Coca-Cola Life And Glaceau Smartwater To Be Launched In The U.K.

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KO: The Coca-Cola Company logo
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The Coca-Cola Company

Health and wellness concerns continue to cast a shadow over sugary sodas, especially in developed markets. Consumers have also remained skeptical about the safety of artificial sweeteners, especially aspartame, in the low/no calorie versions of these drinks. Beverage makers such as The Coca-Cola Company (NYSE:KO) remain committed to the goal of finding a solution to the high sugar problem in soft drinks, without compromising taste and quality. The company launched its naturally-sweetened Coca-Cola Life in Argentina and Chile, and after months of testing, the drink is set for introduction in the U.S. and U.K. markets this year. While Coca-Cola will aim to spur sales of its ailing diet segment with the launch of Coca-Cola Life in the U.S., the launch of the drink in the stabilizing U.K. market might add incremental sales. The company will also introduce the bottled water brand Glaceau Smartwater in the U.K. this year, to penetrate the country’s bottled water market.

We estimate a $40.99 price for Coca-Cola, which is roughly 2% below the current market price.

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Coca-Cola Life Aims To Increase Great Britain Volumes

Great Britain represented only 2% of the net volumes for Coca-Cola last year. [1] As consumers shift away from sugary carbonated soft drinks (CSDs) due to high sugar and calorie amounts, sparkling beverage volumes for Coca-Cola in Europe were down 1% year-over-year in 2013, the only other market apart from North America to report declining sparkling unit sales. The flagship drink Coca-Cola is the largest soft drink brand in the U.S., holding 18% market share in the country last year. [2] In the U.K. as well, the drink leads the beverage market with 15.4% value share in measured grocery and convenience store channels. [3]

Coca-Cola had already launched its low calorie Coca-Cola Life in Argentina in June last year, and followed it with the launch of the drink in Chile in November. Sold in green colored cans, Coca-Cola Life caused a 7% rise in beverage volumes in Argentina last year, despite weak economic conditions in the country. After months of testing, the company is set to launch the product in the U.K., in a bid to increase consumption of its trademark drink. As the U.K. recovers from the double-dip recession, consumer spending is expected to improve, and could boost soft drink sales going forward. Per capita consumption of Coca-Cola beverages in the U.K. is still low at around 12.5 gallons. In contrast, around 46 gallons and 25 gallons of Coca-Cola soft drinks are consumed per person in Mexico and the U.S. respectively. Relatively low current per capita consumption levels in the U.K. present growth opportunities for Coca-Cola in the country.

“Healthier” Coca-Cola Looks To Attract Calorie-Conscious Customers

Coca-Cola Life will join the diet stevia-sweetened U.K. portfolio of the company, presently comprising Sprite and Glaceau Vitaminwater. In fact, rather than adding the low-sugar Sprite to the lineup, Coca-Cola completely replaced the standard Sprite with the version containing stevia in the U.K. The reception to stevia in the country has been fairly positive, unlike in the U.S., where the recently launched stevia-fueled Glaceau Vitaminwater has faced widespread consumer criticism. Now with the launch of another stevia drink Coca-Cola Life, containing two-thirds the calories in regular Coke, the beverage behemoth will aim to add incremental sales by targeting the calorie-conscious customers. Zero calorie drinks already form more than 40% of the current lineup for Coca-Cola in the U.K. The company is a signatory to the government’s Responsibility Deal, aimed at improving public health. Coca-Cola has vowed to decrease the average calories per litre in its carbonated drink portfolio by 5% by the end of this year. [4]

Coca-Cola To Introduce Premium Smartwater Bottled Water In The U.K.

With the launch of Coca-Cola Life in September, the first Coca-Cola drink to be launched in the U.K. since Coca-Cola Zero in 2006, the company will expand its cola lineup in the country and hope to draw further sales. In addition, Coca-Cola is also expanding its line of bottled water brands in the U.K. with the launch of Glaceau Smartwater in August. The beverage maker has invested 3.5 billion pounds (~$6 billion) in the production facility at Morpeth, U.K., to support and market the launch of the water brand. [5] The U.K. bottled water market presently worth around 1.38 billion pounds ($2.35 billion) is expected to grow by 8% over the next three years. Danone Waters currently leads this market, constituting almost one-fourth of the net volumes, with strong brands such as Volvic and Evian. Consumer preference to premium water brands such as Evian in the U.K. is one of the reasons why Coca-Cola’s relatively cheaper Dasani water brand has failed to generate meaningful sales in country. With the launch of Glaceau Smartwater, Coca-Cola will position itself in the premium water segment in the U.K., and aim to draw consumer attention. Smartwater is already a success in the U.S., with retail sales up an impressive 36.8% year-over-year to $520 million last year. [6]

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Notes:
  1. Coca-Cola annual report []
  2. U.S. beverage results for 2013, beverage-digest.com []
  3. Leading soft drink brands in the U.K., statista.com []
  4. Coke with fewer calories and less sugar to tackle obesity, June 2014, theguardian.com []
  5. Coca-Cola UK press release []
  6. Leading still bottled water brands in the U.S., statista.com []