Tuesday, November 09, 2010

Big Ole Sodas

I went to the movies this weekend for the first time in months, and when my wife made a snack bar run she asked me what I wanted.  "Get me the smallest size Coke they have," I said.    She returned with a squat, fat stubby cup--the diameter of one of those 64 oz Big Gulps but only half the height.

"THAT's the small?" I asked.

"Yes," she said.

Truthfully, though I wasn't really surprised, since the movie theaters have long been the home of wantonly excessive soft drink volumes, and I've long been chronicling the ever-expanding packaging sizes of soft drinks (see, for example, whether you can even afford Coke machine Coke these days.)

So, much to my amazement, when I went to my local grocery store yesterday, did I notice not one but TWO new soda container sizes on the soft drink aisle: six-packs of 7.5 ounce cans and, perhaps most surprising of all, 1.25 liter bottles.

I can understand the market for the 7.5 oz cans.  There are plenty of people--most of them in the higher end of the age demographic--who like a soft drink now and again but don't feel compelled to suck down more than a single glass worth at a time.  This is, in fact, almost a throwback to the 6 ounce glass bottles of their youth.

But what about that 1.25 liter bottle?  Is this for the same demographic as the 7.5 oz can, only meant to be kept in the fridge so you can have four or so glasses of your favorite Coca-Cola product over the course of a few days?  Or, is it meant as a single serve for our overcaffeinated, over sugared, ever-growing (and I mean that literally) younger consumer set?  Is this a sign that portion sanity might be returning to the soft drink market, or is it the final proof that the prediction I made about a decade ago--that single serve soft drink containers would eventually grow so large that people would need special contraptions with wheels and handles just to lug them around--is about to come to pass?

There is surprisingly little in the press or on the InterWebs about this new turn of soft drink development, but experimenting with packaging sizes is not a new phenomenon.  The 3-liter bottle was a big thing for a while back in the 1990s, but those have long since faded out, probably because their clumsy bulk was hard to fit in the fridge and difficult to pour when full, outweighing the cost break you might get from the extra volume.

Back in 2004, soft drink bottlers experimented with alternate bottle sizes again.  That year, Beverage Digest cited John Alm, the then-President and CEO of mega-bottler Coca-Cola Enterprises, saying that new sizes--1.5 Liter, 1.25 Liter, and 1.75 Liter--will "reduce dependence on 2-Liter," which one can only take to mean reduce Coke's dependence on getting so much of their revenue from 2-Liter sales.   (Side note: the Coca-Cola Company owns the brand, the formula, and the marketing.  Coca-Cola Enterprises is a separate company that performs the actual bottling and distribution.  This got even more confusing this year when Coca-Cola acquired the North American operations of Coca-Cola Enterprises but not all of the company.)

And why would reducing "dependence on 2-Liter" be important?  For starters, in the New York Metro market Coke and Pepsi were duking it out head to head on store shelves in a price war so fierce they were often losing money on sales.  The plan was to raise margins by introducing the 1.5 liter bottle at a price that was higher per-ounce but conspicuously lower per bottle than Pepsi's 2-Liter, and then to raise the price of the Coke 2-liter, so that there was effectively a lower priced and a higher priced Coke offering bracketing Pepsi's two liter.

The plan backfired out of the gate.  Many stores dropped the 2-liter Cokes altogether, and some didn't even drop the price on the new 1.5-liter bottles, causing howls of protests from shoppers who thought they were getting screwed.   The outrage was exacerbated by the fact that the 1.5-liter bottles were the same height as the 2 liters and had contours that made them look similar in width to their larger cousins.  Coke's share of the Metro New York soft drink market fell from 35.6% in January to 30.1% in June, while Pepsi's rose from 34.1% to 38.2%.  (See details here and here.)

Leave it to Papa Coke to come to the rescue.  The Coca-Cola Company's 2004 Annual Report noted that "the Company worked closely with Coca-Cola Enterprises Inc. to reverse early unit case volume losses in the weeks after the May introduction of a new 1.5-liter package in the New York City area. By working with customers, re-examining price and package elasticity, and overhauling in-store merchandising, the Coca-Cola system regained unit case volume share lead on a full-year basis in the New York City area by the end of 2004."  They did so by encouraging store managers to return the 2 liters to the shelves and put them in prominent positions where shoppers could easily see and compare both sizes and prices.  By the end of the year their market share was back up, and profits were, too.

Although the 1.5 Liter Coke bottle is a very common size overseas, it hasn't been seen in the United States very much outside of New York City.  So what's up with the new sizes?  Is this a fresh attempt on the Coca-Cola company to push up the price-per ounce on us?

Not really, according to this dispatch from Joe Guy Collier at the Atlanta Journal-Constitution.  This time around, apparently, it's all about "packaging diversity", an attempt on the part of Coke to boost their sagging North American sales.  Novel sizes and bundles of Coca-Cola products, the theory goes, will stimulate interest and spur purchases.   In addition to the two new sizes I spotted in my grocery store, recent packaging "innovations" include twin-packs of 50 ounce (1.5 liter) bottles and an 8.5 ounce aluminum bottle similar to those things Budweiser came out with lately.

And, hey, it just might work.  It caught my attention enough to snap some phone camera pics and write a blog post about it.

In the end, though, it really just comes down to getting more cents per ounce for the product.  "There was a point in time when value was defined as more — more ounces for less (money)," the Journal-Constitution quotes Ralph Kytan, VP of Coke's North American bottling operations, as saying.  "Package diversity is about matching up the benefits of the package with the needs of the purchaser for the occasion they're buying for."  Meaning, in other words, figuring out new ways to get them to pay more per ounce than they would for a boring old two-liter.

And does it work?  In a very unscientific survey, I found the following on the shelf tags at my supermarket:

Two liter: 2.6 cents per oz.
1.25 liter: 2.9 cents per oz. (and on sale, with a regular price equating to 3.5 cents per oz.)
12-pack of 12-oz. cans: 4.3 cents per oz.
6-pack of half-liter bottles: 4.5 cents per oz.
8-pack of 12 oz. bottles: 5.2 cents per oz.
8-pack of 7.5 oz cans: 7.2 cents per oz.

I predict the fairly rapid demise of the 1.25 liter bottle because, it seems to me, you buy a can or bottle of soda for either single-serving consumption, meaning you are going to drink the contents of the container all at one time without resealing it, or for multi-serving consumption, meaning you are either serving a bunch of people from a single bottle or drinking it all yourself over the course of a few hours before it can go flat, the way my wife does, ingesting Diet Coke continually throughout the day almost as if it were connected to an IV drip.

If you're buying single-serve, I would speculate, you'll choose the container most suited to your typical serving size.  If buying  multiserves, you'll want the one that gives the lowest per ounce cost without becoming too large to carry.  The 1.25 liter bottle doesn't seem to serve either purpose.

My wife, by the way, orders the extra large fountain drink at the movies, and she was delighted recently when the snack bar started allowing free refills on the largest size cups.  As for me,  I threw my small cup away still half full and still had a bad case of too-much-damn-sugar stomach the rest of the afternoon.  That 8 pack of 7.5 oz. cans is perfect for me.  Just big enough to wash down my Geritol.

And it might very well last a full year.


n.lea. said...

wow.you really did your research. found your blog very interesting! Thanks for sharing

Frangipan said...

They do this in coffee shops too, more than you could ever drink!

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