According to foreign media reports, Coca-Cola's first energy drink under the Coca-Cola brand, Coca-Cola Energy, will debut in Spain and Hungary next month. It combines naturally sourced caffeine, guarana extract, and B vitamins. Each 250 ml contains 80 mg of caffeine, more than three times that of regular Coca-Cola. Coca-Cola will also offer consumers a zero-calorie, zero-sugar option in 250 ml cans.

01 Coca-Cola's Market Strategy Behind the Scenes

From Coca-Cola's acquisition of a 16.7% stake in Monster Beverage Corp. (the parent company of Monster Beverage, which uses the brand name "Monster" in the Chinese market) to the 2016 joint entry into the Chinese market, Coca-Cola has invested heavily in production, channels, and distribution, directly targeting Red Bull. The goal is to capitalize on Red Bull's 20 billion in sales and grab a share of the market.

However, according to 2017 data, Monster Beverage's net sales were $3 billion, up 10.4% year-over-year, but it struggled in the Chinese market, with poor sales and a loss of $9 million.

Monster's failure showed Coca-Cola the difficulties of the Chinese market. But the escalating trademark issues surrounding Red Bull and the vast market potential have kept Coca-Cola interested. They are preparing to launch a new energy drink, "Coca-Cola Energy."

Of course, since Coca-Cola has decided to launch its own energy drink, it aims to compete not only in the Chinese market but also to secure a place in the energy drink market in its home territory. According to research firm Market Research Hub, the U.S. energy drink market will reach $16.9 billion by 2022, far more attractive than the Chinese market.

02 Monster CEO's Response

Since Coca-Cola's plan to launch its own energy drink would directly compete with Monster Beverage, violating the original 2015 agreement, Monster Beverage has filed for arbitration on the matter.

Monster CEO Rodney C. Sacks previously said during Monster Beverage's third-quarter earnings call: "Regarding our relationship with Coca-Cola, I think our relationship is good and has always been good. Obviously, Coca-Cola is looking at its own portfolio and seeking new opportunities.

"We are now in civil arbitration over a disagreement in the previous agreement. The agreement between Coca-Cola and the partner company restricts its competition in the energy drink category, with some exceptions. As you may have learned, Coca-Cola has developed two energy drink products under the Coca-Cola brand and plans to market them. They believe this qualifies as an exception.

"But we believe the exception does not apply. While both parties seek to clarify the agreement, we filed for arbitration on October 31. Coca-Cola has stated that it has suspended the launch of such new energy drinks until April 2019."

As of now, the arbitration outcome is pending. Coca-Cola plans to launch the drink in April as originally scheduled. Whether Coca-Cola and Monster Beverage have reached a settlement on this matter is still unknown.

03 "A Total Beverage Company"

In 2015, Coca-Cola proposed a "total beverage" development strategy, determined to expand into non-carbonated beverage areas. Carbonated drinks, which have historically accounted for 80% of its overall business, have brought in substantial cash flow, but in an era where the "Coke" myth is fading, carbonated beverages have become a constraint for Coca-Cola.

Health, personalization, and functionality have become mainstream consumer demands. Among these, energy drinks, packaged water, and protein beverages are the three categories most favored by young consumers. Clearly, Coca-Cola recognizes this. While managing with an "asset-light" approach, it is also diversifying its product lines to spread development risks.

Coca-Cola's global chief marketing officer, Javier Meza, said: "Coca-Cola Energy includes ingredients from natural sources and the delicious, refreshing taste of Coca-Cola. We made these two qualities the core of the formula and offer it under the Coca-Cola brand, inviting people to try a new and different energy drink that complements an optimistic and busy life."

Meza stated that in 2019 and 2020, the new product will be launched in other countries, mainly in Europe, with further announcements to be made as planned.

Will it successfully enter the Chinese market? Let's wait and see.

Source: foodbev, compiled by New Distribution

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