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How Coca-Cola will solve the bottled water problem



<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Coca-Cola ( KO ) is back to showing good sales and volume gains in the Coke and Zero Sugar diet counter in the US, now it just needs to get water business back to top health among a range of new players. "Data-reactid =" 15 "> Coca-Cola (KO) is back to show good sales and volume gains in its diet coke and Zero Sugar soda in the US. Now it just needs to get the water business back to top health amid a barrage of new entrants.

“Our results in the water category have not been as strong as we would like. We are working on further plans to address this in the market in the near future, ”Coca-Cola CEO James Quincey told analysts about the company's third-quarter revenue this month.

Quincey is right in calling out the nuclear water business. – led by the Dasani, Smartwater and Topo Chico brands – in need of improvement.

Volume of unit case – a key performance measure for beverage companies – in Cokes Water in North America increased business with water and sports drinks by only 1% in the third quarter. The overall business, which Coke refers to as "hydration" and also includes VitaminWater and Powerade, has seen the volume relatively flat in the nine months ended September 27.

<p class = "canvas-atom canvas text Mb (1.0 em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "For perspective, unit volume for trademark increased Coke products with solid 2% in the third quarter Over to Coke rival PepsiCo ( PEP ), bottled water sales like LIFEWTR and Propel increased by double digits in the third quarter, PepsiCo executives added to the earnings call that the new sparkling beverage continued to post very strong growth and is gaining share in the flavored sparkling water category helped by packaging and flavor innovation. "" Data-reactid = "19"> For perspective, unit volume for brand Coke products increased by solid 2% in Q3. Over at Coke rival PepsiCo (PEP), bottled water sales such as LIFEWTR and Propel increased by double-digit figures in Q3. in PepsiCo added to the earnings call that the new sparkling beverage with sparkling water continued to "post very strong growth and is gaining share in the flavored water category that helps with packaging and flavor innovation."

Coke's water business has halved in it most of the year, with the likes of Propel taking advantage of aggressive marketing of new waters with flavors and electrolytes, meanwhile, boxing water from leading beverage manufacturers has finally begun to grab retail, and supermarket aisles have also been overrun with water drinks that offer various whole-foods and interesting flavors

Flat water business

Sales of Coke water business have been flat this year, according to data from Nielsen. The bottled water business in the United States (still and sparkling) increases by about 5% to $ 12.8 billion per Nielsen.

Nielsen data estimates Coke has about 14% market share of the US water business. Coke's water business is the second highest gross margin in the beverage portfolio, behind sparkling beverages and in front of coffee and tea, according to data from Coke. North American operations are the third largest as a percentage of revenue from sparkling beverages and juices, dairy products and plant-based beverages.

That is, Coke should say ship in water so to speak. A spokesperson for Coke refused to share the company's attack plan to change the course of water sales. But experts point out that Coke is moving more aggressively on two fronts that are already moving.

On Thursday, March 16, 2017 photos, bottles of Lifewtr and Smartwater in Philadelphia are displayed. As bottled water is gaining in popularity, Coke, Pepsi and other companies are using celebrity endorsements, stylish packaging and fancy filtration processes like "reverse osmosis" to sell people on extended variations of what comes out of the tap. They also add blossoms such as bubbles, flavors or sweeteners that can blur the lines between what is water and what is soda. (AP Photo / Matt Rourke)

The first is to "premiumise" the water portfolio and add variants of the Smartwater core to suit different consumer needs along with flavored sparkling beverages. For example, Smartwater is currently raising three new water formulas beyond the original: water with antioxidants, alkaline substances and sparkling. Dasani has introduced slim boxes and bottles of flavored sparkling water.

The second aspect will focus on moving away from plastic bottles all the way into aluminum boxes to play to health-minded, nature conservationists. The Dasani brand aims to remove about 1 billion virgin PET plastic bottles from the supply chain over the next five years. Moving into recyclable, reusable packaging should also help the margins of the water business even with volume challenges.

It is unclear how long before Coke's water business can turn itself in the face of this effort.

"The algorithm will improve over time as SmartWater / Topo Chico and a new flavored sparkling [water] come at a premium price, but the volume will still be challenged because they will not squeeze as much Dasani (less profitable)," says veteran beverage analyst Laurent Grandet at Guggenheim Securities Yahoo Finance.

<p class = "canvas atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " Brian Sozzi is the editor and co-anchor of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi "data-reactid =" 40 "> Brian Sozzi is editor and major anchor of The First Trade [19659048] at Yahoo Finance Follow him on Twitter @BrianSozzi

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – -sm "type =" text "content =" Read the latest financial and business news from Yahoo Finance "data-reactid =" 41 "> Read the latest financial and business news from Yahoo Finance [19659030] <p class = "canvas atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " Follow Yahoo Finance on [19659048] Twitter Facebook Instagram [19659022] Flipboard SmartNews LinkedIn YouTube and reddit . "data-reactid =" 47 "> [19659018] Follow Yahoo Finance on Twitter Facebook Instagram Flipboard SmartNews LinkedIn YouTube and reddit .


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