Over the past year, Coca-Cola has been experimenting with limited-time bizarre flavors and immersive online experiences. Now it aims to add more varieties of cans, bottles and value packs to provide more options for cash-strapped consumers, even if that ultimately means paying more for less.
“Packaging innovation plays a bigger role,” when shoppers worry about spending, CEO James Quincey said on a third-quarter earnings call with analysts on Tuesday. “We will approach ’23 with a broad innovation agenda, but with a slight weighting to packaging.”
For companies like Coke, offering more types of containers — especially smaller ones — is a way to retain or attract customers worried about their spending, even as prices continue to rise.
“It’s about extending the price scale,” Quincey said, “making sure that the price of entry…gets as low in the price spectrum, the actual payout, as possible.”
This is especially important now, as Coca-Cola has seen consumers begin to tighten their belts due to soaring prices.
Some shoppers have started spending less on groceries. “Therefore, price becomes even more important than price per litre,” Quincey said. “That’s absolutely what we’re looking for.”
In other words, even though customers end up paying more per liter when buying smaller packs, some are willing to make that trade-off for a lower price because they can’t afford the more expensive item.
Coca-Cola (KO) already sells smaller containers and multipacks with fewer cans. In the third quarter, the company launched a value collection that offers customers products in a variety of sizes. These items, available in select stores across the United States, “help retain and recruit more consumers while creating value for our customers,” Quincey said.
The CEO also said returnable containers are another way to cut costs, as consumers get money back for returned bottles and cans.
Earlier this year, the company announced its goal of selling at least a quarter of all its beverages worldwide in reusable or returnable containers by 2030. (Coca-Cola also recently announced a change in the appearance of Sprite bottles, ditching its signature green for clear plastic, which is easier to recycle.)
These strategies could help offset the impact of rising prices on consumers. The company expects inflation and commodity market volatility to affect its own costs, and is expected to continue to raise prices.
“There will be higher than normal input costs,” Quincey said on CNBC’s Squawk on the Street. “So we expect prices to be higher than normal next year on top of what happened this year.”
The company is also considering other changes, including adding “more premium options for those who still have a lot of disposable income,” Quincey said on the analyst call.
And he plans to continue to strengthen Coke Zero Sugar, a growth engine, with more marketing and other innovations.
So far, Coca-Cola’s pricing and innovation strategy seems to be working. In the third quarter, the company’s net revenue jumped 10% to $1.1 billion.