Coca-Cola Pouring Cash Into Australia to Stem Sales Decline
By Mike Cherney
SYDNEY--Coca-Cola Co. is pouring cash into an effort by its Australian bottler to halt a decline in soft-drink sales in the country, which remains a challenge for its global business despite the high-profile launches of new products recently.
The Australian bottler, Coca-Cola Amatil Ltd., said Wednesday that unit case volume fell 2.5% and revenue fell 3.3% in Australia in 2017. In contrast, Coke, which owns a roughly 31% stake in Amatil, said unit case volume was flat globally in 2017.
Coke Chief Executive James Quincey said on a conference call last week that Australia is among the places to push smaller package sizes as consumers move away from guzzling sugary carbonated beverages and view them as a treat to drink sparingly. In September, for example, Amatil started selling slim 250-milliliter cans of sugar-free flavored sparkling water under its Mount Franklin brand.
Some companies view Australia as a good market to test new products given its similarities with the U.S., and any products that fall flat could indicate trouble ahead in other markets.
The decline in Australia comes even after the launch of Coke No Sugar in the middle of last year, which is marketed as Coke Zero Sugar in the U.S. One big grocery chain, Woolworths Group Ltd., initially refused to stock the new drink, saying customers already had enough low-sugar options, though it is selling the drink now. Amatil said its performance in the second half of the year was better than the first and that there were "positive indicators" from No Sugar and other new products.
Amatil plans to spend more than $30 million this year to stabilize carbonated-beverage sales and grow sales in other categories that are showing promise, like coffee and energy drinks. The plan involves increasing the frequency of flavors which are rotated, like the recently introduced raspberry and coffee varieties, lowering prices to keep products like bottled water competitive, and investments in digital technology.
On a conference call with analysts, Amatil Managing Director Alison Watkins said it would be "fair to assume" that Coke plans to spend a similar amount.
"We're both committed," Ms. Watkins said. "This is a joint plan and the investment sitting behind it reflects that."
A spokesperson for Coca-Cola South Pacific, the drinks giant's subsidiary in the region, said the company is contributing "significant investment" on top of Amatil's amount. The spokesperson said consumers in Australia and New Zealand will see more innovative products hitting store shelves, with a focus on low and no-sugar beverages.
Coke is looking to preserve soda sales in global markets. In the U.S., it is betting that new Diet Coke flavors and redesigned cans will cut losses and has relied on smaller cans to offset volume declines.
Coke's market share in Australia is higher than it is in the U.S., but it has been falling despite the efforts to retain customers. Coke's Australia carbonated-beverage market share fell from 55% in 2012 to about 50% in 2017, while in the U.S. it actually grew from 36% to 37% in the same period, according to market research firm Euromonitor International.
Overall sales volume of carbonated beverages in Australia are down 10% over the same period, compared with 9% in the U.S., Euromonitor says.
Soda sales in Australia are "anticipated to remain negative as consumer aversion to sugar consumption persists," Euromonitor analyst Sara Agostino said.
Write to Mike Cherney at firstname.lastname@example.org
(END) Dow Jones Newswires
February 21, 2018 02:22 ET (07:22 GMT)Copyright (c) 2018 Dow Jones & Company, Inc.