Are Healthy Trends Proving to Be a Problem for Coca-Cola (NYSE:KO)?

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By Hanson So on October 24, 2014 Consumer Staples

The Coca Cola (NYSE:KO) Company‘s sparkling portfolio is stained this quarter with its less than expected output in terms of revenues. The revenues remained stagnant and global increase of only 1% in the third quarter led to a 5.5% decrease in the share. The growth within the North American market and Europe remained very little, which is alarming as its makes up 35% of the company’s total net volume. Due to economical fluctuations, consumer spending rate has also declined resulting in not so great quarterly finish for Coca Cola (NYSE:KO).

In these extreme times, the company has planned to take extreme measures to improve cash flow. These strategic plans are set at savings, the company plans to save $1 billion in productivity by 2016, $2 billion in 2017 and $3 billion by 2019. These plans are to be attained through supply chain optimization, resource and cost allocations, system standardization as well as media investments.

Volatile economies have played a major role in the year’s earnings. As Coca Cola (NYSE:KO)’s strategy was to enter into emerging economies, where at this stage penetration is at the low but purchasing power or income of people is rising steadily. These included the Latin America and Eastern Europe market, which made up the 30% of the net volumes.

Other figures revealed a 5% increase in the Eurasia and African market; whereas unit sales in Russia, Belarus and Ukraine fell by 3% in the third quarter. This was a result of slow economic growth and inflation, which led to people cutting down on irrelevant purchases. Also the fall in the currency value led to a decrease in the net earnings.

Back home, there was also a 1% decrease in the North American region, due to changes in consumer preferences, which led them away from sugar and calorie packed drinks. The juices in the market faced a similar dilemma. The domestic market rounds up to one-fifth of Coca-Cola (NYSE:KO) sales, with that declining the company is thinking of new launches and investments into good strategy building. One such launch in the pipeline is Coca-Cola (NYSE:KO) Life, the drink is naturally sweetened. Even though it might hit the mark with some consumers as a low calorie drink but artificial sweeteners come with their own list of health warnings.

In the midst of losses, the ray of light comes in small packages. The company has noticed that even though the sales volume has remained stagnant or fell down, the small package sales seem to be making head wave. Despite the fact that mini cans contain the same amount of calorie as the 20 ounce bottle, but consumers are opting for it due to a small size offering with less cumulative calorie count. These sales rose by 3%, hence the pricing of the 7.5 ounce mini can is set higher than the 20 or 24 ounce package, contributing to rise in net pricing. As similar trends seem to be taking over Coca Cola (NYSE:KO) needs to focus on its price mix and take advantage of the situation.