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Coca-Cola Downsizing?

September 26, 2011 at 10:44 am by Ted Mininni

Americans have been counting calories over the past six years. How do we know? Soda volume has dropped over that time frame. And now that consumers are also pinching pennies, Coca-Cola is acting. Their answer? Smaller packaging options. Less product. So what else is new? How many food and beverage companies are doing the same thing?

A recent Wall Street Journal article explains the rationale: “Coke is importing the strategy from Mexico, where bottling partners began diversifying package sizes more than a decade ago to offer more price options in the wake of the 1994 peso devaluation and economic crisis. In Mexico, the company’s top market by per-capita consumption, Coke is now sold in more than 30 packages, ranging from 6.75 ounces to three liters”.

Here’s the plan: Coke will be rolling out 89-cent 12.5 ounce bottles to complement its new 16 ounce bottles (an alternative to the 20 ounce c-store size). New supermarket eight packs of small 7.5 ounce cans will be re-priced to $2.99 to encourage sales. That’s 20% less than current pricing. It also brings the calorie count below 100.

• Could this move bring back customers who’ve forsaken the sugary cola?
• Could it attract new consumers?

This strategy is being offset by raising prices on larger sized bottles and cans that more affluent consumers will pay. Also: the smaller packages sell for less but consumers pay a premium price per ounce, so they’re quite profitable. 7.5 ounce cans cost 37 cents a pop; the same as the 12 ounce cans.

Pricing will likely shake out this way:

• 16 ounce bottle $1.19
• 20 ounce bottle $1.69
• 1-liter bottle $1.99

Coca-Cola is promoting this strategy more aggressively than PepsiCo, its chief rival and they’re getting results. Beverage Digest reports that Coca-Cola gained 1.1% more of the U.S. soda market while PepsiCo’s share slipped 0.2%.

You can bet that new package sizes and attractive price points will be aggressively marketed. Special price promotions, meal combos and all kinds of deals will be launched to keep the brand and its new package options in front of the consumer.

• Often, downsized packaging leads to consumer perception of getting less product for their money, but in the case of high calorie sodas, could Coke’s strategy actually please consumers and lead to more volume?
• Do you think Coke’s marketing strategy will work? Or do you think soda sales will continue to fall as consumers seek out healthier beverage choices?
• Will you purchase Coke in smaller pack sizes?

I’d love to get your take on the next round in the Cola Wars.

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