What's going on?
On Tuesday, Coca-Cola reported revenues and profits in better shape than expected – but flexing its sales strength didn’t quite convince investors it had a six-pack of its own, as the stock fell by a flabby 2%.
What does this mean?
In the age-old battle between Coca-Cola and PepsiCo, Pepsi’s been winning for most of the last five years – thanks in part to its swiftness in spotting and adapting to the consumer trend of eating and drinking healthier foods and beverages.
But Coca-Cola’s been making a comeback – its shares have performed 12% better than Pepsi’s over the last year. In the first quarter of 2018, its marquee Coke brands grew by 4% globally compared to last year – and healthier products were at the heart of it! Specifically, Coke Zero Sugar improved on last year’s sales by more than 10% and Diet Coke’s funky new rebranding (including new flavors to bubble up millennials’ fickle taste buds) helped it get back to its growing ways in North America.
Why should I care?
For you personally: Coca-Cola’s sugar-free focus might be at a Goldilocks moment.
Several major countries (including the US and UK) have recently introduced a “sugar tax”, aimed at lowering the sugar content in your drinks and tackling obesity (since we’re all stretching those waistbands). Given its recent investments in drinks companies like Honest Tea, the market is now playing into Coke’s increasingly healthy hands – helping the company, not your waistline, to grow. The result may be a healthier bottom line for all!
For markets: Small brands are having a big impact in consumer goods.
The recent flurry of large consumer goods companies acquiring smaller businesses illustrates the challenges of a low-growth environment. And it’s not just affecting product prices, but share prices too: Coke’s shares are almost flat over the last five years, but big acquirers like Unilever (which bought Dollar Shave Club in 2016) have been rewarded by their shareholders – its stock is up over 40% in the same period.