Coca-Cola Zeroes In on New Diet Soda for U.S. -- WSJ

By Jennifer Maloney Features Dow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 27, 2017).

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Coca-Cola Co. is replacing Coke Zero in the U.S. with another diet soda in an effort to hold on to consumers cutting back on sugary drinks.

Coca-Cola Zero Sugar, which the Atlanta-based company said Wednesday has been a strong seller in Europe, the Middle East and Latin America, will become available in the U.S. in August.

Although both diet sodas are sugar-free and contain the same artificial sweeteners, Coca-Cola said Zero Sugar tastes more like original Coke and looks more like it, too, with a red circle on cans and bottles in contrast with Coke Zero's black design.

In a conference call Wednesday, Coca-Cola Chief Executive James Quincey said the new recipe "will actually help people stay in the Coca-Cola franchise." Zero Sugar, which like Coke Zero is sweetened with aspartame and acesulfame K, was first introduced last year in the U.K.

The company launched Coke Zero in 2006, but gains by that product haven't compensated for a broad decline in consumption of aspartame-sweetened Diet Coke, said Mr. Quincey, who took over the beverage giant in May. Rather than switching to Coke Zero or Diet Coke, fans of original Coca-Cola can now "stay with the brand they love. It just comes with a couple of variants -- one with sugar and one without sugar," Mr. Quincey said on a call with journalists.

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Coke has been aiming to cut sugar from its products and diversify beyond soda as more countries implement taxes on high-calorie beverages to combat rising rates of obesity and diabetes, and as consumers switch to healthier beverages.

The Zero Sugar name is intended to better communicate to consumers that it contains no sugar. But Susan Cantor, chief executive of branding firm Red Peak, which isn't involved with the new Coke product, said some shoppers may find it confusing.

"Sugar is a bad word these days, so I question their thought process in putting it so prominently on the package," she said. "This could possibly call attention to the very ingredient that they have eliminated."

While shifting away from sugary drinks, many consumers are also rejecting artificially sweetened diet sodas, posing a challenge for soda giants trying to introduce lower-calorie options. Low- and no-calorie cola sales fell 5% by volume in North America last year, according to Euromonitor.

Coke Zero was the No. 10 soda brand in the U.S. last year, with sales growth of 3.5%, according to Beverage Digest, an industry tracker. Diet Coke, meanwhile, was the third-biggest brand but is losing fizz, with a 2% drop in sales.

Mr. Quincey, who earlier this year laid out a plan to transform Coke into "a total beverage company," said new product launches in the second quarter included premium juices in China and "higher-value" smoothies in Europe. The company is experimenting with reformulating low-calorie versions of many of its sodas to make them taste better, he said. Coca-Cola's low- and no-calorie soda volume notched percentage gains in the mid-single digits during the latest quarter, the company said.

Coke on Wednesday raised its full-year earnings outlook, forecasting adjusted earnings per share to be flat to down 2%; its previous guidance was for a decline of 1% to 3% on an adjusted basis, which excludes among other factors the company's divestment of bottling operations. Analysts polled by Thomson Reuters had forecast full-year earnings of $1.89 a share, a 1% decline.

Coke's beverage volumes during the latest quarter were flat world-wide as growth in developed markets like Mexico and Spain offset weakness in Latin American markets. However, adjusted revenue grew 3% as the company shifted its focus to revenue growth over volume growth.

In all, Coke reported second-quarter profit of $1.37 billion, or 32 cents a share, down from $3.45 billion, or 79 cents a share, a year earlier. Last year's quarter included the company's now-divested bottling business. On an adjusted basis earnings fell to 59 cents a share. Revenue fell 16% to $9.7 billion.

Shares were little changed, up 16 cents to $45.40, after gaining 9% so far this year.

Imani Moise contributed to this article.

Write to Jennifer Maloney at jennifer.maloney@wsj.com

(END) Dow Jones Newswires

July 27, 2017 02:47 ET (06:47 GMT)