(ATLANTA) -- Coca Cola's top executive for North America and Latin America made an amazing and public admission Tuesday.
Steve Cahillane acknowledged during a conference call with industry analysts that sales of Diet Coke -- the Number Two selling soft drink in the U.S., second only to Coke itself -- were down three percent last year because of consumers' concerns over artificial sweeteners.
So, here's what that mighty global company on Atlanta's North Avenue is doing about the Diet Coke "artificial sweetener" controversy -- it's playing aggressive offense while toughening up its defense.
And Wall Street likes the Diet Coke playbook that it sees emerging from the Atlanta headquarters, even if increasing numbers of consumers in the U.S. don't, right now.
First, Coke is sticking with aspartame as the sweetener in Diet Coke, and promoting Diet Coke more than ever, convinced it can boost slipping sales.
| August, 2013: Coke Defends Aspartame |
But Coke also continues to develop new drinks that could take Diet Coke's place as a top-tier brand, if and when Diet Coke joins the ranks of Tab.
Dominic Chu, Markets Reporter with CNBC, told 11Alive's Jon Shirek that has been Coke's trademark strategy for decades.
"I mean, Coca Cola went from a one-product company back in its founding, just selling Coca Cola, all the way to what it is today. You've got all different kinds of products. You've got Dasani on the water side of things. You've also got big teas like Honest Tea, you've also got the Fuze drinks. What you're seeing is maybe, perhaps, a slow down in the soda side of sales, but they are seeing double-digit growth, rapid growth, in things like those teas, the tea market. So as consumers start to change their buying patterns, their buying proclivities, what you're seeing is Coca Cola trying to add products to the mix where customers are. Now, none of those products even comes close to the sales volume of a traditional Coca Cola, or even a Diet Coke, but what it does show you is big companies like Coca Cola are always looking for where those consumer trends are, and they're looking to make acquisitions to make sure they always have a product that people want to drink.... The controversy around sweeteners, artificial sweeteners in diet sodas, has been around for years, and what happens is a lot of these companies, they typically go and they evolve their product mix. If customers start to pull back on those products, they find other products to substitute for those. So with Coca Cola and other big-name soft drink makers, you're talking about, yes, some controversy. But we've yet to see any real, solid impact to sales just because of those concerns."
Coke is experimenting with a natural sweetener, stevia, from the stevia plant, and using that in Diet Coke sold in Argentina. Not anywhere else, yet.
| 11Alive Web Poll: What do you think about artificial sweeteners? |
But Chu said sales of the aspartame version of Diet Coke remain relatively strong worldwide, despite some consumer resistance in the U.S.
"About 60 percent of its revenues, its sales, comes from outside the U.S. So as much as we're focused a little bit on what's happening with Diet Coke and the possible consumer issues that they have with sweeteners, you've got to look around the world in places like emerging markets -- all those growth markets -- Coca Cola products still sell very heavily there. And where the sales growth is, is outside the U.S. borders. So even though there's this issue right now, perhaps, a small one, at best, in the United States and North America, you still have to see where the patterns are all over the world, because that is where Coca Cola sells the majority of its product. You've got to look outside the U.S. borders."
Even if increasing numbers of U.S. consumers reject Diet Coke and other sodas containing artificial sweeteners such as aspartame, Chu said Wall Street is still bullish on the big Coke brand.
"Generally speaking, a lot of the traders and analysts and experts that we talk to, fund managers, all say that Coca Cola is a solid, blue chip company. It's an iconic brand, one that has very stable cash flows, one that pays a pretty decent dividend to investors. So when it comes to Coca Cola, there's always going to be a share-holder base who's in there looking to invest in the company that may not be growing as rapidly as some big internet company, but is certainly one that's got a lot of brand recognition, and one that provides slow and steady returns and even payments in terms of dividends for its investors. That's the reason why a lot of investors invest in a company like Coca Cola. They're not looking for rocket-sized gains in the stock, they're looking for a slow and steady performer."