Monday, May 28, 2007

RX: Responsive. Nimble. Sexy.

Observations, lessons and insights gleaned from a fabulous Sunday Business section in yesterday's New York Times:

To the list of dominant, all-American icons under seige – Detroit automakers, newspaper publishers – add another unthinkable entry: Coca-Cola.

The world changed. Coke didn't. Coke got hammered.

Oh, it's still a successful business with an iconic brand. It still makes money. Looking at the global market, there's still some growth. (Where have you heard all that before?)

But young people aren't forming the cola habit the way they once did. More nimble rivals spotted emerging consumer trends first and moved faster.

Taken as a whole, soda sales still handily outweigh all other beverage categories combined, but the trend lines are ominous for a “sparkling beverage”-dependent company like Coke ... a survey last year [found] that teenagers, who used to be among the biggest consumers of soda, increasingly prefer other beverages.

“If you lost that generation, as they age they aren’t suddenly going to start drinking carbonated soft drinks,” says [an analyst]. “That’s the importance of Coke closing the non-carb gap.”

Yet that insight has hardly been a secret. Coke and Pepsi executives have talked about the importance of noncarbonated beverages since the early 1990s and have rolled out all sorts of new products to attract cola-weary customers. But in that effort, Coke has seemed to always be a step behind.

“The difference was, Pepsi meant it and Coke didn’t,” said Emanuel Goldman, the veteran beverage analyst who retired from ING Barings in San Francisco and now works as a consultant. “Coke really didn’t mean it when they said they were an all-beverage company.”
[Emphasis added.]

The Times' long, insightful story by Andrew Martin also contains some suggestions about what went wrong, and what it might take to change things:

So how did Coke lose its magic? Macroeconomic factors played a role. So did a raft of bad publicity over issues of obesity, racial discrimination and food poisoning. But internal issues were also in play. Mr. Isdell surveyed his top executives about the problem when he took charge, and arrogance, he says, was a common answer. Complacency was another. [My emphasis].

I also found intriguing insights in two other stories in Sunday Business. One was Ben Stein's column, The Dream That Was Once Detroit. Here are a couple of graphs I underlined. (It's not hard to connect the dots from the Coke story and Stein's column when you're thinking about the newspaper business today.)

The legacy costs [that burden U.S. automakers] may mean a slight premium in the price of a Detroit-made car as compared with a Japanese or German car. But think about it: when was the last time you heard a buyer of a new car say that she bought her last car because it was 5 percent cheaper than another model she was considering?

I am sure some economists say that somewhere, but what I hear is that buyers choose a car because it looks better or handles better or seems to be better made or — in the case of us insecure men — goes faster. Fit and finish. Reputation for being well-made. Quality of the “feel” when you’re behind the wheel. Sexy good looks. That’s how cars are sold.

And there's a prescription in Ben's column, too:

American cars used to rule the world. The Cars of the Fabulous ’50s (there is a book with that name; look at it and be amazed at what Detroit used to make) and the early 1960s were gorgeous, powerful, lush. You had the feeling you were a commodore of the proudest highway fleet in history ... You didn’t need a Mercedes. The American product, Detroit iron, was the stuff of which dreams were made.

“Ye shall be as gods.” That’s what Detroit told us. “Ye shall be as gods.” And Detroit was Parnassus.

Then it all fell apart. Starting in the late 1960s (except for the Corvette, always the design leader in North America), American cars became shapeless blobs ... look at the style, feel the feel of the Nissan Altima or the Toyota Camry (often designed and made in America) compared with most of the Big Three’s offerings, and the comparison is pathetic ...

In other words, the problem is not the U.A.W. The problem is not so much legacy costs. The problem is that management stopped making cars that Americans wanted to buy and drive.

Finally, still one more gem from Sunday Business. (Newspapers may be dying, but, damn, the good ones are sure interesting). This one is from Randall Stross' column on why Apple rules the retail world for electronics.

Apple stores extend an “emotional connection” to their customers that Sony’s do not, Mr. Ander said. The absence of such a connection, he said, was a common failing of manufacturers who venture into retail on their own ...

Wendy Liebman, the founder of WSL Strategic Retail in New York, was equally critical of the Sony Style store, which she faulted as being merely “a place of stuff.” She said that a successful brand excites a passionate attachment, the way Starbucks or Target do, and that Apple’s stores exemplify “emotional connection.”

“People can just walk in, absorb the fumes and feel like the smartest technophile in the world,” she said. Let’s add that there is only one place to buy computers that features Geniuses at all times.

Responsive. Nimble. Emotionally connected. Sexy good looks.

See? What's so hard about that?

1 comment:

  1. Give people products they will crave.

    The New York Daily News does that.

    How many other newspapers can say that?