Branding’s High-wire Acts

By Bill Chidley

Comprising both the lead position and 15 of the 100 Best Global Brands on this year’s list, food and beverage brands are perhaps the world’s most aggressive marketers as a group. Today, they are also the most under siege, as they experience increasing political pressure as symbols — and perceived causes — of health-related social maladies. Like high-wire acts, they amaze us with their spectacular abilities to delight our senses and entertain us as they always seem one slip away from disastrously negative media coverage.

The tension between these forces of doom and delight make these some of the hardest brands to successfully manage, yet they seem to rebound and even advance in the face of adversity. This summer, both Coca-Cola and McDonald’s utilized the London Olympic Games as a world venue to showcase their latest approach to staying exciting and relevant, in spite of the controversy surrounding their sponsorship. While critics have pointed out that McDonald’s and Coca-Cola’s offerings conflict with the athletic Olympic ideal, the two brands placed emphasis on their healthier options and maintained that complex health issues cannot be solved by companies alone. A persistent drum of negativity, however, ultimately cannot be good for any brand or sector. The proverbial elephant in the room, namely health concerns, may not impact the choices of core users and loyalists, but it does disrupt the stream of potential new users who have not yet formed habits and are open to alternatives.

Evolving the soft drink and fast food offers

Since the margins involved in selling food and beverage brands are slim, it is imperative that these brands continually attract new consumers into their categories and, of course, to their specific brands. In order to achieve this, food and beverage leaders like Coca-Cola and McDonald’s will have to tune into the concerns of the public and respond to them. More than ever, consumer conversations are driving the images and perceptions of brands, which means food and beverage companies will have to focus more on understanding, engaging with consumers, and even changing course if a product or practice proves to be unpopular.

Soft drinks have been a rite of passage among the youth cultures of modern societies for generations, and fast food has been the go-to rescue and even “fun” meal solution for families as well, which legitimizes these categories for future generations. However, it is becoming less and less likely that these traditional points of entry will be the “guaranteed” new consumer pipelines that they have been. The Cola Wars of the 1980s assumed cola consumption and pitted brands against each other for share. In the near future, we will see brands battling for an ever-shrinking piece of the market if their offerings are not adjusted to reflect evolving preferences, and if consumer relationships are not successfully managed to encourage trial and discourage defection.

As brands like Coca-Cola, Pepsi, McDonald’s, and KFC balance on the high wire, there are other acts that are eager to steal the show. The energy drinks category looks as though it is here to stay, and remains above the fray of controversy for the time being. Brands like Red Bull (globally) and 5-Hour Energy (in the US) are sourcing volume and occasions from stalwart coffee and soft drink brands by offering a benefit focused on consumers’ on-the-go lifestyles. These brands are drawing many imitators and capturing users beyond the early-adopting younger market. Starbucks, for instance, is responding to the trend with a line of natural energy drinks called Refreshers. Differentiating their “beverage innovation” from competing energy drinks, Starbucks is touting the benefits of green coffee extract, a natural source of energy derived from coffee, but without coffee flavor, that gives their fruity new drinks a boost. On the food side, premium offerings in the burger segment like Five Guys in the US and Canada, and global chicken chains like South Africa’s Nando’s are capturing more share from global brands.

Overall, the model for growth in food and beverage remains unchanged and is derived from three simultaneous investment areas: more accessibility and marketing presence in the underserved parts of the world; product innovation to reflect the unique preferences of diverse consumers; and more experiential innovation in packaging and delivery channels in mature markets. Coca-Cola is investing billions of USD in India to increase presence and preference and outpace competitors, and sees China eventually becoming its biggest market. McDonald’s is continuing to invest heavily in renewing the brand experience in its aged fleet of restaurants in the US as it simultaneously tries to appeal to new mothers and silence critics with a healthier Happy Meal.

Drinking to the health of alcohol

Like soft drink and fast food brands, alcohol brands have survived their share of falls from the high wire over the years as well. Though there has been long-time awareness of the risks associated with consumption, alcohol brands continue to face challenges from legislators and the medical community. For example, a report published by the House of Commons Science and Technology Committee in the UK this year recommends that adults abstain from drinking for two days a week. The report and its findings seemingly justify a new push for legislation aimed at reducing consumption in the UK. Additionally, Russian beer will lose its classification as a “foodstuff ” this year. The new classification will impose limitations on beer marketing by aligning it with spirits, which have been banned from TV for years in Russia, except on pay channels.

Despite these setbacks, alcohol off ers on this year’s list are looking for growth by strengthening their brands and seeking ways to drive preference. Mid-tier brands like Budweiser, for instance, are still heavily reliant on promotional activity to drive sales and periodic redesigns of their light beer variants to keep the category fresh. Distilled beer and spirits continue to see disproportionate growth in developing markets as evidenced by AB InBev signing with FIFA to be the official beer sponsor of the 2018 World Cup in Russia. In the US, unemployment has hampered beer sales and intensified price related promotions, making growth difficult. China is currently the largest beer market and accounted for 43% of the world’s volume growth. However, beer pricing remains low in China and profit margins are thin, which makes it challenging for global brands to invest.

China is also the focus of growth for classic spirit brands like Johnnie Walker (that boasts the highest brand value increase of alcohol brands at 12%) and Hennessy, which have become two of the top three brands in that market. Diageo, for instance, is shifting focus and investment from the mature markets to the faster-growing emerging markets, and is planning for half of its sales to come from developing economies within the next four years. Now that they’ve acquired Shui Jing Fang, maker of a traditional spirit known as baijiu that dominates the Chinese market, Diageo hopes to develop baijiu into a global brand.

The food and beverage brand space will continue to be an exciting one to watch as the big players fl ex their marketing muscle and thrill us on the high wire of the consumer stage. We expect to see more innovation in products, digital marketing, and social media, as well as agile marketing in developing countries as these brands continue to grapple with thorny ethical issues, health concerns, and growth challenges that are unique to their sector.