For most of us, the shape of a 2-liter bottle is something we take for granted.For Hendrik Steckhan, head of carbonated soft-drink brands for Coca-Cola North America, the shape is a problem. Coca-Cola should not be in the same 2-liter bottle as every other brand, he said.
“When you think about this, it just doesn’t make sense,” Steckhan said.
Faced with a nagging decline in North American sales, Atlanta-based Coke and its bottlers are turning to packaging as a key way to set their products apart and try to generate fresh appeal.
Consumers will see more sizes and bundles of Coke products at supermarkets and convenience stores. The iconic contour shape also will become even more prominent. A 2-liter contour bottle, already in Birmingham and Chattanooga, is being added to Atlanta this month.
The push for what’s called “package diversity” is significant, and the stakes are high.
Across the industry, U.S. sales of carbonated soft drinks have declined for four straight years, according to figures from Beverage Digest, a New York-based trade publication. PepsiCo, Coke’s chief rival, also is using packaging, including new logos and different package sizes, as part of a strategy to revive soft-drink sales.
Carbonated soft drinks face headwinds that go beyond packaging, said John Sicher, editor and publisher of Beverage Digest. U.S. consumers have been shifting for several years to noncarbonated beverages, such as tea and water.
Deftly done, packaging changes could encourage more people to try carbonated soft drinks or purchase those beverages more often by providing attractive size and price options, Sicher said.
“It’s likely these packaging changes will help,” he said. “Whether they return the category to growth is something we’re not going to know for awhile.”
Beyond the big three
Coke and its bottlers began working on new packaging options about two years ago. The strategy borrows heavily from what Coke has learned internationally, where sales for carbonated soft drinks continue to rise even in mature markets.
For years Coke has relied on a wide range of package sizes overseas. It easily can be found in more than a dozen can or bottle sizes.
The North American market, by contrast, is dominated by three packages: a 2-liter straight-walled bottle, a 12-pack of 12-ounce aluminum cans and a 20-ounce plastic bottle.
Coke executives attribute the difference to a highly competitive U.S. market where Coke and Pepsi have battled for decades.
“There was a point in time when value was defined as more —- more ounces for less [money],” said Ralph Kytan, vice president of Coke’s North American bottling operations.
Coke hopes to rewrite the value equation.
“Package diversity is about matching up the benefits of the package with the needs of the purchaser for the occasion they’re buying for,” Kytan said.
The changes could mean consumers pay more per ounce for soft drinks in a new size. Coke, for example, is testing a twin-pack of 50-ounce bottles (roughly 1.5 liters) that would be priced higher per ounce than the 2-liter.
The packages, though, are not designed to be a math game for consumers, Steckhan said.
Instead, they are designed to make Coke better fit what consumers want, he said.
In a conference room at Coke headquarters, Steckhan walked through a set of packages: a 2-liter contour, twin-pack of 50-ounces, 1-liter, 20-ounce and 16-ounce plastic bottles, and an 8.5-ounce aluminum bottle.
“Each of these has a role to play for a different consumer and different purchase desire,” he said.
At convenience stores, the 20-ounce is the top seller, but its price of more than $1 has hurt sales. A teenager looking for a more affordable option might grab a 16-ounce bottle priced at 99 cents, Steckhan said.
At the grocery store, the 12-pack and 2-liter are the top sellers. But the 50-ounce twin-pack might be more appealing for smaller families, he said. One bottle can be shared for a meal, leaving the other unopened and fresh for the next meal.
Coke also has high hopes for its 2-liter contour, Steckhan said. The original contour glass bottle was created in 1916 to help Coke stand out from the pack.
“At the simplest level, I think the consumer prefers better, special and different over the same,” Steckhan said.
Major system shift
The changes require a shift in how Coke and its bottlers operate. Ahead of national roll-outs, bottlers have tested new products in select cities.
Last summer, Atlanta-based Coca-Cola Enterprises, Coke’s largest bottler, tested the smaller 16- and 14-ounce bottles in Miami and Charlottesville, Va. It went national with the smaller sizes late last year.
CCE hopes to roll out the 2-liter contour bottles across its North American markets over the next 18 to 24 months.
The new packages add to a product list already growing in recent years as the Coke system added new brands, such as Vitaminwater and Fuze. CCE handles more than 400 SKUs, or stock keeping units, representing different drinks and package sizes.
The new packages require some one-time costs to adjust plant bottling lines, said Mark Thomson, vice president of carbonated soft-drink commercialization for CCE North America. They also take up space on CCE delivery trucks and at warehouses, he said.
“But it’s not overly burdensome, particularly when things are working,” Thomson said. “We always find room for the stuff that works.”
CCE has mitigated the impact of the additional sizes by eliminating SKUs in other areas. For example, it’s cut out or reduced the frequency of flavor extensions, such as Coke with lime.
The main shift is in mindset,Thomson said. In the past, Coke and its U.S. bottlers stressed efficiency, focusing on a narrow range of packages, he said. Now, bottlers view packaging as a marketing tool to reach more consumers, Thomson said.
More changes coming
Coke and CCE executives said this is just the beginning.
Coke has looked at an eight-pack of cans but hasn’t decided whether it will be rolled out broadly.
“It’s a journey we’re on, and, frankly, I think we’re early into the journey,” said Kytan, Coke’s VP of bottling operations.
Coke is well aware that competitors are testing and rolling out their own package diversity plans. Coke, though, has at least one significant advantage, said Steckhan, head of North America carbonated soft drinks.
“Anyone today can come up with a differentiated package,” Steckhan said. “What they can’t do is replicate 90 years of history of the contour shape.”
From Page One Source: Coca-Cola North America
Coke is using a range of package sizes and bundles to reach consumers.
2-liter contour: Uses the iconic contour shape. It is being rolled out nationally over the next two years.
50-ounce twin-pack: About 1.5 liters each, this size could be shared by friends and families over a meal.
16-ounce bottle: At 99 cents, it’s an entry point when the 20-ounce may be too big and pricey.
8.5-ounce aluminum bottle: A container offered in restaurants, clubs and upscale hotels.
The big three
U.S. sales for carbonated soft-drinks are heavily weighted toward three package sizes: 2-liter bottles and 12-pack/12-ounce cans at grocery stores, and 20-ounce bottles at convenience stores.
Supermarkets market share
12-pack: 47.4 percent.
2-liter: 24.8 percent.
24-pack: 10.2 percent
es market share
20-ounce: 35.9 percent.
12-pack: 24.5 percent.
2-liter: 23.1 percent.
Source: Beverage Digest