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Coke's Innovation Initiative

July 12/Business Monitor International (BMI) -- The Coca-Cola Company has submitted a planning application to build a new $300 million manufacturing and innovation facility in Ireland. The plant will be built in the county of Wexford, south of Dublin, and include facilities to pilot new products. The move comes despite a slowdown in carbonated soft drink sales in Ireland over the last five years, and the focus on innovation is likely to be a response to this trend, which has also been witnessed across much Western Europe.

The new plant is expected to produce concentrated syrup for Coca-Cola's existing products and could also play an important role in the firm's future innovation strategy. Coca-Cola's decision to base the facility in Ireland is likely to stem from the country's relatively generous corporate tax rates and may also be due to Ireland's policy of tax exemption on patent income.

The growing demand for "functional" soft drinks that offer health benefits has increased the amount of scientific investment needed to develop new drinks, and patents are now playing an important role in protecting firms' intellectual property. Ireland's attitude toward patents has already encouraged several major pharmaceutical firms to relocate to the country, and as the science behind functional food and drink products becomes more sophisticated, a similar trend could be witnessed within the food and drink sector.

Sales of carbonated soft drinks in Ireland have been steadily decreasing for the last five years. This has been mainly driven by the wellness trend, with consumers opting for healthier beverages such as bottled water and fruit juices. The sports and energy drinks category has also witnessed dynamic growth, with sales doubling between 2002 and 2007. These trends are forecast by BMI to continue over the next five years, and with this is mind, Coca-Cola must surely be looking to develop products that take advantage of these movements in the soft drink sector.

The sports and energy drink category offers particular promise. Coca-Cola's size and financial might should give it the freedom to innovate and develop new advanced products in this sector that can be backed with scientific evidence. In addition, substantial innovation in the functional drink category, which is still in its infancy, should help the global beverage firms such as Coca Cola and PepsiCo stand out from their smaller competitors.

From the July 21, 2008, Prepared Foods e-Flash