Coca Wars

Press, 24 July 1987, Page 17

Coca Wars

GEOFF MEIN snaps the tab off the coming New Zealand cola wars and gets a taste of the military parlance being used by Coke and Pepsi as they square off:

Nearly 50 years have passed since Winston Churchill took a cigar out of his mouth long enough to make his famous wartime rallying cry in the House of Commons:

“... we shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air, we shall defend our island, whatever the cost may be; we shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills — we shall never surrender ...” The British Prime Minister, speaking after the Battle of Dunkirk in 1940, probably realised that such impassioned tones would be dutifully recorded for posterity. But he could not have predicted that parts of his speech would be used as a tactical weapon in a bloodless marketing battle to be fought half a century later on a group of islands in the South Pacific.

Pepsi-Cola, the long-time international rival of Coca-Cola, is preparing to fire the opening salvos in what it says is the last theatre in the Western World to enjoy the cola wars — New Zealand.

Campaign lines from next month

Cola drinkers can expect the campaigns of the respective combatants to begin in earnest next month.

The calm before the promised storm is already showing signs of breaking, as both sides try to woo the attention and support of the country’s media.

In the pre-battle war of words, Pepsi is challenging the "tired giant” to a fight “on the beaches” this summer. CocaCola’s response has been to play down the threat from its archrival, the “impersonator.”

Coca-Cola’s New Zealand manager, Bill Hodgetts, predicts Pepsi’s thrust will generate curiosity, but not sales of what he considers “a typical Number two brand.”

“Don’t be surprised if Pepsi is a short-term venture. It has happened elsewhere,” he says. Pepsi’s Australasian manager, David Head, says he has a deep respect for Coca-Cola’s organisation.

“But they will be deeply shaken if they think we will be here only for a short haul. They seem to think they can come out with a fly swat and get rid of us by Christmas.”

On one point both men agree: it will be the biggest consumer product confrontation New Zealand has ever seen.

Pepsi-Cola Bottlers New Zealand, Ltd, a subsidiary of Dominion Breweries, has been planning its strategy since announcing in May last year that it had secured the Pepsi franchise. In the first six months of its New Zealand campaign, the company plans to spend more on advertising than Coca-Cola spent in the three years prior to the franchise announcement.

David Head says Coca-Cola, which has enjoyed a healthy monopoly in the New Zealand soft drink market, has been “pretty arrogant” and has upset a lot of people in the trade. He believes the Pepsi bid will force Coca-Cola to clean up its act and become more competitive.

Coca-Cola says it is anxious that the cola wars, which continues to range in the United States, will not come to New Zealand.

Promotion

by superstars

The company hopes its image will reflect the confidence and superiority it feels over the newcomer. According to the company’s hierarchy, "Coke is it” and any challengers are welcome.

Pepsi’s bid for a share of the New Zealand cola market will be spearheaded by a battalion of superstars from the stage and screen, all of whom have been paid generously to extol the virtues of the soft drink. Michael Jackson was paid close to $lO million for two commercials in 1983. With that sort of money up for grabs, it is not surprising that several other leading personalities have beaten a path to Pepsi’s door. The company’s “new generation” image will be brought to New Zealand television screens by Jackson, David Bowie, Tina Turner, Miami Sound Machine and Michael J. Fox, of “Family Ties” and “Back to the Future” fame.

David Head makes no apologies for Pepsi’s aggressive and confrontationist advertising. “We are quite happy to put our product up against Coke.” He adds that, even though Coca-Cola will publicly write off the Pepsi threat as a non-event, the old rival had already started v react last year by> doubling its

advertising budget. “They are taking out a lot of insurance.”

“Totally incorrect,” counters Bill Hodgetts. Coca-Cola’s advertising budget increased by no more than 40 per cent last year, and the increase was due more to higher television advertising charges and the launching of new products than concern about Pepsi. Coca-Cola’s advertising strategy, he says, is based not on the promotion of superstars, but on “the product as the hero.” The company’s main target group for many years has been young people between the ages of 12 and 24. Advertising has concentrated on the sun, sand and surf.

That emphasis is changing. Coca-Cola wants to move into other fields: “Coke at work,” “Coke with food” and “Coke as a night-time disco drink.”

Whether the company is worried about Pepsi or not, it plans to spend more than $1.2 million on television advertising this year, as well as pumping record sums into cinema, radio and newspaper advertising. It has also announced a $1.3 million sponsorship package for the 1990 Commonwealth games in Auckland.

Each year, New Zealanders drink an average of 40 litres of soft drink each. Australians drink twice as much, and Americans twice as much again. David Head attributes this -country’s low figure to the “exceptionally good” quality of New Zealand water and the strength of the fruit juice industry. He expects the cola war to

boost over-all soft drink consumption, and predicts that fruit juice manufacturers will have to fight hard to retain their market share.

