Coca-Cola figured out how to make more money by selling less soda

Americans are drinking less Coke than ever before. However, the president of Coca-Cola North America says that’s a good thing for the company.

“People ask me, ‘When do you think the carbonated soft drink categories going to stop declining?'” Sandy Douglas said in a Morgan Stanley Global Consumer and Retail Conference on Tuesday. “That question is born of measuring volume, a gallonage, not packages.”

While the sheer volume of soda that Americans consume is decreasing, the number of bottles and cans that they are buying is increasing. While in 2015 the value of the “core” products, the gallon and 12-ounce can, fell 2% at Coca-Cola, the value of “transaction” purchases, such as smaller cans and bottles, grew 15%.

So, at Coca-Cola, the silver lining of Americans cutting down on soda is that the company can charge more per sip of Coke, as customers purchase smaller, less cost-efficient bottles.

“The consumer is moving to smaller packages,” Douglas said. “A 12-ounce can traded to a 7-ounce can is a 30% reduction in volume, but it’s an increase in revenue.”

For example, a 8.5-ounce aluminium bottle of Coke generates $US1.60 in revenue per purchase, while a two-litre gallon only generates $US0.18. That’s nearly nine times the revenue.

A Coca-Cola slide at Morgan Stanley Global Consumer ConferenceCoca-ColaA Coca-Cola slide at Morgan Stanley Global Consumer Conference

An additional hidden benefit of cutting down the size of packaging is that it gets Coca-Cola brownie points with anti-obesity advocates.

In 2014, the American Beverage Association pledged to cut calories by 20%. By serving smaller cans and bottles, Coca-Cola is able to do just that, without necessarily cutting sugar from the recipe.

“That’s the soda industry’s response,” Marion Nestle, a professor of nutrition, food studies, and public health at New York University and the author of the book “Soda Politics” told Business Insider last week on the rise of mini-cans in the beverage industry. “They want to be part of the solution, and they charge more for them.”

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