How Coke and Pepsi Are Fighting Back Against the Anti-Soda Movement
Coca-Cola and PepsiCo might be beverage industry behemoths worth billions, but the dark, syrupy cola products that first made the companies so popular are now the enemy of a pro-health movement that’s placing the blame for obesity and other problems at the soda giants’ feet. Profits are down, and the future is uncertain for both companies.
But in the face of this, the companies are putting strategies in place to make their soda products more appealing to health-conscious consumers, while also venturing into other beverages to hold the bottom line. In the process, it’s possible that the companies will be able to pull off one of the oldest tricks in the book: getting consumers to pay more for less.
A report from Harvard’s T.H. Chan School of Public Health outlined several studies that link high soda consumption to obesity, especially because of targeted advertising to children and youth. For every 20 ounces of the “liquid candy,” people consume 15 to 18 teaspoons of sugar. One 20-year study found that, among the 120,000 men and women observed, consuming one extra soda per day led to weight gain of about a pound every four years.
As a result of numerous studies along those lines, sales of soda products have been in a declined state for several years. In last year’s annual report by industry tracker Beverage Digest, sales of Coca-Cola beverages declined 1.1% in 2013 from the year before. PepsiCo’s liquid sales were down 3.4%. But the largest drops for both companies came from carbonated beverage sales: Coca-Cola’s sales volume declined 2.2% in the nation in 2013, and PepsiCo’s volume decline was double that at 4.4%.
That trend has continued into 2014. In the quarterly report in September, Coca-Cola reported a loss of 8% in net income attributable to shareholders compared to the same nine-month period in 2013. PepsiCo boasted a 4% increase in its net income, but both companies saw a loss of about 0.5% in operating profits through September 2014, compared to 2013.
In the past several months both companies have begun to use the health trends to their advantage when possible, putting a greater emphasis on selling mini cans with less soda at a greater cost per ounce. It’s one way for the company to attempt to regain some of the product buying while still giving consumers the option for portion control.
Unlike when bags of cheese or cartons of yogurt change their shape but boast the “new bag, same size” sort of marketing, offering the obviously smaller cans could be the key to success for the soda companies. By offering the smaller portion-control sizes, the companies offer a solution to the reports that sodas are the reason for spikes in the rates of Type 2 Diabetes and obesity.
A regular 12-ounce can of Coke contains about 140 calories, 45 milligrams of sodium, 39 carbohydrates and 39 grams of sugar. The “mini” 7.5-ounce cans have about 90 calories, 30 milligrams of sodium, 25 carbohydrates and 35 grams of sugar.
According to the Associated Press, a regular 12-ounce can of Coke costs about 31 cents, and the 7.5-ounce cans cost about 40 cents each. That’s about 2.6 cents per ounce for the regular can, and about 5.3 cents per ounce for the same soda in a smaller container.
But at least for now, Coca-Cola executives are hopeful that the boom in selling the novelty cans will offset the losses of larger containers. The health trend has created “a tremendous opportunity for the Coca-Cola brand with our smaller packages,” said Sandy Douglas in November, the company’s North American president.
The smaller cans still represent a minority of the sales volume: The volume of sales is between 1 and 2%, Douglas said in the November consumer conference hosted by Morgan Stanley. Coke’s mini cans accounted for just 1.1% of sales volume in supermarkets in 2014, according to John Sicher, Beverage Digest’s editor and publisher. However, the mini cans accounted for about 2.2% of sales.
There’s a trend in consumer services where customers are calling for greater accountability. It’s the reason McDonald’s has struggled in the mire of public relations issues because of movies such as Super Size Me that perpetuated the perception that fast food is poor quality and extremely unhealthy. A report from the Harvard Business Review points out that those perceptions can be especially difficult to overcome.
But soda companies are certainly trying to stay ahead of politicians and health gurus placing the blame for obesity at their feet. In September, Coca-Cola, PepsiCo, and the Dr Pepper Snapple Group banded together and pledged to cut calorie intake from soda by about 20% in the next decade.
New products for both Coca-Cola and Pepsi include offerings of soda with few calories: Coca-Cola Life and Pepsi True were part of gradual roll-outs late last year and are sweetened with Stevia. Coca-Cola recently introduced its premium milk line, Fairlife, which contains 50% more protein and 30% more calcium than regular milk products. The CEO of Fairlife, Steve Jones, told USA Today he hopes it is “Coke’s next billion dollar brand.”
But among the other product offerings, Coke and Pepsi mentioned the smaller can sizes as another viable marketing option.
So far, Coca-Cola has had its share of publicity stunts to promote the smaller cans, including setting up mini kiosks in five German cities last May, according to Adweek. The soda company created the video posted below to suggest consumers can still “open happiness” and enjoy it, without the extra calories and 4.5 ounces.
But the fact remains that the novel items, though adorable, will cost more over time. So as in all things, buying the mini cans will be a consumer choice each time in the soda aisle at the grocery store. Health-conscious soda buyers who are also watching their wallets might want to truly “share a Coke” and split a 12-ounce can instead.