Coca-Cola - The Beginning

The history of Coca-Cola goes back to1886 when it was invented by Dr JohnPemberton, in Atlanta, Georgia, USA.According to legend, Dr Pemberton wastrying to develop a revitalising tonic andproduced a thick brown syrup that hecarried down the street in a jug toJacob’s pharmacy. It was sampled withcarbonated water, pronounced ‘deliciousand refreshing’ and placed on sale forfive cents a glass as a soda fountaindrink. In trying to develop the newproduct, Dr Pemberton’s partner andbookkeeper, Frank M. Robinson, suggestedthat two ‘c’s would look good inadvertising and penned the now famoustrademark ‘Coca-Cola’ in his uniquescript. The first newspaper advertisementfor Coca-Cola appeared in the AtlantaJournal and invited thirsty citizens tosample the new refreshing soda fountaindrink. During the first year sales averageda modest nine drinks a day!

In 1888, John Pemberton sold his interests toAsa Chandler. Chandler formed The Coca-ColaCompany in 1892 and by 1895 Coca-Colawas being drunk in every state acrossAmerica. As demand for the product grew,production was increased and it was madeavailable in bottles rather than just throughthe soda fountain. The opening of bottlingplants in 1909 meant that all the elementswere in place to launch a global brand. Littledid Pemberton know the impact his mixturewas to have on the soft drinks industry.

Today Coca-Cola is located all over theworld. In Ireland they have concentratefactories in Drogheda and Ballina, andbottling plants in Dublin and Belfast. Herethe concentrate is mixed with carbonatedwater, bottled and sold. These businesseswork hard to quench the thirst of the CelticTiger so much so that Coca-Cola holds a54% market share of the Carbonated SoftDrinks (CSD) business in Ireland.

A total of 910 people are employed inCoca-Cola businesses in Ireland. Thepayroll to these employees is in the regionof £15m each year. But this is only afraction of the money that Coca-Colacontributes to the Irish economy. Inaddition to wages, Coca-Cola spends£50m on Irish raw materials and £25m onIrish services, such as marketing andtransport. That represents £90m ploughedback into the economy by Coca-Cola eachyear.

This case study will focus on the second keybrand in The Coca-Cola Company, diet Coke.It will examine how diet Coke was developed,positioned in the marketplace and how theadvertising for diet Coke has developed as thebrand has evolved.

Product Life Cycle

The Coca-Cola formula has always been awell-kept secret and has not changedthrough the years. In other respects, however,Coca-Cola has been constantly developing. Thishas been important in maintaining the brandin its number one position. It is quite naturalfor products to go into decline, at some stage,after being introduced into a market. This isknown as the product life cycle. The trick isto delay this decline by constantly developingthe product and or the brand, to extend itslifecycle.

Within an industry sector it is possible toplot the position of several similarproducts on a product life cycle diagram.For example, the diagram below shows thedifferent types of drives that have beenused in computers since the 1970s. Youmay not have heard of the 5” drive but thatis because it is not available in mostcomputers today. At the other end of the scaleis a question mark because no one is quitesure what new drives will be launched next.

What is happening here is that new productsare created as the technology improves.

What about the Coca-Cola brand? It hasbeen around for over 100 years. How has itmaintained its leadership position eventhough the product has not changed in over100 years? The answer is that Coca-Colaare constantly developing the brand imageand reinforcing the core product benefitsof taste and refreshment to ensure that thebrand grows instead of declining.

One way Coca-Cola does this is to make theproduct more accessible, ensuring that it isalways there to meet changing consumerneeds. For example, you would probablynever have tasted Coca-Cola if it hadremained available only over the counter froma soda fountain. Once the decision was madeto bottle the drink then it became possible tosell the product outside the main cities andindeed outside America. Years later the 330mlcan continued the growth and development ofthe brand. The 1990s saw the introduction ofthe 500ml screw cap bottle and the 2 litrecontour bottle was launched in February1999. The lifecycle of the brand has certainlybeen extended by making Coca-Cola moreaccessible through new package forms.

Launch of diet Coke

Another way to extend a product through itslifecycle is to adapt it as consumers’ needschange. The example below illustrates howcomputer drives were developed to adapt tomore technically advanced equipment. Fordiet Coke it was quite similar. It began in the1970s when market research indicated thatconsumers’ attitudes to their diet and their

health were changing. Coca-Cola conductedcareful and extensive research and as aresult identified an opportunity to develop aproduct that would meet these changingconsumer needs. The identification by TheCoca-Cola Company of this unmet need withconsumers and the unique opportunity itrepresented heralded the launch of diet Coke.

When diet Coke was first launched in 1982no one could have predicted the huge impact itwas to have on the marketplace. The initialadvertising campaign was carefully planned,with no expense spared – the introductorysixty-second commercial cost $2.5 million tomake. By 1986 diet Coke was being sold in 61countries with 60 million drinks sold everyday.It was a phenomenal success.

Brand Extension Strategy

When companies with existing brandsintroduce new products under those brandnames to the marketplace, this is known as abrand extension strategy. A brand extensionstrategy offers a number of advantages. Apopular brand name gives the new productinstant recognition and immediate acceptance.However, brand extension is not without risk. Ifthe brand extension does not live up to theexisting brand’s reputation then it coulddamage its image.

Diet Coke is an example of a successful brandextension because it has grown and establisheditself within its own right. Within a year of itslaunch it was the biggest selling diet soft drinkin America and by 1987 it was the third largestselling soft drink of any kind in the world.

