Nostalgia vs. Fashion

Positioning, not taste, is what separates the contenders in the Cola Wars.

Like many people I tell myself that I don’t like the taste of Pepsi Cola, so I buy Coke whenever the need to drink a carbonated cola drink arises. I’m not alone in having a cola preference either and I know a lot of people who prefer the taste of one over the other. Whilst the consumer in me is fairly convinced that it is purely taste that stops me from choosing Pepsi, I now see it more as a “limiting belief” just something I made up to justify my actions. As an enthusiast for great marketing, I know really that it isn’t just the taste; in fact, it may not be the taste at all, that makes me prefer Coke and fundamentally what makes it such an appealing and successful brand.

There is no brand out there that can rival Coke and it has just been named the world’s top brand for the thirteenth time by those in the know. But why has it been and is it still so successful? I have my own theory about that: it’s all about its positioning. If I am right then why are we all so convinced it’s the taste that makes all the difference? I think we just feel the need to justify our buying choices in tangible terms, so we fall back on taste when it comes to Colas that apparently have so little else to differentiate them: appearances though can be deceptive.

PepsiCo has just announced its third quarter results and the weak headline is that it gained share, when measured by volume and dollars spent, in soda brands, in North America. Wow, that is some heavily conditioned claim, isn’t it? Is that really the best it could do? Well, yes, it seems it is. That’s the only good news though. Earnings declined by 4.9%, although underlying sales growth existed in several markets but it was swamped by other effects. Even in North America the good news on soda brand sales was more than wiped out by declines in non-carbonated drinks. On top of that Coca Cola has also just released its results and claims it grew share on a volume basis too, but admits it was flat on a dollar basis. Claim and counter claim around a pretty rock solid soda market in the homeland it seems to me.

Coke’s brands (which incredibly run to 3500) dominate something like 41.9% of the US carbonated drinks market and Pepsi has a 29.9% share; in Colas, Coke has 17% and Pepsi 9.9%. Pepsi has been trying to regain lost ground on Coke for some time now; of course it has to try, but I don’t think it will achieve too much, because both brands are locked into strong and reliable market positions that would be foolish to mess with but which, in my humble opinion, will always favour Coke.

Investing Daily’s Jim Fink says that Coke’s success is all about the best taste combined with the best global distribution network. I don’t think that is the full story. To some extent I think taste is a secondary issue, but I know it is hard to discount if you, like me, like the taste of Coke. Coke is positioned on wholesomeness and nostalgia for childhood. Its advertising is “family friendly” and “cute” and it focuses on the drink. In complete contrast, Pepsi has tended to focus on the person drinking it and has used stars to personify the brand and it is positioned around the new and what is fashionable. There is no contest for me between the two positions; Coke’s “nostalgia” will always be stronger because it is more profound, it runs deeper and has a broader social scope and appeal than “fashion” ever will.

Why does this matter to you? Well, if you accept my argument, Coke and Pepsi’s relative market strength and success were decided a long time ago when their respective marketing and positioning strategies were first put in place. This is the most important aspect of any marketing strategy and only poorly understood by most people. Getting your positioning right, up- front, provides the key foundation to long term wealth creation. Just how well is your brand positioned and what are you going to do about it?

Mark

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