Coca-Cola Betting Big on Smaller Packages
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 firstname.lastname@example.org
(END) Dow Jones Newswires
February 16, 2018 12:29 ET (17:29 GMT)Copyright (c) 2018 Dow Jones & Company, Inc.