it’s not good for business growth, ‘Mr. Zhan said. As a result, Coca Cola needs to focus on new products that are “disruptive and ultimately bring substantial scale growth to the company.”.
He concluded by pointing out that fundamentally speaking, if we want to promote the agenda of accelerating product portfolio adjustment, accelerating the transformation of marketing methods and providing platform services, then we can’t have so many people to make decisions.
“To exaggerate, every country has the right to launch any category of brands In order for Coca Cola’s strategy to be implemented and to be able to manage its product portfolio fairly, the company needs to adjust its organizational structure to focus more on the biggest opportunities in the regional market or globally, he said.
From January 1, 2021, the business operation part will be restructured into 9 new operation divisions in 4 geographical regions, global venture capital group and bottling investment group.
Only when you close your clenched fist can you attack better. We’ll see what happens to Coca Cola as it continues to evolve.