The Coca-Cola Company (NYSE:KO) has been an extraordinary long-term winner for investors. It’s one of the most recognized brands throughout the world, and its product diversification has led to continued success. However, a more health-conscious consumer is now less interested in sparkling beverages, which has led to decreased demand for Coke, Sprite, and Fanta. Fortunately, Coca-Cola is seeing growth in other areas.
By The Coca-Cola Company (NYSE:KO)’s own admission, the best way for the company to measure its brand strength is through changes in unit-case volume, which is based on average daily sales. Unit cases refer to soda that you would purchase at a store, whether it’s a single bottle or a case.
Determining a trend
Unit-case volume growth increased 1% worldwide in the second quarter year over year. Since this doesn’t tell us much, we have to look at this story by region. Before moving forward, it should be noted that each region is broken down into sparkling beverages (soda) and still beverages (juices, water, ready-to-drink tea). All numbers are based on year-over-year volume growth.
Eurasia & Africa
This is one of two regions that has seen growth in both beverage types, which has been thanks to effective marketing campaigns and increased packaging and pricing options.
1). Unit-Case Volume Growth: Up 9%
2). Sparkling Beverages: Up 7%
3). Still Beverages: Up 15%
Marketing for the 2014 Sochi Winter Olympics in Russia and The Coca-Cola Company (NYSE:KO)’s 50% ownership in Aujan Industries have played significant roles.
Latin America is the only other region that has seen increased unit-case volume growth for both sparkling and still beverages.
1). Unit-Case Volume Growth: Up 2%
2). Sparkling Beverages: Up 1%
3). Still Beverages: Up 2%
The growth in Latin America stems from new ad campaigns as well as different price points and packaging options.
The Pacific is yet another region showing more growth in still beverages.
1). Unit-Case Volume Growth: Up 2%
2). Sparkling Beverages: Even
3). Still Beverages: Up 4%
In India, there has been equal interest in both sparkling and still beverages. In China, the Chinese consumer is especially interested in juice and water.
The American consumer is much less interested in soda than in the past due to health concerns.
1). Unit-Case Volume Growth: Down 1%
2). Sparkling Beverages: Down 1%
3). Still Beverages: Up 5%
The good news for The Coca-Cola Company (NYSE:KO) in North America is that it’s seeing strength in bottled water (Dasani and Smartwater) and ready-to-drink tea (Gold Peak). Juices, Simply, and Minute Maid, are also performing well with volume growth rates of 3%, 4%, and 3%, respectively. Sports drinks, on the other hand, have suffered a 2% drop.
Europe remains a black hole for many companies, and The Coca-Cola Company (NYSE:KO) is no exception.
1). Unit-Case Volume Growth: Down 4%
2). Sparkling Beverages: Down 3%
3). Still Beverages: Down 6%
Coca-Cola is attempting to build its brands in the region, but it’s an uphill battle, considering the weak economic environment.
Coca-Cola vs. peers
Coca-Cola might have a stronger brand than PepsiCo, Inc. (NYSE:PEP), but PepsiCo is no slouch. For instance, PepsiCo is a more diversified company, especially thanks to its Frito-Lay division, which includes Doritos, Lay’s, Tostitos, Fritos, Cheetos, and more.
PepsiCo, Inc. (NYSE:PEP) also hits on the healthy consumer angle with Tropicana (nutritious juices) and Quaker. Additionally, it owns Gatorade (popular sports performance and rehydration drinks). Overall, PepsiCo owns 200 brands, 22 of which do over $1 billion in annual sales.