SAINSBURY AGREES TO ALTER COLA LABEL

JAMES FALLON

LONDON (FNS) -- J. Sainsbury here has agreed to modify the label design of its store-brand cola cans to head off a legal battle with Coca-Cola Co. over trade dress similarities.

The dispute put a spotlight on trade dress issues for brand marketers and retailers at a time when brand owners were pressuring the government to tighten restrictions on look-alike products.

The U.K. food retailer sparked a cola war in Britain when it relaunched its Sainsbury's

Classic private-label cola in an agreement with Canadian manufacturer Cott Corp. in April.

Cott, which already has dented Coca-Cola's market position in North America, formulated the new Sainsbury cola to the retailer's specifications. It is producing the syrup at Cott's U.K. subsidiary Ben Shaws.

The relaunch upset Coke, which claimed Sainsbury's cans and bottles copied the appearance of Coke, which confused customers. It even hired two public relations companies and an investment bank to battle the new Sainsbury cola and threatened the company with legal action.

Coke also ran full-page newspaper ads with the message, "If anyone tells you their cola's the same as Coke, don't buy it."

The complaints were a tempest in a can, Sainsbury claimed, but it changed the design of its product to address Coke's concerns, "in view of our successful trading relationship with the Coca-Cola company over many years," said David Sainsbury, the group's chairman.

Sainsbury changed the typeface on the can and omitted an underline of the world Classic. The chairman admitted that if the group had not made the changes, "our relationship with Coke would not have been a very happy one."

The relaunch of the Sainsbury private-label cola occurred as brand manufacturers were complaining to Parliament about the copycat tendency of private-label products. A brand owners group that included Procter & Gamble, Unilever, Nestle and Mars asked for amendments to the U.K. bill on trademarks to ban retailers from using packaging on their private-label products that is similar to that of the major brands. Parliament so far has resisted the idea.

Initial results show the relaunch has been successful, Sainsbury said. After the first three weeks, Sainsbury's Classic had increased its share of the U.K. cola market to 15% from 2.5% to 3% previously, according to AGB Research. Sainsbury's Classic accounted for 60% of sales of cola in Sainsbury's stores, up from 20% previously, while Coke's share fell to 33% from 63%, Sainsbury said.

Meanwhile, overall cola sales rose to 3 million liters a week from 2 million liters previously, he added. Analysts say Sainsbury's Classic represents a significant threat to Coke, which dominates the United Kingdom's 670 million pound ($1 billion) cola market with a 60% share.

Cott's private-label cola has gained a 30% share of the Canadian market and the company reportedly is in talks with other U.K. food retailers about developing private-label colas for them. Cott is said to be aiming for a 5% to 10% share of the British market within the next two years.

Sainsbury's Classic has been launched in regular, diet, caffeine-free and diet caffeine-free versions. The company initially is pricing the cola at 59 pence (88 cents) for a 2-liter bottle, compared with Coke's 1.05 pounds ($1.57). The regular price of Sainsbury's Classic will be 69 pence ($1.03) for a 2-liter bottle, although a spokeswoman could not say when the promotional price will come to an end.

Sainsbury's Classic is the second time recently the United Kingdom's largest food retailer has upset brand manufacturers. The company last year launched a new private-label laundry detergent under the subbrand Novon that captured about 25% of its detergent sales, upsetting such detergent manufacturers as Unilever and Procter & Gamble.