Coke and Pepsi face headwinds
Despite the fact that consumers are consuming sodas less frequently after lots of headlines about sugary drinks and the obesity epidemic, Coca-Cola managed to post better-than-expected earnings on Wednesday.
But the celebration may be short-lived if Coke and its main rival Pepsi focus heavily on promoting their namesake soda brands.
Consumer analyst Nik Modi of RBC Capital Markets says soda sales have been declining industry-wide, and among the reasons why is “the mom veto.”
“Mothers are not buying these products for their kids, like the prior generation,” says Modi, adding that consumers are not only paying more attention to the number of calories in the products they consume, but also to the number of ingredients and kinds of ingredients.
He says one way Coca-Cola has combated this trend is by selling smaller cans of its sodas. “If you give a child an 8-ounce can of coke, that’s much more tolerable than a 12-ounce can or a 20-ounce can,” says Modi.
Coke has also raised prices and cut costs by doing things like laying off 1,800 employees. But industry consultant Tom Pirko is pessimistic about the future for both Coca-Cola and Pepsi, because the majority of sales for both companies come from foreign countries.
“Brazil, the rest of Latin America, Europe, Russia: the economies are in trouble and this is all directly affecting Coca-Cola,” says Pirko, adding that both Coke and Pepsi should focus more on promoting and selling their non-soda brands.
Coca-Cola recently even got into the milk business.
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