Recently, we shared thoughts from a couple of battle-tested leaders at The Garage Group on what it takes in today’s uncertain, ever-changing environment to keep brand portfolios relevant and growing. Through that lens, we’re taking a look at Coca-Cola, and shining a light on key actionable takeaways for brands across categories from the beverage leader, which prioritized its core brands and retired 50% of its portfolio in the past year.
“Brands naturally go through the process of SKU rationalization and
portfolio optimization. But, COVID-19 has forced companies to focus
on their core.” – Erin Faulk, Senior Vice President of Lean Growth
Prior to the onset of the global pandemic, the beverage landscape had already been changing. Consumers began to desire functional benefits from beverages and food. Another shift was the blurring lines between alcoholic and non-alcoholic, with hard drinks getting softer and soft drinks getting harder. Topo Chico Hard Seltzer is an example of a recent launch which offers 2g sugar, fewer than 100 calories, and relatively low (4.7%) alcohol content to meet growing consumer needs around health.
The pandemic amplified these shifts and added a dimension: away-from-home occasions were drastically curtailed and even eliminated in the name of isolation to curb the spread of the virus. For Coke, venue sales historically represented half of their overall sales. With these dynamics in play, the beverage giant decided to focus on its core brands – those which can be scaled to drive long term growth and profitability – and say goodbye to smaller brands.
Takeaways from Coca-Cola’s deprioritization of small brands include:
Coca-Cola retired regional offerings and underperforming brands that contributed little to the bottom line. In doing so, the company creates margin for new ways of thinking about consumer needs and Jobs To Be Done. Topo Chico meets the needs of consumers who want to enjoy beverages that relax and refresh without sacrificing taste and compromising their personal health goals.
“We love our brands, make no mistake; we want to make sure
that we create space for new.”
– Cath Coetzer, head of Coca-Cola’s innovation and marketing operations
Coke recognized that even brands with lackluster performance have their loyal followers. Retro reduced-calorie label TaB had remained in the Coca-Cola portfolio for just that reason. Even though it’s annual sales recently represented 0.1% of the $22 billion in global sales of diet cola, TaB consumers were vocal and persistent in asking that it be kept on shelves. Coke acknowledged that they knew there would be TaB lovers who would be “heartbroken,” and issued a verbal invitation to them to come along on a new beverage journey.
“I say to them: ‘Come on the journey with us to what’s coming next in the reduced-calorie segment.’” – Cath Coetzer
A reason for dropping the juice and smoothie Odwalla brand was that it simply wasn’t cost effective to continue to produce and distribute; and Coke cited changing consumer preferences as the driver. Retiring Odwalla and other low profit brands creates margin to invest in more resources in the solid performers consumers flock to.
“It is more important than ever to evaluate where we can
improve efficiencies in our business and operations.”
– John Hackett, president of Coke’s Minute Maid business unit
How is your brand currently evaluating its portfolio? In what ways might multiple consumer touch points help you prioritize SKUs and propel innovation?
If you need a partner to help you rethink your brand portfolio and get close to consumers, get in touch with The Garage Group. We help BigCo leaders tackle strategy and innovation challenges via startup-inspired approaches. Get in touch with us >>>
