Is Bionade the biggest threat to Coca-Cola Amatil Ltd?

A new ‘healthy’ fizzy soft drink threatens to compete with Coke

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Soft drinks maker Coca-Cola Amatil (ASX: CCL) is coming to the end of its life-cycle, according to Karsten Knorr, director of Drinks Beverage Logistics (DBL).

DBL has secured exclusive distribution rights to Bionade Cola, made by German bottler Bionade GmbH. Bionade is the market leader in the healthy soft drinks category in Europe, selling around 500 million bottles a year. DBL has been selling Bionade in Australia through health food stores and gourmet food shops over the past two years.

Mr Knorr says the company is in early talks with supermarkets, to stock the beverage in the health food aisles – separate from the traditional fizzy drinks made by Coca-Cola and rival Pepsi. Mr Knorr says the company could fill a niche in the soft drinks market, as health-conscious consumers switch away from high-sugar and artificially sweetened drinks.

Bionade, which is made from water, sugar, malt and natural flavours, but brewed like beer, is non-alcoholic and has around one-third to one-fifth of the sugar content of the traditional soft drinks.

Mr Knorr says Bionade sales are expected to reach 1 million bottles this year, and is targeting 3 million a year. He says Bionade is still under the radar, but from his perspective Coca-Cola hasn’t realised consumers are asking for new alternatives.

Coca-Cola has in the past tried to introduce new products, even altering the flavour of its traditional Coke, but that went down like a lead balloon with consumers. Coke Zero is one of the successful new products, containing no sugar, unlike traditional Coke.

But it’s unlikely that Australian consumers are going to switch off Coke, or any other of Coca-Cola Amatil’s other fizzy soft drinks, anytime soon. Coke has faced many competitors since it was first produced in the late nineteenth century, and it’s still here today.

Coca-Cola Amatil also produces other non-fizzy drinks, including bottled water, and has recently re-entered the wine and beer markets after a two year absence.

Foolish takeaway

While Woolworths Limited (ASX: WOW), Coles – owned by Wesfarmers Limited (ASX: WES) and IGA – supplied by Metcash Limited (ASX: MTS) may well stock Bionade in the near future, odds are that it will remain a niche product. Coca-Cola Amatil is likely to remain the dominant fizzy drinks supplier along with Pepsi, in Australia for many years to come.

Motley Fool writer/analyst Mike King owns shares in Coca-Cola Amatil and Woolworths. You can follow Mike on Twitter @TMFKinga

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