Reformulated Coca-Cola Zero Sugar started rolling out last year

Analysts have trumpeted Coca-Cola Zero Sugar as well as Coca-Cola European Partners' non-CSD offerings as the group's key growth drivers in 2016.

In a note following Tuesday's fourth-quarter and full-year results announcement, Wells Fargo analyst Bonnie Herzog flagged the reformulated Coke Zero, as well as the continued roll-out of bottled water brand Glaceau Smartwater. CCEP relaunched Coca-Cola Zero as Coca-Cola Zero Sugar last summer, with the tagline "Tastes more like Coke, looks more like Coke". Meanwhile, the firm has been busy bolstering its Glaceau Smartwater operations, with an US$18m upgrade at its UK production facility and the launch of a sparkling variant last year.

"We were encouraged by CCEP's ability to deliver solid results for the quarter and year against a challenging operating environment," said Herzog. "We remain encouraged by CCEP's ability to drive volume growth through its successful reformulation of Coke Zero (volumes up 13.5% in Q4) ... [and] expanding Smartwater distribution, including sparkling."

The growth of Coke Zero, however, has come at a price, according to analysts at Exane BNPP. "A lot of cannibalisation has come from Coca-Cola Diet/Light," analysts said. "The good news is that it brings consumers back to the Coca-Cola category. In the Nordics, the brand is taking share on competitors."

On Smartwater, Exane analysts described the water category across Europe as "significant". Following the UK launch, "CCEP is now looking to expand Smartwater to other territories," said Exane.  

On a conference call after the results announcement, CEO Damian Gammell said Smartwater is "quite a different consumer proposition than our other brands, and its packaging is quite unique". He said the product is only available in single-serve. "It's quite a premium proposition and it's very much focused in on-the-go," he said.

Moreover, "Smartwater expansion should not have a significant impact on capital expenditure," added Exane.

The pressure remains, however, for brand Coke, which posted a 1.5% sales slip for CCEP last year. The trend echoes recent comments made by incoming Coca-Cola Co CEO James Quincey, who said last month that the group is on the way to becoming a "total beverage company". The Coke brand will "always be the heart and soul" of the company, Quincey noted, but the soft drinks giant needs to be "bigger than the core brand".