Coca-Cola Sales Rise, Lifted by Higher Soda Demand--2nd Update

Date : 10/18/2019 @ 3:45PM
Source : Dow Jones News
Stock : Coca Cola Company (KO)
Quote : 52.41  0.7 (1.35%) @ 1:00AM
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Coca-Cola Sales Rise, Lifted by Higher Soda Demand--2nd Update

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By Jennifer Maloney 

Coca-Cola Co.'s carbonated soft drinks are making a comeback.

The beverage giant over the past few years has expanded into coffee, tea, dairy and water as consumers shifted away from sugary sodas. But in the latest quarter, CEO James Quincey said, the company's sales rose in large part thanks to variations on its namesake cola -- including some that contain less sugar.

A diet version called Coke Zero Sugar has grown 14% by volume globally so far this year, Mr. Quincey said. And unit sales of the company's 7.5 oz "mini cans" have increased 15% this year in the U.S. Meanwhile, the company is rolling out a coffee-flavored variant called Coca-Cola Plus Coffee and a new energy drink called Coca-Cola Energy, available in more than 25 countries and expected to launch in the U.S. in January.

"It's a reflection of how we've adapted our strategy to what needs to be done to help people moderate their sugar," Mr. Quincey said Friday in an interview. Young adults who previously didn't drink soda are now starting to do so, he said, because of new offerings such as Coke Zero Sugar, which tastes more like original Coca-Cola than Diet Coke does.

"I think what you're starting to see is, yes, some reconsideration of the category," he said. "Has it flip-flopped overnight? No, it hasn't, but I think you're starting to see that if you bring relevantly marketed innovation for the right occasion to people then they will engage."

The energy and coffee drinks are also available in sugarless versions.

The company is reaching new demographic groups with Coke Zero Sugar and Coca-Cola Energy, Bernstein analyst Ali Dibadj said. "The former can bring younger drinkers into cola and the latter is to get older drinkers into energy. We'll see if this success of expanding the scope of consumer persists, but so far, it seems to be working OK."

Coke cleared a legal hurdle earlier this year with Monster Beverage Corp. to launch its new energy drink in the U.S. Monster, which counts Coca-Cola as a distribution partner and a significant shareholder, had sought to block the sale of Coke's energy drink, citing a noncompete agreement.

Mr. Quincey said he hopes Coca-Cola Energy will appeal to people who don't currently buy energy drinks: "people who perhaps didn't come into the category because of the flavor profile that tends to be pretty strong.... It's an easier way into the category."

After launching the drink in Europe, the company is tweaking the recipe for the U.S. launch to make it taste more like original Coke, he said.

In January Coke spent $5.1 billion to buy British coffee-shop chain Costa Coffee. Sales in the U.K. have been hurt by a dip in consumer confidence amid Brexit worries, Mr. Quincey said. Coke is now talking to food-service customers in the U.S. about bringing Costa's coffee machines here, he said.

Coke also is eyeing the competitive seltzer market. The Atlanta-based company in 2017 bought a sparkling mineral water from Mexico called Topo Chico, which has a cult following in Texas. Rival PepsiCo Inc. then launched a flavored seltzer called Bubly that has taken share from market leader LaCroix.

"I think we have to see what we do next," Mr. Quincey said.

Coca-Cola on Friday reported higher quarterly profit and sales, extending a recent streak of growth after several years of sluggish demand for sugary drinks.

Organic revenue, a measure of sales that excludes currency swings, acquisitions and divestitures, increased 5% from the same time a year ago. By that measure, the company now forecasts at least 5% growth for the full year.

PepsiCo, which also has a large snacks business, reported organic-revenue growth of 4.3% for the latest period as it ramped up advertising for its biggest brands.

Coke reported a profit of $2.59 billion, up from $1.89 billion a year ago. Net revenue rose about 8% to $9.5 billion.

Global unit case volume grew 2% in the quarter. In North America, unit case volume rose 1%, driven by a 3% increase in Coca-Cola and double-digit growth in Coke Zero Sugar.

Sales of water, enhanced water and sports drinks grew 2% in the quarter. Tea and coffee volume grew 4%.

--Patrick Thomas contributed to this article.

Write to Jennifer Maloney at jennifer.maloney@wsj.com

 

(END) Dow Jones Newswires

October 18, 2019 11:30 ET (15:30 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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