Coca-Cola looks for opportunities in craft to drive growth

Coca-Cola is looking for more opportunities in premium segments and craft beverages as it looks to jump on the “resurging trend” and drive growth.

The company has just revamped the Schweppes brand in the UK and launched a new range of premium mixers, Schweppes 1783. Meanwhile, in Spain it has introduced Royal Bliss, a new premium mixer brand only sold in the on-premise channel.

Coca-Cola is also building a foundation in “sophisticated flavours” with brands including Appletiser in Europe.

Speaking on an analyst call following the company’s Q3 results yesterday (25 October), Coca-Cola CEO James Quincey said: “As you know, more consumers, most notably adults, are seeking unique and distinct products with sophisticated flavours, quality ingredients, and smaller-scale craft production.

“We’re looking at opportunities in growing premium segments such as adult craft beverages.”

READ MORE: Global behemoths versus small brewers – The battle for the craft beer market

While Coca-Cola is attempting to reconfigure its business to become a “total beverage company”, it is still reliant on sparkling sales, a sector where sales are sluggish as consumers turn to healthier options.

However, while sales at the company were down in the quarter, the fall was not as bad as many analysts had feared. Sales dropped 15% to $9.1bn in the three months to the end of September, ahead of analyst expectations of $8.72bn.

Coca-Cola put this down to successful reformulation and relaunch of products such as Coke Zero Sugar. Quincey said that in markets such as the UK where it has been on sale for more than 12 months it is seeing “continued acceleration that is lifting the whole franchise”.

While he admitted that Coke Zero Sugar does at times cannibalise both Diet Coke and Coke Original, there is “additional volume and additional consumers coming back into the franchise.”

“It’s unrealistic to expect cannibalisation to be zero. But obviously the key is that to be a net positive. So, we are pleased with how it’s playing out. It’s slightly different in different countries depending on the mix of the Coke franchise in those countries, but it’s a net positive and we are encouraged,” explained Quincey.

However, he also admitted that not all its efforts have worked. For example, in Costa Rica Coca-Cola launched a Fanta sweetened with only juice and no added sugar but found that consumers saw it as an incremental not an improvement and so it has had to bring back the original formula.

“The lesson is ultimately that a single approach across all markets will not work. We need to tailor our approach based on consumer mindset and tastes in each market. Further, our model needs to be flexible, so if a brand introduction isn’t successful, we can adapt and change strategies quickly. And we have empowered our local leaders to make these key brand decisions,” he said.