Aug 27, 2017
Will This Israeli Grocery Chain Break Coca-Cola's Stronghold on the Israeli Soda Market?
Grocer mounts an audacious private-label challenge to powerhouse that controls 90% of the local cola market.
The first shot in Israel's version of the cola wars was fired on Friday when bottles of Super-Sol's private label brand reached store shelves around the country.
The flagship version of Super-Sol's private label soft drink comes in bottles sporting the white lettering over a red background familiar to generations of Cola-Cola drinkers around the world, but they sport with word "Cola" in English. The product is made in Turkey by a Japanese company called DyDo and comes in regular and low-calorie versions.
Super-Sol is Israel's biggest supermarket chain and private label products now make up a fifth of its turnover. It hasn't hesitated to take on local powerhouses like Tnuva and Osem with lower-price products and has scored big successes with dairy (though it's been less successful with baby products).
But in taking on Coca-Cola, the grocery chain is treading into dangerous territory because brand loyalty in the category is so intense. Central Bottling Company, the local Coca-Cola bottler, controls some 90% of the cola drink trade, which racks up 1.6 billion shekels ($450 million) in annual sales.
Its biggest rivals, locally bottled versions of Pepsi and RC, trail badly behind even though they are priced much lower. Jafora Tabora tried to get a foothold in the market three years ago with a cola called Schweppes 22, but pulled out after just a year and a 12-million shekel investment.
Super-Sol itself took a stab at the cola market shortly after the 2011 social-justice protests created a heightened sense of consumerism. It didn't succeed, but since then Super-Sol's private label business has grown much stronger.
Online, the food retailer is offering its private label cola for 4.30 shekels for a 1.5-liter bottle. In packages of four the price goes down to 3.72 a bottle and 3.11 for packages of eight now on sale.
That compares with 6.20 for a single bottle of Coke and 5.98 per bottle in six-packs. Super-Sol's Cola is priced about same as Pepsi and RC.
Uri Kilstein, Super-Sol's executive vice president for commerce and marketing, said he was optimistic about the chain's chances. "Retailers all over the world offer private label cola and many of them have succeeded quite well in market shares and sales," he said.
But people in the industry are skeptical."While it's a cheaper product than Coca-Cola, it it's going to take away sales it will take them from Pepsi and RC, which are priced at about the same level as Super-Sol private label products," said one executive, who asked not to be identified.
"Anyone who's buying Coca-Cola, even though Pepsi and RC are available for less, won't change his shopping habits just because Super-Sol is offering a cheaper product," he added, predicting that Super-Sol will have trouble earning back a return on its investment because it's not going to grow the category.
An executive at a medium-sized retailer dismissed the new cola as a "gimmick," recalling the bitter defeats of others who have tried to take on Coca-Cola. Industry sources said they were now waiting to see whether Central Bottling would lower Coca-Cola prices, which it could do before the Rosh Hashanah holiday next month. They added, however, that it would be up to the bottler and that they wouldn't cut prices themselves.
"My profit margin on Coca-Cola is already nil. Central Bottling will be constrained about discounting because it's a monopoly," said another grocery executive.