Coca-Cola Keeps Its Fizz As Profits Climb In Q3

By Sam Lewis

Beverage giant remains on track to achieve long-term goals

It doesn’t seem like being dethroned by Apple as the world’s most popular brand has affected Coca-Cola in the least. The world’s largest soft drink company released its quarterly earnings report on Tuesday, Oct 15, and the results indicate Coke is on track to meet its goal of doubling 2010’s “system revenue” by 2020.

Coca-Cola’s quarterly report cites earnings climbing 6 percent, up to $2.45 billion, or 54 cents a share — meeting analysts’ forecasts — against $2.31 billion, or 50 cents per share, from the same time last year. However, revenue for the company fell to $12.03 billion, down from $12.34 billion. The revenue total also fell short of market analysts’ predictions of $12.05 billion. The company cites the restructuring of bottling ops in the Philippines and Brazil, accompanied with weaker-than-expected currencies in many emerging markets, as culprits of the decline in revenue. The company’s CFO, Gary Fayard, says the issues with strength of currency may further injure operating income by 5 or 6 percent during the upcoming fourth quarter.

Global volume growth also fared well for Coca-Cola, growing two percent versus the same quarter of 2012. “Soda is not doing great overall in the U.S.,” says Morningstar analyst Tom Mullarkey. “But the Coke brand is the leading soda brand, and so the company continues to push it forward.” North American sales growth matched global volume growth at two percent, but this was largely due to non-soda products. Still-drink offerings, like bottled water, saw 5 percent sales growth, while teas — including Fuze and Honest Tea — saw double digit sales growth. Carbonated beverage sales in North America remained flat.

Region by region, here is how Coca-Cola’s volume performed globally:

Asia-Pacific saw volume rise 5 percent, led by a 21 percent increase in Vietnam.

China’s volume of the soft drink brand rose 9 percent. This was due to more disposable income in its stabilized economy.

Eurasia and Africa both had volume increases of 4 percent, while Europe lost 1 percent.

Sales volume stayed flat throughout Latin American, largely in part to storms in Mexico taking a toll on beverage sales. The Mexican government announced in September it would being levying taxes on soda in an effort to fight obesity in the country. Coca-Cola’s CEO, Muhtar Kent, remains optimistic despite the proposed Mexican legislation. “A regressive discriminatory tax on one part of the food industry just is not going to work,” Kent says in Tuesday’s earnings conference call. Kent was also unsure if the tax would even become a law.

In spite of declining popularity in North America, Coca-Cola has found, and will continue to find new ways to remain profitable. The company knows that consumers don’t want to always drink water and will find new products, even if it’s not the carbonated staple product, to reach consumers. If the trend of blaming soda for obesity leads to declining sales of the company’s staple product worldwide, Coca-Cola will find a way to persevere, remaining a global icon.