The last time Coca-Cola’s global sales of soda declined, we wondered if Y2K would lead to spontaneous combustion or something. However, Coke’s latest earnings report tells us that global sales are down once again.
According to a story by reporter Candice Choi of The Associated Press, Coca-Cola’s global sales of soda declined by 1 percent in the first quarter of 2014 — its first quarterly slip in the measure since 1999.
Even so, Choi writes that the decline was offset by strong sales from Coke’s non-carbonated beverages by Minute Maid, Powerade and Dasani. The company’s overall volume increased by 2 percent, a 1 percent increase from the previous quarter. Gary Fayard, Coke’s outgoing CFO, attributed the global decline to the timing of Easter, which falls in the second quarter, and the double-digit CSD decline in Great Britain, where Coke switched to smaller bottles without changing prices.
“It’s not as concerning to us as it would look at first pass,” Fayard told The AP.
However, Fayard’s optimism could be interpreted as a tacit sign of Coke’s overarching challenge: the decline of CSDs.
“In developed nations like the U.S., soda has been under fire for years over concerns that it fuels weight gain,” Choi writes. “More recently, executives have blamed declines in diet sodas on concerns about artificial sweeteners.”
These widespread concerns have opened the door to an armada of functional foods and beverages, as noted by Michael Zacka, the president and CEO of Tetra Pak, U.S. and Canada, in a recent story on The Huffington Post.
While it’s easy to notice the alarming aftermath of the American tendency to eat with emotion and reckless abandon, Zacka writes that consumers should also pay attention to a silver lining.
“These very public efforts to improve health and prevent disease by eating right have also spurred the food and beverage industries to develop promising and innovative products that will help individuals as well as stimulate companies’ sales,” he writes.
Sure, Zacka’s company is providing the packaging for a heap of these companies, however, he makes strong points. While one could argue that this is the golden age of functional foods and beverages, people have long used chicken soup to fight colds. And let’s not forget the adage: “an apple a day keeps the doctor away.”
Consumers may question the efficacy of these products, especially after years of drinking vitaminwater and Sobe only to find a still-hurried heart rate and a larger waistline. Yet, Zacka notes that some of these functional elements have already hit the mainstream consciousness, such as probiotics for boosting immunity and gut and digestive health as well as fiber for colon health.
One of the greatest challenges of these functional food and beverage brands is finding a way to dethrone the current kings. One of those kings, Starbucks, will soon test its Starbucks Evenings concept, which will introduce alcoholic beverages and an expanded food menu to its loyal legions.
The menu additions could slightly shift Starbucks’ identity and would almost certainly boost sales during slower coffee hours. However, Roger Dooley, a contributor to Forbes, writes that the concept could also lead to “product contagion.”
“Researchers at Duke and Arizona State found that subjects were less likely to sample cookies that had been in a shopping cart next to feminine napkins,” Dooley writes, “even after the products had been separated and an hour had passed!”
This kind of effect depends on the person, he writes. Someone who likes coffee and wine would have no problem with their coexistence. However, consumers who are very health-focused might be turned off by, for example, a bottle of kale juice leaning against a case of Genesee Cream Ale.
“One simple strategy Starbucks can employ is keeping alcohol products physically and visually separated from other products,” Dooley writes.