Health concerns hindering profits at CCA
Reporting by Naomi Kaplan
Coca-Cola Amatil (CCA) is hoping healthier beverages will be the key to strengthening sales following declining soft drink profits.
The beverage group's underlying net profit is predicted to dip in the six months to June, while the full-year result is expected to stay broadly in line with last year's result.
In CCA's sparkling beverages portfolio – which includes brands such as Coke, Sprite, Fanta and Kirks – profits dropped 4.7% in 2016.
Managing Director Alison Watkins told CCA's annual meeting on Tuesday: “We will continue with our plans to respond to the changes in the Australian market. We also know our diversified business portfolio is our strength and can mitigate some of this impact.
“We recognise we have a role to play in addressing the issue of obesity in the communities in which we operate.”
There has been an obvious shift in consumer purchases of sugary products in recent years.
According to the 2016 Nielsen’s Global Health and Ingredient Sentiment Survey 24% of Australian consumers follow a diet that limits the consumption of sugar, 44% say they avoid sugar as an ingredient, and a majority (56%) choose not to buy sugar or high sugar products.
Obesity Policy Coalition executive manager, Jane Martin told The New Daily: “Australians are becoming increasingly aware of the health impacts of high added sugar intake. We’ve seen food and drink manufacturers respond to this by expanding their lower-sugar and sugar-free options.”
CCA has been moving to meet shifting tastes in Australia with lower sugar products.
Already 34% of CCA’s sales volume is made up of low or no kilojoule varieties. And 79% of its brands have low kilojoule or no added sugar alternatives.
One example is Coca-Cola with Stevia, which was recently re-branded from Coke Life in an attempt to emphasise the healthy aspect of ‘stevia'.
However, Coke Life proved problematic due to its middle ground in the market.
Michael Callaghan, Deakin University’s marketing lecturer told The New Daily that the re-branded Coke With Stevia product risked cannibalising Coca-Cola's mainstream products such as Diet Coke and Coke Zero.
“I think Coke Life was a failure because most consumers deal with binary choices: sugar or no sugar, low fat or not, alcoholic or non-alcoholic,” he said.
“Coca-Cola is presenting this ‘continuum’ of choices and I don’t think that’s what consumers want.”
The Coke Life brand will be completely withdrawn from the UK market in June, but remain available in other markets, including Australia and the US.
Despite the disappointing uptake of Coke Life, CCA said it would continue to develop new products and test out new ideas.
“Our ability to deliver further innovation with The Coca-Cola Company in this area presents great opportunities for us as a business and ensures our place in the beverages market of the future,” said Watkins.