Coca-Cola Amatil Ltd (ASX: CCL) is planning a $10 million promotional campaign for the Australian release of Coke Life in April.
Coca-Cola Life is the newest Coke brand with a third less sugar and calories. It uses a natural sweetener called stevia, which is several hundred times sweeter than regular sugar. The exact formula to produce a taste similar to regular Coke took a number of years of market testing and adjustment. The new brand was initially released in the US last November in select markets.
Much is depending on Coke Life to reinvigorate sales and consumer demand. As a brand, Coke Life could take some time to establish itself, similar to the successful Coke Zero.
However, Coca-Cola Amatil needs to drive ads and promotions hard. Consumers now want more low-calorie beverages with natural ingredients. The company is also expanding its health and energy drinks product range as well. Coca-Cola Amatil did have some sales success with its most recent campaign "Colour you Summer". The Australian reported the ads drove can beverage sales up 7% during December and January.
Restructuring
The previous Coca-Cola Amatil management made cost cuts for short-term saving gains that actually reduced longer-term company performance. This happened at a time when consumers were turning towards healthier drinks with less sugar, compounding the effects of the cutbacks in overall revenue and earnings.
On top of that, strong pricing competition in Wesfarmers Limited's (ASX: WES) Coles supermarkets is also pressuring sales. Altogether, Coca-Cola Amatil's recently announced full-year revenue was down 1.7%, yet earnings fell 25.3%.
Coca-Cola Amatil's three-year restructuring program will see some change initiatives in place by mid-2015. The company projects cost savings of over $100 million in the next three years.
Improvements are planned for its second-largest business segment in Indonesia as well, after the company made a $500 million deal with The Coca-Cola Company in exchange for a 29.5% stake in the Indonesian business.
Getting ready
For investors, Coca-Cola Amatil may still offer longer-term opportunities. The share price has rallied almost 18% in the past two months. That's still well off from the $15 highs in May 2013. The benefits of the restructuring will take time. Building a position while things are developing could be a good way to position yourself.