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Coca-Cola Fetching Higher Prices With Marketing, Mini-Cans

Time: 2015-7-22 16:31:59     Author: admin     Hits: 

Earns Coca Cola

NEW YORK -- Coca-Cola says people are shelling out more money for its drinks, thanks to a mix of reinvigorated marketing and mini-cans and glass bottles that tend to cost more.

To help boost weak sales growth, the maker of Sprite, Fanta and Powerade has been slashing costs, then pouring some of that money into increased marketing.

The Atlanta-based company, known for more than a century's worth of ads such as "I'd Like To Buy The World A Coke," says the stepped-up quality and quantity of its advertising is helping it command higher prices for its drinks.

In a conference call with analysts Wednesday, Coca-Cola CEO Muhtar Kent said the company's revenue growth in North America during the second quarter would not have been achieved without the "infusion" of improved marketing.

Without providing specifics, the company said overall advertising spending saw a double-digit percentage increase during the quarter.

In the U.S., a recent campaign is the "Share A Coke" program, which puts popular names and words like "Friend" and "Legend" on packages. Many customers snap pictures of the cans and bottles, then post them on social media sites like Facebook and Instagram.

The increased focus on marketing comes as Coca-Cola faces broader challenges in the U.S., with beverage options proliferating and people continuing to move away from traditional sodas.

That has prompted the company to focus on extracting more money per transaction by raising prices on traditional packages, as well as by pushing offerings like mini-cans that cost more. During the quarter, the company said the sales volume of mini-cans rose double-digits.

Sandy Douglas, president of Coca-Cola North America, noted that moms in particular like the smaller sizes and that people are willing to pay "a little bit more money" for them.

In the past, Douglas noted that the company marketed packages that were too big and led to waste. He said a variety of smaller sizes now account for roughly in the "low teens" as a percent of sales volume in North America.

Other food and beverage companies have pushed up revenue with similar strategies. Earlier this month, for instance, PepsiCo CEO Indra Nooyi said the company is using "creative revenue management tactics, coupled with innovation" to boost its financial performance.

That could mean newer products that cost a bit more, like Mountain Dew Dewshine that come in a glass bottle.

And in April, Starbucks said it boosted sales in the U.S. with the help of pricier drinks like the "Flat White" espresso and Teavana "Shaken" ice teas.

"What we're seeing is a premiumization, a trade-up" Starbucks Chief Financial Officer Scott Maw said at the time.

For the quarter, Coca-Cola's total volume for carbonated drinks in North America rose just 1 percent. That increase was due to the company's expanded distribution of Monster energy drinks. When including non-carbonated drinks like Powerade, volume for North America rose 2 percent.

Organic revenue for the region rose 5 percent, however, thanks to higher pricing and the smaller packages.

For the quarter ended July 3, Coca-Cola Co. said its profit rose to $3.11 billion, or 71 cents a share. Not including one-time items such as the gain related to its deal to acquire a stake in Monster Beverage (MNST), it said it earned 63 cents a share.

Analysts on average expected 60 cents a share, according to Zacks Investment Research.

Total revenue including regions around the world slipped to $12.16 billion, dragged down by the impact of foreign currency exchange rates. Coca-Cola said organic revenue, which strips out such factors, rose 4 percent overall for the period.

A year earlier, the company earned $2.6 billion, or 58 cents a share.

Shares of Coca-Cola (KO) edged up 11 cents to $41.30.