What do you do when your customer starts to shrink, both literally and figuratively?
What do you do when your customer starts to shrink, both literally and figuratively? Historically, soft drinks have made up a signifi-cant portion of American beverage consumption and sales have grown year after year. Today, however, the $81 billion soft drink industry is being challenged by changes in consumers’ attitudes toward both sugar-sweetened and diet drinks. Sales of carbon-ated soft drinks have been in decline since 2004 and, in 2016, sales of bottled water surpassed soft drink sales for the first time. There are at least two reasons for the declining sales of soft drinks, both related to consumers’ moving toward a healthier lifestyle. First, in the U.S. the rates of obesity, diabetes, and other weight-related health issues are on the rise. In 2016, the Centers for Disease Control and Prevention estimated that al-most 40 percent of U.S. adults were obese. And the problem is not limited to adults; with distressing regularity, children are being diagnosed as obese. Although obesity and its related issues are complicated and have many different causes, soft drink manufacturers like Coca-Cola have been forced to bear a large share of the blame.
The association of obesity and soft drinks has become so much of a problem that, in some cities, politicians are propos-ing “soda taxes” to reduce the amount of sugar consumed. Only a small number of local governments have enacted the laws, and one of the biggest, Cook County (Chicago), repealed theirs after only two months. While the direct impact on soda sales has been minimal, the indirect consequence of all the press surrounding these laws is that consumers are being re-minded that soft drinks may not be the healthiest choice. Coca-Cola’s initial response to consumers’ concerns about weight was the introduction of low-calorie soft drinks, including Diet Coke. Debuting in 1982, the no-sugar version of their flag-ship product has been wildly successful and is still the second most popular soda in the U.S. However, Diet Coke has suffered along with the rest of the industry. In an effort to increase their share of a shrinking market, Coca-Cola marketers have introduced a line of exciting new Diet Coke flavors: ginger lime, Feisty Cherry, Zesty Blood Orange, and Twisted Mango. And the new flavors come in a new package: a more slender profile can in silver with a bold center stripe in colors corresponding to the four new flavors. In the early months, the new Diet Coke flavors seemed to be a hit. In the first quarter of sales, the brand saw quarterly volume growth for the first time since 2010. Coca-Cola Chief Executive James Quincey said that the combination of the new flavors, packaging, and marketing was “bold enough and inter-esting enough” to get the attention of some of the lapsed Diet Coke fans. He also noted that among his targets were millenni-als and others who were drinking flavored sparkling water. In addition to changes in consumer attitudes toward sweet-ened soft drinks, many consumers seeking a healthier lifestyle have also begun to question the safety of artificial sweeteners used in diet soft drinks. According to Barry M. Popkin, a pro-fessor of nutrition at the University of North Carolina, this has led to consumers changing from regular to diet soft drinks and finally to other beverages. The decision for many consumers has ultimately been to choose water. Ironically, health and wellness were key to the begin-ning of the Coca-Cola story. In 1886, Dr. John S. Pemberton, a pharmacist, created a flavored syrup that was mixed with carbonated water and sold to customers. The motivation was to create a nonalcoholic alternative to the French Wine Coca, a concoction Dr. Pemberton used to cure his addiction to morphine. Dr. Pemberton promoted his new product as having a variety of health benefits, claiming that it was a cure for head-aches, it relieved exhaustion, and it calmed nerves. This mixture, which would eventually evolve into Coca-Cola, was primarily sold in pharmacies. However, instead of promoting it as a medi-cine, Dr. Pemberton decided to sell it as a fountain drink. Coca-Cola seems to be treating obesity as a real threat to both their financial health and the health of consumers. Every year since 2004, Coca-Cola’s annual report has listed obesity and its health consequences as a threat to company profits. On their website, they note their goal “to be a more helpful and effective partner in efforts to address the serious problem of obesity around the world” and list their role in helping con-sumers by reducing sugar in Coca-Cola product recipes and introducing more low and no-sugar brands. Of course, no one knows how these ongoing concerns by consumers and public health officials alike will affect how Americans feel about soft drinks in the long run. Will soft drinks ever attain the negative status of tobacco products, which many consumers have abandoned? Will Coca-Cola be able to reclaim its former position as market leader or must Coke change its focus to something else? Water, anyone?
Be sure to include a link to the source material you used in compiling your response. Each response should be 1-2 paragraphs with appropriate detail and content.
1. What is the decision facing Coca-Cola?
2. What factors are important in understanding this decision situation?
3. What are the alternatives?
4. What decision(s) do you recommend?