Coca-Cola unshaken by soft drink declines
April 16, 2014
by Monica Watrous
ATLANTA — Consumers bought less Coke last quarter, but that hasn’t fizzled the Coca-Cola Co.’s confidence.
Despite a 1% global volume decline for sparkling beverages during the company’s first quarter, ended March 28, Coca-Cola remains steadfast in its plan to restore growth for its soft drink business.
“I believe that we have a great future, where so many hundreds of millions of people in so many large markets haven’t tasted a Coca-Cola in the last month or in the last six months or in the last year,” said Muhtar Kent, chairman and chief executive officer, during an April 15 call with analysts to discuss first-quarter earnings. “We have tremendous opportunity going forward. And I believe that innovation, packaging, equipment and great marketing will continue to grow our business going forward, both in sparkling and in stills.”
As part of efforts to rebuild momentum in the sparkling segment, Coca-Cola is increasing its investment in media and brand-building by $400 million this year. Forthcoming innovation will target Sprite and Fanta, as well as a wide range of new package introductions across the entire soft drink portfolio.
“We are adding a sharpened focus with our bottling partners to increase sparkling brand penetration, as well as cold drink availability,” Mr. Kent said. “We are overlaying disciplined occasion brand price pack channel strategies, supported by revenue growth management capabilities to drive sustained value growth. We are continuously innovating to meet evolving consumer needs. And also, we are engaging with partners and stakeholders to promote trust and to address category misperceptions. These strategies to accelerate sparkling growth are solid, and we expect to see improving results throughout the year.”
Coca-Cola said the shift in timing of the Easter holiday and one fewer selling day affected sales of soft drinks, which was offset by strong gains in still beverage volumes, including juices, teas and sports drinks.
“It is still early in our journey to restore sparkling momentum, yet we are tenaciously focused on building and improving upon this quarter’s performance,” Mr. Kent said.
Also key to Coca-Cola’s growth strategy is the creation of new and innovative consumption opportunities, through such platforms as the Freestyle multi-flavor dispenser for food service, as well as the company’s partnership with Keurig Green Mountain to develop the Keurig Cold at-home beverage maker.
|Coca-Cola's Freestyle machine
“And with new innovations, like creating new paths to consumption, creating new consumption occasions like the Keurig Green Mountain innovation, like Freestyle that … every time it is actually installed in an outlet, it drives traffic, it drives incidence, it drives increased sales and it drives excitement for the consumer,” Mr. Kent said. “And at the same time, our contour packages, you will see us being focused much more on the contour. Next year is the 100th anniversary of the contour bottle, the iconic contour bottle. You will see a lot of activity around that, also.
“So, we feel we have a lot of work to do. But we feel that, isn’t that a great place, where you have a lot of work to do and you believe in your future?”
Net income attributable to shareowners of Coca-Cola during the quarter declined 8% to $1,619 million, equal to 36c per share, which compared with $1,769 million, or 39c per share, in the same period of the previous year.
Net operating revenues declined 4% to $10,576 million from $11,035 million in the first quarter of 2013. Excluding the effect of structural changes, primarily the deconsolidation of company-owned bottling operations, Coca-Cola posted comparable currency neutral net revenue growth of 2%.
During the quarter, Coca-Cola achieved global volume growth of 2% and gained global volume and value share in nonalcoholic ready-to-drink beverages. Still beverage volume grew 8%, driven by solid growth across categories that included juices and juice drinks, ready-to-drink teas, packaged water, sports drinks and energy drinks.