Small cans resulting in big sales for Coca-Cola
Good things came in small sizes for Coca-Cola last quarter. The company reported sales that topped forecasts, thanks in part to a double-digit increase in volume for its 7.5-ounce mini cans.
The smaller-sized cans appeal to more health-conscious consumers who are increasingly watching what they drink and eat but may not want to switch to diet sodas that contain artificial sweeteners and other chemicals. The word “diet” did not appear once in the company’s earnings release and was not mentioned on the conference call with analysts on Friday morning either.
But Coke CEO James Quincey pointed out during the conference call that mini-can sales grew 15% in the United States alone during the quarter.
Sodas in Coke’s mini cans are just 90 calories and have 25 grams of sugar, compared to a standard 12 ounce can that has 140 calories and 39 grams of sugar.
The company also said that its Coca-Cola Zero Sugar brand posted double-digit sales growth. Coke changed the name of its Coke Zero product to Coca-Cola Zero Sugar a few years ago.
Coke hopes to attract more Millennial customers
Quincey said during the conference call that the strong sales of smaller-sized sodas and Coca-Cola Zero Sugar are examples of “a revitalization of the sparkling business,” adding that the company is starting to win over younger customers that may have been shunning Coke products.
“Has it flip-flopped overnight? No, it hasn’t,” Quincey conceded, but he said he was encouraged to see that the Coke brand was becoming more relevant with Millennials.
Wall Street cheered the results too. Coke’s stock rose nearly 2% Friday. Shares are now up 16% this year. That’s in line with the broader market but is lagging the performance of top rival Pepsi.
Pepsi, which also owns the Frito-Lay snacks business, Quaker Oats and Gatorade, reported strong sales and earnings earlier this month thanks to its more diverse product mix. The stock is up nearly 25% in 2019.
Coke is also ramping up to launch its own energy drink in America next year as well. The company said Friday that Coca-Cola Energy and Coca-Cola Energy Cherry will be available in the US in January and that there will be zero-calorie versions of them as well.
But Coke’s solid sales show that there may still be some life left for Coke’s core carbonated beverage products — albeit with some twists.
The company said in Friday’s earnings report that it saw strong demand for the launch of its Coca-Cola Plus Coffee beverage in international markets. Coke executives told CNN Business earlier this year that it was hoping to bring the brand to the US in 2020.
Coca-Cola Energy debuted in Spain and Hungary earlier this year and the company said it is now available in more than 25 countries.
“The rollout supports ongoing efforts to deliver more beverage options that meet changing preferences, lifestyles and tastes. It’s also an example of the company’s commitment to move quickly, bring more drinks to the shelf,” the company said in the earnings release.
Coke needs to be about more than cola
Still, the company has been trying to move beyond its soft drink roots and become more of what Quincey likes to call a “total beverage company” — a move that it hopes will attract younger consumers.
To that end, Coke said that sales of tea and coffee worldwide grew at a faster clip than soda in the third quarter, led by solid demand in Japan and Turkey as well as strong sales of Gold Peak tea in North America.
Coke is also aggressively promoting its brands of water, juice, milk and sports drinks to move beyond classic colas.
The company is the largest investor in energy drink maker Monster Beverage as well, with a nearly 19% stake. And Coke bought UK-based coffee chain Costa earlier this year for more than $5 billion.
Coke is continuing to tout its sustainability and recycling efforts, another move that could win over socially conscious millennial customers. The company has started to sell its Dasani water in aluminum cans and bottles, for example.