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Coca-Cola’s ‘marketing in smaller sizes’ pays off as profit rises, but revenues continue to slide

coca-cola

Coca-Cola’s strategy of pushing smaller cans and bottles at premium prices to lift margins in North America has saved the drinks giant after it reported a 1 per cent rise in volumes in the region, which helped off-set flat volumes globally and falling revenues.

The drinks business said it increased prices 3 per cent globally in the second quarter as it increasingly focuses on revenue over volume to spur growth following a series of disappointing financial quarters. However, this is the first quarter that overall volumes at Coca-Cola haven’t grown since 1999, a factor blamed on tough economic conditions and weakening demand in China and some emerging markets.

Overall non-carbonated drinks helped to offset waning sales of fizzy drinks as consumers wise up to the health implications of sugary drinks.

Coca-Cola's total revenue for the quarter fell by 5 per cent to $11.54bn, missing the $11.69bn analysts had expected.

Speaking about pushing smaller packaging last November, Coca-Cola’s chief financial officer Kathy Waller said that a 12-ounce can traded to a 7-ounce can is a 30 per cent reduction in volume, but it’s an increase in revenue.

Interestingly the drinks business this time declined to pull out sales of Coke, instead focusing on sparkling and non-sparkling products.

Speaking on a call with investors this morning, James Quincy, chief operating officer, explained the focus on revenue over growth.

“We are moving the business to more of a revenue focus. We believe in our segmented revenue approach, it’s not that we have forgotten about volume or don’t believe it’s an underlying driver, but as well look at more developed markets we are looking at a revenue strategy with smaller packages and higher pricing. The best way to think about health is the revenue growth.”

Earlier this month Coke launched a £10m campaign for its rebranded Coke Zero Sugar, which has been given a makeover to taste more like the brand’s original Coke in a bid to get more people to try its reformulated sugar-free variant.

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