Soda makers have become bad guys in the US, Europe, and other developed nations. They are often held responsible for the growing obesity epidemic, which brings with it hordes of diseases like diabetes, heart problems, hyper tension and the list can go on.
As awareness increases, it is no surprise that soda giants like The Coca-Cola Company (NYSE:KO) and PepsiCo, Inc. (NYSE:PEP) are seeing falling sales in the world’s largest soda market – the US. Thus, the beverage makers have turned their attention to emerging nations like China, India and Brazil to fuel growth.
Recently, Coca-Cola announced its strategy to tackle the anti-obesity campaigns while at the same time driving growth in countries like China and India. Let us take a closer look.
They say “If you can't beat them, join them." And The Coca-Cola Company (NYSE:KO) seems to be doing just that.
It has said it will not advertise its products to children below the age of 12, it will support more physical activity programs, and will offer more zero- or low-calorie products in all the 200-odd countries where it operates. The company will also print the calorie counts clearly on its packaging.
The Coca-Cola Company (NYSE:KO) has been making such pledges from around 2007. It started with the US, in the UK it stopped advertising to children since 2009, and now it is intending to carry these initiatives across the world.
The new pledges are aimed to improve the image of the company for sure but they have a deeper significance.
In today’s world obesity is not confined to the US and first world countries alone. The menace is rising at an alarming rate in the developing nations like India and China. With the growing middle-class population, there is a rise in people’s disposable incomes and also their propensity to indulge in fast food and soda.
According to World Health Organization, by 2015 50%-57% of the Chinese population will become either overweight or obese while in India it would be around 31% for adult men and 29% for adult women.
So, it is not rocket science that the future of the soda industry lies more in diet drinks and low-calorie drinks than the traditional sugar syrups. Already in China, healthy beverages have increased their market share while there has been a fall in the share of carbonated beverages last year. The Coca-Cola Company (NYSE:KO) wants to be right there when the demand for low-calorie soda starts gaining momentum.
The appeal of markets like China and India lies in their huge 1 billion-plus populations. And the per-capita soda consumption is very low there compared to matured markets like the US.
The Coca-Cola Company (NYSE:KO) estimates that in the US, the annual per-capita consumption of Coca-Cola products is about 403 servings while it is 39 in China and only 12 in India. This opens up huge opportunities for the company.
As Coca-Cola increases its penetration of these markets it will make sure that there is adequate supply of low-calorie drinks. Currently, compared to the US where 41% of the total Coke sales is made up of zero calorie drinks like Diet Coke and Coke Zero, in China zero-calorie options make up no more than 10% of total sales. In some Chinese coastal cities the percentage is still in the high single-digit range.
The Coca-Cola Company (NYSE:KO) is investing heavily in China and India. Last week it announced that it will pour $4 billion in China through 2014. The company will build a new plant in the country while investing in transportation and retail outlets. Coca-Cola is planning to grow China into its largest beverage market.