Earlier this week, Coca-Cola reported its latest earnings with a big smile, boasting that global soda volume sales rose in the last three months of 2015.
The news suggests things might not be as bad as they seem in the soda universe — even in the United States, the largest market in the world, where Coca-Cola has seen its sales plummet amid a growing distaste for carbonated drinks.
But it's also a testament to the success of a clever little trick the soda industry has adopted in tough times: selling its product in smaller packages.
For decades, soda makers nudged people to drink more with ever-larger cans, bottles and cups. That strategy, however, has failed in recent years, as the narrative about the harms of drinking soda has intensified. So they have opted to do the opposite, shipping carbonated drinks out in smaller servings in hopes it will make soda sexy again.
The strategy might seem a bit wacky — downsize containers to supersize sales? — but it's actually ingenious.
For Coca-Cola, it means a more profitable product, since packaging is such a significant contributor to price. "Certainly, they make more money per ounce this way," said David Just, a professor of behavioral economics at Cornell University who studies consumer food choices.
Many other big food brands, including Kraft, General Mills and Campbell's Soup, have employed a similar strategy: shrinking package sizes in order to boost profit margins. But this is particularly important to a company like Coca-Cola, given the steady decline in soda consumption.
The mini cans and bottles allow Coca-Cola to save money on aluminum and glass, most or even all of which it pockets. Look no further than the pricing of its different offerings for evidence.
A quick search on Amazon — and a bit of simple math — shows the premium consumers have to pay for the smaller cans. A 12-pack of regular 12-ounce cans costs $4.99, while an 8-pack of the new 7.5 ounce cans costs $2.99. On a per can basis, that doesn't look so bad — it comes out to roughly $0.42 and $0.37, respectively. But the cans are different sizes, which obscures the mark-up. On a per ounce basis, the new cans are actually about 42 percent more expensive, running roughly $0.05 per ounce, instead of the $0.035 per ounce it costs when buying the larger cans.
But the mini cans are also a welcome addition for consumers who are drinking less soda. The smaller servings offer a middle-ground between the soda people have been drinking and the soda they should be drinking: none at all. They are, in other words, a great way for self-conscious soda drinkers to achieve — or pretend to achieve — whatever soda drinking goal they have set for themselves.
And here's where things get interesting: Selling soda in smaller cans might not only help Coca-Cola make more money on the soda people buy — it could even push people to buy more soda.
Just points to various studies that he and his colleague Brian Wansink, the director of the Cornell Food and Brand Lab, have performed over the years. In one from 2013, the two showed that people are incredibly responsive to labels. Participants, having been told that the food put in front of them was "double-size," left 10 times as much food on their plates as those who were told their serving was "regular," even though both groups were given the exact same amount.
The opposite, Just says, happens when servings are labeled as small. "If they are marketed as minis, as I believe they are, they can actually increase consumption," Just said.
"People upon consuming them are either left wanting or feel they have done something virtuous by not consuming more," he added. "If they are left wanting, they may be much more likely to move to a second can, which could be a bad thing for the consumer, but a good thing for Coke. If they feel they have done something virtuous, they might feel they have a license to consume more elsewhere, and most often overcompensate."
It's unclear if the miniature cans will be enough to offset the growing distaste for soda around the world, especially in places like the United States, where the distaste has been particularly severe. But thus far, they certainly seem to be helping.
On Tuesday, Kathy Waller, the company's chief financial officer, expressed enthusiasm about the smaller packaging. "In the United States, in particular, we have a price-pack architecture strategy promoting the mini cans and the 8-ounce glass bottles," she told Reuters. The strategy, she said, has been helping to boost sales in the country.
It was hardly the first time Coca-Cola has touted the success of its new approach. Last year, the company published a piece on its website highlighting how receptive soda drinkers have been to the smaller cans and bottles. Sales of mini cans, it notes, have grown in the double digits since they were introduced in 2007. In the first half of 2015, they grew by almost 20 percent in North America alone.
"The consumer is very much approving the smaller packages," Muhtar Kent, Coca-Cola's CEO, told Wall Street analysts over the summer. "Smaller packages are growing much faster than larger packages."
Strangely, that could mean more, not less, soda drinking down the road.