Coca-Cola (KO) and PepsiCo (PEP) are making efforts to enhance their soda volumes, which have been declining due to consumers’ changing beverage preferences. On January 22, 2018, four new flavors of Coca-Cola’s Diet Coke brand hit the US grocery shelves. The new flavors are Ginger Lime, Feisty Cherry, Zesty Blood Orange, and Twisted Mango. The new flavors will be launched in the Canadian market in February.
On January 9, rival PepsiCo (PEP) announced the launch of Mountain Dew Ice, a lemon-lime flavored carbonated beverage. The new product will compete with Coca-Cola’s Sprite and smaller rival Dr Pepper Snapple’s (DPS) 7Up brand in the US market.
Will innovation help?
There has been a persistent weakness in the volumes of carbonated beverages, given their high-calorie content and alleged negative health impacts. The diet versions have also failed to deliver results.
Coca-Cola’s soda beverage volumes were flat on a year-over-year basis in 3Q17. PepsiCo’s North America Beverage segment’s carbonated soft drink volumes fell 5% that quarter.
Beverage choices such as bottled water and ready-to-drink teas have been gaining popularity among consumers. Nonalcoholic beverage companies are trying to enhance their soda portfolios by introducing fruit-based flavors, low-calorie or no-calorie options, and enhanced packaging. Aside from these initiatives, Coca-Cola and PepsiCo are also trying to enhance their soda revenues through higher prices for certain beverages.
We’ll look at the top-line expectations for Coca-Cola and PepsiCo in the next part of this series.