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Coca-Cola, one of the great symbols of American ingenuity and pride, is on the ropes.
Crushed between the triple threat of a slowdown in carbonated soda sales at home, the deteriorating image of U.S. interests overseas and a rise in health concerns everywhere, its revenues are flagging, and Coca-Cola's (KO, news, msgs) stock price, though up a bit recently, is down 45% from 1998.
Yet Coke has been around a long time, and it is a fighter. And it just so happens that, in recent months, its long-dithering executives appear to have recognized their peril in a more fundamental way than in the past and are prepared to emerge from their corner, swinging.
Yes, the cola king is preparing a comeback. And this time it just might work.
On Wednesday, Coca-Cola reported a drop in its fourth-quarter net income, but revenue rose, and results surpassed Wall Street's expectations. The company said it had experienced surprisingly strong 3% growth in its sparkling beverages, or carbonated drinks, a business that includes trademark products like Coke and Fanta.
The secret recipe going forward, strangely enough, has nothing to do with the red can for which it is so famous. The future is mostly green, with a big new-age helping of tangerine and pink grapefruit, and perhaps a dash of java.
Long odds, big payoff
The new corporate Coca-Cola, you see, is not really that into soda at all. While sugar water will always be at the core of the company's mission, the way forward is all about high-concept juices in groovy bottles, as well as vitamin water, energy potions and chilled coffee.Consider Coca-Cola's most recent $250 million purchase, a small "alternative" beverage pioneer called Fuze. If you've never heard of it, you're probably not a 28-year-old woman. In years past, this was exactly the kind of concept drink the soda giant shunned. Now it's considered a potential lifesaver.
Fuze was invented four years ago in the New Jersey basement of industry veteran Lance Collins. It's an awesome story of stubborn entrepreneurship. Collins knew the odds were around 97-1 against success, but he thought he saw a niche for low-calorie, high-taste, upscale juices for beautiful people, and gave it a shot. His design team created a gorgeous, colorful glass bottle for his "banana colada" and "peach mango" concoctions, gave them coy names like Slenderize, Refresh and Vitalize, called them "infuzions" instead of juices, and listed "transformative" ingredients like chromium, carnitine and Citrimax.
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This doesn't sound like Coca-Cola's cup of tea, but check out the demographic. Collins started small by focusing on urban women in their 20s and 30s, then elbowed his way past the big boys of the game via an aggressive distribution strategy into one chain store after another. He sold 24 million bottles in 2003, double that in 2004, and double again last year.
Success for a new beverage is all about persuading a distributor to make room for your stuff on its truck, and by all accounts Collins' salesmen pulled every trick in the book to fight their way into the awesome sales routes of Coke, Budweiser and Miller beer. You can now choose from an entire shelf of Fuze at the tiny Korean deli in Seattle where I get my lunch every day, which is astonishing for an independent brand. Or you can buy cases of it at Wal-Mart Stores (WMT, news, msgs), and in many supermarkets, not only in the United States but also in Asia, South America and Europe.
Cute little Fuze is the future of Coca-Cola because, well, everyone's doing it. Archrival PepsiCo (PEP, news, msgs) started its own youth movement by buying the stunningly successful SoBe line of oddball tea and energy drinks for $370 million in 2000 and added the quirky independent Izze line of light juices, which my kids love, late last year. Coca-Cola bought natural juice maker Odwalla in 2001, and picked up Fuze earlier this month.
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