Mini cans help lead to bigger profit for Coca-Cola

This is a ‘transitional year’ due to cost cutting, CEO says

NEW YORK— Coca-Cola reported a better-than-expected profit Tuesday as it stepped up marketing and fetched higher prices for sodas in North America.

The world’s biggest beverage maker 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, Coca-Cola’s overall soda volume in North America was flat, while volume for noncarbonated drinks rose 3 per cent. Its “price/ mix” for the region, which factors in the prices and sizes of its drinks, rose 4 per cent.

“A lot of it was driven by the smaller cans, which are more premiumpriced,” said Kathy Waller, CocaCola’s chief financial officer.

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

During a conference call, CEO Muhtar Kent said 2015 will be a “transitional year” as the company undergoes dramatic cost-cutting to improve results. But he 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 with an array of brands including Honest Tea and Zico coconut water that better fit with health trends. It also recently began the national rollout of Fairlife, a pricier milk that promises more protein and less sugar.

Still, about 70 per cent of CocaCola’s global sales volume comes from carbonated soft drinks, according to Ali Dibadj, a Bernstein analyst.

For 2014, Coca-Cola said volume rose 2 per cent, including a1-per-cent boost in carbonated soft drinks. That was in line with its performance the previous year, and down from 2012.

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 per cent of the industry’s growth was driven by categories that hadn’t existed five years earlier.

Coca-Cola is working on reducing costs by $3 billion (U.S.) a year to boost its financial results and have more money for marketing. Earlier this year, it said it was cutting up to 1,800 jobs as part of the push.

For the period ended Dec. 31, CocaCola Co. said it earned $770 million, or 17 cents per share. Excluding onetime items such as expenses related to its cost-cutting plan, it earned 44 cents per share.

That topped the 42 cents per share analysts expected, according to Zacks Investment Research.