Bloomberg report this week that Coca-Cola Co.’s first quarter earnings were helped by growth in its Diet Coke and Coca-Cola Zero Sugar carbonated drinks brands.
Today, most consumers are moving away from carbonated, sugary drinks and looking for healthier options. However, in the first quarter of 2018, the conglomerate saw its drinks becoming popular again, especially Diet Coke. This growth is being attributed to a major design overhaul, which has led to the company seeing growth in that segment in the North American region for the first time since the last quarter of 2010.
Coca-Cola’s CEO James Quincey, on a call with analysts stated that the company got off to a strong start with returning Diet Coke to the North American market. And while it is still only early stages, the initial consumer response is encouraging. Additionally, while a full turnaround may not happen just yet, this return to growth in the soda market is heartening for the company.
According to the industry publication, Beverage-Digest, Coca-Cola’s Diet Coke saw a 4.3% drop in sales last year. And while the beverage still remains North America’s 3rd biggest carbonated soft drink has been on a steady decline for the last few years. The fact that consumer tastes have been shifting away from carbonated soft drinks makes this sudden spurt all the more remarkable.
But now, it seems that Americans hadn’t given up on Coke yet, they were just looking for a new look. Therefore, Diet Coke got its biggest make-over ever and this make-over was announced in January this year. And the change was drastic. Taller, thinner cans were introduced and the design on the cans were changed. And the most drastic change was that four new flavors were introduced –besides the classic Diet Coke flavor. These flavors are: Twisted Mango, Ginger Lime, Zesty Blood Orange and Feisty Cherry.
This gamble actually worked. Quincey told analysts on the earnings call that the new Diet Coke flavors made up about one-third of the brand’s growth in the first quarter.
Even the company’s upgraded version of Coca-Cola’s Zero Sugar did well. In fact, globally, the brand saw gains in the double digits. Thanks to the boost in Diet Coke and Coca-Cola Zero Sugar, even classic Coke grew by 3%.
The challenge the company now faces is figuring out exactly what worked to increase their sales. Was it the new packaging, the slimmer cans, the new flavors or the marketing campaign? Quincey stated that the company would be looking at releasing more flavors for Diet Coke.
Interesting enough, it wasn’t just the Diet Coke and Coco-Cola Zero Sugar brands that did well this last quarter. The company’s healthier juices and waters, which are non-branded, also raked in sales. The company’s range of sparkling waters also helped boost earnings in quarter one.
In fact, the company’s gamble on acquiring mineral water brand, Topo Chico’s distribution rights in the US has really paid off. The water brand’s value in the US has already skyrocketed 30% in the first quarter of 2018.
In recent years, Coca-Cola has been shifting its focus to healthier drinks and has been developing a range of drinks that push beyond sodas. Quincey gets the credit for turning a soda company into something much more – a total beverage company.
Quincey’s predecessor, Muhtar Kent, also gets some credit for his efforts in steering the company in this new direction. It has taken Coca-Cola years to reach this point, but now that it has, investors finally have something to smile about.