Coca-Cola Amatil’s launch of its new Coca-Cola No Sugar in Australia and New Zealand on June 16 is the most significant launch of a new Coke product since Coca-Cola Zero was released over a decade ago, in 2006. This new product development is the result of the company’s continuous effort to play with its recipes and reformulate a no-sugar cola that replicates the taste of the original Coca-Cola. The release of this product to the Australasian market, after an initial launch in Mexico, was considered a trial for entering the US market. However the launch has experienced a significant setback, as Australia’s leading supermarket Woolworths is refusing to range it. Importantly, it reflects both the current market saturation of low-calorie cola carbonate products and the growing health consciousness of local consumers.
So what is the significance of Woolworths’ move?
Woolworths was the leading supermarket in Australia in 2016, making up 40% of dollar sales in the A$85 billion supermarkets category. In addition to this, 68% of off-trade dollar sales of soft drinks went through supermarkets last year. This means that Coca-Cola No Sugar sales could be denied a significant proportion of consumer spend through retail outlets; a potentially substantial obstacle for Coca-Cola No Sugar’s Australian sales.
This move also reflects the troubled state of carbonates in Australia, such as the 13% decline in per capita consumption of carbonates through retailers between 2011 and 2016. In fact, Australians have been spending less on carbonates at both off-trade retailers and through foodservice every year since 2013, providing a challenge for retailers and manufacturers who have been driving constant price promotions in an effort to spur the growth of carbonates. This strategy, however, has failed to turn around the declining consumption.
On the other hand, Australian consumers continue to show a penchant for healthier beverage alternatives. These include bottled water, coconut and other plant waters and the latest ready-to-drink tea option, kombucha, with all of these products seeing healthy growth over the last year. In addition to this interest in healthier alternatives, some consumers feel uncertain about the safety of artificial sweeteners used in no-sugar products, such as aspartame, which has a sweetness rating 200 times that of sugar. While the Australian government’s official stance is that the levels of aspartame used in diet beverages is too small to pose a health risk, media reports and some health advocates continue to suggest that consuming smaller quantities of regular ‘full strength’ soft drinks, such as regular Coca-Cola, may in fact be healthier than consuming artificial sweeteners.
Another hindrance to the consumption of low-sugar soft drink varieties is that there is still a proportion of the market that enjoys the full-sugar varieties and will not make ‘the switch’ to low-sugar varieties. This is especially true for consumers of soft drinks at on-trade venues who are often looking to treat themselves. For those choosing to drink soft drinks, rather than healthier alternatives such as bottled water, they often do not want to sacrifice taste to have a ‘healthier’ soft drink alternative. It will be interesting to see how consumers respond to this new product if it has the same taste as the original Coca-Cola while also including artificial sweeteners.
In contrast to Woolworths, rival supermarket chain Coles has chosen to stock Coca-Cola No Sugar and is driving awareness of the launch through price promotion. While Woolworths may make the decision to range the product in the future, the fact that Australia’s leading supermarket has refused to stock Coca-Cola’s latest product from its launch date reflects the growing tide of consumers turning away from carbonates products to healthier alternatives such as bottled water and fresh juice.