Diet Coke is now the world’s leading low-calorie soft drink, sold in a total of 149countries with most of the sales being in theUSA, Britain, Germany, Canada and Australia.Northern Ireland has the second highest percapita consumption of diet Coke in the world.This is second only to the Cayman Islandwhere the consumption of diet Coke is drivenby the high tourist industry.

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Positioning diet Coke

During a product’s life, a company will re-formulate its marketing strategy manytimes in order to retain and driveconsumer interest. Not only do economicconditions change but there are also newproducts being introduced by competitors.The product will also pass throughdifferent stages of buyer and consumerinterest and advertisers must respond tothis.

A new product like diet Coke presents aparticular challenge to the advertisingdepartment of Coca-Cola: How is it possibleto position diet Coke so that existing sales ofCoca-Cola are not affected and new growthis achieved?

The answer was to position diet Coke as theonly soft drink that can give you great Colataste with just one calorie. Previous diet andlow calorie drinks were only aimed atwomen but diet Coke emphasised the uniqueand refreshing taste benefits of diet Cokeright from the beginning and this appealed toboth men and women. The catchy themesong proclaimed that “you’re gonna drink itjust for the taste of it.”

Advertising Campaigns

The main objective of advertising is toproject and communicate the brand image,drive awareness of the availability of theproduct and in turn target and appeal topotential customers. Advertising shouldalso create consumer interest in the brandand persuade the potential customer topurchase. Market Research is an essentialpart of product development but also playsan essential role in the development ofadvertising in order to identify what are

the key elements to be included in theadvertisement that will appeal to potentialconsumers eg, music, humour, etc.

■ Target Audience

Diet Coke advertisements target both menand women. In the years immediately afterthe launch women in their twenties weretargeted but once the brand was wellestablished the age range was extended tofemales between 18 and 35 years of age.The male audiences for the campaigns areusually over 25 years of age.

■ Advertising Aim

The main aim of diet Coke advertising isto communicate the unique productbenefits of refreshing Cola taste with justone calorie. However, the advertisementmust also communicate and portray otherelements such as the brand image, brandname, people who drink the product, etc.

■ Market Research

Coca-Cola uses both qualitative andquantitative research to judge andmeasure lots of different things frommarket share to consumers’ reactionsto different advertising campaigns.Qualitative research involves getting afocus group of 2 – 8 people to discuss,

for example, the new advertisement for

a few hours. Quantitative research ison a much larger scale and uses aquestionnaire to ask specific questionsand in this way keep track of trends.Sometimes the researchers can get asurprise.

■ Advertisements

As a result of continuously using marketresearch and understanding how consumersattitudes towards products change thisinformation has helped diet Cokeadvertisements to evolve and developover the years.

Prior to 1990 the diet Coke commercialsfocused on adults enjoying the uniqueand refreshing taste of diet Coke aspart of their lifestyle.

Between 1990 and 1992 celebritieswere used to endorse the brand. DemiMoore, Whitney Houston and RodStewart all appeared in diet Cokecommercials during this time.

1994 saw the launch of the first “Break”style commercial. Both men and womenfeature prominently in the commercialenjoying a break from their routinewith a great tasting, low calorierefreshment.

In addition diet Coke commercialsfocus on contemporary lifestyle andfeature adults who are full of energyand vitality and are living their life tothe full. The advertisement illustratesthe good feeling one gets fromdrinking diet Coke.

Character and Personality

Companies very often give their productsbrand personalities in order to identify andpersonify the personality of the consumer.Over the years, diet Coke advertisementshave ensured that the brand has establishedits own unique character and personality.

Researchers are able to imagine what dietCoke would be like if diet Coke was aperson. This type of character andpersonality definition is important whenmaking an advertisement and helpsdetermine lots of things from the type ofactors used, the music, the setting and thewhole focus of the advertisement.

Diet CokeBrand Personality

If diet Coke were a person, that personwould be:■ fun■ independent■ sociable■ confident■ lively■ unafraid to show emotions.

Summary

In 1897 The Coca-Cola Company’s maindrink was Coca-Cola and it was not until1982 that the company extended the brandwith the launch of diet Coke. Other brandsin the Coca-Cola portfolio include Lilt,Fanta, Sprite and their diet counterparts.

Worldwide diet Coke has grown to be thethird largest brand in The Coca-ColaCompany. The introduction of diet Cokestrengthened the position of Coca-Cola asthe leading supplier of soft drinks inIreland. Over two-thirds of people whowant a non-alcoholic drink choose acarbonated soft drink (CSD) and over halfof those that choose a CSD select a Coca-Colabrand. Quite often they choose diet Coke –just for the taste of it.

Describe the importance of the TheCoca-Cola Company to the Irisheconomy.

Draw a product life cycle diagram andshow where you would place each ofthe following electrical goods:(a) black and white television(b) colour television(c) digital television(d) computer monitor(e) digital camera.

Outline the brand extension strategyfor any other brand you know.

Positioning a product in the marketplaceis very important. Describe how Coca-Cola

met the challenge of introducing diet Cokeonto the world market.

From your reading of this study,demonstrate how Coca-Cola uses

both qualitative and quantitative marketresearch.

Look at a recent diet Coke or Coca-Colaadvertisement and write a short note

about the character and personality of thebrands.

While every effort has been made to ensure the accuracy ofinformation contained in this case study, no liability shall attachto either The Irish Times Ltd or Woodgrange Consultants Ltd for

any errors or omissions in this case study.

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