Brand Diversification Strategy: Big Soda to Alcohol

Judging by the strong sales, consumer reaction appears positive

However, the companies are increasingly being challenged by regulators, consumer organizations and public health experts who argue that the soda companies are creating confusion, blurring the lines between kids and adult drinks, and fueling alcohol consumption.

The reason for the criticism can largely be traced back to the Soda companies’ choice of brand strategy. As a quick review shows, most of the alcoholic offerings from the soda brands are visually very closely close to their non-alcoholic counterparts. (See figure above). There could be many reasons for this choice of strategy. Among these instant brand recognition and built-in preferences presumably rank very high, as they lead to higher trial sand conversion at lower cost. The other extreme: developing a completely new brand for the alcoholic offerings would have required much higher marketing budgets to build awareness.

The mounting criticism highlights the risks of the closely associated brand strategy. As the alcoholic soda cocktails don’t have distinct identities, the criticism, when there is an issue, of course falls on the original non-alcoholic soda brands and their parent companies.  In the case of big soda and alcohol, the lack of distinctiveness has led to confusion.As the Wall Street Journal and New York Times report, there have been cases of kids bring alcoholic drinks to school by mistake and supermarkets placing the alcoholic sodas in the wrong aisle next to the non-alcoholic soda. Furthermore, there is the concern amongst regulators, consumer groups and public-health experts that hard seltzers, and ready-to-drink canned cocktails will contribute to increased alcohol consumption.

Now, the soda companies all have the power and resources to address these concerns and do a rebrand as well as public health campaigns as necessary. However, the case is interesting for more regular companies and brands looking to diversify into another category. As the soda and alcohol liaison shows, it is keenly important to be aware of the tradeoff and risks involved. This is true whether you are looking to diversify to a different market, price point or category.

The big soda companies undoubtedly went through a great deal of analysis before deciding on the strategy they did. Given their resources, they may even have taken a calculated risk in order to enter the hard seltzer and canned cocktail market fast. After all, it is valued at $10 Billion in 2021 by Grand ViewResearch and growing in double-digits, as quoted in the Wall Street Journal.

When we founded Remarkly, having spent many years in brand consulting, it was in part to make risk analysis and informed decision making accessible to all companies and support sustainable growth.We have seen companies make smart decisions and we have helped companies navigate the less fortunate ones, sometimes based on intuition and gut feel.What Remarkly does is use artificial intelligence (AI) and automation to simplify the decision-making processes and empower brands to make quick yet structured and informed decisions about how to diversify their brand in a manner that minimizes risk and maximizing the opportunity.  Ultimately, our goal is to support companies in achieving profitable and sustainable expansion and growth by limiting over investment and product failures.

Big soda and alcohol for sure is a dangerous liaison however it looks like they have at least accomplished one goal, which is the successful entry to the category. According to an analysis by Goldman Sachs quoted in theWall Street Journal: PepsiCo’s Hard Mountain Dew sales totaled $54 million in the 52 weeks ended Aug. 12 in U.S. retail stores tracked by Nielsen while sales ofSimply Spiked, a boozy extension of Coca-Cola’s orange juice brand, totaled$111 million in the same period. Spirits maker Brown-Forman called this year’s introduction of Jack Daniel’s & Coca-Cola the most successfulU.S. product launch in the distiller’s history, saying the canned cocktail now has higher U.S. retail-store distribution than any of its products except for JackDaniel’s Tennessee Whiskey. Most likely they are savvy enough to navigate the brand controversy as well. It will be interesting to follow.

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About Remarkly: Remarkly helps companies develop a smart data-driven approach to brand strategy decision-making for example in connection with a diversification opportunity.If you are a looking at one, visit www.remarkly.io, our AI powered model can for sure help you find the right approach.  

^{Sources:
https://www.wsj.com/business/retail/new-boozy-drinks-blur-lines-between-kid-and-adult-beverages-6c86463f?cx_testId=3&cx_testVariant=cx_170&cx_artPos=0&mod=WTRN#cxrecs_s
https://www.nytimes.com/2023/02/21/health/alcohol-soft-drinks-health-risk.html
https://www.thedrinksbusiness.com/2023/03/monster-energy-drinks-launch-alcoholic-product/}

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