Coca-Cola's diet drinks boost Q2 performance
- Coca-Cola's second quarter earnings exceeded Wall Street expectations, reporting net income of $2.32 billion compared to $1.37 billion in the year-ago period, according to a company release. Total revenue for the quarter fell 8% to $8.9 billion, a decline the company attributes to refranchising its bottling operations, but these results still topped analyst estimates of $8.54 billion.
- The Atlanta-based beverage giant said that its Diet Coke brand continues to see stronger sales thanks to a revamped, slimmer can design and a new line of flavors, including Ginger Lime and Feisty Cherry. Coca-Cola's sparkling drink volumes rose 1% on double-digit growth of Coca-Cola Zero Sugar during the second quarter, and Powerade drove 5% growth for water, enhanced water and sports drinks. The company expects at least 4% growth in organic revenue and at least 9% growth in adjusted income for the fiscal year.
- "We're encouraged with our performance year-to-date as we continue our evolution as a consumer-centric, total beverage company," James Quincey, President and CEO of The Coca-Cola Company, said in the release. "We have the right strategies in place and remain focused on achieving our full year guidance."
Despite the soda category's struggle to stay relevant, Coca-Cola has found new growth by revamping brands that have slipped out of consumer favor over the years — namely Diet Coke. The company relaunched the brand in January with a taller, slimmer can and four new flavors, and consumer interest in the new product suite appears to be holding strong.
This sales uptick is no small feat. Consumer rejection of sugary soft drinks, as well as their growing disinterest in diet-focused formulas, has dealt a blow to soda makers. This shifting consumer behavior has also driven the meteoric rise of bottled water, which became the largest U.S. beverage category by volume in the U.S.
To keep a strong foothold in this blossoming segment, Coca-Cola has also poured investments into premium water varieties. The company has checked the market dominance of cult favorite sparkling water LaCroix — as well as new brands such as Pepsi's bubly beverage line and Nestle's new lineup of 10 sparkling spring water brands — by acquiring the right to distribute Top Chico sparkling water in the U.S. Coca-Cola has also entered the sparkling, flavored water space with its Dasani brand. This overall strategy seems to be paying off, as the company's water and sports drinks grew 4% for the period.
Rival PepsiCo has also responded to shifting consumer behavior in this category by rolling out its first sugar-free Gatorade variety, as well as G2, a reduced-sugar version that contains half the calories and carbohydrates of the brand's original formula. It will be interesting to see if these new beverages, which PepsiCo CEO Indra Nooyi said are "off to a great start" during a call with analysts, will prompt similar innovation by Coca-Cola.
Coca-Cola's recent moves reflect CEO James Quincey's vision to grow the manufacturer into "a total beverage company." This strategy has resulted in a shift away from lower-performing juice brands such as Minute Maid, which are no longer viewed by shoppers as a healthy breakfast staple.
The goal has also sparked Coca-Cola's investment in e-commerce paths to growth, such as the digital MyCoke platform, which allows retail customers to schedule future orders and refill orders online. This strategy has contributed to more than a 5% uptick in sales revenue, and could allow the soda giant to gain a step ahead of competitors who may be less digitally focused.
It remains to be seen if the company's investments, especially in its diet beverages, will continue to capture strong growth. If the category's performance holds steady, it could signal new opportunity for diet brands across the soda space that have been viewed as out-of-touch with consumer interests — so long as brands can pinpoint the innovations and value-adds that would lure their customers back to these beverages.
- The Coca-Cola Company The Coca-Cola Company Reports Continued Strong Results in Second Quarter 2018
- CNBC Coca-Cola tops earnings expectations as diet drinks fuel global growth
- U.S. News and World Report Coca-Cola Says Diet Sodas Doing Better After Revamping
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