Drastic cuts are coming to Coca-Cola Co.’s brand portfolio. Part of a broader corporate restructuring, which includes a sizable reduction in the workforce, the company has indicated that it may eliminate 50% or more of the beverage brands it sells around the world.
Accelerated by supply chain disruptions and changes in consumer behavior brought about by the COVID-19 pandemic, the realignment is being undertaken from a position of strength. Coca-Cola places sixth in Forbes’ current ranking of the world’s most valuable brands, and it is first among those outside the technology sector. Culling the portfolio to stimulate growth of its strongest lines and open up space for emerging products, the company will eliminate, among other brands, Tab, its first diet soda; Zico coconut water; Coca-Cola Life; and Diet Coke Feisty Cherry, along with a number of packaging configurations.
“We’re challenging ourselves to think differently about our brands,” says Cath Coetzer, global head of innovation and marketing operations. “We’re prioritizing bets that have scale potential across beverage categories, consumer need states and drinking occasions, because scale is the algorithm that truly drives growth.”
Coca-Cola’s new approach merits close scrutiny for a variety of reasons, including the promise of putting a serious dent in the vexing problem of SKU proliferation. For many years, mass market retailers and suppliers have lamented the fact that shoppers in most CPG categories confront an overwhelming number of products — frequently with no real distinction between items beyond color, flavor or size — but little has been done to rationalize presentations. Coca-Cola’s initiative will make the beverage section a proving ground for a simpler, more targeted way of doing things.
Talk to retailers who operate stores in both Europe and the United States, and they’ll tell you that Europeans do just fine with more limited assortments than Americans have come to expect. The COVID outbreak has reinforced that view, supplementing the argument that consumers don’t require multiple variations for every product they purchase with sound business reasons for keeping the merchandise mix as tight as possible. CPG companies with large assortments encounter increased complexity in keeping the supply chain moving, more out-of-stocks and higher costs.
Coca-Cola is attempting to demonstrate that, in terms of brands and SKUs, less is more. The entire industry is waiting to see if consumers agree with that proposition.