In spite of the widespread vilification of “sugary beverages” in the U.S.—of which you couldn’t find a better example than a certain fizzy drink sold in a red can—Coca-Cola (KO) is not shying away from soda. In fact, it’s doubling down with an additional $1 billion in advertising through 2016. Even though Americans are drinking far less of the stuff these days, Coca-Cola’s big bet still might not be a bad idea.
1. People around the world are actually drinking more soda. There’s no way for Coca-Cola to suddenly back away from its portfolio of sweet, bubbly beverages, which account for about three-fourths of its global sales by case volume. And while demand in North America and Europe has been shaky, Coca-Cola’s soda sales are growing in key markets like Latin America and Asia Pacific. The company’s total soda sales increased by 1 percent as measured by volume last year, including an additional 100 million cases of the classic Coca-Cola.
2. Coke is in the right markets for sugary drinks. While the U.S. still represents 19 percent of the company’s worldwide unit case volume, Coca-Cola is selling most of its soda overseas, including key markets like Mexico, China, Brazil and Japan. That’s important since Latin America is now the largest market for soda in terms of dollar sales, according to Euromonitor International, and is forecast to grow 17.3 percent from 2013 to 2018.
3. The global ranks of middle-class teens are growing, and that’s Coke’s core consumer. The company is betting on favorable demographic trends with the global growth of the middle class, and teenagers in particular. Coke’s chief financial officer, Gary Fayard, recently pointed to these forecasts. Between 2010 and 2020, he said, “You see a 50 percent increase in the middle-class, 800 million people entering the middle-class and then with that a 70 percent increase in personal expenditures. And you see a billion teenagers today.” Fayard called the world’s 3.5 billion people in their teens and 20s “our core demographic.”
To lure these customers, Coca-Cola is sponsoring this year’s World Cup in Brazil and getting ready to pour another $1 billion into ads. “We’ve seen time and time again that marketing truly, truly works. In 2014, we’re going to improve our marketing game in terms of both quantity, but also importantly in terms of quality,” said CEO Muhtar Kent at a conference in February.
4. For the health conscious, new low-calorie sodas are coming. If it can get its marketing right, Coke believes forthcoming low-calorie products sold in smaller sizes and using new sweeteners can appeal to people who have been avoiding soda. The company is already selling a stevia-sweetened Coca-Cola Life, launched last year in Chile and Argentina. That might be enough to bring recent soda abstainers back to the vending machine.
