The Coca-Cola Co., Atlanta, reported mixed results for its third-quarter and year-to-date 2014 timeframes, with Chairman and Chief Executive Officer Muhtar Kent calling out “early signs of progress.”
The Coca-Cola Co. reported global volume growth of 1 percent in the third quarter and 2 percent year to date and gained volume and value share in non-alcohol ready-to-drink (NARTD) beverages in the quarter. Global sparkling beverage volume was even in the quarter and grew 1 percent year to date as a challenging macroeconomic environment, adverse weather in certain regions and competitive pressures in certain markets impacted results. However, on a global basis, the company gained volume and value share in core sparkling beverages in the quarter due, in part, to successful execution of the “Share a Coke” marketing campaign in many markets around the world. Worldwide Coca-Cola brand volume was even in the quarter while Sprite and Fanta both grew 1 percent.
Worldwide still beverage volume grew 2 percent in the quarter and 5 percent year to date, with tea contributing 4 percent volume growth in the quarter and both water and energy drinks volume growing 7 percent. Volume growth in these beverage categories was partially offset by a decline in juices and juice drinks, due in part to price increases to cover higher input costs in North America and a decline in sports drinks. The company maintained global volume share while gaining global value share in total still beverages during the quarter and gained value share in juices and juice drinks, ready-to-drink tea, energy drinks and packaged water.
After adjusting for structural changes, the company delivered comparable currency neutral net revenue growth of 1 percent in the quarter, capturing global price/mix of 1 percent. On a year-to-date basis, comparable currency neutral net revenues grew 2 percent after adjusting for structural changes. Excluding the impact of structural changes, comparable currency neutral operating income grew 5 percent in the quarter and year to date, while the company increased its media investments by double digits as compared with the prior year.
In North America, a rational approach to pricing, incremental media investments, high-quality marketing programs and disciplined price/pack strategies emphasizing small packages drove incidence and revenue growth in sparkling beverages as well as value share gains in NARTD beverages for the 18th consecutive quarter. Immediate consumption packages outperformed future consumption packages in sparkling beverages, reflecting the company’s emphasis on recruiting new consumers by offering a variety of entry-level packages. Sparkling beverage volume declined 1 percent in the quarter, while sparkling price/mix grew 3 percent because of strong pricing and the performance of smaller-size packages. “Share a Coke” campaign activation helped the company gain value share in the competitive sparkling beverage segment, resulting in the ninth consecutive quarter in which it gained or maintained sparkling value share. Still beverage volume declined 1 percent, while the company gained value share in still beverages, marking the 29th consecutive quarter that the still beverage portfolio has either gained or maintained value share. Volume growth in tea, energy drinks and water was offset by declines in juices and juice drinks as well as sports drinks.
Reported net revenues decreased 2 percent in North America during the quarter, which included a 2 point headwind from structural items related to refranchised territories and changes to The Coca-Cola Co.’s process of buying and selling recyclable materials, it says. Positive price/mix of 1 percent was offset by a decrease in volume. Reported operating income decreased 5 percent, which included items impacting comparability, principally net gains/losses related to economic hedges. Comparable currency neutral operating income decreased 1 percent, primarily driven by increased brand investments and the impact of structural items, partially offset by gross margin expansion.
“Earlier this year, we announced five strategic priorities to restore momentum and reinvigorate long-term sustainable growth,” Kent said in a statement. “While we have begun to see early signs of progress, we recognize that we need to increase the scope and pace of change as we continue to face a challenging macroeconomic environment. We are, therefore, taking actions to strengthen our long-term financial performance, including further aligning our organization and our incentive plans to drive revenue and profit growth, increasing our productivity target to $3 billion in annualized savings by 2019, streamlining and simplifying our organization, and proceeding with plans for refranchising the majority of company-owned North American bottling territories by the end of 2017. While these actions will take time to implement, we are confident that they will position The Coca-Cola Co. to continue delivering sustainable value to our shareowners as we work toward our 2020 Vision.”
For the company’s full financial report, visit the Investors page at www.coca-colacompany.com.