How Can The Revamp Of Diet Coke Impact Coca-Cola?

by Trefis Team
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Coca Cola
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Diet Coke, known as Coke Light in some markets, a ‘sugar-free’ version of Coca-Cola Classic (or Coke), is the second most widely sold soft drink in the country. It was introduced first in 1982 and is among the most successful Coca-Cola brands. The success of the brand in the past was a result of the fact that it had no calories or sugar, making it seem like it was a healthy choice. However, increasing concerns about the dangers of artificial sweeteners, such as increased risk of stroke for daily drinkers of diet beverages, have resulted in a substantial decline in the sales of such drinks, including Diet Coke. In FY 2016, the volumes for the brand fell 5%, more than any other Coca-Cola brand, according to their annual report. Moreover, according to Nielsen, while diet soda volumes were down 4% for the 12 weeks to 30 December, those for Diet Coke fell 6% in the same period. To arrest this decline, Coca-Cola decided to revamp Diet Coke. While the original Diet Coke remains, four new flavors of it – Ginger Lime, Feisty Cherry, Zesty Blood Orange, and Twisted Mango – have been introduced, keeping the millennial generation in mind.

We have a $48 price estimate for Coca-Cola, which is slightly higher than the current market price.

Need For A Revamp

Besides the aforementioned reason for the decline in Diet Coke sales, the brand has been negatively impacted by the broader decline in soda consumption, with per-capita consumption falling to 642 8-ounce servings in 2016, a 31-year low, according to Beverage Digest. Moreover, with the rebranding of Coke Zero Sugar in FY 2017, Diet Coke seems to have lost its utility. While reporting its third quarter sales, the company had stated that the year-to-date global volume and revenue for Coke Zero Sugar was growing at double-digits. As a result, the revamp of Diet Coke was much needed, with the company hoping its new flavors and packaging will help to halt its steady decline.

According to our estimates, revenue from Diet Coke is set to decline by a considerable rate in the next couple of years, due to the above-mentioned factors, as well as a result of the company’s refranchising efforts. The turnaround can be expected in FY 2020, due to these efforts, as well as a result of its loyal customer base and growth expected in international markets.

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See our complete analysis for The Coca-Cola Company

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking and encourages readers to comment and ask questions in the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Coca-Cola

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