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CNBC: Coke looking for the next real thing

with sales its flagship product flat, the company is scrambling to find the next blockbuster beverage. CNBC Special Report.
/ Source: CNBC

Once, the world was divided into two kinds of people: Coke fans and Pepsi fans. Today, it’s not so simple. When you walk into your local supermarket, you’re bombarded by beverage choices: sodas, juices, energy drinks — all crying out for your attention.

In such a crowded marketplace, Coca-Cola, the largest beverage company in the world, knows it has to catch your eye.

For a decade or so, much of the company’s competition has come from tea, energy drinks and juices. With all that growth, soda sales have been dropping in North America — which is why the company knows it has to revive its soda sales.

Coca-Cola now sells almost 70 different brands in the U.S. and almost 500 different brands around the world. Many of those are not sodas, although soda — what the beverage industry calls “sparkling beverages” — is still at the heart of Coke’s business.

“Organic growth of our sparkling beverage business is the oxygen of our business," said C.E.O. Muhtar Kent. "If we don’t have that growth, our financial numbers don’t work.”

But with store shelves crowded with so many choices, Coke has to work harder to maintain that growth.

The company’s research shows that half of all shoppers’ decisions to buy are the result of an impulse that hits in the first five seconds in the aisle.

“We’re spending a lot of time trying to understand shopping and shopping psychology,” says Joe Tripodi, Coke’s Chief Marketing Officer. “Then we use that information to help improve our overall presence in stores and how we engage shoppers.”

Secret research facility
To help it better understand why and when people purchase its products, Coke has built a secret research facility at its headquarters in Atlanta that can be transformed into any place shoppers buy Coke products, whether it’s a convenience store, a supermarket or a drive-thru. In this lab, the company researches how to make the most of a shopper’s first five seconds. Coke marketers believe the key is to get shoppers to make an instant association to a happy memory they have of Coke in their lives.

Tripodi says those memories build up over decades.

“What you’re trying to do when you engage with consumers is continue to build that memory bank of positive associations between your brand and what it stands for,” he said. “We’re not claiming we’re solving world peace or anything, but offering a little moment of joy in an overall difficult day.”

Branding expert Michelle Barry says Coke has always been good at inspiring emotions.

“When you talk to consumers about any companies’ ads or jingles they remember, there are very few,” she said. “But Coke has produced some of the iconic ads people do remember.”

Although it’s been almost 40 years since Coca-Cola produced its famous “Hilltop” commercial, in which young people sing that they’d “like to teach the world to sing,” the ad is still etched in popular memory. Barry says the playful, energetic quality of the song is what still appeals to people, inspiring them to create their own YouTube versions of the song.

Contoured bottles
To breathe life into soda sales in North America, Coke executives think they need a new marketing boost. And they hope to get that boost from a new use of one its old icons: its instantly recognizable contoured bottled. They’re rolling out a new plastic two-liter bottle with the contoured shape to attract the attention of shoppers.

Tripodi says they hope to restore “the majesty of our brand through that contour, because there’s something magical about the look and feel of the contour bottle.”

Barry believes a simple change in bottle shape can make a difference for some shoppers.

“This is operating at a subtle level,” she said. “It’s not something that will inspire many people to come up to the shelf and say, ‘Wow.’”

But she thinks it could make the difference for more casual soda drinkers and encourage them to buy.        

Kent believes the bottle shape is already boosting sales.

“This bottle alone is giving us a million incremental transactions per week in the United States that we didn't have before,” he said.