Packaging. It's an interesting marketing question. I recall meeting with the owner of micro-brewer WarBird in Fort Wayne, Indiana, who insisted on selling his beer in cans and nothing but cans due to the way the can protected his beer from light. A few years later, and he is now selling in bottles, the industry standard.
Coke and Pepsi have been in a battle for years. They played nice for awhile, then Pepsi turned up the heat with the Pepsi Challenge Taste test back in the 1970's or 80's.
It scared Coke so much they debuted what turned out to be New Coke, and then brought back Classic Coke.
But due to my friendship with a Pepsi insider, I learned a few things.
Coke does better in fountain sales, selling the syrup to restaurants, because their syrup has a longer shelf life than the sweeter Pepsi Syrup. My friend says that Pepsi out sells Coke in pre-packaged sales (cans & bottles).
Personally, I prefer the taste of Diet Mt. Dew out of a 12 oz. can. I like the size of 12 oz cans and I like the Diet Dew.
Coke is looking at changing the size of their packaging:
Coke's Fine Young Cannibals
June 13, 2008
Cannibalization appears to be eating away at Coca-Cola. The No. 1 soft drink maker, coming off a year in which Coke sales volume shrank 3%, is looking to shrink one of its most profitable items.
Coke's bottlers are currently testing a 16-oz. bottle priced at 99 cents. Analysts have said in a country of expanding waistlines and shrinking pocket books that 20 ounces is more soda than consumers want at too high a price (up to $1.49). Thus the need for the new packaging innovation.
The 16-oz. package has been available in 1,700 stores for the past month within the Coke Consolidated bottling system. Lauren Steele, rep for Coke's No. 2 bottler, said, "The preliminary results are very promising."
Morgan Stanley research suggests otherwise. "The 16-oz. merely cannibalizes the higher margin 20-oz. package," analyst William Pecoriello wrote in a report last week. He estimated the rollout of the new package could cost No. 1 bottler Coca-Cola Enterprises up to $30 million in operating profits during the next 12 months.
Sales of 20-oz. bottles currently make up 43% of Coke's dollar share at convenience stores, per Beverage Digest, Bedford Hills, New York. But throughout the year, sales of 20-oz. soft drinks like Coke, Diet Coke and Sprite have declined in the high single digits, per Morgan Stanley. "It makes sense to try and shake the single-serve market from its doldrums," said Beverage Marketing managing director Gary Hemphill. "Packaging innovation is one way to do that.
To bolster its noncarbonated portfolio, Coke bought Glacéau Vitaminwater last year and it has proved to be a hit. But, even that product has wrought cannibalization issues in "fast-lane" coolers. Consumers who opt to grab a Vitaminwater over the higher-margin Coke are causing headaches for bottlers. "It's an issue the system has to work through," said Beverage Digest's John Sicher. However, Coke rep Scott Williamson argued that, "Variety and choice makes the cooler more productive and generates higher volume and gross profit."
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