Coca-Cola sells more drinks but soda dips
NEW YORK, USA
Coca-Cola sold more drinks in the first quarter, but it wasn’t because of soda.
The world’s biggest beverage maker said yesterday that its global volume for soda fell for first time in at least a decade. The drop was offset by stronger sales of noncarbonated drinks such as juice, and overall volume rose two per cent.
A stronger dollar contributed to an eight per cent decline in profit for the quarter. Adjusted for such one-time factors, earnings per share were in line with Wall Street expectations, and the company’s shares rose more than three per cent.
Gary Fayard, the company’s outgoing chief financial officer, attributed the global decline in sodas partly to the timing of Easter, which falls in the second quarter this year instead of the first.
“It’s not as concerning to us as it would look at first pass,” he said in a phone interview.
He also cited a double-digit soda decline in Great Britain, where the company stood by its pricing despite switching to smaller bottles. For the full year, Fayard said he expects global soda volume to be positive.
Coca-Cola Co sells a wide variety of drinks, including Minute Maid, Powerade and Dasani bottled water. But the quarterly decline in soda underscores the pressures the company is facing around its flagship product, both at home and abroad.
Soda has been under fire in developed nations such as the United States for years over concerns that it fuels weight gain. More recently, executives have blamed even steeper declines in diet sodas to worries about artificial sweeteners.
In North America, soda volume slipped one per cent in the quarter. Soda volume also took a hit in Mexico as the country instituted a tax on the sugary drinks. Fayard noted the company sells many other types of drinks. But for now, sodas still account for 75 per cent of the company’s case volume outside the US
Coca-Cola isn’t alone in its struggles to boost soda sales. PepsiCo Inc, which reports its quarterly results Thursday, has suffered even steeper declines despite stepped-up marketing, including sponsorship of the Super Bowl half-time show.
Although both companies sell a wide array of beverages, sodas remain a big part of their businesses and they’re scrambling to figure out ways to stop the declines even as they rely more heavily on other types of drinks.
In the year ahead, Coca-Cola plans to increase its marketing budget by US$400 million. The company also introduced a version of its namesake soda sweetened with a mix of stevia and sugar in Argentina, with plans to eventually introduce the drink elsewhere.
For the quarter ended March 28, Coca-Cola’s net income fell to US$1.62 billion, or 36 cents per share. That compares with net income of US$1.77 billion, or 39 cents per share a year ago.
Excluding one-time items, net income was 44 cents per share, matching analysts expectations.
Revenue fell four per cent to US$10.58 billion, but was above the US$10.5 billion Wall Street expected.
Companies like Coca-Cola that do a large portion of their business overseas take a hit to revenue when the dollar is strong, because foreign currencies convert back into fewer dollars.
Coca-Cola’s shares were up more than 3 per cent at US$40.09 in morning trading.