Why Lucozade cola is not the real thing
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Lucozade has launched a cola and brand owner GSK has asked its retailers to stock the new Lucozade Energy Cola “next to the Coke selection where possible”. According to Lucozade Energy’s brand manager Matt McKie: “Lucozade is becoming renowned for launching category changing new product development, and Lucozade Energy Cola is set to strengthen this reputation”.
There are very few points of absolute certainty in the nebulous world of marketing. But one of them is that Lucozade is never going to have any meaningful impact on the cola category. That will be a double blow for GSK. First, because the time and money invested in it will not produce any substantial return. Second, because it’s subsequent failure will undermine, rather than strengthen, GSK’s FMCG credentials.
Failure will prove particularly troubling for GSK because it has just completed a much trumpeted strategic consolidation of its consumer healthcare and nutritional health divisions to create the world’s first “fast moving consumer healthcare” company. What better way to demonstrate the new group’s synergy than by launching a hybrid line extension combining the consumer attraction of cola and the health credentials of Lucozade?
But what looks good on paper doesn’t look so good in the aisles. GSK has fallen into one of the oldest marketing pitfalls: launching a cola.
GSK’s new product is predicated on four strategic observations. First, the company has a track record of creating genuinely successful new lines - Lucozade Energy Blackcurrant was a genuine sales triumph for example. Second, Lucozade is a big brand with £120m in annual sales and ever deeper pockets. Third, the cola category is the biggest single drinks category in the UK worth £3bn annually and hugely attractive as a target category. And fourth - GSK has probably produced a cola that is testing extremely well, with a large proportion of consumers preferring it in taste tests over the two traditional cola giants.
GSK has fallen into one of the oldest marketing pitfalls: launching a cola
We’re big. We’re successful. We believe we have a superior cola product. And we think we can grab a big share of a very big category. It looks like a recipe for success, so why will the results be so poisonous?
There is a reason that Coke and Pepsi own 90% of British cola sales between them. But it’s certainly not related to product performance. There have been hundreds of blind cola taste tests over the years, and almost all have been united by two fundamentally crucial results: most consumers cannot tell the taste of their favourite cola from the rest and, usually, Coke and Pepsi finish well down the league table of preferred colas.
Yet despite this, both Pepsi and Coke continue to dominate. That’s because they hold the ace card in the cola category - brand equity. Both have long heritage, enormous brand awareness and imperious brand associations. Combine that with marketing expertise and very big global budgets and you begin to see why they will retain their share and why Lucozade has no chance of winning any of it.
Study the long history of cola and you’ll see the same ultimately flat result. In 1993, Virgin and Canadian soft drinks manufacturer Cott claimed, quite correctly, that they could produce several colas that tested better than either Coke or Pepsi. Emboldened by the same four factors that now drive GSK, Virgin launched its Cola in 1994 to much Branson-fuelled fanfare. After encouraging launch sales and a target of 10% share by year end, the brand gradually faded to a cameo role on Virgin’s various vehicles.
More recently, Red Bull fell for the same four factors and launched Red Bull Cola from the top of a skyscraper in 2008. Once again the brand had to admit defeat two years later.
It’s the same story north of the border where AG Barr enjoys legendary success in its domestic Scottish market with its Irn Bru brand - the only beverage in Europe to outsell Coke can for can. But when the Scots manufacturer attempted to take on Coke, its Barr Cola fell flat.
Even our usually invulnerable private labels have struggled with cola. Both Tesco and Sainsbury’s have store brand colas, but both take less than 25% share in store and do so at a 50% discount from their branded rivals. British retailers expect these two figures, but traditionally the other way round: their main private label lines usually enjoy 50% of the category share at a 25% price discount from the national brand leaders.
You could even argue that the big two cola players have struggled to innovate their own category with new line extensions. Pepsi Raw fizzled to nothing in less than three years, and Coca-Cola famously screwed up with its better-tasting but brand-defying New Coke launch in 1985. More recently, it has failed to build UK sales of Coke Zero beyond a miserly 3%.
The cola category appears closed to even the incumbent brands that dominate it. So what hope Lucozade? None.
On the brighter side - at least Lucozade is a brand built on recuperation.
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Readers' comments (14)
Camille Medina | Thu, 3 Nov 2011 4:59 pm
In his latest article on GSK’s Lucozade new cola flavour Mark Ritson wrote:
“Both [Coke and Pepsi] have long heritage, enormous brand awareness and imperious brand associations”. I am quite surprised to find myself actually having to write (in order to remind whoever might have forgotten) that heritage is built over time and that the same goes for awareness and brand associations. Back to the days when Coke and Pepsi had only just started, who knew they were going to grow so big?
Then Mr. Ritson carries on:
“Combine that with marketing expertise and very big global budgets and you begin to see why they will retain their share and why Lucozade has no chance of winning any of it.”
