Coca-Cola Life off to 'lackluster' start in the US, says analyst

Initial feedback suggests the US debut of Coca-Cola Life has been “lackluster”, with staff in some of the first stores to feature the product reporting “satisfactory” sales, but nothing to set the world on fire, says Ali Dibadj, senior analyst at Sanford Bernstein.

The US version of stevia-and-sugar-sweetened Coca-Cola Life - which has 60 calories per 8-oz glass bottle (vs 93 calories for 8oz of regular Coke) - first hit shelves in The Fresh Market stores in Georgia, North Carolina, South Carolina, and Florida in late August ahead of a nationwide rollout scheduled for next month.

Sales thus far seem satisfactory, although nothing out of the ordinary

But conversations with staff at 32 The Fresh Market stores a month after the launch, suggested that Coca-Cola Life has not generated as much excitement as might have been expected, said Dibadj in an October 1 note.

“A month into the test-run, we spoke to clerks and store managers across 32 of the 64 The Fresh Market locations to find that sales of Coca-Cola Life thus far seem satisfactory (although nothing out of the ordinary) on the whole.

“We were not impressed by the 5-days (launch date on 25th August, 2014) worth of U.S. Nielsen scanner data from the quad week ending August 30th, 2014, whereby The Fresh Market, as a whole, sold $5,110 worth of Coca-Cola Life, which is equivalent to an average sales figure of $16 or average volume of three six-packs per store per day.

We would have expected inflated sales considering the ‘novelty factor’ surrounding the launch of this new product line extension.”

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Picture credit: Sanford Bernstein

We aren't yet sure if this is the magic bullet

However, “supply-side constraints” may have had some bearing on the sales, he cautioned, noting that one store received its first shipment three weeks late, while another sold three weeks of inventory in the first two days, and was only able to replenish stocks two weeks later, so would presumably have sold a lot more had the product been available.

Supply chain issues notwithstanding, however, conversations with employees “confirm the moderate performance of Coca-Cola Life within the past month”, he added, “with 22 of the 32 locations performing averagely, six locations performing extremely well, and almost just as many, four, performing poorly.

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Pepsi True - which has 60 calories per 7.5oz can, compared with 100 calories for the equivalent amount of regular Pepsi - will be available exclusively on Amazon from mid-October in 24-packs of 7.5-ounce cans, a move PepsiCo says will help it assess demand ahead of a wider launch.

“The feedback we received appears to be merely satisfactory or mixed. South Carolina, in particular, had polarized results, with two locations selling Coca-Cola Life extremely well, and another two not selling at all.”

One clerk at a South Carolina store said it had "sold a lot at the beginning, but not as much anymore", while another in Florida said the store had experienced a slowdown in sales after the initial hype had worn off, he added.

“Conversely, another clerk from Georgia mentioned that the drink was great and people were coming back for more. This suggests mixed reviews on Coca-Cola Life, with worrying implications that once the novelty factor wears of and more consumers decide they do not like the taste, sales will deteriorate.”

He added: “We think it will be important for Coca-Cola Life to bring users back into the carbonated soft drinks category in order to stem ongoing sales declines, but aren't yet sure if this is the magic bullet.”

Can Coca-Cola Life drive incremental growth to the CSD category?

The big question facing Coca-Cola Life and new rival Pepsi True - which PepsiCo is currently selling exclusively on Amazon in order to gauge appeal - is whether they will bring incremental growth to the carbonates category by bringing in new - or lapsed - consumers.

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It’s too early to say in the US market, but in a Sept 24 note on stevia supplier PureCircle, Wells Fargo senior analyst Bonnie Herzog said Coca-Cola Life did appear to be generating incremental growth for Coca-Cola in Argentina driven by “lapsed users returning to the category and Millennial or new users drawn to a product that doesn’t have the calories of regular Coke or the artificial sweeteners in Coke Light”.  

However, other market watchers say the jury is out, with Euromonitor International beverages analyst Jonas Feliciano arguing that it is probably wishful thinking to believe that US consumers will ever go back to drinking as much cola as they did in the 1980s or 1990s (click HERE).

Coca-Cola has not yet provided an update on how well Coca-Cola Life is performing in the US market.