Coca-Cola Betting Big on Smaller Packages
February 16 2018 - 12:44PM
Dow Jones News
By Cara Lombardo
Coca-Cola Co. is betting that smaller packages that command
higher prices will boost sales in the company's struggling soda
business this year.
Chief Executive James Quincey told investors on an earnings call
Friday that Coke's 7.5-ounce cans and other downsized offerings
continue to sell briskly and will be a key part of its plans to
increase organic revenue by 4% this year. He also pointed to
rebounding sales abroad in countries such as India and Brazil.
Analysts have questioned whether Coke's target for organic
revenue, which excludes currency swings, acquisitions and
divestitures, is realistic. Beverage companies have seen soda
volumes drop as consumers switch to healthier options such as
bottled water and teas, and analysts expect sales across the
industry to grow by about 2% to 3% this year.
Mr. Quincey said on a call with media that mini cans and other
smaller packages account for between 10% and 20% of Coke's sales by
volume and he expects that to increase incrementally over the next
several years. The company launched the mini cans in the U.S. in
2010 and has since relied on them and other smaller packages to
offset volume declines.
"It's an ongoing evolution because in the end you still have to
engage with consumers on why it's an interesting choice for them,"
he said.
Coke, whose brands include Sprite and Powerade, also is hoping
that new Diet Coke flavors and redesigned cans will help cut losses
in its soda business. U.S. volumes of Diet Coke, the third largest
carbonated soft drink in the U.S., dropped about 4.3% last year,
according to industry publication Beverage Digest.
"I'm not sure just the flavors and the packages would get us
there, but it's certainly going to be a next step in the right
direction," Mr. Quincey said when asked about its early
results.
Coke's overall drink volumes were flat in the fourth quarter, as
were its carbonated-drink volumes, which include soda, sparkling
water and energy drinks. Volumes in its tea and coffee segment,
which includes Honest Tea, rose 2%. Water and sports-drink volumes
also rose 2%, while juice and dairy-beverage volumes dropped
2%.
The Atlanta-based company's fourth-quarter revenue declined 20%
to $7.5 billion from a year ago as it continued to refranchise its
bottler operations to cut costs. Organic revenue rose 6%.
Coke reported a loss of $2.8 billion, or 66 cents a share,
compared with net income of $550 million, or 13 cents a share, a
year ago. The loss stemmed from a one-time $3.6 billion charge in
the fourth quarter to account for the new U.S. tax law.
Excluding one-time items, the company earned 39 cents a share,
up from 37 cents a share in the year-earlier period. Analysts had
expected adjusted earnings per share of 38 cents.
Shares, down about 2% so far this year, rose less than 1% in
early trading.
Coke this week also nominated two new board members: Christopher
Davis, chairman of investment firm Davis Advisors, and Caroline
Tsay, CEO of Compute Software Inc. Adding the two would increase
the company's board size to 16 members from 14.
Write to Cara Lombardo at cara.lombardo@wsj.com
(END) Dow Jones Newswires
February 16, 2018 12:29 ET (17:29 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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