Dive Brief:
- Coca-Cola will discontinue its Zico coconut water brand and may cut other less-popular versions of Coke and Diet Coke, The Wall Street Journal reported.
- The cuts are part of the beverage giant's ongoing efforts to streamline its portfolio to focus on offerings that can achieve large scale, the paper said. Among the other brands that are under review include Diet Coke Feisty Cherry; Coke Life, a lower-calorie version of the cola sweetened with stevia; and regional soda brands such as Northern Neck Ginger Ale and Delaware Punch. Coca-Cola also is planning to end retail-store sales of Hubert's Lemonade.
- Coca-Cola already has streamlined its brands during the pandemic. Earlier this year, Coca-Cola said it was discontinuing its Odwalla juice business and divesting its refrigerated trucking network that it uses to deliver the beverage.
Dive Insight:
Coca-Cola has pledged repeatedly during the pandemic to improve the efficiency of its operations and hone its product offerings to focus on those with the highest demand. While companies such as PepsiCo and Unilever have reduced the products they sell in an effort to prioritize volume and get the most popular items through the supply chain, few have been as outspoken as Coca-Cola when it comes to ending production altogether of some brands.
In the case of Zico, The Wall Street Journal noted it trails market leader Vita Coco, and U.S. coconut water sales have been generally falling during the last few years after a prolonged period of growth. The paper noted that while sales of the liquid have risen 4.4% this year to date, Zico’s sales plunged 46% during the same period because Coca-Cola focused on other products in higher demand. The decision to cut Hubert’s Lemonade from stores, as well as the possibility of dropping other offerings in the coming months, follows a similar path of cutting brands that simply aren't its best-selling products.
As Coca-Cola refines its product assortment, the company also has turned to job cuts to help streamline its business. Coca-Cola in August said it would offer buyouts to about 4,000 employees in the U.S., Canada and Puerto Rico as part of a broader restructuring. Job cuts could follow depending on how many people accept the buyouts, it said.
Coca-Cola CEO James Quincey has said the company needs to improve how it spends money to innovate and then market the hundreds of brands it sells around the world. By trimming its portfolio, Coca-Cola can move those dollars to its popular flavors in Coke and Diet Coke, or smaller but promising growth brands like Topo Chico. This year alone, Coca-Cola introduced Topo Chico Hard Seltzer that will be the manufactured, marketed and distributed by Molson Coors in the U.S. in 2021.
Quincey has noted publicly that of the company's 400 "master brands," more than half are single-country products with little to no scale. He estimated the combined revenue of those brands is approximately 2% of the company's total. Coca-Cola has been cutting products in recent years he categorized as "zombie brands," but the pandemic has quickened that initiative.
"We were getting good at entering and experimenting and innovating and it was driving growth," Quincey said at a Barclays conference in September, according to a Seeking Alpha transcript. "But we just [haven't] been disciplined enough in converging on a few winning answers in the categories."
When Quincey took the helm of Coca-Cola in May 2017, he vowed to turn the business into a "total beverage company" and move further beyond its namesake sodas into trendier drinks popular with consumers. He has done just that by purchasing the aforementioned Topo Chico, buying Costa Coffee for $5.1 billion and taking a minority stake in premium sports drink maker BodyArmor.
Even though the world's largest nonalcoholic beverage company will continue innovating and introducing new product offerings, a bigger part of Coca-Cola's strategy, at least in the near term, will be addition by subtraction.
"What it means to be a total beverage company is always going to evolve because people's tastes and needs will continue to evolve," Quincey wrote in response to questions submitted by Food Dive last year. "Five to 10 years from now, many brands may be different or might not exist. New ones will take their place. This journey doesn't end."