Not so sweet news for the world’s most iconic brand

Minerals, pop, soda, soft drinks, fizzy drinks. The popularity of carbonated drinks is reflected in the variety of names we have for them. But signs point to a marked decline in that popularity. It appears our once insatiable thirst for fizzy drinks might be waning.

In many respects, Coca-Cola’s first-quarter results, announced this week, were encouraging for the firm. Bearish predictions had suggested further declines, but the company beat expectations, managing to stem the tide of declining growth. There was a slight improvement on the surprisingly sluggish sales in the final three months of 2013. Still, net income fell by 7.5 per cent to $1.62 billion (€1.17 billion).

“We don’t think this is a great result, but satisfying as one step in the right direction to restore momentum,” said chief executive Muhtar Kent.

Decline
Less Coca-Cola was sold this quarter than a year earlier, the first such decline since 1999 – and that trend appears inexorable. Declines in the US and Europe continued, and even Mexico, the largest per-capita consumers of Coke in the world, registered a decline after introducing a tax on soft drinks. That points to a growing awareness about the risk posed by sugar-filled drinks.

It may be somewhat facile to compare sugared drinks to cigarettes – Coca-Cola isn’t carcinogenic, for one thing. But the analogy is instructive in another sense, as the two industries sell a product that is associated with a major public health risk. Diabetes is a looming catastrophe for many developed countries, and carbonated drinks stuffed full of high-fructose corn syrup are a huge factor in that crisis.

Famously, cigarette manufacturers now concentrate their marketing efforts in developing countries, and Coca-Cola is relying on the BRIC countries – Brazil, Russia, India and China – for growth. The Chinese market accounted for a huge part of Coke’s quarterly sales.

Canny
The soda firms' response has been both obvious and canny: diversifying into other, non-sugary beverages. Bottled water shows no such contraction, and both Coca-Cola and Pepsi sell loads of the stuff. But they're not stopping there. Pepsi is thought to be weighing up a bid for SodaStream, the booming home-carbonating gadget maker, and Coca-Cola has agreed to buy a 10 per cent stake in Keurig Green Mountain, which is preparing a SodaStream-like device.

Coca-Cola is also eyeing this summer’s soccer World Cup. As one of the tournament’s official sponsors, it is embarking on its biggest ever promotional programme. There’s no global audience like the World Cup, and in summer time they will be thirsty, so it’s a perfect opportunity to push the most iconic brand in the world.

But if trends continue, there might come a time when Coke and its rival beverages will be considered a bad habit rather than a refreshing drink. If that happens, it will take a lot more than positive brand management to keep growing sales.