Coca-Cola ($NYSE:KO) and CEO James Quincey love talking about weeding out the company’s ‘zombie’ brands, or underperforming products. The company's 2019 growth strategy report bragged that Coke had “killed” more than 600 zombies that year. Now, only halfway into 2020, Quincey says about 200 more underperforming brands are on the chopping block.

Per Coke’s July 21 earnings call, Quincey is eyeing brands that are a) confined to a single-country market, and b) growing slower than average. Quincey made the point of saying entire brands, not just specific products, are set to go. Upon request, a Coke spokesman declined to say which Coca-Cola Company brands are available exclusively in single markets.

The End of an Age of Exploration?

The Coke higher-ups have fingered fruit juice Odwalla and its 300 employees as their latest high-profile sacrifice. In recent years, Odwalla has failed to live up to the standards of what the Coca-Cola Company calls “Explorer” brands, meant to disrupt industry leaders like, in this case, Naked. While Coke demands double digit value growth of Explorers, Odwalla dipped in sales and market share between 2018 and 2019, even before COVID. According to bevindustry.com, Naked held onto 65.1% of the market, while Odwalla failed to crack 4%. Hence, Odwalla became a ‘zombie’ to be culled, and will be discontinued July 31st.

In oh-so-innocent 2018, Coke launched hundreds of new Explorers, as well as a range of new products from its “Challengers”, or their brands with 10-30% value share. In 2019, 38% of these Explorers met Coke’s success criteria, along with only 30% of Challengers. With the COVID crisis depressing sales across the board, Coke is now signaling a hasty retreat to reprioritize its “Leader” brands (Coke Zero Sugar, Sprite, POWERADE). This spells danger for both Explorers and Challengers, most of which were already in danger of being cut. James Quincey has said that the COVID crisis is only acting as a catalyst in the weeding out process.

Coke’s recent hiring pattern reflects their newly conservative, less exploratory growth strategy. Hundreds of brands are in no need of distributors, marketing, or sales teams. Job listings over the past quarter have dropped 39%.

Which Cuts Are Next?

It is hard to say, since Coca-Cola considers this information to be highly sensitive. There is never a list of names of the “zombies killed” section of their reports. With companies as large as this, failed products tend to be scrubbed from the internet and dropped down the memory hole. Even a list of Coke’s current holdings is hard to scrabble together. 

Any core brand on this list of Coke’s 21 billion-dollar companies can most likely be marked safe, along with the majority of brands Americans will have heard about. Many of Coke’s single-market brands operate in Africa, the Middle East, or the hinterlands of Europe, and are unheard of to most Americans. For instance, few know of Bonbon Anglais, a bubble-gum flavored Coke product that is sold only in Madagascar, or julmust, a Christmas holiday drink popular only in Sweden, which Coke produces a version of every December.

Bonbon Anglais is insanely popular in Madagascar, so it's probably safe. Less totalizing products in single countries are the ones most likely to go, which means we are looking more at products that resemble julmust - though not julmust itself - to be deemed ‘zombies.’

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