Talk Money with Tony Field – July 30, 2015

  • 30/07/2015
Coke New Zealand says that last year it purchased 18 percent less sugar than it did in 2008 (file)
Coke New Zealand says that last year it purchased 18 percent less sugar than it did in 2008 (file)

People are becoming more concerned about sugar and are switching to alternative food and drinks. So what do you do if you are a global soft drink giant? You diversify.

Companies like Coca-Cola are increasingly focusing on products like ready-to-drink tea and water.

They are also selling more smaller-sized cans and bottles of soft drinks. Those cans cost more per ounce, or per 100 ml, than the larger bottles.

It is part of the reason that Coca-Cola recently announced a 19 percent increase in net income in the June quarter, despite a 3 percent drop in global revenue. The fall in revenue was partly because sales of soft drinks are falling in many regions. Global revenue was also hurt by a rising US dollar.

There was a 7 percent growth in ready-to-drink tea and 8 percent growth in packaged water.

Coke Zero was up 1 percent and Sprite rose 3 percent. But Diet Coke sales fell 7 percent for the quarter as consumers conscious of their calories sought out alternatives.

Coke New Zealand is part of the Australian company Coca-Cola Amatil. Its profit result is a few weeks away and ASX share market rules mean it is in a profit 'blackout' until those results are released.

But at its last profit result Coca-Cola Amatil told investors that sales of its core products were down 3.3 percent in New Zealand.

Like the parent company in the US, it is also diversifying into products like water and tea and has introduced Coke Life, a product with less sugar and sweetened with stevia.

Coke New Zealand says that last year it purchased 18 percent less sugar than it did in 2008.

It says its 250ml six-pack is seeing the highest transaction numbers amongst all its multipack products.

The 300 ml pack is now 19 percent of sales of all single-serve packs.

Frucor, which includes Pepsi in its brands, says its sales are commercially sensitive. But it says it's seeing more demand for lower or no sugar drinks.

It says sales of Sparkling OH! (a lower-sugar, stevia-sweetened drink) is "performing very strongly".

Here is my chat with Paul Henry about the marketing of soft drinks.

More than 1 million New Zealanders are considered to be obese. That has prompted repeated calls for a sugar tax.

Paul Henry spoke to the Prime Minister's Chief Science Advisor Sir Peter Gluckman today about the idea.

Here is Paul Henry's interview with Sir Peter Gluckman.

Investors and currency traders around the world were watching this morning to see what the Federal Reserve would have to say about possible interest rate rises in the United States. That will have an impact on our dollar because higher rates would make it more attractive for investors to move their money into the US.

The Fed's been holding a two-day policy meeting and afterwards issued a statement saying that rates remain on hold for now.

That was expected, but what people wanted to see was a signal on when rates might start to go up from their current near-zero levels.

Federal Reserve chair Janet Yellen provided no timetable, but many analysts expect a rate hike as early as September.

The Fed will want to see more economic growth before it starts hiking rates.

Wall Street finished higher, with the Dow Jones Industrial Average up 121 points, or 0.69 percent.

The New Zealand dollar is trading at 66.72 US cents this morning, slightly down from 66.83 yesterday.

But those numbers don't quite tell the story of what was a volatile 24 hours.

The Kiwi rose yesterday morning after comments by Reserve Bank Governor Graeme Wheeler. In notes from a speech he'd given he made clear that he believes some analysts are overestimating just how low the official cash rate might go. The dollar rose as towards 77.40 US cents, before falling back in the afternoon.

The kiwi is trading at 91.51 Australian cents, compared to 91.25 yesterday. It is 42.76 pence, almost unchanged from yesterday. The dollar is buying 60.75 euro, up from 60.46 yesterday.

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