News

Following second quarter earnings report, Coca-Cola looks to drop more brands

After Coca-Cola announced the discontinuation of its Odwalla juice brand earlier this month, Coke's CEO James Quincey said during the company's second quarter earnings call that more of the CPG giant’s brands will be on the chopping block in the near future. He declined to name any brands specifically.

“We are shifting to prioritizing fewer but bigger and stronger brands across various consumer needs,” he said on the earnings call. “As a reference point, of our 400 master brands, more than half are single-country brands with little to no scale.” Those 200 brands only account for 2% of Coca-Cola’s total revenue.

With the pandemic straining supply chains worldwide, Quincey said that Coke responded by focusing its efforts on providing resiliency for its core brands. The strategy resulted in a 14% increase in volume growth in China during the second quarter. Overall, the Atlanta-based giant saw sales drop 28% to $7.2 billion.

Coke is taking this pared-down mentality and will be spreading it further across its business units. Already, the company has eliminated 275 “zombie” products in 2019, CNN Business reported.

While many brands may no longer be on supermarket shelves in the coming months, Coke is not turning its back on innovation. “We believe the best way forward is to be more choiceful and target bigger, more scalable bets and be disciplined in our experimentation,” said Quincey in the call. One of those rising star brands is Topo Chico.

Coca-Cola is not alone in streamlining its offerings to focus on its best-selling brands. Unilever and PepsiCo similarly trimmed their product offerings in favor of promoting items that are perennially popular and a sure bet for sales. PepsiCo’s Frito-Lay division slashed 21% of its SKUs in the midst of the pandemic, Food Dive reported. In fact, in U.S. grocery stores, the average number of product offerings declined 7.3% in the four weeks leading up to June 13, according to Nielsen data.

Trimming the list of products may benefit Coca-Cola in the long term by reducing decision fatigue from consumers and allowing the manufacturer to double down on those brands to compose a product mix that will become the lifeblood of its success.