Coke faces UK sales slump, but claims Euro 2016 marketing will spark revival

Coke: sales were hit by problems around new IT system
Coke: sales were hit by problems around new IT system

Coca-Cola Enterprises (CCE) - the company that distributes Coke in the UK and six other European countries - saw its sales fall 7% to $1.5bn (£1.03bn) in the first quarter of 2016.

Revealing the results yesterday, CCE said it had been hit by a "soft consumer environment" and technical problems, but that it was well placed to rebound on the back of its Euro 2016 activity this summer.

"We have solid marketing plans in place, including strong initiatives for the UEFA Euro 2016 - Europe’s biggest soccer event - and a renewed focus on immediate consumption, including a variety of new packaging initiatives," said chief operating officer Damian Gammell.

"And, we will benefit from initiatives supporting the ‘Taste the Feeling’ campaign, which will better link our four core Coca-Cola trademark products."

Volume sales in the UK fell 5% - partly, but not entirely down to problems with implementing a new software system. CCE chief executive and chairman John Brock said sales would have fallen anyway, but could not give an idea of what the difference might have been.

"We continue to face an overall soft consumer environment that has limited category growth," said Brock.

"However, we remain confident that our marketplace strategies, innovation initiatives, and customer-focused effectiveness will sustain our outlook for the full year."

CCE, which is in the process of merging with its counterparts in Spain and Germany to create Coca-Cola European Partners, said it expected full-year comparable sales for 2016 to be up slightly.

One eye on the sugar tax

Thanks to the market-leading position of full-sugar Coke, CCE is set to be the company most severely hit by the ‘sugar tax’, announced by Chancellor George Osborne in March’s budget.

Jon Woods, GB general manager at The Coca-Cola Company, had already laid into the tax, saying it "flies in the face of evidence" on reducing obesity, and Brock yesterday made it clear he was just as firmly opposed to "discriminatory taxes which don’t do any good".

Brock would not be drawn on how the looming tax would affect the company’s strategy in the next two years. "The programme does not take effect until 2018, and consultations and working with the regulators is just starting, and we’ll see where it goes," he said.

However, last week saw two major brand developments that Coke explicitly said were aimed at getting more consumers to switch from red Coke, which incurs the top rate of the soft drinks levy, to the lower- or no-sugar variants.

Firstly, the Coke family is getting a global visual makeover, bringing the sub-brands more closely in line with classic Coke. This will roll out gradually across the world during 2016 and 2017.

And in the UK, Coca-Cola Zero will relaunch as Coca-Cola Zero Sugar, with a new recipe the company said was closer to classic Coke. The launch, from late June, will be supported by a £10m campaign across TV, out of home, digital and experiential. CCGB said the investment was its biggest in a new product launch for a decade.

UK Coke Zero sales had been growing by volume but falling by value, thanks to the product being heavily promoted. Mid-sugar version Coke Life, meanwhile, launched in 2014, has failed to gain much momentum, and was also relaunched in January.

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