Bill Hodgetts agrees that Pepsi’s use of superstars in advertising will “add enormous focus on the cola sector.” But he expects the intrusion to help Coca-Cola’s sales, following the pattern of Pepsi’s four previous forays into New Zealand. The cola war might be bloodless, but there will be little love lost between the two protagonists. Both will be looking closely for opportunities to discredit their rival. If one party ends up taking the other to court, it will not be the first time in the long saga of international conflict. Pepsi has already hinted that its old rival is bribing daily owners with repaints of their stores in Coca-Cola’s traditional red and white colour scheme. Pepsi’s New Zealand manager, John Wafer, says the repaints constitute visual pollution. David Head, on a fleeting visit to New Zealand last week, managed to get in a jab about store managers in the L. D. Nathan chain being pressured by upper management to favour Coca-Cola over Pepsi. (L. D. Nathan and Company, Ltd, owns Oasis Industries, Ltd, which has the largest of the three Coca-Cola franchises in New Zealand.) Bill Hodgetts is quick to respond. He says selected dairies had been repainted as part of Coca-Cola’s “total look” programme which started long before Pepsi’s arrival. Other stores are being refurbished with the company’s new graphics.

He is not aware of any pressure being put on store managers by L. D. Nathans, adding that if retailers chose to favour CocaCola, the decision will be based on the knowledge that consumers recognise it as a superior product

Then comes the counterpunch. He says Pepsi is not only pressuring D. B. hotels to change from Coca-Cola to Pepsi, but there had been a specific directive. Consumers ordering Bacardi and Coke will be given Bacardi and Pepsi, instead of "the real thing.” Both camps have released baffling arrays of figures and statistics to show their shares of various markets.

Coca-Cola claims a 2-1 lead over Pepsi in the United States, a 5-1 lead in the rest of the world, a 15-1 lead in Australia, and a 38-1 “pre-war” lead in New Zealand. It boasts a 43 per cent share of the international soft drink business in 1986.

Pepsi concedes that Coca-Cola is ahead over-all, although it questions its rival’s figures. It claims to be the leader in the allimportant United States market, on the basis that Pepsi outsells Coca-Cola in American supermarkets and groceries, the only places where the two colas compete directly against each other. Pepsi also claims the lead in Canada, the Soviet Union, Central America and parts of Asia. It admits it is behind Coca-Cola in Britain, Europe, Japan and Australia.

While Pepsi’s superstars duel with Coca-Cola’s Max Headroom in big budget, state-of-the-art television commercials, the critical backstage battle will be fought in the bottling plants and distribution networks.

John Wafer accepts that Pepsi will only succeed by offering the best service to traders and consumers. He is promising delivery anywhere in New Zealand within 24 hours of an order being placed.

“Our aim,” he says, “is to make the opposition’s service levels look ridiculous.”

Pepsi has built a $l2 million bottling plant at Wiri, South Auckland. It will fill and pack 1.25 litre and 2 litre plastic bottles at the rate of 15,000 litres an hour. Cans and smaller glass bottles will initially be imported. The company hopes to outgun Coca-Cola by offering 375 ml cans of Pepsi for the same price as 333 ml cans of the rival cola. Coca-Cola, which has bottling plants in Auckland, Wellington, Christchurch and New Plymouth, is pushing the motto: “Coke within arm’s reach of desire.”

Bill Hodgetts dismisses Pepsi’s, 24-hour-anywhere-in-New Zealand promise as "laughable.” He expects the newcomer to concentrate on supplying big urban centres at the expense of rural communities.

He is even less impressed with Pepsi’s plan to import cans and small glass bottles: “Why not incorporate the local can and glass industries and help employment? We employ more than 700 people in New Zealand; Pepsi will use 40.” The two colas are expected to dominate the war in New Zealand, but both companies will use the flare-up to promote their allied brand of soft drink. Products marketed in New Zealand under the registered trademark of the Coca-Cola Company include Diet Coke, Fanta orange, Mellow Yellow, Leed and Diet Leed lemonade, Fresca and Hi-C.

As well as Pepsi-Cola, Pepsi will introduce Diet Pepsi, 7-Up lemonade, Miranda orange and lemon, and the Canada Dry range of tonic water, ginger ale and club soda. Bill Hodgetts likes to talk about the outcome of the cola war in Australia, arguably the most similar battleground to New Zealand. Pepsi, he says, has been very aggressive across the Tasman for 20 years; it has thrown everything at Coca-Cola but has won less than three per cent of the market.

He expects “the typical Number Two brand” to achieve similar results in New Zealand, after its “new kid on the block” novelty wears off.

Military terms in vocabulary

Although he dislikes the term “cola wars” because it implies a battle between two equal partners, military terms have forced their way into Bill Hodgetts’ vocabulary: “We have our troops marshalled in a way that will make it difficult for Pepsi to make inroads.”

Pepsi’s international head, Roger Enrico, summed up his company’s attitude in his book, “The Other Guy Blinked.” The warfare, he wrote, must be perceived as a continuing battle without blood.

"The more fun we provide, the more people buy our products — all of our products. The catch is, the cola wars must be fun. If it ever looks as if one company is on the ropes — as if it has been dealt such a run of bad fortune that it won’t recover — the air will go out of the game faster than the fizz leaves an open can