The competitive landscape of Korea's zero-cola market is changing. It used to be that when Coca-Cola set a new trend, Pepsi, the latecomer, responded, but recently Coca-Cola has released a new product targeting Pepsi's hit.
According to the food industry on the 2nd, Coca-Cola Beverage, a subsidiary of LG H&H(051900), released "Coca-Cola Zero Lemon Lime" the day before. It is to expand the zero-cola flavor lineup.
In Korea's cola market, Coca-Cola had long led the market, with Pepsi from Lotte Chilsung Beverage following. But the situation was different for lime-flavored zero cola.
Lotte Chilsung Beverage launched "Pepsi Zero Sugar Lime" in 2021. Since then, lime flavor has established itself as a leading product group in Korea's zero-cola segment. After the market had sufficiently formed, Coca-Cola decided to release a product in the same category in Korea, leading to talk that, unusually, the leading brand has adopted the latecomer's strategy.
According to Lotte Chilsung Beverage's analysis of Nielsen Korea data, Pepsi Zero Sugar's share of Korea's zero-cola market rose from 2.8% in its first year, 2021, to 40.2% in 2022, and reached 47% last year, showing an upward trend.
The overall zero-cola market in Korea also grew rapidly. The size of Korea's zero-cola market expanded about 40 times, from 7.3 billion won in 2021 to 288.2 billion won last year. Zero cola's share of the overall cola market also climbed from 21% in 2021 to 42% last year.
Meanwhile, despite the market's expansion, Coca-Cola Zero's share declined. Coca-Cola Zero's share fell from 59.8% in 2022 to 53% last year. This is also why some say the new product is more defensive, aiming to hold on to consumers moving to Pepsi rather than pioneering a new market.
Some also say LG H&H's beverage business performance acted as a burden. According to the Financial Supervisory Service's electronic disclosure system, LG H&H's refreshment division sales in the second quarter of this year rose only 0.5% from a year earlier, while operating profit fell 15.1%. Some brands, including Coca-Cola and Monster Energy, grew, but overall business profitability worsened due to sluggish domestic consumption and rising raw material prices.
A Coca-Cola official said, "Coca-Cola Zero has steadily introduced products with various flavors such as cherry, vanilla, lemon, and lime worldwide, expanding the zero portfolio," and added, "Coca-Cola Zero Lemon Lime was launched to reflect recent trends so that Korean consumers can enjoy a wider variety of flavors, regardless of competing products."
Lotte Chilsung Beverage plans to extend its first-mover advantage. A Lotte Chilsung Beverage official said, "On Jun. 6 we launched 'Pepsi Extra Fizz,' which enhances carbonation persistence, and on Aug. 2 we will hold the 'Pepsi Festival' at Sajik Baseball Stadium in Busan, expanding consumer touchpoints," and added, "We will continue to strengthen brand competitiveness with products and marketing that actively reflect market trends."
◇ "Competition to secure flavors will intensify"
The industry also sees the market evolving from a competition over "zero or not" to "which flavor to choose," spurred by this rivalry. With competition in various flavors such as cherry, lemon, and vanilla taking off after lime, projections are that companies that differentiate not only by brand but also by taste and experience will secure market competitiveness.
Lee Jong-woo, a professor in the department of distribution and marketing at Namseoul University, said, "Previously, consumers chose products based on brand, so Coca-Cola showed strength, but recently younger consumers are selecting products by considering whether they are zero drinks and also the taste." He added, "It may be a bit late from Coca-Cola's perspective, which had a high dependence on the original product, but competition to secure a wider range of flavors is likely to unfold going forward."