I recently caught a tantalizing tidbit in a food industry newsletter and followed it to its source. An article titled “An herbal drink from Coca Cola?” from the Austin American-Statesman, states that Coca Cola is up to something big. Really big.
“For months, the Atlanta-based drinks giant has been working quietly to perfect prototype beverages using Chinese herbal cures. Analysts and executives suggest the project could be as important to the company’s future asits original formula was to its past.”
How cool is that? If this seems somewhat far-fetched, let’s remember that the original Coke formula is a blend of South American coca leaves and African kola nuts (the caffeine source), as the article aptly points out. Given the attention functional foods and beverages are getting these days, and their high growth potential, I think Coke is onto something here.
Let’s also remember that collaborating with the Chinese when it comes to herbs, is also a great idea. Chinese herbal medicine has been around for thousands of years, so the Chinese are a font of information. Even though this seems to be a top secret project, a short news release did apparently state that Coke and the China Academy of Chinese Medical Sciences had opened “a research center in Beijing last October.”
A few tantalizing tidbits have come out here and there. This one caught my eye: “Access Asia, a Shanghai-based market research firm, said in a January report that Coke’s aim could be nothing less than to create ‘the new product for the new millennium’.”
Could it be that a new brand of soft drink is about to be born? One sans sugar? One with healthy herbal ingredients? Could this start a revolution in the beverage industry as Coca Cola did over 100 years ago?
If it does, Coca Cola has a unique opportunity, it seems to me. The company blended exotic ingredients in the past to create a brand new category. It could conceivably do so again–and do it while being in touch with a new era, new consumers and new ideas. . .while still being true to its legacy. Gotta love that.
The worldwide market would be huge right out of the chute for such a new product. North America, Europe, Asia. . .all moving toward functionals in a big way. . . The market is primed and ready. If you ask me, success for such a drink; or drinks (more than one formula may be in the offing) will all boil down to a few factors, as they always do with foods or beverages:
* Taste and aftertaste profiles
* Mouth feel
* Market positioning
* Major features and selling points
* Healthy herbs explained without making undue claims–a major sticking point with FDA
* Packaging
Questions:
* What do you think of Coke’s potential new drink(s)?
* Would you be willing to try a brand new beverage product if Coca Cola was behind it?
* Or would you be reticent, preferring to buy bona fide healthy beverages associated as the mainstay of other brands instead?
I’d love to hear from you.
The success of an herbal Coke produced drink will hinder on Coke’s ability to see past themselves. The Coke brand stands for good tasting bad-for-you in a bottle. Even Diet Coke Plus, in my limited experience, is little more than window dressing.
If Coke is going to go a new route, delivering truly good-for-you drinks, they will need to determine how this postisions the Coke brand. Launching a “and this one isn’t artificial, nor will it kill you teath” product line would damage their existing market.
The concept is a strong one, and the market it ready. But Coke has to be primed and ready to deliver in manner that will boost (and possibly reposition) the Coke brand without damaging their flagship products.
I believe this is a very specific push by CC further into the Chinese market. per capita consumption in China would have to grow more then 10 fold to catch up with consumption in North America. If you marry that with China’s population you have a HUGGGE (biggest to date) opportunity.
Outside of Asia, I believe it will be quick/nimble new competitors who will beat Coke to the market with their herbal drinks. Ultimately, Coke will end up having to spend billions to buy them out. This is just the nature of how mature companies work.
Many people here are assuming this will be Coca-Cola branded. In my view, that has so many obvious problems that it is fairly unlikely.
After all, they didn’t name Dasani “CokeWater”.
I agree with Andrew: this looks like a specific effort to gain a foothold in the Chinese market. If it can sell globally, all the better — but Asia-Pacific alone is more than large enough for this to have a major payout.
The major risk is that Coke, as a big company, will be drawn to the middle of the market: a product that’s neither sweet enough to be a successful refreshment nor herbal enough to be a successful “natural” product.
I also wonder about cost of goods — herbal drinks may be more expensive to produce. My guess is that Coke’s model relies heavily on low COGS and high profit.
Will management accept lower contribution from this product line, or will it demand Coke-like contribution?
“The concept is a strong one, and the market it ready. But Coke has to be primed and ready to deliver in manner that will boost (and possibly reposition) the Coke brand without damaging their flagship products.”
Exactly, Jon. Let’s remember that when Coca Cola positioned its flagship product 100 years ago, no one gave a thought to the formula and whether it was healthy or not. The soft drink was new and refreshing. Period.
Fast forwarding to today, we now live in a new era, don’t we? Since this is so hush-hush, we have no idea how the new Chinese herbal Coke is going to be formulated. I have a feeling the company is doing considerable work on that front, as well as testing and tasting. The company is a formidable marketer, so I wouldn’t bet against them in this venture. I confess I’m intrigued by this and can’t wait until it comes out to write about it again.
Thanks for sharing your thoughts with us, Jon. I appreciate it.
