The Coca-Cola Co. remains “very bullish” about the U.S. beverage market, and the company’s success in adapting its approach on packaging, marketing and price to fit customer needs is a big reason why, J. Alexander (Sandy) Douglas, global chief customer officer, told analysts at the Goldman Sachs Consumer Products Symposium held May 14 in New York.
Mr. Douglas, who was promoted from president of Coca-Cola North America to global chief customer officer at the beginning of 2013, said a lot has changed in the U.S. beverage market over the past six or seven years. The company in the late 2000s operated a three-package market in the United States: 12-pack cans, 2-liter bottles, and 20-oz bottles. As a result, Mr. Douglas described Coca-Cola as being “very, very price sensitive” in its approach.
“We ran that play, and we ran that play everywhere,” he said.
That approach has changed, though, and Coca-Cola has become open to diversity of packaging.
“It’s not being done to be complicated,” Mr. Douglas said of the innovations in packaging. “It’s being done because there are specific job descriptions for each of the packages.”
He said the introduction of the 1.25-liter bottle at a price point of 99c to $1.09 has allowed Coca-Cola to take 2-liter pricing “up where it should be.”
“(The 1.25-liter price point) works very well when consumers don’t have a lot of pennies, and that big bottle strategy has worked very well for us,” he said. “But it’s early stage because the household penetration of the 1.25-liter bottle is still low, so it takes time to build it.”
Mr. Douglas also cited the initial success of mini cans, which were launched to respond to consumers’ desires for portion control, as an example of packaging innovation that is working.
“The evolution of the U.S. packaging formats reflects a continuous effort to understand what consumers are looking for and then to be able to deploy it across retail formats that themselves are focused on specific occasions,” he said. “And, ultimately, to weave together the execution into an architecture that makes the brand as big and as valuable as possible.”
Asked what the biggest lesson Coca-Cola has learned in its evolution in the U.S. market, Mr. Douglas responded, “That price and running one package all the time and asking consumers to fit their needs into your packaging is the opposite way to go.”
“In the U.S. soft drink business we made that business weaker as an industry for a number of years because we believed that efficiency and price were the best way to build the business,” he explained. “Certainly, we want to be efficient, and we can’t be priced out of whack, but we have far more evidence now that a well-marketed and merchandised soft drink brand will grow sales and profits than an efficiently produced and distributed one, as long as you keep the two in balance.”
