Carbonated soft drinks form a key part of Coca-Cola’s (KO) business. The category is under pressure as consumers are moving toward healthier beverage choices like bottled water and ready-to-drink tea.
In 2016, sparkling beverages accounted for 72% of Coca-Cola’s worldwide unit case volume, while still beverages accounted for the remaining 28%. The company’s Coca-Cola brand alone represented 45% of the worldwide unit case volume in 2016.
Changing consumer tastes have been negatively impacting the volumes of sparkling beverages. In 2Q17, Coca-Cola’s overall unit case volume growth was unchanged on a year-over-year basis. The company’s sparkling soft drink volumes were flat in the quarter.
However, volumes of juice, dairy, and plant-based beverages were up 3%. Volumes of water, enhanced water, and sports drinks rose 1% in 2Q17. Coca-Cola’s tea and coffee volumes grew 2% in 2Q17.
Rival PepsiCo’s (PEP) North America Beverages segment experienced a 2.5% decline in its carbonated soft drink volumes in 2Q17. The segment’s noncarbonated beverage volumes rose 4% in 2Q17.
Focus on sparkling beverages
Given the importance of sparkling beverages in Coca-Cola’s overall portfolio, the company is taking several initiatives to improve the performance of this category. Coca-Cola is introducing and reformulating several low-calorie and no-calorie versions of its soda beverage brands to cater to the growing demand for healthier beverage choices. The company has more than 500 products in the pipeline with reduced sugar levels.
Coca-Cola continues to roll out its revamped Coca-Cola Zero Sugar globally. In 2Q17, Coca-Cola Zero Sugar volumes grew by double digits in Europe, the Middle East, and Africa, as well as Latin America. The company is also introducing affordable small sparkling beverage packages in several markets.
We’ll discuss Coca-Cola’s valuation in the next part of this series.