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Can Orange Vanilla Coke Save Coca-Cola?

By Rick Munarriz – Updated Apr 15, 2019 at 2:40PM

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A new flavor for its iconic soft drink is turning heads, but it may not be enough to turn things around.

There's a new way to enjoy Coca-Cola (KO -1.71%). The world's largest beverage company recently introduced Orange Vanilla Coke and a calorie-free Orange Vanilla Coke Zero variant, hoping to fizz up sales for its flagship soft drink brand. After six years of declines in reported revenue, you can't blame the pop star for banking on a new tune.

Coca-Cola isn't phoning it in here. It launched an over-the-top TV ad featuring a 1970s-style car chase late last month, and the next time you head into your local grocery store, you shouldn't be surprised to find a fair amount of Coca-Cola's shelf space has been dedicated to the new flavor, which evokes nostalgic notes of Dreamsicle orange-popsicle-coated vanilla ice cream treats.  

Orange Vanilla Coca-Cola in cans.

Image source: Coca-Cola.

Orange you glad

Introducing new products is part of the art of being Coca-Cola. It rolls out hundreds of new lines a year, globally. It has seen the writing on the wall when it comes to the consumption trends of sugary soft drinks, a segment that has experienced declines in the U.S. every year since 2004. Coca-Cola has spent the past few years snapping up niche beverage companies to wean itself off its bread-and-butter soft drink stronghold. It hasn't shied away from cutting big checks for Odwalla fruit juices, Fuze teas, ZICO coconut water, and Glaceau vitamin-fortified water. Last summer, it struck a $5.1 billion deal for Costa coffees, a platform with a bean-roasting presence in more than 30 different countries. 

One trend that has helped spark renewed interest in canned and bottled beverages is the boom in flavored sparkling waters. Coca-Cola tried to tap that vein early last year by introducing new Diet Coke varieties. Offering up new fruity flavors including Ginger Lime and Twisted Mango in slim cans was supposed to appeal to jaded millennials hooked on LaCroix offerings. It recently added Strawberry Guava and Blueberry Acai to its Diet Coke product line, but the new Orange Vanilla Coke is the first new stateside rollout for the beverage behemoth's Coke Zero brand in years. 

You have to go all the way back to 2007 -- when Coca-Cola added Vanilla Coke Zero to its existing Cherry Coke Zero -- to find the last new flavor for its sugar-free Coca-Cola Zero brand. If anything it's surprising that it took Coca-Cola this long to get around to expanding its offerings on that front. A Coca-Cola marketing manager told AdAge last month that cherry- and vanilla-flavored Cokes account for roughly 9% of the brand's dollar volume but are driving 18% of the dollar growth.   

Check out the latest earnings call transcript for Coca-Cola.

One can argue that Coca-Cola doesn't need saving. The past six years of declining revenue mask legitimate growth, as currency fluctuations and bottler refranchising have weighed on its top-line performance on a reported basis. Revenue may have declined 10% at Coca-Cola last year, but organic revenue rose 5%. Overall case volume is also inching higher. 

It's also not just acquisitions where Coca-Cola is deploying its gobs of cash. It has returned money to shareholders through share buybacks and, more importantly, dividends. Coca-Cola has hiked its payout 57 years in a row, and its meandering share price finds that yield at a robust 3.5%. The stock remains a defensive play for investors, and it was one of the few investments to buck Friday's sell-off by moving higher for the day. 

Orange Vanilla Coke may not be enough to move the needle for a company ringing up $31.9 billion in revenue, but it can't hurt. Keeping things fresh and fizzy is what Coca-Cola is all about. 

Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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