Coke’s earnings plunge 55% in 4Q

Company using tactics such as small cans, bottles to shore up revenue.

Atlanta-based Coca-Cola’s profit dropped 55 percent in the fourth quarter,

Coca-Cola’s profit plunged 55 percent in the fourth quarter, rounding out what has been a tough year for the world’s largest beverage company.

Atlanta-based Coke has been struggling to boost global sales volume amid economic volatility overseas and an ongoing shift away from soda back at home.

To make up for weak volume gains, it’s using a variety of tactics including a focus on “mini-cans” and smaller bottles in the U.S. that are positioned as premium offerings and help push up revenue.

For the quarter that ended Dec. 31, Coca-Cola’s overall soda volume in North America was flat, while volume for noncarbonated drinks rose 3 percent. Its “price/mix” for the region, which factors in the prices and sizes of its drinks, rose 4 percent.

“A lot of it was driven by the smaller cans, which are more premium-priced,” said Kathy Waller, Coca-Cola’s chief financial officer, in a phone interview.

Sales of the mini-cans alone, which still represent a tiny fraction of overall volume, rose 15 percent during the quarter, the company said. Coca-Cola is also significantly increasing marketing, including a double-digit percentage boost in media spending.

During a conference call, CEO Muhtar Kent said 2015 would be a “transitional year” as the company undergoes dramatic cost-cutting to improve results. But he nevertheless expressed optimism for growth; he noted that the average household consumes 26 beverages a day, and that only 1.4 of those are Coca-Cola brands.

To keep pace with changing tastes, Coca-Cola has also diversified and owns an array of brands including Honest Tea and Zico coconut water that better fit with prevailing health trends.

It also recently began the national rollout of Fairlife, a pricier milk that promises more protein and less sugar.

Still, about 70 percent of Coca-Cola’s global sales volume comes from carbonated soft drinks, according to Ali Dibadj, a Bernstein analyst.

The shift away from soft drinks in the U.S. comes amid a proliferation of options in the beverage aisle. Between 2001 and 2006, an internal study by Coca-Cola found that 30 percent of the industry’s growth was driven by categories that hadn’t existed five years earlier.

Soda’s image has also taken a beating from health advocates at home and overseas, who blame it for fueling weight gain.

For the quarter, net income fell to $771 million in the quarter, down from $1.71 billion in the same period last year. Earnings per share dropped 54 percent from 38 cents a share a year ago to 17 cents a share in the fourth quarter.

Despite the challenges, Coke beat Wall Street estimates. Excluding items, the company earned 44 cents per share; analysts had expected 42 cents.

Revenue was down 2 percent, from $11.04 billion in the fourth quarter of 2013 to $10.87 billion for the same period in 2014. Analysts expected $10.77 billion.

Coke attributed some of the challenges to noncash charges related to refranchising in North America, costs associat- ed with a $3 billion productivity program announced last year and changes to the exchange rate in Venezuela.

Coke said in January it was cutting up to 1,800 jobs globally — including about 500 in metro Atlanta — in the face of sluggish sales partly because of obesity concerns.

“We continue to see 2015 as a transition year as the benefits from the announced initiatives will take time to materialize amidst an uncertain and volatile macroeconomic environment,” Kent, the CEO, said Tuesday. “We remain confident that we have the right strategies in place.”

Shares of Coca-Cola rose 2.8 percent to $42.40.