Coca-Cola’s ‘marketing in smaller sizes’ strategy begins to pop as volumes rise
Coca-Cola’s decision to shrink its cans while pushing products at a more premium price is beginning to show signs of paying off after it reported a 3 per cent rise in sales volume in the fourth quarter ended 31 December.
The impetus for the shift is that smaller packages are growing much faster than larger packages, amid vicissitudes in consumer health concerns, meaning that Coke is essentially able to sell more Coke more often and charge more for it.
Chief operating officer James Quincy told investors on a call today (9 February) that the increase in sales volume comes with an increased marketing effort behind mini-cans and 8 oz. glass bottles.
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“We grew purchase transactions 3 per cent as they [consumers] increasingly reach for the mini cans, smaller, premium aluminium which drives more margin. This strategic focus was seen on Sunday night during the Superbowl which focussed exclusively on the mini can package.”
While full year net revenue declined 4 per cent, organic revenue grew 4 per cent which Coca-Cola credited to an increase in marketing investment and media spend behind its core brands. That investment comes after the drinks giant slashed its advertising agency roster down to two global providers and around 10 regional providers.
Coca-Cola is targeting $3bn in annual cost savings by 2019, and has been cutting costs via job reductions and selling some of its bottling operations and factories. Today it announced it will refranchise all of its North America bottling operations by the end of 2017 to become “less capital intensive with higher margins and returns”, according to chief executive Muhtar Kent
"This acceleration of our global refranchising marks a step change in our efforts to refocus The Coca-Cola Company on its core business of building strong, valuable brands and leading a system of strong bottling partners. When this transformation is complete, we will look very different than we do today”.
As part of its turnaround Coca-Cola last month rolled out the One Brand strategy it trialled in Great Britain globally in a bid leverage the power of the Coke brand to shift sales of lower and no calorie variants such as Coke Zero and Coke Life.