The Coca-Cola Company CEO Muhtar Kent says the ‘romance of the smaller package’ is critical to building more romance around brands such as Coke in the US.
Discussing Coke’s Q2 2014 results for the quarter ending June 27 this morning, Kent said the company was making “steady progress to restore our global growth potential”.
But despite solid group figures including global volume growth of 3% in the quarter, Coke disappointed with flat volume sales for unit cases in Europe, North America and Latin America.
Group net operating sales fell 1% to $12.574bn year-on-year while reported operating income fell 2% to $3.17bn.
Sparkling performance in North America
But Coke still managed to outperform the rest of the industry with stable sparkling beverage volumes in North America during the quarter, which it said brought volume and value share gains.
The company’s sparkling price mix increased 3% in the quarter, as Coke continued to implement its new pricing strategy.
Judy Hong, an analyst at Goldman Sachs, asked Kent and his colleagues about the drivers for North American pricing on the sparkling side, and wanted to know if the company could sustain its policy?
Kent said that a “very big portion” (60%+) of growth for brand Coca-Cola in North America during Q2 and year-to-date came from higher-margin smaller packs (7.5oz and 16oz), with mix driving revenue; he added that Coke was “operating with tremendous discipline and diligence in marketplace”.
‘Solid financial performance year to date…’
Despite volume challenges in carbonates and widespread retail promotions, Kent said value share in North America was being driven by smaller-sized packs for brands such as Coca-Cola, with 7.5oz (213ml) Mini Cans (which offer better margins for Coke and retailers, and entice consumers with a health fillip of guzzling less soda) and 16oz immediate consumption packages selling strongly.
“We see a way forward in terms of building more romance with the brand through smaller packages – that’s an important element in terms of what’s being discussed,” Kent said.
Summing up Coke’s quarterly performance, CEO and president Kent insisted the company was making steady progress towards restoring its global growth potential.
“As we now reach the mid-point of the year, we have delivered sound financial performance year to date and demonstrated sequential improvement in our global volume growth,” he said.
“While I am pleased with our progress to date, we remain focused on the work required to return our business to the level of sustainable growth we and our shareholders expect,” Kent added.