Analyst warns of CCE's 'challenged start' with smaller 1.75 L Coke bottle


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Coca-Cola Enterprises' 1.75 liter Coke bottle was launched last March in Great Britain
Coca-Cola Enterprises' 1.75 liter Coke bottle was launched last March in Great Britain

Related tags Coca-cola Cce

A US analyst warns that Coca-Cola Enterprises (CCE) has suffered a ‘slightly challenged start’ with its new 1.75 liter contoured PET bottle in Great Britain.

Introduced at the end of March 2013, the 1.75 liter pack size for Coca-Cola, Diet Coke, Coke Zero, Cherry Coke and Vanilla Coke was introduced with a lower recommended retail price to, in CCE’s words, “capitalize on shoppers making a single bottle mission to their local convenience store”.

However, shoppers on forums such as Digital Spy​ this year have reported major retailers including Sainsbury selling the smaller bottle for the same ​price as the 2 liter package – generating a higher margin.

Darren Goldney, CCE sales and customer development director, said at the time of the launch last March: “One of the key platforms for unlocking the vast growth potential of the soft drinks category is the introduction of packs that meet specific shopper needs.”

CCE sought to boost C-store sales

CCE chose to introduce the 1.75 liter format in place of its traditional 2 liter bottle in the UK based on “strong insight into how shoppers buy take-home formats of cola in the convenience channel.”

But within the scope of a favourable note previewing CCE’s Q1 2014 earnings announced tomorrow – she predicts volumes up 1.8% for the quarter, sales up 3.4% for the quarter – Wells Fargo Securities analyst Bonnie Herzog warned that the new package had had a “slightly challenged start”​.

“Further, given poor weather conditions at the beginning of the quarter, the challenging promotional environment, and excess inventory, the market had softer than expected Holiday 2013 results,”​ Herzog wrote.

“We think there may be downward pressure on top-line results for this market. However, with COGS [cost of goods sold] also down (benefiting margin) and the British pound up relative to the US dollar, we think CCE’s bottom line results will largely be in line with our prior expectations,”​ she added.

CCE pays ‘diet downturn’ won’t cross Atlantic

Presuming that the ‘Diet Downturn’ did not cross the Atlantic to the UK and hit diet CSDs, Herzog said she expected Coke Zero volumes (+15% in 2013) to continue to represent an important growth source for CCE.

She also complimented the company for recent innovations – the successful ‘Share a Coke’ campaign that is ongoing this year, recent plans to launch stevia-sweetened Nestea and Fanta and introduce adult soft drink Finley in France, plus packaging innovation.

“New packaging for Coke Zero, the 1.75 liter ‘contour’ bottle in Great Britain and expansion of the 250ml can into immediate consumption channels should all help offset an otherwise challenging economic environment and allow CCE to at a minimum maintain its volumes this year,”​  Herzog added.

Coca-Cola Enterprises UK did not respond to a request for comment prior to publication.

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