Coca-Cola praises marketing investment for helping to shift consumer mindsets about the soft drink company and its namesake brand.
The Coca-Cola Company is seeing strong growth thanks to innovations across its portfolio, including on its namesake Coca-Cola brand, which has struggled amid the shift to lower sugar soft drinks.
The soft drink giant saw net revenues increase 8% year on year to $9.5bn (£7.3bn) for the three months ending 27 September, driven by innovation, new packaging and low and no-sugar variants.
Speaking on an investor call today (18 October), Coca-Cola CEO James Quincey praised “consumer-centric” innovations such as Coca-Cola’s first own-brand energy drink – Coca-Cola Energy – and Coke Zero for its strong results – especially in its namesake brand.
Results have been better than expected, so much so that Coca-Cola has improved its outlook. It now expects organic revenues to increase by at least 5% for the full year, while operating profit growth should be between 8% and 9%. That is up from a previous operating profit target of between 7% and 8%.
Quincy has been leading efforts to diversify Coke beyond fizzy drinks and into juice, water and other beverages as consumers shift away from sugar-heavy soft drinks.
In order to turn the business around, Quincy was quick to point to the importance of marketing. He said: “You need innovation, you need marketing, you need packaging and you need execution.”
Trademark Coca-Cola has grown retail value by 6% for the year to-date through an accelerated pace of innovation and optimising price and packaging.
Quincey noted the brand was attempting to shift consumer perceptions of Coca-Cola to see it as a healthier option.
Speaking about tackling this mindset in younger consumers, Quincey said: “You need some reconsideration of the category” highlighting attempts to shift perceptions from soft drinks to sparkling because of the healthier connotation.
He added: “If you bring relevantly marketed innovation to the people they will engage.” However, he acknowledged this change in mindset won’t “flip-flop over night”.
Another innovation, Fuze Tea, grew sales by 3%. The iced tea brand was launched two years ago in the UK but has seen positive momentum and share gains this quarter thanks to increased marketing. Quincy noted the improvement was “showing the importance of sustained investment to bring challenger brands to leaders”.
What’s next for Costa?
The results come more than a year after Coke struck a £3.9bn deal to buy the UK’s Costa Coffee chain. Quincy assured investors that the business had been fully integrated into the company but was hindered in the short-term with the fallout from Brexit.
He explained: “It is fair to say in the short-term that Brexit has affected consumer sentiment [but that is similar] to the entire business outlook in the UK.”
In the long-term, the brand will expand innovations in ready-to-drink having already launched a low-sugar ready-to -drink Costa product in the UK.
Costa Coffee Ready-To-Drink was launched in June and includes three of the brand’s most popular variants – Classic Latte, Caramel Latte and Black Americano.
Quincey teased investors that sales of the product are already “ahead of expectations and doing well in context of our coffee strategy”.