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Tuesday, May 22, 2007

Guarding mother brands with product extensions

Taken from ET

Pepsi and Coca Cola are two very old beverage brands. Although these two giants continue to dominate worldwide beverage markets, in Bangladesh consumers today have a large number of new soft drinks to choose from. Not surprisingly, competition in the carbonated soft drink (CSD) market has increased. Bracing themselves for this competition the two giants have added new flavors and extensions of old brands into their product-lines to cater for the needs of different niche markets that have emerged over the years.These global brands have different marketing strategies for different countries. This is primarily because consumer preference for a particular brand may considerably differ from country to country. For example in Bangladesh today the growth of lemon CSD market is greater than that of cola CSD market. But in India, it is the opposite. This is why Transcom Beverage Ltd., the exclusive franchise of Pepsico USA, has launched 7Up Ice as a permanent brand with a proposition to provide a different taste for lemon CSD consumers who may be bored with the traditional flavors such as 7Up or Sprite. The product was originally launched in India as an "in-and-out" strategy for a few months. Such an in-and-out strategy is often implemented to create extra-excitement around the mother brand. It allows consumers to relish a new flavor for some time and then revert to the mother brand. Another example is 'Pepsi Aha', which was launched for a selected period of time in India.Under the lemon flavor, Transcom Beverage has also launched Teem, which is cloudy in colour, unlike 7Up, which is clear. At the same time, the company has strengthened its position in the "no sugar" CSD market.

Khurshid Irfan Chowdhury, General Manager of Sales and Marketing for Transcom Beverage, informs ET that Pepsi is currently the only company that is providing the "diet" version of two flavors-cola and lemon. 'Pepsi diet' and '7Up light' are sugar free CSD. Since 7Up light was launched four months back, Khurshid claims, many consumers have switched from cola to 7Up light. 7Up is somewhat fizzy in taste in comparison to 7Up Ice, which gives the consumer a cooling feel after taste. In the CSD market, there are good reasons behind launching product extensions. Product extensions offer consumers different tastes of flavors under the label of the mother brand. If the consumer is bored with the mother brand she now has opportunities to consume different flavors under the trusted mother brand. This becomes an important strategy to fend off competition, as the consumer now may not be willing to switch to other brands. At the same time, the switch from the mother brand to one of its extensions is not likely to reduce the value of the mother brand.Transcom Beverage is conscious about having brands with clear market demarcations. "In this industry every company is offering cola flavor and sometimes too many cola products might create confusion among the potential consumers. Our products are differentiated through taste, level of presentation, and functional and emotional benefit. For example the clear difference between 7up and 7up Ice is not only in terms of taste but also of pack-presentation." Transcom, Khurshid claims, is the first company that has introduced beverage product of different colors basically to target young groups between the ages of 15 and 25. "For example Mountain Dew with different colors is for those who are adventurous-minded and love to take up challenges. Mountain Dew is mainly sold in all metropolitan areas or divisional towns." Distribution cost of beverage product is much high compared to other FMCG products due to larger size and weight of CSD products. On the other hand, consumers in Bangladesh are price-sensitive. So packaging of CSD is done based on consumer's purchasing capacity.

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