uploads///Coca Cola volumes

Will Coca-Cola and PepsiCo Deliver Better Volumes in 2019?


Mar. 29 2019, Published 3:12 p.m. ET

High exposure to the soda category

Growing health awareness among consumers has been shifting them away from sugary soda beverages to better choices like bottled water and ready-to-drink tea. Coca-Cola (KO) still has significant exposure to sparkling beverages, though it has been rapidly expanding its portfolio of non-soda drinks. In 2018, sparkling beverages accounted for 69% of Coca-Cola’s worldwide unit case volume while other nonalcoholic beverage categories (like water, plant-based beverages, juice, tea, and coffee) accounted for the rest.

Coca-Cola’s unit case volume increased 2% in 2018, driven by a 2% increase in sparkling soft drink volumes. Coca-Cola’s sparkling soft drink volume growth was driven by a double-digit increase in Coca-Cola Zero Sugar volumes and a rise in low-calorie and no-calorie offerings from Sprite and Fanta.

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Coca-Cola’s tea and coffee volumes increased 1% in 2018, and water, enhanced water, and sports drink volumes rose 3%. However, volumes of juice, dairy, and plant-based beverages fell 1% in 2018, reflecting the company’s decision to deprioritize low-value juice brands in major African and Southeast Asian markets and downsizing packaging in the juice portfolio within North America.

PepsiCo’s (PEP) North America Beverages segment—its largest segment based on revenue—reported a 1% decline in its 2018 volumes as a 2.0% rise in noncarbonated beverage volumes was more than offset by a 3.0% fall in carbonated soft drink volumes.

Initiatives to boost volumes

To improve soda volumes, both Coca-Cola and PepsiCo have been developing low- or no-sugar options. Coca-Cola’s revamped Coca-Cola Zero Sugar beverage has been quite successful. In February, Coca-Cola launched Orange Vanilla Coke and Orange Vanilla Coke Zero Sugar, which marked the first flavor innovations under the Coca-Cola trademark in more than a decade.

Both beverage companies are promoting smaller packages of soda beverages.

Coca-Cola is also aggressively making strategic acquisitions in growth categories beyond traditional soda. In 2018, the company acquired a stake in BodyArmor sports drink, acquired Australia’s Organic & Raw Trading Co (maker of MOJO kombucha), acquired French fruit juice manufacturer Tropico, and acquired a stake in Australia’s Made which manufactures several healthy drinks like cold-pressed juice, protein smoothies, and probiotic milk.

The most notable acquisition from Coca-Cola was British coffee company Costa for $4.9 billion, which it completed earlier this year. This acquisition will give Coca-Cola a platform to expand in the $500 billion hot beverages market.

Notable launches from PepsiCo in 2018 include Bubly sparkling water and Gatorade Zero.


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