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    Coke Finds Hero in Zero

    Beverage giant also reports first-quarter results that exceed Wall Street expectations.

    ATLANTA -- After a series of flops and a move by consumers toward bottled water, juice drinks and other new beverages, Coca-Cola Co. is scoring a surprise hit with Coca-Cola Zero, a no-calorie soda made from the top-secret Coke formula and a blend of artificial sweeteners, The Wall Street Journal reported.

    According to the newspaper, Coke Zero has sold more than 100 million unit cases -- an industry standard of measurement comprising 24 eight-ounce bottles -- since its June 2005 debut. While that's a fraction of the sales of Diet Coke or Coca-Cola Classic, the new drink is the Atlanta-based beverage giant's "most successful launch...of any brand in 20 years," said E. Neville Isdell, Coca-Cola's chairman and CEO.

    Coke Zero's success came on the heels of C2, which disappeared from store shelves in late 2004. C2 had about half the carbohydrates and calories of Coca-Cola Classic and was aimed at weight-conscious consumers who don't like the taste of Diet Coke.

    After some initial marketing missteps in its U.S. launch, Coke Zero has generated buzz with a series of ads that show an actual, but unwitting Coke lawyer caught on hidden camera as two actors posing as Coca-Cola Classic marketers seek legal advice on how to sue Coke Zero "back to the stone age" for "taste infringement." "You'll be humiliated and you'll get fired," blurts Elizabeth Finn Johnson, one of the in-house lawyers.

    Katie Bayne, chief marketing officer for Coke's North American business, told The Wall Street Journal that company officials are meeting monthly with bottlers to analyze consumer feedback and swap ideas on how to sell more Coke Zero. In previous product launches, "we'd just put it out there," she concedes.

    John Downs, a spokesman for Coca-Cola Enterprises Inc., Coke's largest bottler, said collaboration has improved significantly and "really makes the system powerful."

    Coke Zero has about a 1-percent market share in the southeastern U.S. territory of Coca-Cola Bottling Co. Consolidated, Coke's second-biggest U.S. bottler. It will be sold in 40 countries by the end of 2007, the company said.

    In related news, Coca-Cola reported first-quarter results last week that exceeded Wall Street's expectations. The beverage giant, whose brands also include its namesake soda, as well as Sprite, Minute Maid and Dasani, reported net income of $1.26 billion, or 54 cents a share, up from $1.11 billion, or 47 cents a share, a year earlier.

    Revenue rose 17 percent to $6.1 billion, as unit-case volume increased 6 percent -- the highest figure since 2002. Unit-case volume indicates the amount of products that the company moved to retailers in a particular period, the newspaper said.

    Analysts polled by Thomson Financial on average expected the company to earn 53 cents a share in the latest quarter on revenue of $5.6 billion.

    Sparkling beverages, which includes Coke's carbonated drinks business, saw global volumes increase 5 percent. Coca-Cola recorded 4-percent growth.

    In the company's still beverages segment, which includes its noncarbonated drinks, Dasani water achieved 21- percent volume growth, and sports drink Powerade grew 7 percent.

    Coca-Cola has been trying to boost its noncarbonated drinks business -- an area in which rival PepsiCo has the advantage in recent years. Coke was quick to point out that it grew both its carbonated and noncarbonated businesses in the latest quarter.

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