Coca-Cola gets lift from trademark drinks
Citing rising costs, company posts profit of $2.3B compared with $1.4B a year ago
Coca-Cola Co. reported rising drink volumes in its latest quarter, boosted by demand for diet sodas in the U.S. and experiments abroad, such as a version of CocaCola with coffee.
The soda giant has been diversifying its portfolio away from sugary drinks, adding seltzer and soy beverages to its stable. Results for the June quarter, it said, were driven by Coca-Cola Zero Sugar, a diet version with a flavor closer to original Coke that has helped offset declining sales of traditional Coca-Cola.
Coca-Cola also said it was taking the unusual step of raising prices on its carbonated sodas in the middle of the year, a move that Chief Executive James Quincey said was in response to rising costs, including higher freight rates as well as metal prices after the U.S. imposed tariffs on Chinese imports earlier this year.
“There is some broad-based push on input costs that have kind of come in and affected ours and many other industries as well,” he said, adding that he expected the company’s bottlers
and retailers would likely pass along the higher prices to consumers.
Along with increasing demand for Coke Zero Sugar in the U.S., the company said it had largely halted a long slump in Diet Coke volumes in its home market. Earlier this year, the company introduced slimmer Diet Coke cans and four new flavors such as Zesty Blood Orange.
The changes are “allowing existing consumers to stay and continue to enjoy the franchise, and it’s getting people to try it,” Mr. Quincey said Wednesday on a call with analysts.
Under Mr. Quincey, the Atlanta-based giant has ramped up experiments in overseas markets and moved to weed out unsuccessful products. The company launched Coca-Cola Plus Coffee in Australia last fall, and now is rolling out versions of the coffee-infused cola to other markets including Vietnam and Turkey.
Meanwhile, it is killing “zombie” brands and products, Mr. Quincey said. The Middle East and North Africa unit identified more than 125 underperforming products.
To date the company has pulled 60% of them, and plans to eliminate the rest by the end of the year.
Organic revenue, which excludes currency swings, acquisitions and divestitures, increased 5% from a year ago, helped by growth in sales of concentrates and higher prices for products.
Overall, sales declined 8% from a year earlier to $8.9 billion, as a result of the divestiture of its bottling operations. CocaCola posted a profit of $2.3 billion, compared with $1.4 billion a year ago.
Drink volumes grew 2% across the company’s portfolio in the quarter, driven by doubledigit growth in Coca-Cola-branded products. Volumes rose 2% in carbonated soft drinks and rose 4% for water, enhanced water and sports drinks.
Volumes declined in juice, where higher costs have caused Coca-Cola and others to shrink packages, and in coffee and tea.