Who Owns Whom

Creativity driving the health of the sector

Reading the latest WOW report on the manufacture and wholesale of non-alcoholic beverages in South Africa, the creativity of business and the power of marketing are on display.

The steady stream of new drinks on the shelves hasn’t stopped. From having mainly milk and Coca Cola brands on the racks, we now have entire passages in retail shops filled with all kind of drinks, including many different brands of water, a trend predicted by Robin Williams in his earliest stand-up comedy when he said a time will come when bottled water would be sold in dark alleys like drugs.

The plethora of new brands that has coming to market and become popular, is powered by advertising. It is this context that illustrates that with a good campaign and creative content, products can leap to the top of the charts and create a dominant position with a particularly compelling differentiation. The complication arises in keeping the momentum to stretch the product lifecycle.

Good examples are Exxon in the 1960s which made a killing with the advert “Put a tiger in your tank” but after a while it then sank!

Today one of the very popular caffeinated energy drinks “Red Bull”’s slogan “Gives you wings” and the associated advertising and marketing propelled it to the top of the league in no time. It drew consumers from other types of drinks, charges 60% higher pricing compared to other energy drinks and maintains by far the highest market share in its category of non-alcoholic beverages. The WOW report on the manufacturing and wholesale of non-alcoholic drinks states that Austria (which produces Red Bull energy drink) accounted for 38% of the value of water with sugar (carbonated drinks, energy drinks) imports!

We know there are many other examples of successful advertising, yet it remains kind of a mystery what exactly it is that causes a slogan or other advertising content to be a winner. Perhaps big data coupled with artificial intelligence will allow us to glean insights into the human mind that will assist with more focused advertising to hit the target, whilst simultaneously navigating today’s restrictive environment whereby the protection of private information. POPI is still a contested topic with big tech giants being manipulated by unscrupulous organisations for targeted mis-information.

The astuteness of the soft drinks manufacturers is not to be underestimated. In its introduction, WOW states: “The sugar tax, which took effect in April 2018, has had a negative effect on soft drink consumption and is likely behind a 38.8% increase in the price of 21 fizzy drink bottles between January 2017 and November 2021.”

Whilst with so-called sin taxes government financially benefits from curtailing the consumption of products that are not healthy or are seen to contribute to some social ill, business jump on the same bandwagon by adding  additional margins to the same products. We see this every year in SA when sin taxes are increased on alcoholic beverages. A say R2 in additional taxes translates in a R5 to 10 additional consumption cost.

Questioning the validity of a sugar tax, it seems that newer brands such as those in the category of energy drinks have such strong top of mind attributes i.e. energy, that the sugar content goes unnoticed by consumers, it just plays into the price increase justification.

The first Stats SA graph below visualises a very stable evolution of prices with just a few ripples for especially mineral water, all ripples due to the COVID impact.

On the opposite side is an illustration that refers to the same information but indicates how price increases exceeds inflation more evidently.

Stats SA
Beverages price increase relative to the CPI

The WOW report on the manufacturing and distribution of non-alcoholic drinks brings into the spotlight that taste and interest evolve, creating perennial opportunities to introduce new products in the market. The barrier to entry is not that high. The fact that the big players continually buy up newcomers confirms that the field is open to competition. If one manages to produce something people like you will need access to market and a reasonable budget to create awareness and attention to your product. That’s the biggest hurdle for the SMMEs not only in the beverages sector.

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