Wednesday, February 29, 2012

Coke opens Citra: Strategic or a shot in the dark?

I must say that I feel a bit nostalgic writing this post. I still remember, it was one my birthdays almost 2 decades ago (yeah I am getting older) when I sipped “Citra”, a new flavored soft drink for the first time. While I don’t recall tasting the clear drink in green bottle too often after that but I was surprised when I heard that Coca-Cola plans to revive Citra after 19 years. This move once again reaffirms the fact that it’s neither easy to create a brand nor easy to kill one especially in FMCG sector.

The aerated beverages industry or the soft drink industry has been witnessing increased activity in the recent past. While Coca-Cola India finally managed to break-even after almost 16 years of entering India in 1993, which “opens happiness” for them but slowing growth especially in the cola category has been a cause of concern.  While the cola majors’ brush with pesticide in 2003, badly affected their sales in India (the detailed case study), but in the recent past, the concerns over the unhealthy nature of colas  have gone global. It has been banned across schools and there has been debate that "beer could be healthier than these soft drinks". But I refuse to be drawn into the latter. 

Even the diet variants of Coke and Pepsi couldn't revive the sales. In my opinion, the diet variants do more harm than good to the classic versions as it’s an acceptance on the part of the company that Coke or for that matter Pepsi is unhealthy. So does the launch or should we say the re-launch of Citra make sense? I think it does or at least it’s worth a try. These are my justification for this launch:

Lime-lemon is the clear winner: The lime-lemon category in India has a healthy growth rate of 16-17% a year, w.r.t. cola at about 11-12% and orange drinks at 8-9%. The success of Sprite and the durability of Limca has shown that Indian taste buds have taken a liking for lime-lemon variety. Both Sprite and Limca feature in the top 5 selling soft drink brands in India whereas Coke is yet to make the cut (Thums Up has a share of roughly 42% of the 4,000 crore pure cola market. Pepsi - 36%, and Coca- under a fifth).  

Indians just not sipping enough: Citra is expected to be priced 20% lower than the other coca-cola brands. Taking a cue from the past, this could prove to be differentiator. After all the “Coke for Rs. 5” did help the cola major revive itself after the pesticide setback. While some may say that the “Rs. 5” campaign eroded the profits substantially but it did revive the sales and the players could raise the price at a later stage. Given the largely under-penetrated Indian market e.g. India's per capita consumption of carbonated drinks is just 11 liters/year compared to China at 34 liters and Mexico at 675 liters in Mexico, market penetration is still the need of the hour.

Citra is just a pilot: Some might say, why spend on launching an old brand; why not execute this market penetration strategy using the established ones like Sprite or Limca? I think lowering the price of an established brand would call for pan-India price reduction which would dent profits in a big way.  Thus, it’s advisable to introduce a cheaper new variant as a pilot. This would also provide market intelligence on the price-sensitivity of the Indian market based on which future strategy can be designed.

While the “Citra” move makes sense to me, I am bit surprised why Pepsico has decided that the new Mirinda flavors will be around only for three months and go off the shelves before peak season of May-June? Readers, any justification for the statement above? May be they have something else up their sleeves.