Diet Coke Revamp, Core Brands Drive Q1 Growth

The Coca-Cola Company touted its Diet Coke rebrand, the performance of Coke Zero Sugar, and its 2017 acquisition of sparkling water brand Topo Chico as positive contributors to its Q1 2018 financial results during a conference call with investors on Monday.

During the call, Coke CEO James Quincey highlighted 5 percent organic revenue growth, driven mostly by a 4 percent increase in sales. Net revenue declined 16 percent to $7.6 billion for the quarter, a result of the company’s refranchising of its bottling territories. The company also reported 3 percent total unit case volume growth with the core Coca-Cola brand products — including zero calorie lines — as the largest driver, growing 4 percent globally.

“I’ve spoken before about our success with Coca-Cola Zero Sugar,” Quincey said. “During the first quarter, the brand continued its trend of strong double-digit volume and revenue growth globally. And in North America, we’ve been working hard to reinvigorate the Diet Coke brand through an integrated approach.”

During the question and answer section of the call, Quincey said the company is still learning how best to “re-engage” consumers with the newly relaunched Diet Coke, which debuted in January, but that the new packaging and flavors has brought back some lapsed consumers, including millennials and sparkling water drinkers.

Most notably, following its 11th consecutive year of declining volume, the brand saw positive volume growth in North America.

“I don’t know what’s going to happen in Q2, I hope the trend continues,” Quincey said. “As we said, we put a lot of our effort in Q1. But whichever way it goes, whether it continues or softens a little in Q2, I think we are learning some interesting things about what it takes to reinvigorate Diet Coke and brand.”

Mexican sparkling water brand Topo Chico, which Coke acquired through its Venturing & Emerging Brands (VEB) unit for $220 million in October, also showed strong growth in line with the category. According to Quincey, Topo Chico has increased its distribution in c-stores by 25 percent since being purchased. Meanwhile, global sparkling beverage volume sales were up 4 percent, bolstered by double digit growth with Smartwater and Dasani sparkling varieties.

Tea and coffee sales grew 5 percent globally, with Quincey citing FUZE Tea’s European launch as a significant global driver.

Wells Fargo Securities beverage analyst Bonnie Herzog praised the company’s volume growth and in particular Diet Coke’s resurgence. However, Herzog expressed concern about soft growth for water and sports drinks, up 1 percent for the quarter, and North American juice, dairy, and plant-based beverage sales, which rose 3 percent.

Coke’s stock closed down 2 percent at $43.07 per share. Shares are down 6 percent overall this year.