Coca-Cola and the Shift to the “Branded House”: Should Other Marketers Consider a Similar Move?
Last month, Coca-Cola launched a bold shift in branding, called the “One Brand” strategy in 11 markets, starting with the U.K. The strategy calls for a unification of marketing under the Coca-Cola master brand for all its product sub-brands, including Diet Coke, Coca-Cola Life, Coca-Cola Zero and regular Coke.
The decision and launch is an important one for Coca-Cola, as it is for any marketer who manages a larger brand or product portfolio. It offers the potential for greater clarity, synergy and leverage. Advertising the four products together under the Coca-Cola brand communicates the breadth of offerings from full-calorie to low-calorie or zero-sugar versions and helps clarify consumer choices, which is important when only five percent of consumers today know that Coca-Cola offers lower-calorie and sugar-free products. It also creates brand-building synergies by bundling all marketing spend on a single brand, while driving greater penetration and trial of the product sub-brands. Finally, it creates leverage, with major initiatives such as the new multimedia platform Coca-Cola Journey benefiting the overall portfolio.
But it also carries some risk. Any major packaging change in the beverage category lives under the specter of the Tropicana debacle. But more broadly, consumers could be confused or alienated by the change in relative weight given to the product sub-brands: Will consumers who drank Diet Coke still choose it at the shelf when it is so heavily branded Coca-Cola? A lot to consider. Many companies are leveraging master brands through line extensions and integrated marketing programs. Yet Coca-Cola is pushing the envelope the furthest in terms of building a more unified branding approach.
Our CEO Erich Joachimsthaler and Prof. David Aaker developed a spectrum that defines a continuum of strategies; at one end is the “House of Brands,” where each brand has its own brand identity, often representing a separate demographic, need, or occasion. Head & Shoulders and Pantene, both owned by Procter & Gamble, are good examples. On the opposite end of the spectrum is the “branded house,” where all products are marketed under a single brand. For example, all BMWs are BMWs regardless of the series.
Should other marketers consider a similar move to a branded house?
To assess the potential for their own brands and portfolios, marketers should ask four questions:
1. What is the overall brand promise and what type of brand relationship do you aspire to create with consumers?
Coca-Cola’s overall brand promise had been about refreshment for the past century when seven years ago Coca-Cola moved away from refreshment because it had become a point of parity with competitors and began to focus on the emotional consumer territory of “open happiness.” For the launch of the one-brand strategy, the brand promise was slightly modified to “choose happiness” to emphasize the idea of options. Thus, the single over-arching brand promise could reinforce Coca-Cola’s decision to move toward a “branded house” strategy.
2. What is the role of the brand in consumers’ daily life contexts?
To accomplish its growth strategy, Coca-Cola targets 30 drinking occasions and aspires to be part of consumer lives in these contexts. These occasions guide the execution of its strategies and range from “gotta have it to go” to “family home meal.” Coca-Cola’s overall brand promise works across all these occasions, which makes a “branded house” strategy a strong option to drive trial and repeat consumption for the four sub-brands.
3. What are the competitive dynamics in the overall business ecosystem?
Competition is intense in the cola category, with shifting consumer preferences and significant retailer pressures. A recent US Gallup poll showed that 63% of Americans avoid soda, which explains the ten-year decline in soda volume sales. It is important to recognize that Coca-Cola does not compete against only other colas like Pepsi, but also other beverage and refreshment alternatives and even against non-consumption. By moving to a “branded house” strategy, Coca-Cola provides retailers with additional incentive and marketing support to carry the full portfolio. And as part of a larger business ecosystem, it becomes more difficult for some retailers such as Whole Foods to stop carrying Coca-Cola in favor of smaller emerging brands.
4. How does the master brand create value?
Coca-Cola’s new “branded house” strategy creates value to consumers by simplifying the many brand promises to just one. Consumers are not necessarily better off with more messages, more stories, more content, more brand promises and more choices. “Choose Happiness” simplifies the consumer’s choice: Coca-Cola. The strategy also creates value for Coca-Cola by driving higher penetration through trial and higher incidence of consumption for each of the four sub-brands, which increases overall share of occasion and share of market, and by bundling the overall marketing spend around just one brand, which creates greater share-of-voice.
In the end, a move toward a “branded house” strategy should be a considered decision. In the right situation, it can be a driver of value creation; but the benefits should be carefully weighted against the risks.
Top 5 Brands to Watch as Candidates for a “Branded House” strategy: