Coca Cola is selling alcoholic drinks in cans. Only in Japan, and it’s low alcohol, but it’s still something I could not have imagined from The Cola Cola Company twenty years ago. It’s reported this week that they are experimenting with a uniquely Japanese alcopop called Chu-Hi, containing alcohol, fizzy water, and flavouring.

This tells us one thing for sure, and a couple of maybes. For sure, this looks like a level of flexibility being permitted in local markets that has not been seen since the sacred formula was standardised and the syrup production process centralised. (Although there has been improvisation when needs must – see chapter 13 of “For God Country and Coca Cola” on how wartime production problems in Nazi Germany led to the creation of Fanta. So much for strategic, consumer-needs-led innovation.)

The maybes are a bigger deal. Maybe sugar is now demonised to the point where it’s on a par with alcohol. No longer an innocent, universal source of joy, and Coke a unifying force for happiness. Instead, a route to pleasure but not a trouble-free one. The second maybe is this: the people who run Coca Cola are worried. In some countries sugar is now taxed, as alcohol and tobacco are. This is on the rise. What a shock for soft drinks executives to find they could be in the same business – selling addictive substances that can cause health problems. Tobacco companies have created vaping brands as part of their alternative lines of business. The big players in branded alcohol have diversified and added low alcohol and soft drinks. It’s a wake-up call for any business reliant on sugar if the mighty Coca Cola Company thinks alcohol is a good direction for diversification. At the very least, this means that an alcopop is no longer off-limits for a soft drinks company. What used to be across a great divide is now on a continuum.

We have seen signs of this, with the rise and fall of fruit juice and smoothies. PepsiCo owns Tropicana, the market leader in orange juice in the USA, a big OJ market. Coca Cola bought UK-based Innocent Smoothies. Both used to see these as natural, healthy additions to their portfolios; a defensive play when carbonated soft drinks were under attack. For a time, consumers thought it too. But in recent years fruit juice volume sales have fallen faster in Europe than fizzy drinks have.

It’s too soon to say that Coca Cola is moving into the alcoholic drinks business. They say it’s only Japan. But look at it another way: Japan is a nicely-confined market, without much exporting of local products into other markets. It’s also a hotbed of product innovation, in which drinks come and go fast. In other words, it’s a great place to run a controlled experiment. If you think your main ingredient is becoming a liability, you look for other ways to leverage your assets and capabilities:  canning liquids and getting them out to buyers via perhaps the world’s most successful distribution network. I’m betting there’ll be another such experiment happening somewhere else soon.

If this is a sign of a shift away from monolithic brands and a one-size-fits-all approach to product development, that’s nice for people who work at Coke, interesting for a few industry observers, and largely irrelevant to the rest of us. If it’s an indication of how far the image of sugar has fallen, that has much wider implications.

Comment | March 2018