Higher sale of the sugar free sodas and vitamin waters of Coca-Cola, as reported in its financial results for the third quarter, indicates that the measures that one of the largest soft drinks company has taken to address the changing consumer tastes has been successful. The company posted a better than expected revenue and profit for the quarter.
Like its rival Pepsi Co., Coca Cola – the largest beverage company in the world, is also moving towards including drinks that are non-carbonated drinks and has been investing heavily in enhanced waters such as electrolyte-filled smartwater.
With the aim of attracting the younger generation who prefer sipping lattes over gulping big sodas, earlier this year, world’s second-largest coffee chain Costa was acquired by Coke for $5.1 billion and have made an investment against a stake in Kobe Bryant-backed sports drink BodyArmor.
The media reports about Coke making some serious efforts to get into the business of making cannabis-infused drinks in North America and in Canada in the wake of more and more US states legalizing recreational and medicinal cannabis use were played down by Coke Chief Executive Officer James Quincey.
“We don’t have any plans at this stage to get into this space,” he told analysis in a post earnings cal. He also added that analysts should not assume that the company would continue with the speed of acquisitions that it has shown in the third quarter.
“M&A of course is not a strategy in and of itself – it’s an enabler of our strategy.”
Coke reported a 6 per cent increase in the third quarter for its organic revenue, or the revenues generated from its core beverage business, where growth for Diet Coke and Coca-Cola Zero Sugar have been in double digits.
There was also a 2 per cent increase in volumes – which is one of the key indicators of growth, in the third quarter which is almost the same as in the same period a year ago. There was also an increase of 2 per cent in sale of carbonated drinks grew while there was 5 per cent rise in water and sports drinks compared to just 1 percent in the previous quarter.
“(We are) starting to see growth coming back into water as we’ve done a bit of de-prioritizing and moved more into premium and innovation,” Quincey said.
The company launched a new slim line Diet Coke cans earlier this year together with new falvours in it such as ginger lime and feisty cherry. And the company pledged earlier in the month to come up with two new variants of its smartwater brand for the U.S. West coast
Wall Street analysts and investors have supported that strategy that the company has taken since the appointment of Quincey’s last year.
Following the release of the financial numbers for the third quarter reports, there was a 2 per cent increase in shares of Coke which brought the stick out of the red for this year so far. In comparison, there has been an almost 6 per cent dip in the shares of rival Pepsi for the year so far and a 5 per cent dip in the S&P consumer staples index in the same period.
“We are impressed with Coca-Cola’s ability to deliver a strong and balanced top line, suggesting that its refranchising and portfolio transformation are paying off,” Wells Fargo analyst Bonnie Herzog said.
(Adapted from Reuters.com)