While their advertisements continually convince me that the world is at peace and everyone loves drinking Coke, the truth is always revealed in the numbers: the company’s stock may have rose 3 percent last week and overall revenue increased, but heavy marketing costs and increased health concerns over the fizzy drinks of yesteryear may signal a downswing in the carbonated drink industry as we know it, calling for Coke to adapt its business.
Globally speaking, Coke’s actual soda sales dropped in their last quarter for the first time in fifteen years. American health advocates cheered, as not only less Coca-Cola was sold in the U.S., but Europe and Mexico. In the latter, historically the biggest market for Coca-Cola, a recently imposed soda-tax probably did most of the damage, and may lead the way for similar taxes in other countries.
“Healthier” alternatives like Diet Coke have not proved sustaining either, as claims against the beverage’s use of potentially dangerous artificial sweeteners have sunk sales.
So where does this revenue bump come from? Coke’s ‘still drinks’, like Powerade, Dasani, and Minute Maid, provide reliable backup, generating over $1 billion for the company every year. In the previous quarter, sales rose 8 percent for the company’s still drink brands. Also, while soda sales have fallen in big markets like Mexico, Eastern markets like China and Japan are starting to carry the foreign carbonated burden, and 80 percent of the company’s volume is still overseas.
Coca-Cola CEO Muhtar Kent plans to focus on the balance between the still and carbonated brands under their flagship, while also massively increasing marketing spending, adding $400 million to already billion dollar costs. Competition like Pepsi Co. are doing the same. That said, increased marketing may not offset the health side of the equation in the long run. The time could come where Coca-Cola’s name brand product will have to take a back seat to the less-carbonated brands. #DasaniIsBeautiful just doesn’t have the same ring, does it?