I agree and disagree with your statements, Andrew. First, I agree that China is a highly attractive market for Coke and every other Western consumer product company. A new drink formulated with Chinese herbs has huge potential across Asia. However, Europe is a mature market for herbal products, and the U.S. itself is seeing huge growth in functional foods and beverages.
Second, I don’t agree that smaller companies are likely to steal Coke’s thunder on this. By their nature, smaller companies are more nimble in many cases, but they lack some major advantages Coca Cola has. Namely, sophisticated marketing capabilities, huge advertising budgets and supply chain/distribution. All of those assets are extremely important and small companies simply don’t have them.
To you point about successful product entries from smaller companies, Coke already does buy them out if they see great potential and strong sales indicators. I wrote a post earlier this year about Coca Cola’s acquistion of Honest Tea, for example.
Good stuff, Andrew. Thank you for weighing in.
You raise some interesting points, Tom. Coca Cola may very well give this herbal drink a new brand name and identity to create a new line. They can then add new skus as they go along. While I agree this drink concept has huge potential in Asia, I also think there are significant numbers of consumers in other parts of the world who love to jump on new, esoteric products as trend setters, you know? With mature consumer markets in the U.S. and Europe, that are primed for more functional beverages, it seems a natural fit to me.
Raw material costs are another, very important issue. However, there’s a reason Western companies like to source ingredients and labor abroad, isn’t there? It’s cheaper. While some esoteric herbs may be more costly, I suspect that many are fairly modest in price. Also, Coca Cola knows all about sourcing, supply chain and distribution efficiencies. Many CPG companies give up some profit dollars on cost of goods and make it up in those efficiencies. Let’s remember that.
Thanks for adding some strong, well-articulated points to my post, Tom. I appreciate it.
Ted,
I seldom consume soft drinks. However, I do eat and drink healthful organic products. If the Coke brand is attached to it, I likely would pass. Healthful and Coke just don’t resonate with me.
Lewis,
Many would agree with your assessment. I believe that’s what Jon said in his comment. Tom then made the observation that it’s likely Coke will develop a separate brand name and identity for the new product. That might help where a large number of consumers are concerned.
I’m not sure this new drink is going to be a “soft drink”, featuring the large amount of sugar and carbonation of its Coke cousin. Something tells me that this may very well be entirely different. We’ll have to wait and see.
Thanks for weighing in, Lewis. I always appreciate your observations.
Hi Ted, conjecture is fun isn’t it? CKE is smart in trying to size up a new drink for the Asian market. There’s a huge, tectonic shift going on in China where via massive 10%+ annual growth, a 300 million plus middle class is starting to emerge and even some of the more rural areas are integrating into the Chinese economy. Translation: huge, huge market.
Agreed, Paul. It makes sense for Coke to work right within China with Chinese herbalists to create a drink or group of drink products that will appeal to Asians. I wouldn’t be surprised to find slightly modified formulas though, if not the same one that rolls out in Asia, to appear in Europe and the Americas, as well. China’s emerging middle class does make it a huge, huge market. However, I do not believe that Coke is forgetting about the mature markets of the West in this venture, either. We’ll have to wait and see, as I’ve said before.
Thanks for adding your comments, Paul. I appreciate it.
I surprised companies like Coke haven’t delved into the functional confections market more. For a brand that is essentially built on Caffeine, you would think they’d come out with something like FOOSH Energy Mints, where you can get a solid dose of caffeine and B Vitamins in mint form, insted of having to drink a Coke or energy drink. I find these carbanation from those drinks just bloats me, but I still want the caffeine.
JT,
Thanks for adding your comments to my post. Coke does have high caffeine energy drinks branded “Burn” and “Full Throttle Blue Demon” and sub-branded Coca Cola. The latter appeals to young Hispanic males in particular. I’m not sure how successful these have been overall for Coke.
But a functional drink blended with Chinese herbs is a new departure for the company. It seems that the company will be putting a big push behind it with its marketing and advertising muscle. I’m curious, and eager, to see how this is going to roll out. Would you be tempted to try it when it does, JT?
I agree with Lewis Green’s comment. A healthy product launched under the CocaCola brand name sounds like an oxymoron to me.
The soft drink was new and refreshing.
And contained caffeine and–cocaine, if the rumors are true! In this sense (even if apocryphal), the new herbal beverage would be, dare I say, a classic Coke?
I suspect many consumers will agree with you and Lewis on this issue, Janine. However, wouldn’t it be interesting if Coca Cola decided to give the new beverage a new brand name and positioning? They might, you know. The company also owns other beverage brands from companies that it bought out along the way, don’t forget, so Coke is used to managing a portfolio of brands under its corporate umbrella.
Right, Marlena. Coca leaves were used in the original Coca Cola formula in the 1890’s. A new herbal beverage might very well become another Coke classic in time, or it may fall below expectations. Time will tell. Odds are good for such a beverage right now, though. The marketplace has steadily accepted herbal beverages and while Coke is looking at the huge potential in Asia, the markets in Europe and the Americas are also prime territories for new beverages.
Thank you for weighing in, Janine and Marlena. I appreciate your comments.
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