Coca-Cola Co. said Wednesday that it would replace Coke Zero soda in the U.S. market with Coca-Cola Zero Sugar after foreign sales of the new recipe and brand showed encouraging signs.
To avoid the inevitable comparisons to the New Coke brand that flopped in the 1980s as a reformulated replacement for Coca-Cola, the beverage giant spent more than five years on research, recipe mixing and testing of Coca-Cola Zero Sugar before starting sales.
Coca-Cola Zero Sugar will get fresh packaging featuring more of Coca-Cola Classic's trademark red wrapping, with a splash of black to reflect Coke Zero's previous look.
Now sold in more than 25 markets, the drink is set to hit the U.S. in August. After Coca-Cola Zero Sugar hits the U.S., Coke Zero will be phased out.
The replacement is very similar to Coke Zero in taste, said industry expert and Beverage Digest executive editor Duane Stanford. The ingredient list is exactly the same, meaning the formulation was likely tweaked only slightly.
"It’s not as if it’s some complete overhaul of the formula," he said. "It’s really as much about the package redesign and repositioning as anything. One of the things they’re trying to do is make it 100% clear that there is no sugar in the product and that it is a no-calorie product."
Coke CEO James Quincey acknowledged that customers were confused.
"It may surprise you to learn, but it’s true that consumers have not always been clear that either Diet Cokes or Coke Zeroes are absolutely zero sugar. That’s just a fact of consumer research," he said on a conference call.
With Coke also selling other Zero-branded sodas, including Sprite Zero and Cherry Zero, Quincey said the company "is taking a harder look at can we improve those formulas," as well.
The company will invest in "substantial marketing and media support" to introduce the new brand, Quincey said. That will include a national tour where consumers will be given free samples and educated about the drink.
"Coca-Cola’s strategy, in general, is very pointed because they want to go where consumers are going, and that means offering more products that allow people to control their sugar and calorie intake," Stanford said.
The company on Wednesday reported flat beverage sales globally for the second quarter but said it was encouraged by the performance of no-calorie and low-calorie sodas in foreign markets. Sales of drinks prepared for immediate consumption also provided a lift.
The beverage giant's total drink sales were effectively unchanged, compared to a year ago, but the company said the performance of Coca-Cola Zero Sugar was a bright spot. Sales of Diet Coke and its sister brand in global markets, Coke Light, continued to slide. But global growth in Coca-Cola Zero Sugar, also known elsewhere as Coca-Cola No Sugar, offset that decline by a factor of 2-to-1.
Sales of no-calorie and low-calorie drinks rose in the "mid single digits," with Coca-Cola Zero Sugar in the "double digits," the company said.
That's good news for an industry that's grappling with American consumers' drift away from sodas branded as "diet" drinks toward more natural sounding products.
Altogether, core revenue rose 3% for the period, compared to a year earlier. Net revenue fell 16% to $9.7 billion, though that was because the company is transforming bottling operations into franchises and experiencing a slight hit due to unfavorable currency rates.
Sparkling soft drink sales were even, tea and coffee sales rose 2%, sales of water and sports drinks increased 1% and sales of juice, dairy and plant-based beverages was up 3%.
Net income fell 60% to $1.37 billion, amounting to earnings of 32 cents per share. Revenue of $9.71 billion outpaced S&P Global Market Intelligence expectations of $9.62 billion.
Coke shares rose 0.8% in pre-market trading to $45.58 at 1:36 p.m.
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