New product explosion looms in beverage aisles.

Beverage-Aisle-Feature

Changes in the approach to brand marketing at the major soft drink companies could lead to a proliferation of new products on retail shelves that are backed by these giants, said Tom Pirko, president of Bevmark Consulting.

While the major soft drink companies have historically invested heavily in promoting and preserving the reputation of their core brands, they now appear ready to embrace a new way of thinking in which experimental new brands and products could be launched with more frequency, he said.

“The soft drink industry for a very long time was so reliant on managing consumer awareness and brand, but over the last five years that has been breaking down,” he said. “Now they are willing to throw things out there, and see what sticks.”

As consumers increasingly obtain information about new products through nontraditional channels like social media, and pressures continue to build against marketing traditional soft drinks to children, the major soft drink companies can no longer “keep it simple” by focusing on core brands, Pirko explained.

“I think you are going to see this greater proliferation of product at retail than you would have seen before, especially among the two biggest soft drink companies.”

Some new products could be line extensions, he noted, but others could be “products that span in different directions,” with experimental new flavors and ingredients, and new varieties of functionality.

“They are no longer going to be conservative about this,” Pirko said, noting that for the first time, some soft drink companies are diverting money away from their core brand to promote these new brands.

In fact, during a recent conference call with investors, Indra Nooyi, CEO of PepsiCo, said the industry was going through a “secular change” that the company will address with technology. The company is planning to debut several new beverage products with natural sweeteners in North America this year.

While many new beverage products from these companies may be developed in-house, others could be acquired from among the multitude of smaller operators producing new beverages with attributes such as healthfulness and natural ingredients.

Atlanta-based Coca-Cola North America in fact has established a division called Venture and Emerging Brands (VEB), which seeks out “high-potential growth brands” for investment.

The proliferation of beverage products “is good for retailers,” Pirko noted, because it gives them more product diversity on the shelf, “allows them to plug into hot new trends, and gives them insights into how young consumers behave, as opposed to their parents and grandparents.”

The soft drink companies themselves will also increasingly take to the internet and social media to promote these brands directly to consumers, he said.

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