Bubbling competition in Baltic cola market

RIGA - A visitor from another planet might find it odd that a sugary, fizzing, brown drink is one of this world's strongest unifying symbols. The Baltics have acquired a taste for cola as well, and the business of this beverage is one of the clearest signs that the region is integrating with the global economy.

According to Martins Jansons, general manager for Coca Cola Dzerieni in Latvia, demand for his firm's products has been growing so rapidly that there are no available figures for its place in the beverages market, which includes tea, coffee and milk. From a zero base back in 1992, sales have increased by 25 to 30 percent per year. However, people in the Baltics still guzzle just a fifth as much Fanta, Coke and Sprite as they do across the sea in Scandinavia.

While there is no direct connection between Coke's Commonwealth of Independent States and Baltic operations, similar histories and markets mean that a certain amount of coordination takes place.

For example, there are many consumers in the Baltics who watch only Russian TV, so ad campaigns can be borrowed from the big country to the East.

"Every market is different, but the Baltics are not more difficult in any particular way," said Jansons. "All of these countries come from the U.S.S.R., but their development rates are different, so what is happening in Latvia today could be Russia's future," said Jansons.

Coca Cola widely employs its global logos and sponsorships of major sporting events such as the World Cup and Olympics to sell the products in the Baltics. Jansons said that free trade agreements between the Baltics are leading to single market conditions, but there are some interesting differences between the three countries.

For example, Sprite is far more popular than Coke in Lithuania because that country is basketball mad and is very responsive to the soft drink's sponsorship of the NBA.

Unfortunately, Coke's major global competitor, Pepsi Cola, could not be contacted for this article. However, anecdotal evidence suggests that it has fallen behind in the race, despite having had a foothold in the market back in Soviet times.

It had better hurry up or risk being left flat. Earlier this year, the American company Triarc struck a deal with the Latvian drinks maker Cido to bottle its Royal Crown (RC) Cola in the Baltics.

According to Cido Marketing Manager Glenn Eliott, his company started production of its three brands of RC soft drinks in May. While its first priority is establishing itself in Latvia, it eventually aims to have 10 percent of the market in Lithuanian and Estonia as well.

"We want to be a truly Baltic beverage company," he said.

The success of Cido, and its competitor Gutta, in the fruit juice market is a sign that local producers can successfully fight against foreign competition. According to Eliott, while four years ago 50 percent of juices sold in Latvia were contraband imports, now the local players have 90 percent of sales.

Cido's juices and nectars hold 10 percent of the market in Estonia and 6 percent in Lithuania.