Releasing its H1 2017 results this morning, Coca-Cola Amatil (whose markets also include NZ, Fiji, Indonesia and Papua New Guinea) reported underlying earnings before interest and tax (EBIT) of $312.7m and underlying net profit after tax (NPAT) of $190.1m, representing declines of 4.3% and 4.1% respectively.
Coca-Cola Amatil group managing director Alison Watkins says the company recognizes the ‘central role of product innovation’ with new products across still and sparkling beverages for H2 in the pipeline.
Group CFO Martyn Robers says the company is encouraged by improving performances in Australia since Easter, with a number of 'positive developments...and strong execution plans'.
Coca-Cola Amatil says Australian Beverages had a challenging start to the year, with performance improving since Easter.
In sparkling beverages, volume declined 3.8%. In cola, aggressive competitor pricing in the early part of the year resulted in volume share loss.
In still beverages, volume decreased 8.5%, reflecting challenges in water, sports, tea & juice alongside volume growth in energy & dairy.
Revenue declined 5.1%.
Coca-Cola No Sugar
Coca-Cola No Sugar was launched in Australia in June, making it one of the first markets to introduce the new version of Coca-Cola Zero (No Sugar is also known as Coca-Cola Zero Sugar in other markets).
The drink claims to ‘taste even more like classic Coca-Cola’ but without sugar or calories, catering for the increasing number of consumers who are watching their sugar intake.
However, Woolworths decided not to stock the new beverage, with the supermarket giant saying consumers already had plenty of sugar-free cola options.
Despite this, Watkins says the No Sugar brand has achieved “a very high level of awareness among Australian consumers and is playing its anticipated role in recruiting to the category”.
“Already, around 28% of sparkling beverage consumers in Australia have consumed a Coca-Cola No Sugar, and 39% of this group have consumed a Coca-Cola No Sugar more than once,” she said.
“Despite the lack of ranging in Woolworths, Coca-Cola No Sugar has achieved strong penetration levels in outlets across the country with all other grocery, petrol & convenience customers, and 68% of state immediate consumption and HORECA [hotel/restaurant/ café] outlets ranging the product.
“This is a strong performance for a product with only 10 weeks in the market”.
Another launch in H1 has been Keri Juice Blenders, which entered the market six weeks ago.
Innovation in water
Coca-Cola says its performance in the Australian water category continues to feel the pressure from private label water, with some of its enhanced water products, such as Glaceau SmartWater, having ‘not yet gained substantial traction in the market’.
However, Watkins believes long-term growth will come from mainstream and premium brands.
“Our approach has been to have strong brands across all segments, but focus most attention on our mainstream and premium water brands. While our volume share of the category sits at around 15% of the market, our revenue share is well above this at more than 25%.
“The opportunity in this approach is evidenced by the fact that 60% of revenue growth in the water category in Australia year to date has come from the enhanced water segment. This compares to only 11% of the volume growth.
"The enhanced water segment includes any flavored still water and all sparkling water brands and represents approximately 35% of the packaged water market from a category revenue perspective, but only 16% on a volume basis. We are committed to capturing an even more substantial share of this rather than only chasing the low margin volume.”