Coca-Cola sees sparkling future ahead

Coca-Cola is doubling down on its core strengths of soft drinks, such as sparkling beverages and juice, to fuel long-term growth, and has geared up for the upcoming Chinese Lunar New Year in January, said its top executive.

James Quincey, Coca-Cola's chairman and CEO, struck an optimistic tone during the company's recent earnings call, highlighting efforts to reposition its China portfolio.

"The long-term opportunity remains to have a bigger and better business in China," Quincey said. "We're not super concerned about short-term corrections because we see that actually within the overall result, the re-staging and regrowth of the sparkling sector is going to be good."

He added, "We're gearing up for Chinese Lunar New Year at the beginning of the year, so that should be good."

The beverage giant has moved to concentrate its efforts on soft drinks, while scaling back its focus on case-packaged water. The company posted a 2 percent decline in unit case volume in the Asia-Pacific region during the third quarter.

China's carbonated beverage market has long been dominated by Coca-Cola and PepsiCo, supported by their strong brand power and awareness in the market.

The two combined are expected to take up 89.9 percent of the market share in revenue this year, according to research firm Mintel.

The rise of the catering sector will help grow consumption of carbonated beverages. Mintel also forecasts modest growth in the sector, with sales projected to rise at 2 percent annually through 2029 to 21.4 billion liters.

However, the market for sparkling beverages — including carbonated drinks, sparkling water and sparkling juices — is adapting to meet changing demands. As sugary drinks have seen a drop in popularity, products emphasizing strong carbonation, unique flavors and functional benefits are gaining traction, according to Mintel.

Rika Huang, a senior analyst at Mintel, said cautious consumption and a focus on health are reshaping the market. "Brands need to evolve from offering less sugar to promoting sugar control," she said. "Innovations with focus on scenarios like home and dining places will help sparkling drinks to better face challenges."

China's fast-moving consumer goods (FMCG) market in the first three quarters of this year has faced headwinds, with growth slowing to 0.8 percent amid cautious spending and heightened competition, according to an FMCG report from Bain & Company and Kantar Worldpanel released on Tuesday.

Beverage sales have been a relative bright spot, with revenue up 3.3 percent during the period, compared to 0.1 percent in the same period of 2023. Volume is up 4.5 percent, an increase on the figure of 3.4 percent a year ago.

Still, price sensitivity among consumers remains a concern. Average selling prices for beverages declined by 1.2 percent year-on-year in the third quarter, signaling a growing demand for value.

Among categories, carbonated drinks went down 3 percent, juice surged 20 percent, which is mainly pushed by the 129 percent rise of coconut water, and ready-to-drink tea was up 11 percent.