Overseas drinkers boost Coca-Cola’s profit

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Published: April 21,2010

Tags: global markets, retail

NEW YORK — Coca-Cola Co.’s first-quarter profit climbed 19 percent as the world’s largest drink maker continued to expand rapidly overseas.

That offset persistent weakness in the U.S. as shoppers skimped on buying soda, water, juices and teas.

The results were weaker than analyst expectations.

The company earned $1.61 billion, or 69 cents per share, in the quarter ending April 2. That’s up from earnings of $1.35 billion, or 58 cents a share, in the same period last year.

Revenue rose 5 percent to $7.53 billion.

Analysts expected earnings of 75 cents per share on revenue of $7.72 billion, according to Thomson Reuters.

Worldwide case volume rose 3 percent, with international case volume growing faster at 5 percent. The company has courted consumers in international markets as their economies improve, by pitching its drinks as an affordable luxury. In North America, shoppers have cut back on spending during the recession.

Eurasia and Africa led international growth, with volume up 11 percent. India’s volume grew 29 percent and Turkey’s 18 percent.

Elsewhere, Brazil’s volume gained 12 percent. The flagship Coca-Cola brand posted double-digit growth in Russia, Egypt, Brazil, India, Vietnam and the Philippines.

About three-fourths of Coca-Cola’s revenue came from outside North America in the quarter. North America is the world’s biggest soft drink market, but sales have been weak as people shift to juices and teas.

Emerging markets are still key, and Coca-Cola is doing a solid job of getting people to consume more soft drinks by investing in its business there, said Edward Jones analyst Jack Russo. As those markets grow, the idle markets of North America and Europe will continue to be less relevant, he said.

“There’s so much opportunity it’s almost frightening to think of,” he said. “And really, the U.S. and Europe just become sources of cash flow to fund these investments.”

In North America, total case volume — including soft drinks and juices — fell 2 percent in the quarter. Soft drink volume declined 1 percent, less steep than previous quarters. The company credited its marketing campaigns for the Super Bowl and the Winter Olympics.

CEO Muhtar Kent said the company’s fountain business, which serves restaurants and other retail spots, improved in North America during the latter part of the quarter, showing people are spending money. But that doesn’t mean people are returning to soft drinks.

“It’s too early to say whether the category is beginning to improve,” he told investors on a conference call.

Sales of uncarbonated drinks such as water, juices and teas fell 2 percent in North America. People have been switching because of health concerns, but the company says people are cutting back on all spending because of the recession.

Uncarbonated drinks grew 8 percent worldwide, driven by a 12 percent increase outside North America.

Also Tuesday, Coca-Cola named North American President Steve Cahillane to lead a new business unit called Coca-Cola Refreshments. It will incorporate the newly acquired Coca-Cola Enterprises North American bottling operations, North American food service, the Minute-Maid and Odwalla juice businesses and North American supply-chain operations.

The appointment will take effect after Coca-Cola closes on the acquisition of the bottler. That’s expected in the fourth quarter.

In February, the company said it would buy the North American operations of its biggest bottler. The deal will give Coke more control over U.S. distribution and help it get new drinks on shelves more quickly to keep up with changing tastes.

Coke’s announcement followed a similar move by rival PepsiCo Inc., which bought its two biggest bottlers in a $7.8 billion deal.

Company shares were unchanged at $56.29.

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