ATLANTA — The Coca-Cola Co. is slashing more than half its beverage brands so it can focus on those with the greatest potential, Chairman and CEO James Quincey said Thursday on the company’s third-quarter earnings call.
Tab diet soda and Zico coconut water are the two latest brands the company announced it will retire by Dec. 31.
Coca-Cola is narrowing its master brands to about 200 products, Quincey said. While he didn’t name specific brands cut aside from what has already been announced, he said the drinks were distributed across beverage segments, slightly more in the hydration space than any of the others.
“They account for a relatively small amount of revenue and profit, but they take up a disproportionate to that amount of time, process and shelf space,” Quincey said of the cut products.
Coca-Cola announced this summer it would phase out struggling brands from its beverage business and cut its business units from 17 to 9. The move is part of a global portfolio refresh prioritizing category-leading brands with the greatest potential for growth and scale, the Atlanta-based company said.
Other outgoing products include Coca-Cola Life, Diet Coke Feisty Cherry, Northern Neck Ginger Ale and Delaware Punch.
“We’re challenging ourselves to think differently about our brands to accelerate our transformation to a total beverage company,” said Cath Coetzer, global head of innovation and marketing operations. “This isn’t about paring down to a specific number of product offerings under our brands. The objective is to drive impact and growth. It’s about continuing to follow the consumer and being very intentional in deciding which of our brands are most deserving of our investments and resources, and also taking the tough but important steps to identify those products that are losing relevance and therefore should exit the portfolio.”
Discontinuing products, like the Odwalla juice line, for example, frees up resources to invest in growing brands like Minute Maid and Simply and fund the launch of products like Topo Chico Hard Seltzer, Coca-Cola Energy and AHA flavored sparkling water, Coca-Cola said.
Goldman Sachs analyst Bonnie Herzog said the move will be positive for Coca-Cola Co.’s remaining brands and its bottom line.
The move, she said in a research note, will reduce “Coca-Cola Co.’s complexity while only modestly impacting topline profits, likely by less than 1%. [That’s] something that should enable Coca-Cola Co. to put a greater emphasis on its core brands, including trademark Coca-Cola.”
Some customers, though, are sad to say goodbye to old brands, like Tab. Loyal fans started several Change.org petitions collecting signatures to try to stop the beverage’s phase-out.
Coca-Cola introduced Tab in 1963 as the company’s first “diet” soft drink. The saccharine-sweetened, zero-calorie soda became a cultural icon in the 1980s and maintained a “small but loyal” following over the last few decades, the company said.
“We’re forever grateful to Tab for paving the way for the diets and lights category, and to the legion of Tab lovers who have embraced the brand for nearly six decades,” said Kerri Kopp, group director of Diet Coke for Coca-Cola North America. “If not for Tab, we wouldn’t have Diet Coke or Coke Zero Sugar.”
Plans to streamline Coca-Cola’s beverage lineup were underway before the COVID-19 pandemic hit, the company said. However, supply chain challenges and shifting shopping behaviors brought on by the COVID-19 pandemic prompted leadership to accelerate the process.
“This is a golden opportunity for us to accelerate the curation of the portfolio that was an ongoing need, and actually bring all of that to fruition in a much shorter timeframe,” Quincey said. “We believe it will set us up with more momentum behind stronger brands as we come out of this crisis.”
While the at-home channel is driving sales now as many restaurants close or limit capacity amid the pandemic, the company has seen losses overall.
Net revenues declined 9% to $8.7 billion in the third quarter. Sparkling soft drinks declined 1%; juice, dairy and plant-based beverages declined 6%; water and sports drinks declined 11%; and tea and coffee declined 15%, Coca-Cola said. However, trademark Coca-Cola grew 1% and Coca-Cola Zero Sugar grew 7% in the quarter and 4% year-to-date.