Clouds Over Coke in Germany
February 23, 2005
Matthias Heusser's discovery must have made Coca-Cola officials happy.
"Coca-Cola bottles fly the best," the 19-year-old high school student from Munich, who had built rockets out of plastic bottles for a science competition, told Münchner Merkur newspaper. Bottles used by discount supermarkets were no good at all, he added: "They burst."
But despite their aerodynamic inferiority, Germany's discounter bottles significantly harmed the world's best known brand last year. Responding to the introduction of a deposit on cans and bottles for carbonated soft drinks, supermarket chains started selling liquids in bottles designed specifically for them.
By doing this, they were able to distinguish easily between their own products, which they are required to take back and recycle, and those sold at other stores.
Protecting the brand
Claiming that a change of bottle would affect brand recognition, Coca-Cola refused to go along, causing discounters to throw out the company's products. Together with a cold summer, which kept people from drinking, this led to an 11 percent decline in sales in Germany -- the company's fifth largest market and the biggest in Europe -- in 2004.
"We are not satisfied with our performance in 2004," Coca-Cola CEO Neville Isdell said when he presented the company's annual report last week.
"A brutal year"
Analysts went a little further.
"Coca-Cola had a brutal year in Germany," Marc Greenberg, a New York-based analyst for Deutsche Bank told Süddeutsche Zeitung.
While the German government is calling for a nation-wide recycling system by mid-2006 that would do away with chain-specific bottles, this won't help Coca-Cola in 2005: Company officials said they expected things to remain tough this year. They've also given in on dropping the unmistakable bottle design, reaching an agreement with at least one discounter to use different containers.
Pepsi pushes ahead
Pepsi, Coke's much smaller but major rival, meanwhile went along with requests by supermarkets to use specific bottles. As a result, the company managed to double its market share to 15 percent. That's still much less than what Coca-Cola sells to Germans -- the Atlanta-based company still holds 60 percent of the market.
But Pepsi has also snatched away another former Coke stronghold: German trains. Starting in January, restaurants aboard switched from red and white to red, white and blue.