Beverage industry behemoth Coca-Cola is following a simple recipe, meeting consumer demand for new flavours, smaller packages, zero sugar and coffee.
Coca-Cola reported strong second-quarter results on July 23, with 6% growth in organic revenue and better-than-expected earnings. The news boosted its share price to a record high, and Coca-Cola subsequently raised its organic revenue forecast for the full year. “Our strategy to transform as a total beverage company has allowed us to continue to win in a growing and vibrant industry”, said CEO James Quincey.
Coca-Cola has expanded its beverage portfolio, adding flavoured water, tea, juices and other offerings in recent years. It has also put new twists on existing drinks, notably its namesake soda. Coke Zero Sugar, launched in 2016, has been a runaway success and is now in its third year of double-digit volume growth. According to Quincey, nearly 25% of Coca-Cola’s revenue is from new or reformulated products, up from 15% two years ago. The British-born executive was appointed CEO in 2017. He previously served as Chief Operating Officer.
Less sugar, new flavours and smaller, ready-to-go packages are attracting consumers and bringing soda back after a years-long slump. In the second quarter, a 4% volume growth in both traditional Coca-Cola and the zero-sugar version helped lift net revenue by 6.1% to $10 billion. “Our performance was largely driven by consumer demand for no-sugar versions of some of our best-known sparkling soft drink brands as well as for the smaller packages with less sugar”, Quincey said.
As part of his plan to diversify and create a “total beverage company”, Quincey has also led Coca-Cola into the coffee business. In 2018 the company bought UK-based Costa Coffee for $5 billion. Costa has nearly 4,000 stores in 32 countries, along with smaller Costa Express outlets, a roastery and at-home coffee products. This has given Coca-Cola “a strong coffee platform across parts of Europe, Asia Pacific, the Middle East and Africa”, the company said last year.
Coca-Cola has since rolled out ready-to-drink Costa Coffee in three varieties as well as Coca-Cola Plus Coffee, a blend of coffee and its trademark soda, in several markets. The beverage company is betting on its coffee innovations, express vending machines, beans and machines for food service to grow sales, Reuters reports.
Other beverage industry giants, notably Coca-Cola’s main rival, PepsiCo, are also adapting successfully to changing consumer tastes, diversifying their beverage portfolios beyond traditional sodas and offering drink brands with lower sugar, new flavours and ready-to-go packages. John Boylan, an analyst with Edward Jones, noted that “it’s a good thing when the category is strong, when there are innovations across all parties”.