- Rising health concerns have triggered the global sugar war
- How is Coca-Cola surviving in the war?
- What makes Coca-Cola a popular company among consumers as well as in the equity market?
The FMCG sector, particularly in the United States and other developed countries is facing the challenge of changing and evolving consumer preferences. This is primarily driven by a deteriorating health condition of the population. According to a World Health Organization (WHO) report, 39% of adults (18 years and above) worldwide are overweight. The primary reason for this is changing lifestyle (from active to sedentary) and excessive sugar intake, particularly from on the go sugary drinks. Further, with a rising awareness in the US and worldwide, the FMCG sector is witnessing a change in consumer preferences away from these sugary drinks to healthier options. In one of its reports, WHO recommended a limit to intake the added sugar to no more than 10% of the total daily calorie/energy intake.
In order to address this rising concern, authorities in most countries have implemented a ‘sugar tax’ on these carbonated drinks, which have sugar content above a prescribed level. It was implemented in most parts of the US in 2017 and in the first year, this was able to bring down the sales volume of soft drinks by ~10%.
But despite these evolving consumer preferences in the last few years, the impact on the world’s largest beverage company; The Coca-Cola Company had been inconsistent and negligible. Televisory do see a decline in its top line numbers from ~$47 billion (2013) to ~$35 billion (2017). However, this was primarily driven by restructuring, currency fluctuations and acquisitions/divestitures. On the other hand, the organic revenue grew by ~3% on an average during this period.

Hence, regardless of the changing FMCG landscape, Coke is still a popular brand among consumers. According to Forbes 2018, Coca-Cola is the 6th most popular brand with a brand value of $57.3 billion, it leads in the beverage category as all the top 5 positions are being held by the technology brands; (in the order) Apple, Google, Microsoft, Facebook and Amazon.
Behind its unshakable popularity is its constant efforts to evolve with the evolving consumer choices. Coke has been at the forefront to introduce new and healthier products in response to increasing health concerns. The management does recognise this changing dynamic within the industry and has been proactive to adhere to these efforts. The CEO of this largest beverage company, James Quincey stated during the Consumer Analyst Group of New York (CAGNY) conference (2017) that ‘We’ve been very clear that for us to drive sustainable, profitable growth of our brands, we also need to encourage and enable our consumers to control added sugar consumption. We are making a very conscious effort to not just expand our portfolio, but to shape our portfolio in a very deliberate way.’
However, the story, in the beginning, was different, Coke (along with other soda companies) tried every possible option to prevent soda taxes from becoming a law. Nonetheless, having faced the defeat in that attempt, Coke decided to shift its focus and work in the direction of diversification to add healthier alternatives in its portfolio.
Though Coca-Cola was already present in various (still) beverage categories such as health drinks, juices, etc., post the implementation of sugar taxes, it has intensified its efforts on still drinks such as bottled water, tea and ready-to-drink coffee to build a portfolio of what it calls ‘consumer-centric brands’. The company has been quite vocal about it through its taglines such as ‘The World Is Changing. So Are We’.

In the last 5 to 7 years, Coke has introduced various new and healthy products/variants across all beverage categories ranging from sparkling soft drinks to juices and ready to drink tea and coffee. It has also reintroduced some popular brands with new flavours and packaging to give its products a refreshing look and eventually attract more customers. The company particularly intensified its focus on still beverage categories.
Few key launches are enumerated below:
- In 2017, Coca-Cola relaunched Coke Zero as Coca-Cola Zero Sugar with an improved recipe and renewed packaging.
- In May 2017, the firm launched low calorie and low sugar range of juice drinks and lemonade.
- Launched lemon, the lime flavour of sprite in collaboration with McDonald’s.
- Launched new flavours of bottled iced coffee such as ‘Shot in the Dark’ coffee espresso blend and Pumpkin Spice bottled iced coffee.
- Launched a new nutrient enhanced version of vitamin water active; hydrating drink for fitness enthusiasts.
- Coca-Cola Japan’s Ayataka, a green tea brand, and I LOHAS, a premium mineral water brand, both crossed the $1 billion retail sales mark in 2016.
- In May 2018, it launched its first alcoholic drink in Japan, a lemon-flavoured fizzy drink available with 3%, 5%, and 7% alcohol content.
Apart from these organic launches, it has also been active in the inorganic industry to expand and diversify its portfolio, some of the key acquisitions are captured below.

More recently, in August 2018, this beverage behemoth announced the acquisition of British coffee chain Costa Coffee for $5.1 billion, which added further diversity to its product portfolio. Costa Coffee with around 3,800 stores in over 30 countries sells 23.5 million cups of coffee each month. Its revenue has grown by ~14% in the last 5 years. Furthermore, Costa has already begun reducing sugar content in its deserts and aims to lower this in drinks by one-fourth by 2020 as compared to what it was in 2015. The world coffee market is estimated to be worth $80-$100 billion as of August 2018 and is expected to grow by 5.5% (2018-2023 [Source: Mordor Intelligence]). Thus, there lies a great scope of expansion in this area for the new parent, thereby, making Costa a perfect blend in Coca-Cola’s ‘consumer-centric’ portfolio.
The result of the diversification can be seen in the annual report card of its sparkling vs still beverage segments. In the last 5 years, the growth in sales volume for the company as a whole was primarily driven by a growth in still beverages as compared to sparkling drinks. Moreover, though sparkling beverages still forms a bigger chunk in its total sales volume, it has witnessed a continuous decline over the last 5 years.

New launches, as well as acquisitions, were directed to build the company as a ‘total beverage company’, present in all possible beverage categories. Its efforts to evolve has clicked not only with consumers but also with the equity market and the analyst community. The market has reacted well in the last few years despite its plunging top line. The company’s share prices over the last few years have surged by ~7% (CAGR) from 2013 to August 2018. Thus, Coca-Cola has been striving hard to drive shareholders’ return on the back of the consumer-centric product portfolio.
We at Televisory believe that its urge to consistently develop in order to stay relatable and popular among consumers has paid well so far, though a lot is yet to be done. Looking at the company beyond its top line numbers reveal that Coca-Cola is definitely not the victim of this changing industry dynamics. However, we also believe that Coke as the conventional soda brand may lose its value over the next 5 to 10 years, but Coca-Cola as a ‘total beverage company’ will stay relevant for consumers as well as the global beverage industry.