Demand for still beverages
Still beverages like sports drinks, ready-to-drink teas and coffees, and bottled water are seeing strong demand as health-conscious consumers move away from soda and sparkling beverages. In the first nine months of fiscal 2015, Coca-Cola (KO) reported 1% growth in its sparkling beverage unit case volume while still beverage volumes rose 4%. This trend is expected to continue in the fourth quarter of fiscal 2015.
Still beverages dominated in 3Q15
In 3Q15, which ended October 2, 2015, Coca-Cola reported 2% growth in sparkling beverage volumes while still beverage unit case volumes grew 6%. The growth in Coca-Cola’s global still beverage volume growth was driven by 4% growth in the ready-to-drink tea category, 5% growth in sports drinks, and 11% growth in packaged water.
As the above graph shows, Coca-Cola’s still beverages volume growth outperformed sparkling beverages across all geographies in 3Q15. Coca-Cola constitutes 0.9% of the First Trust Consumer Staples AlphaDEX Fund (FXG) and 0.8% of the iShares Dow Jones U.S. ETF (IYY).
PepsiCo’s (PEP) North America Beverages segment’s still beverage volumes grew 10%. Carbonated soft drink volumes fell 2%. Dr Pepper Snapple’s (DPS) carbonated soft drink volumes grew 2% and its noncarbonated beverage volumes grew 4% in 3Q15.
Coca-Cola is pursuing growth opportunities in still beverage categories both organically and through inorganic strategies. In August 2015, Coca-Cola bought a ~30 % stake in Suja Juice, a California-based manufacturer of organic juices. The acquisition of this popular organic juice line should Coca-Cola attract health-conscious consumers who are avoiding sugary soda beverages due to health concerns like obesity and diabetes.
In 2015, Coca-Cola expanded into the plant-based protein drinks category. It acquired China Green Culiangwang Beverages Holdings’s beverage business. Coca-Cola also purchased a 16.7% stake in Monster Beverage (MNST) in June 2015 as part of a strategic deal that should help it levere the high-growth energy drink market.