EDITORIAL: Consoles and cola giants stray from the traditional path

Are we entering an era of marketing by variants? Between them, Coke and Pepsi had not launched a spin-off since 1993 - yet in the past 12 months they have given birth to no fewer than five flavours. Similarly, games console makers have begun their pre-Christmas marketing frenzy with communications that put the games in the driving seat and the consoles themselves, if anywhere, under the hood.

Given that this is a fundamental shift in strategy for both markets, it seems fair to ask what has become of the traditional path to volume growth.

Insiders at Coke and Pepsi will be quick to jump to the defence of the core brands, the continued major investment in marketing them, and their relative profitability compared with spin-offs. In a subtle nod to investors, the parent brand will hint that its flavoured offspring create noise and excitement - but really aren't to be taken too seriously.

It's not current market share, or even current slow growth in the cola market, that troubles the soft drinks giants - it's future consumer trends.

In the UK market, value growth in bottled waters and energy drinks are growing at around five times the 2% to 3% rate of colas.

The reality is that the threat of cannibalising sales of their core brands now looks considerably less risky to Coke and Pepsi than doing nothing.

Against this backdrop, the pursuit of new growth opportunities in colas and other markets looks more critical to the future of these companies than they are comfortable having us believe.

The games consoles industry is 100 years younger, but has quickly and bravely grasped the concept that profit is not to be had from the sale of the console itself, but from the incremental sales of 'brand-owned' games.

While games portfolios have always been a driver of console sales, what is so unusual about the current battle is how steeply and suddenly all the manufacturers have dropped their unit prices. Sony, Microsoft and Nintendo now make a loss on every console sold. Where once Microsoft and Nintendo would have been able to maintain a price premium for longer with their new technologies, all three now sell at below £170.

Games choice dictating console purchase turns traditional marketing on its head. The presence of the parent brand in the cacophony of Christmas ads will be too subtle to register among non-gamers, while for potential buyers a taste of the game is a far more powerful lever to purchase than a console logo. The fact that different conditions exist in different sectors matters less than the rapid maturation of markets we are all collectively experiencing. The growth role of variants will become more crucial across our industries.

The season to be aggressive, page 17

Cola giants' NPD frenzy, page 26.


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