The Coca-Cola Company (KO): Can This New Soda End a Sugar Slump?

Page 1 of 2

The Coca-Cola Company (NYSE:KO) announced its intention of rolling out a new drink named Coca-Cola Life, which will use a combination of sugar and Stevia to lower calorie count and make soda healthier.

The Coca-Cola Company (NYSE:KO)

Coke’s move follows concerns that the traditional drinks business may be fizzing out. PepsiCo, Inc. (NYSE:PEP) has released Pepsi Next and Pepsi Max in an attempt to bring back customers who want health alongside their bubbly soda.

What’s wrong in the soda business

U.S. soda consumption is in what some are calling a secular decline. In 2012, Americans drank less soda than the year before, cutting back by 1.2% from the previous year. Soda consumption has dropped for eight straight years, and rests now at the lowest level since 1987, according to CNBC.

The few growth markets are difficult to tap. Bottled water and energy drinks, like those produced by publicly-traded Monster Beverage Corp (NASDAQ:MNST), are the fastest growing drinks in the developed world. The Coca-Cola Company (NYSE:KO) was rumored to have an interest in acquiring Monster to grab its impressive, double-digit growth, though no acquisition ever came through. As Monster grows, the synergies and cost savings from a large acquisition are slowly eroded. It now appears that Monster will remain its own brand throughout its growth phase.

That leads Coca-Cola to turn to a new market. The company believes that a The Coca-Cola Company (NYSE:KO) Life product, which will have fewer calories but offer the sweetness of Coca-Cola, will bring back customers who are running to soda alternatives. The cola will replicate a popular choice at self-service machines: a mix of diet and regular to get the taste consumers want without the calories they don’t.

It’s much better to keep your existing customers than find new markets. Industry analysts believe that once consumers make the switch from sodas to alternatives, they rarely, if ever, come back. That explains why The Coca-Cola Company (NYSE:KO) and PepsiCo, Inc. (NYSE:PEP) have expanded into new bottled waters, fruit drinks, and non-carbonated supplement waters like Vitamin Water.

If the soda duopoly loses soda consumers, then the two major players should have an alternative to keep them customers of their brand.

Should Coca-Cola and PepsiCo fear losing customers for life?

Not exactly.

What The Coca-Cola Company (NYSE:KO) and Pepsi have is a duopoly on distribution. The two rivals have their own stable of soft drinks and bottled beverages which you can find on every supermarket shelf, in every restaurant, and in vending stores in millions of buildings around the world. They have the market in their firm grasp.

The only challenger to the duopoly in distribution is fast-growing Sodastream International Ltd (NASDAQ:SODA), which sells soda-making devices and flavor cartridges to make fresh soda at your home or in the office. SodaStream still lacks the widespread distribution of Coca-Cola and Pepsi products, but it does have an added health advantage: you can make your soda as flavorful and as healthy as you want with one of its countertop devices.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!