Coca-Cola's big bet on smaller packaging is paying off

By Lara O' Reilly



Over the past few months, Coke has shifted its focus towards selling smaller cans and bottles in the US, in the hope that slimming down on portion size will help fatten up its margins. And it's a bet that appears to have paid off.

Coca-Cola said in its second quarter earnings report published Wednesday that it gained non-alcoholic ready to drink (NARTD) beverage volume for the 21st consecutive quarter, driven by an increase in both the quantity and quality of marketing investments, and also its "continued rational approach to pricing and disciplined price/pack strategies."

Net operating revenue in North America grew 3 per cent year-on-year to $5.9 billion in the three months to July 3. Profit grew 7 per cent to $887 million.

On the earnings call, Coke gave more detail: Smaller packages are growing much faster than larger packages, and smaller packs have a higher price per gallon/liter/case.

Coca-Cola chairman and chief executive officer Muhtar Kent explained on the Q2 earnings call that Coca-Cola's marketing model is about "more people enjoying more Coke, more often, for a little more money." Smaller packages are helping drive up overall transaction growth, he added.

"Moms in particular like small packs and are returning to the category to use small packs as a way to give treats to teenagers and others in the household. It's particularly positive that moms can do this without the packaging being too big. For many years we marketed packs that were too big, or were over-consumed. And that's one of the reasons why we are over-accelerating," Kent said on the call.

Strategies have included more aggressively marketing 7.5-ounce mini-cans and smaller 8-ounce glass bottles on supermarket shelves. Coke also recently said it distributed a million mini cans as part of its "Share a Coke" summer marketing push that saw it print popular names on-pack.

Last November, Coke's North American president Sandy Douglas said the trend towards health and wellness had set up a "tremendous opportunity for the Coca-Cola brand with our smaller packages," AP reported.

He explained that a regular 12-ounce can of Coke sold on average for 31 cents. But a 7.5-ounce mini can sells for 50 cents - or, in other words, 2.6 cents-per-ounce for a regular can, or 5.3 cents-per-ounce for the mini can.