Coca Cola sees strong Q218 growth in Latin America despite regional volatility

By Mary Ellen Shoup contact

- Last updated on GMT

Latin American consumers are responding to lower-sugar beverage options such as Coca-Cola Zero Sugar, says the company.
Latin American consumers are responding to lower-sugar beverage options such as Coca-Cola Zero Sugar, says the company.

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Coca-Cola registered solid growth in Latin America despite some volatility caused by workers’ strikes and political unrest throughout the region.

Net operating revenues for the three months ended June 29, 2018 were $19m and $38m for the first six month of 2018, an 8% increase compared to the same periods last year.

“Latin America is one of those places where you need to look at a few quarters averaged together because it can be volatile,”​ Coca-Cola president and CEO James Quincey said during a recent earnings call.

Quincey noted that despite some “clouds on the horizon” ​that the company’s outlook in Latin America is positive, especially for Mexico where the environment looks to be stable and positive and in Brazil where the strike has ended.

“I think sometimes the fears of what might happen are much greater than actually what happens,” ​Quincey added.

“I think we've got a good plan for the second half in Latin America, together with our bottling partners.”

Volume sales for Q218 grew by 12% compared to the same period last year driven by growth in Mexico and Chile, but tempered by declines in Argentina and Brazil.

“Argentina is looking a little more tricky. But look, we've been here before in Latin America several times. I don't think there's something that says everything suddenly all going to go wrong.”

‘Lift & Shift’ strategy

As part of the beverage giant’s overarching goal of becoming a “total beverage company”,​ Coca-Cola has been implementing what it calls a “lift and shift”​ model of bringing well-known and popular regional brands to new markets.

As Quincey describes it: “We operate in 200 countries. Having a success in one country frankly almost doesn’t move the needle. The needle only really moves when it’s a big success in more than one of the big countries.”

For example, taking note of the rising prominence of plant-based beverage options, Coca-Cola acquired Latin American soy-based beverage brand AdeS in 2017 from Unilever in 2017 and has been steadily expanding its footprint throughout the region as well as new markets such as Europe (under a more premium brand image called 'AdeZ').

By the end of 2018, AdeZ will be in 18 markets, according to the company.

Another example of a winning lift and shift strategy is Coca-Cola Zero Sugar, which was introduced in the US in August 2017. It was soon after brought to international markets including Latin America where the product has grown by double digits.

Coca-Cola Zero Sugar had a particularly popular introduction in Chile indicating a growing consumer acceptance and awareness of zero-calorie beverages, according to the soda maker.

In addition to reformulating products to be low- to zero-sugar, the company has made an effort to introduce new products the region from its still beverage portfolio.

For instance, Coca-Cola launched US premium water brand glaceau smartwater to the Latin American market last year to provide consumers with another bottled water option.

The company has also been working to offer lower- and zero-calorie beverages through completely new product introductions specific to Latin America.

In summer 2017, Coca-Cola launched a new category of “Aguas Frescas”​ (“Fresh Waters”​), a suite of non-carbonated beverages using fruit, seed, and botanical ingredients with roots in Mexico and Central America. All the beverages under the Aguas Frescas portfolio contain 3-5% juice with less than 100 calories per 12-ounce serving.

“I think we've got great plans to engage with the customers and the consumers,”​ Quincey added during the call to investors.

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