For Coca-Cola, smaller portions are now a 'real thing'

ATLANTA – Coca-Cola's Super Bowl ad this year featured Ant-Man and The Incredible Hulk battling for a mini-can of the company's namesake soda.

After a lot of twists and turns and broken concrete, the two Marvel comic book characters — one extra big, the other extra small — wound up being satisfied by the same 7.5-ounce drink.

What the ad didn't say is that the two superheroes also paid a lot more for the downsized drink, at least on a per-ounce basis.

Giving consumers smaller amounts of soda but getting more revenue from each sale has become a cornerstone of the Atlanta beverage giant's effort to deal with flagging enthusiasm for giant-sized — or even regular-sized — soft drinks.

Launched seven years ago as the debate over Coke's role in America's obesity epidemic grew heated, sales of 7.5-ounce mini-cans, along with 8-ounce glass and aluminum bottles, have been a boon for Coke, growing double digits over the last three years.

They increased 15 percent in the first five months of 2015.

The smaller versions are elbowing 12-ounce cans and 2-liter bottles for grocery shelf space.

Originally rolled out in Coke and Diet Coke versions, they now contain Caffeine Free Diet Coke, Coke Zero, Sprite, Sprite Zero, Fanta Orange and Seagram's Ginger Ale.

More important, mini's are driving revenue, says Sandy Douglas, president of Coke North America.

A regular 12-ounce can of Coke, for instance, sells on average for 31 cents. A 7.5-ounce mini sells for 50 cents.

"A 12-ounce can traded to a 7-ounce can is a 30 percent reduction in volume, but it's an increase in revenue," Douglas said during Morgan Stanley's Global Consumer and Retail Conference last November.

Coke shareholders are no doubt impressed — the strategy has coincided with a more than 80 percent share price gain since March 2009. But not everyone thinks this is a good thing.

Michael Jacobson, president of health advocacy group Center for Science in the Public Interest, said he fears some consumers could mistakenly think the potential harms of a 12-ounce can, such as diabetes and tooth decay, are lessened in a Coke mini because the packaging is smaller.

In addition, he worries some who don't drink sodas might be tempted to give the mini-can a try because of its size.

"I don't know how this is going to shake out but we should know soon as the popularity increases," he said, adding that he's urged Coke and its rival Pepsi to reduce other sizes, including the 2-liter bottle and 12-ounce can.

The financial improvements brought by mini-cans come at a time when the soft-drink industry has seen its volume — the metric it has used for generations to gauge success — fall every year in North America for the past decade.

Americans, given more choices in teas, coffee and water, have pulled back on drinking sodas.

A Gallup poll last year found that six in 10 U.S. adults said they were trying to steer clear of soft drinks, both diet and regular.

Diet Coke, once a mighty alternative for people who wanted the Coke taste without the calories, has fallen on hard times, slumping 5 percent in fourth quarter 2015, although growth by Coke Zero has helped soften the blow.

Simultaneously the industry faced municipal pushes around the country for taxes on sugary drinks, a failed attempt to regulate drink portions in New York movie theaters, restaurants and stadiums, and health experts' attempts to link obesity and sodas.

Coke became embroiled in controversy after newspaper reports in August found the company funded a University of Colorado "scientific" group that said Americans are getting fatter because of a lack of physical fitness — not sugary drinks.

Coke cut ties to the group, Global Energy Balance Network, and the organization later shut down.

In mini-cans, Coke has found a way to offset some of the damage, if not fix the fundamental problem of weakening demand driven by cultural forces, experts said.

"It turns out consumers are willing to pay more per ounce for convenience and portion control," said Duane Stanford, editor of Beverage Digest, an industry publication.

"The mini-can also is bringing back some consumers who see soft drinks as more of an indulgence and want portion sizes to reflect that belief," Stanford said.

And it's changed the way Coke calculates its business, albeit slowly.

The company still uses volume as its principal barometer, reporting last month that volume for soft drinks in North America, the company's biggest market, grew 2 percent during the fourth quarter of 2015. Volume for the year was flat.

But increasingly it is turning to "transactions" — basically how much money the company makes on each purchase — to tout its financial well-being.

"The past focus of both our company and the industry was how many gallons were sold," Douglas has said in interviews. "That's not a good approach for anticipating and meeting consumer needs in a world exploding with choices."

Douglas told the Morgan Stanley audience that mini-cans and 8-ounce glass and aluminum bottles are popular with all demographics, but especially upper-income consumers and mothers.

"Moms want to treat their kids, but they don't want them to have too much," he said. "They want to be in control, and these packages give them control."

Coke had tried a small-form can before. Before launching the mini's in 2009, it marketed an 8-ounce "squat" can that failed to catch on with the public, the company said.

The slimmer, taller mini resembled cans in Europe and tested well in several Georgia cities before being launched nationwide.

They also are closer to the original size of Coca-Cola, which came in a 6.5-ounce bottle until 1955 when the company began introducing larger sizes.

Ken Bernhardt, regents professor of marketing emeritus at Georgia State University, said the challenge for mini-cans is avoiding cannibalizing larger sizes.

"People have loved Coca-Cola for 130 years," said Bernhardt. They are not going to stop loving them in the next 15 years."