Retro drink hits 50 years

Czech soft-drink company Kofola a.s. was in a tough spot in the years following the Velvet Revolution. Foreign brands such as Pepsi and Coca-Cola were grabbing up market shares as Kofola's sales declined, and many forecast the domestic drink's demise. Nearly two decades later, however, the company, now Kofola S.A., produced a record net profit of 443 million Kč in 2009, and the soft drink is now second only to Coca-Cola and trailed by Pepsi in the Czech Republic. Now celebrating its 50th year, Kofola has reinvented itself and set out ambitious plans for the future.

There is perhaps no greater sign of the communist-era soft drink's comeback success than its presence on tap next to Czech beers at local pubs.

"Kofola from the tap is our flagship," said Hana Bednářová, head PR manager for Kofola.

While proud of its product's popularity as a draft in local bars, the expanding company has among its many ambitions a plan to increase its presence in the hospitality industry, especially in more refined establishments. In the next couple of years, Kofola would like to compete with Karlovarské minerální vody and Coca-Cola Česká republika in the saturated soft-drink market.

In 2002, SANTA-Nápoje Krnov bought the Kofola trademark and original recipe from Ivax for 215 million Kč at a time when the product was becoming a generic name for a subset of soft drinks. SANTA-Nápoje Krnov then changed its name to Kofola.

"Fortunately, in 2002 we bought the trademark and recipe for the Kofola drink. ... Since then, we have been the only ones who can produce Kofola," Bednářová said.

Sales of the product grew over a three-year period after the merger, by 4.6 percent in 2002 and 9.4 percent in 2004.

Last year, Kofola also saw its consolidated sales rise 38 percent to more than 9 billion Kč according to a report by the Warsaw Stock Exchange. In the first quarter of this year, the Kofola group made a net profit of 15 million Kč compared to a loss of 100 million Kč for the same period a year ago. Employee numbers have risen, and the group has companies in the Czech Republic, Hungary, Poland, Russia and Slovakia, where it employs a total of 2,715 people, 839 of them in the Czech Republic.

The Kofola group also ranks as the fourth most admired company in the country after Škoda, ČEZ and Student Agency, according to the Czech Top 100 competition.

Kofola's successful revival was a "coincidence of lucky factors" aided by an extremely clever advertising campaign, says Jiří Ra bel. Rabel was a member of the board at Pepsi distributor General Bottlers at the beginning of the 2000s, when Kofola began to turn the corner.

"They did [advertising] right, an old fashioned brand with a new look. ... It was a symbol of the soft drink industry of the 1980s, and they managed to create nostalgia among the population of an old communist brand without showing the past in a negative sense," he said.

Since 2001, Kofola has been running a distinctive campaign in the Czech media with the slogan "If you love her, nothing else matters." The campaigns have won several Nutcracker awards for their inventiveness and, according to Rabel, have "created a retro look for the product."

Kofola's advertising strategy has been to balance nostalgia for the product with a new draw for younger customers, Bednářová said.

"Our advertising is based on traditional values and selling Kofola's history," she said. "History and tradition certainly play a part, but we also want to focus on young people with this image of Kofola as the 'cool' brand."

The advertising campaign has paid off; Kofola is the country's most popular soft drink for 26.7 percent of consumers, second only to Coca-Cola with 47 percent, and ahead of Pepsi's 14.5 percent, according to a 2010 survey by EuroMonitor International. In Slovakia, Kofola is No. 1.

"Kofola is one of the big success stories of Czechoslovakia and currently has a strong presence in three key markets: the Czech Republic, Slovakia and Poland," Milan Štábel, an analyst at EuroMonitor International, told The Prague Post.

The brand has benefited from a growing movement toward healthier ingredients, as the drink contains 30 percent less sugar than traditional cola, no phosphoric acid and also comes at a lower price.

Even the most ambitious plans still face a saturated soft-drink market, as only marginal total volume growth is expected to occur in the next few years. Soft-drink sales showed slight decline in 2009 as the industry reached saturation, according to a EuroMonitor report. The industry appears to be moving toward drinks that purport to have added vitamins and lower sugar content, the report concluded.

Kofola will have a tough job of moving forward, but Bednářová said the company is prepared to meet these challenges.

"New flavors and formulas are important, and we're paying attention to this trend in our company," she said.

In 2008, Kofola launched Kofola Bez, a sugar-free version that is considered the biggest innovation in the company's history.

While impressed with Kofola's capacity for innovation, Štábel does not expect Kofola to overtake Coca-Cola.

"Kofola is not expected to topple Coca-Cola over the next five years in these markets despite its attempts to further strengthen its position," he said.

The biggest challenge will be overcoming the increasingly segmented market, Rabel added.

"Kofola is not sold in upscale bars," he said. "What we are seeing is the increasing interest in the premium segment, and increasingly, the good bars only want to sell premium soft drinks."

- Filip Šenk contributed to this report.

Cillian O'Donoghue can be reached at
codonoghue@praguepost.com