Coca-cola’s profit rises as it sells more drinks overseas
North America soda volume declines
Coca- Cola is facing a tough time: people are drinking less soda in the U.S. and Europe and uncertain economic conditions around the world are weighing on the world’s biggest beverage maker.
The Atlanta-based company said Tuesday that its profit rose in the fourth quarter, as it benefited from growth in emerging markets and a shift in the calendar that resulted in two extra selling days for the period. But sales volume fell in China and Europe, reflecting a pullback in consumer spending.
In North America, its biggest market by revenue, volume rose just one per cent, boosted by its Powerade sports drinks and bottled teas. The company sold two per cent less soda.
In a conference call with analysts, CEO Muhtar Kent said he expects 2013 will “once again be a year of challenges” but that the company nevertheless expects to hit its long-term target of six per cent to eight per cent growth in operating income.
In the U.S., he said Coca-Cola is starting to see signs of improvement in consumer sentiment but that it was still waiting to see the impact of higher payroll taxes and gasoline prices. In China and Europe, the company said it expects volumes to start rebounding in coming quarters.
“Our view is that this is not the start of a trend,” said Gary Fayard, the company’s chief financial officer, noting that quarterly declines occasionally happen.
Coca-Cola, which also makes Fanta, Minute Maid and Dasani water, is increasingly looking for growth in countries where its drinks aren’t yet as ubiquitous as they are in developed nations. In North America, the company is also relying on a shifting mix of beverages to boost sales amid intensifying criticism of sugary sodas.
The company is also facing tougher competition from PepsiCo Inc., which has significantly stepped up its marketing with major deals including a multiyear contract to sponsor the Super Bowl halftime show. When asked whether that push was having any effect, Kent declined to comment but noted that Coca-Cola’s share of the soda market grew despite a broader industry decline.
“To be frank, we see competition as healthy. It keeps us on our toes,” Kent said.
For the quarter, Coca-Cola said global sales volume rose 3 per cent, helped by gains in countries such as Turkey and Russia.
In Europe, the company blamed an uncertain economy, bad weather and price competition for a 5 per cent decline in volume.
In China, where U.S. companies of all stripes are looking for growth, volume declined four per cent after growing 10 per cent in the year-ago quarter. The company said the business in the region was affected by a slowing economy, bad weather and a later Chinese New Year.
Even though Coca-Cola has quarters where volumes decline in regions such as Europe and China, Kent noted that the company’s results have been insulated by its geographic diversity. The company sells drinks in every country but Cuba and North Korea.
For the October-to-December period, The Coca-Cola Co. earned $1.87 billion, or 41 cents per share. That’s compared with $1.66 billion, or 36 cents per share, in the year-ago period. Not including one-time items, the company said it earned 45 cents per share.