What if it isn’t Lucozade cola’s primary goal to compete with Pepsi and Coke? Ideally yes, I am pretty sure that GSK would be very happy to compete directly with the other colas and the fact that “brand owner GSK has asked its retailers to stock the new Lucozade Energy Cola “next to the Coke selection where possible”” shows it. But think a bit further: who drinks Lucozade and why? I don’t think that you would drink Lucozade for the same reasons as you would drink say Coke or Pepsi. Lucozade, let’s remind it, is an energy drink. Coke and Pepsi aren’t. Given this, if Lucozade is competing directly with another brand, I think it would rather be Red Bull for example. It is true that we live in a world where brands compete fiercely with each other, try to get their neighbours’ market share and to grow big with the ultimate goal of becoming the leader in their category. However, where are the consumers in this battle? I think that Mark Ritson forgot to consider the fact that this new cola flavour gives consumers more choice. Why couldn’t a consumer buy Lucozade cola when he or she needs to keep going or feels sick, and the next day buy a Coke or Pepsi to drink with his or her friends? What if you don’t like any of the other Lucozade flavours? Such things happen.
I can’t predict how the new Lucozade flavour will do but I am sure of one thing: launching a new flavour is not a bad thing in itself. To me, it is rather about thinking about consumers’ tastes; it is about empowering consumers as again, it gives us the choice.
At the end of the day, if GSK were to succeed making themselves a name among the ‘big guys’, then good for them and if they don’t well, that’s too bad. Why this need for being so harsh Mr. Ritson? If you never try you will never achieve anything, so why not give Lucozade a chance?
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Anonymous | Fri, 4 Nov 2011 12:40 pm
Interesting, and yes they have to be brave to try and get that market.
I did actually come across the Lucozade cola a couple of days ago, as I really needed an energy boost. I immediately was put off as I do like the taste of Coke Zero, and wasn't sure what Lucozade's cola would taste like. But I didn't have a punt, because I wasn't sure if it had the same energy kick as normal Lucozade.
So it really fell through the cracks of the two, for me.
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James Larter | Fri, 4 Nov 2011 12:58 pm
I just saw this in a Tesco and purchased it as I had read this article earlier in the week. I have to say, it's certainly not for me. Far too much sugar. If it was a cola flavoured energy drink I think it would be different but it's not so it's sending me confused messages. Is it cola or is it Lucozade?
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Anonymous | Fri, 4 Nov 2011 2:22 pm
Interesting... the last similar launch that Mark Ritson called 'A Clunker' was Stella Cidre (10th Feb) 'It's a beer brand not a cider'... So far so good for them.
That said I think his judgement on this one is probably closer to the mark...
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Mark Ritson | Fri, 4 Nov 2011 3:51 pm
Er... yes.
Thanks Anonymous for "pulling me up" on Stella Cidre article.
My exact prediction was it would sell initially thanks to a big launch, on premise distribution power and lots of brand killing / margin shredding promotions: (8 bottles for £9 at Tesco for example)
But in the long term I pointed out that:
1) Its volumes will fade
and more importantly
2) Its presence will undermine the brand equity of Stella Artois in the lager category and this will result, ultimately, in more being lost than gained over the long term.
If you are going to critique my columns, best understand them (and brand management) before you get stuck in.
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liam | Mon, 7 Nov 2011 1:18 am
Cidre will fail ultimately and so will this. Coca cola and Pepsi own this category, to attempt this is folly. Im sure it will act as a nice case study.
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Jack Stalker | Mon, 7 Nov 2011 9:42 am
"GSK has fallen into one of the oldest marketing pitfalls: launching a cola."
An important point to consider here is that Lucozade are launching a new flavour rather than a whole new cola brand like Virgin and Barrs did.
The sports and energy sector is growing YOY in total soft drinks market; it is also a premium sector, with consumers paying on average £1.00 a litre for sports drinks and £1.34 a litre for energy drinks, compared to the cola sector at £0.67 per litre.
You could argue that GSK are competing with the cola sector but selling their product at almost double the price per RTDL in the sports and energy category.
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Bella Katz | Tue, 8 Nov 2011 12:07 pm
Also Cola is so far down the other end of the sports and fitness spectrum, that I could see it taking away from the healthy(ish) brand positioning Lucozade has built over many years.
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Bella Ikpasaja | Tue, 8 Nov 2011 2:38 pm
I agree entirely with Mark Ritson.
Lucozade's move into Cola is not a credible one, particularly as the brand has a sports/energy based positioning. It seems to be trying to straddle 'health' and 'fizzy-pop' and naively trying to take market share from the established energy drinks category. Sadly badly.
To the Lucozade brand team, I would say.. focus on what your brand is best at, build on it, adopt technologies that strengthen the Lucozade brand - maybe even through nano-tech.
Lead your category. Innovate, instead of trying to follow others.
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Core | Sun, 13 Nov 2011 7:39 pm
You skinny kids clearly do not spend much time in the gym. Coca Cola is a well known cheap energy drink, it does have a bad reputation as being unhealthy but its actually a lot healthier than say monster or rockstar.
Lucozade Cola tastes great and is selling like crazy from our gym vending machine.
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