Australian-based Coke producer Coca-Cola Amatil has reported a heavy profit slump, following a string of branding changes as the awareness about sugar ramps up.
Coca-Cola Amatil suffered a half-year profit decline of 29.3 per cent with sales of fizzy drinks falling 3.8 per cent.
This followed a challenging year for the soft drink giant during which it launched Coke with Stevia in April, shortly after discontinuing production of green-labelled Coke Life.
Three months later, the new Coke No Sugar appeared on shelves coinciding with the phasing out of the similarly branded staple product Coke Zero.
Coca-Cola subsequently lost a major contract with the Domino’s pizza franchise, while supermarket giant Woolworths refused to stock Coke No Sugar on its shelves.
University of Sydney research also revealed in March that soft drink consumption was falling in Australia.
Coca-Cola made $140.1 million in net profit to June 30, down from $198.2 million compared to this time last year.
Leading marketing expert Michael Callaghan last month predicted that Woolworths’ decision not to stock Coca-Cola’s latest product would be a “huge blow” to the company’s bottom line.
“Woolworths wouldn’t do that unless they had some kind of inside information,” he said.
“I’d infer that they’re making more money from selling shelf space to other products.”
Nutrition Plus accredited practising dietitian Melanie McGrice said that consumers have been drinking less sugar-sweetened drinks over recent years.
“In my clinic, I find that clients are now more aware about the health impact of sugar-laden soft drinks, such as Coke, so are turning to other options instead,” she said.
“There is so much variety now — we’re inundated with choice.
“Unfortunately, there’s still a lot of confusion about diet soft drinks though. My clients still believe diet drinks are a healthy choice. But it’s still very acidic, and impacts teeth and bone health.”
Are Aussies abandoning the iconic Coca-Cola?
Deakin University’s Mr Callaghan told The New Daily the “substantial drop in performance” could explain the unusual strategic decision to introduce new brands and eliminate Coca-Cola staple Coke Zero.
“Any business knows what sales they had at the same time last year and I suspect that after peak season for soft drink sales – around February this year – Coca-Cola would have known something was wrong,” Mr Callaghan said.
“I personally think the changes in branding have been a scramble to mitigate the foreseen losses.
“You don’t throw away well-established brands like Coke Zero unless there’s a good reason.”
He attributed this to increased awareness about sugar content in soft drinks, alongside consistently competitive prices being offered by Coke’s main rival, Pepsi.
Mr Callaghan added that it was a “huge loss” to Coca-Cola’s market share in Australia and a move against the international trend.
Coca-Cola Amatil’s earnings remained “strong” overseas in New Zealand and Fiji. The Indonesia and Papua New Guinea division actually lifted its earnings 41.4 per cent.
Coca-Cola Amatil managing director Alison Watkins avoided commenting on the overall decline in profit, focusing on improved performance since Easter.
“Since Easter we have seen pricing pressure in sparkling beverages ease compared to the prior half and volume in branded water has grown with investment in price in the last few months,” Ms Watkins said in a speech, announcing the company’s half-year results.
Despite repeated efforts in obtaining a statement from Coca-Cola Amatil for a breakdown of both high-, and low-sugar drinks sales, The New Daily did not receive a response by deadline.