When economic times get tough, people's thirst for carbonated beverages rarely wavers and often gets stronger. At the same time, they tend to rely on products and brands that they know and trust.
That's one of the key points emphasized by two Coca-Cola Co. executives, Selman Careaga and Oana Vlad, who spoke with TheStreet about how the Atlanta soft-drinks giant has managed through a tougher consumer environment.
In its most recent earnings call, in February 2023, Coca-Cola (KO) reported full-year revenue growth of 11% to $43 billion.
In building those revenue results, the company relied on the older and the new.
Coke's Zero Sugar version, which has been around since 2005 but whose formula was famously reworked in 2017 and then again in 2021, accounted for a chunk of those sales with 9% year-over-year growth in fourth-quarter 2022 and 11% in the full year.
DON'T MISS: Is Coca-Cola Fizzed Out or Is the Stock About to Pop?
And a new concept, launched in 2022, was Coca-Cola Creations, limited-edition flavors with mysterious names like "Starlight" and "Dreamworld." They'd drop for a few weeks and then be replaced with something new.
The Coca-Cola Company
Coca-Cola Creations: 'Guess What's In It'
"We leave this imaginary name so that people can play with that and guess what's in it," Careaga, president of the global Coca-Cola category, told TheStreet in an exclusive interview.
Careaga and Vlad, Coke's senior director of global strategy, talked with TheStreet about business during tough economic times and these new initiatives. This interview has been edited for length and clarity.
TheStreet: Is the idea that people increasingly look for small pick-me-ups during a challenging economy a stereotype? Or have you seen that in the numbers?
Careaga: What you're seeing in the Coke results over the last few quarters and during covid is good performance overall. Yes, it has a pick-me-up benefit as a product, and we really saw people relying on brands that they trusted during that tough environment.
But I think the results are not only because of that but also due to our bottling system that executed quite well globally as well as managing prices, packaging and execution of the entire portfolio that we offer.
TS: How do you manage pricing? There have been several price hikes in the past 12 months.
Careaga: Pricing is managed locally depending on each of the markets and inflation and commodity pricing. It's more of a local situation and a local environment.
I think we managed significantly well in terms of execution and everything that had to do with the supply chain at that time. We had a lot of constraints with materials and ingredients. I think the entire supply chain, technical and bottling teams, did a phenomenal job in terms of making sure that the product was available for people. The pricing largely depends on each of the local markets and where we execute.
TS: How has Zero Sugar fared since the most recent formula update?
Vlad: We did reformulate and improve taste, and since then we've been seeing double-digit growth.
This year is really the next chapter in the growth story for Coke Zero Sugar as we have a reinvented "Best Coke" platform that's really digital first and the hashtag #TakeATaste. This is all about the idea that sometimes when things are so craveable and so delicious, you have to protect them from others who might want to take them from you.
We've been having a lot of fun with a fresh way of marketing. We also have a lot of different mobile experiences like a scavenger hunt, an AR game, and a lot of influencers across North America. I'm excited to see this not just for Zero Sugar but also Zero Sugar Zero Caffeine along with the Coke Creations platform, which is also Zero Sugar-led.
Coca Cola/TS
Coca-Cola Tries to Put Culture in a Bottle
TS: Coca-Cola Creations is a series of limited-edition flavors that drop on the market for a short time. How do you come up with those?
Careaga: We had five for the first year across the world and the similarity across them is that they all start with Coke as a base. They have to taste similar to Coke above all.
[For the additional flavor] we leave this imaginary name so that people can play with that and guess what's in it. We've seen great response with that because it's a blend of experiences, not just for the formula and the packaging but for the digital [campaigns] as well. It's an angle for us to experiment a bit with Coke.
Vlad: We talk about the Creations platform as bottled culture. And because culture is always moving, we want to always be moving either ahead of, or at a minimum with, the culture. For that reason, we don't keep this product on the market but sell for a limited time and then move on to something else.
TheStreet: How do you translate the abstract concept of culture into a taste?
Vlad: We have the most incredible research and development and department of scientists, who have had a lot of fun with this. They work hand in hand with our creatives, our designers and that's how the flavor and the world of experiences really come together in each creation.
TS: Coca-Cola is a very strong and recognizable brand. Straying from what people know can be a risky business move. How do you navigate that?
Careaga: Everything that we do revolves around the core values of the 130-year-old brand. Authenticity, optimism and inclusivity. "Real magic" is not only just a tagline but is embedded into everything that we do.
Creations is just one arm of what we do, but we also have major programs around building rituals around meals and breaks, with music as an example. We have a big program around Coke Studio [a series of summer concert and festivals] and, of course, Christmas. Last year we had the FIFA World Cup and we'll of course do something for the Olympics next year.
So we do have many projects out there that really tap into the classic and the scale of the brand, while Creations is the element where we can take more risks and play a bit more. Over the last year, we learned that people like for Coke to experiment a little bit.
When deciding what to create next or bring back, how much of a factor are discussions on Twitter and other social-media platforms? Some customers have very strong soft-drink opinions.
Careaga: We really have loved seeing the social debates. The majority of the social debates have been speculating about what the flavors are and what the scientists in the Coke lab are up to. But it's less about the flavor profile and much more about trying to predict where culture is going next.
