Coca-Cola's business shows a bleak future for soda

Coke Reports Mixed Quarter

Coca-Cola's worldwide sales of soda are dropping — but the company says there is no need to panic.

Coca-Cola's sparkling beverage sales by volume decreased 1% in the second quarter, the company reported on Wednesday. Sales dropped 5.1% to $11.5 billion, missing analysts' average projection of $11.6 billion, according to Bloomberg.

The decrease in volume is part of an ongoing downward trend in soda consumption, in the US and around the world. The total volume of soda consumed in the US dropped 1.2% in 2015, compared to a drop of 0.9% in 2014, according to Beverage Digest's annual report.

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Coca-Cola executives maintained that the company is coming up with solutions for the fact that consumers around the world are drinking less sparkling — typically soda — beverages.

See the evolution of Coca-Cola through the years:

Coca-Cola through the years
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Coca-Cola through the years
UNITED STATES - CIRCA 1950s: Teenaged girl with bottle of Coca-Cola. (Photo by George Marks/Retrofile/Getty Images)
(GERMANY OUT) *23.03.1912-16.06.1977+Physiker, Raketenforscher, D/USA- Porträt mit Coca-Cola-Flasche- 1963 (Photo by ullstein bild/ullstein bild via Getty Images)
FRANCE - MAY 01: Centenary of Coca-Cola In France In May, 1986. (Photo by Didier CONTANT/Gamma-Rapho via Getty Images)
BOHOL, PHILIPPINES - 1988/01/01: A lemur clings to a coke bottle. . (Photo by Roland Neveu/LightRocket via Getty Images)
Bottles of Coca-Cola, Tab, and Sprite on the shelf of a grocery store in New York City, USA, September 1988. (Photo by Barbara Alper/Getty Images)
SAN FRANCISCO - JANUARY 16: Bottles of Coca-Cola are seen on the shelf at Tower Market January 16, 2004 in San Francisco, California. Coca-Cola is being investigated by U.S. regulators over allegations raised by a former employee that it had inflated its earnings. (Photo by Justin Sullivan/Getty Images)
SAN FRANCISCO - JANUARY 16: Cans of Coca-Cola are seen on the shelf at Tower Market January 16, 2004 in San Francisco, California. Coca-Cola is being investigated by U.S. regulators over allegations raised by a former employee that it had inflated its earnings. (Photo by Justin Sullivan/Getty Images)
UNITED STATES - OCTOBER 20: Bottles of Coca-Cola and Diet Coke are displayed on a shelf in an Associated Supermarket in New York Thursday, October 20, 2005. Coca-Cola Co. said third-quarter profit surged 37 percent, the biggest gain in more than a year, as sales rebounded in the U.S. and demand for Powerade sports (Photo by Ramin Talaie/Bloomberg via Getty Images)
PARK RIDGE, IL - NOVEMBER 07: 2-Liter bottles of Vanilla Coke as seen in a grocery store November 7, 2005 in Park Ridge, Illinois. Atlanta-based Coca-Cola Co. has said it plans to discontinue its Vanilla Coke in the US by the end of the year. (Photo by Tim Boyle/Getty Images)
NEW YORK - FEBRUARY 19: A general view of the new aluminum Coca-Cola bottle at Mercedes Benz Fashion Week Fall 2009 Collections at Bryant Park on February 19, 2009 in New York City (Photo by Donald Bowers/Getty Images for The Coca Cola Company)
Bottles of Coca-Cola Co.'s Coke brand soda sit on a shelf behind the bar at Smith & Wollensky in New York, U.S., on Monday, Feb. 22, 2010. Coca-Cola Co., the world's biggest soda maker, agreed to buy the North American operations of bottler Coca-Cola Enterprises Inc., more than six months after PepsiCo Inc. moved to bring its bottlers in-house to cut costs. Photographer: Daniel Acker/Bloomberg via Getty Images
LONDON, ENGLAND - MARCH 19: Rita Ora attends photocall to celebrates 100 years of the Coca-Cola Contour Bottle at the Coca-Cola Contour Centenary Bar on March 19, 2015 in London, England. (Photo by Mike Marsland/WireImage)

"We believe in our segmented revenue approach. It's not that we've forgotten about volume or don't believe in an underlying driver in the long-term, particularly in developing markets," COO James Quincey said in an earnings call. "In North America and some other developed markets, clearly we're going after more of a revenue strategy that's driven by smaller packages, pricing actions."

In a Q&A released by Coca-Cola,Quincey said that this approach was working in North America, even if Americans are cutting their soda consumption.

"In markets like North America, we are moving towards selling smaller packages instead of bigger packages," he said. "Thanks in large part to this strategy, our North America business had another strong quarter, reporting 4% organic revenue growth and the 25th consecutive quarter of value share gains in our industry."

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Quincy pointed to the "broader macroeconomic environment" in countries including China, Argentina and Venezuela as part of the global drop in sparkling beverage consumption.

In addition to focusing on selling smaller cans and bottles of soda — which can actually make Coca-Cola more money than larger packages — the company is also trying to combat falling soda consumption through investments in teas, juices, and bottled water.

While global sparkling volumes dropped, still beverage sales by volume grew 2% in the quarter.

"Since 2000, we've increased our business from about 10% of our volume coming from still beverages to almost 30% today," Quincey said in the Q&A.

In June, Coca-Cola has announced plans to acquire AdeS, the biggest soy-beverage brand in Latin America. Less than a month later, the company announced an investment in Aloe Gloe, a line of organic aloe-water beverages.

Still, that doesn't mean that Coca-Cola doesn't believe in the power of soda.

"As markets grow and expand, it's often the case that consumers desire, and have, far more choice in the array of available products in any given category," Quincey said in the Q&A. "However, it is worth saying that this expansion of variety does not equate to a decline in sparkling beverages... In fact, sparkling beverages remain the No. 1 driver of revenue growth for the entire nonalcoholic ready-to-drink beverage industry globally."

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