Coca-Cola's business shows a bleak future for soda

coca cola

(Flickr/he who would be lost)
Coca-Cola's worldwide sales of soda are dropping — but the company says there is no need to panic.

Coca-Cola's sparkling beverage sales by volume decreased 1% in the second quarter, the company reported on Wednesday. Sales dropped 5.1% to $11.5 billion, missing analysts' average projection of $11.6 billion, according to Bloomberg.

The decrease in volume is part of an ongoing downward trend in soda consumption, in the US and around the world. The total volume of soda consumed in the US dropped 1.2% in 2015, compared to a drop of 0.9% in 2014, according to Beverage Digest's annual report.

Coca-Cola executives maintained that the company is coming up with solutions for the fact that consumers around the world are drinking less sparkling — typically soda — beverages.

"We believe in our segmented revenue approach. It's not that we've forgotten about volume or don't believe in an underlying driver in the long-term, particularly in developing markets," COO James Quincey said in an earnings call. "In North America and some other developed markets, clearly we're going after more of a revenue strategy that's driven by smaller packages, pricing actions."

coke pepsi mini cans

(Coke's smaller cans are driving sales.Reuters)

In a Q&A released by Coca-Cola, Quincey said that this approach was working in North America, even if Americans are cutting their soda consumption.

"In markets like North America, we are moving towards selling smaller packages instead of bigger packages," he said. "Thanks in large part to this strategy, our North America business had another strong quarter, reporting 4% organic revenue growth and the 25th consecutive quarter of value share gains in our industry."

Quincy pointed to the "broader macroeconomic environment" in countries including China, Argentina and Venezuela as part of the global drop in sparkling beverage consumption.

In addition to focusing on selling smaller cans and bottles of soda — which can actually make Coca-Cola more money than larger packages — the company is also trying to combat falling soda consumption through investments in teas, juices, and bottled water.

AdeS

(Coca-Cola is investing in still beverages, such as AdeS.AdeS)

While global sparkling volumes dropped, still beverage sales by volume grew 2% in the quarter.

"Since 2000, we've increased our business from about 10% of our volume coming from still beverages to almost 30% today," Quincey said in the Q&A.

In June, Coca-Cola has announced plans to acquire AdeS, the biggest soy-beverage brand in Latin America. Less than a month later, the company announced an investment in Aloe Gloe, a line of organic aloe-water beverages.

Still, that doesn’t mean that Coca-Cola doesn’t believe in the power of soda.

"As markets grow and expand, it's often the case that consumers desire, and have, far more choice in the array of available products in any given category," Quincey said in the Q&A. "However, it is worth saying that this expansion of variety does not equate to a decline in sparkling beverages… In fact, sparkling beverages remain the No. 1 driver of revenue growth for the entire nonalcoholic ready-to-drink beverage industry globally."

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