Coca-Cola Reports Better-Than-Expected Profit, as North America Soda Recovers

11 Feb 2015 --- Coca-Cola has reported global volume growth of 2% for the full year and 1% in the quarter. Reported net revenues declined 2% in the quarter; excluding the impact of structural items, comparable currency neutral net revenues grew 4%. However, the company reported better-than-expected profit as sales in North America, its biggest market, rose for the first time in four quarters, offsetting the impact of a stronger dollar on its overseas business.

Coke's sales in North America have declined or remained flat for the last three quarters as U.S. consumers opt for healthier beverages and shift away from diet sodas due to concerns over artificial sweeteners.

The company gained global value share and held volume share in nonalcoholic ready-to-drink (NARTD) beverages in the quarter. Additionally, Coca-Cola gained global volume and value share in sparkling and still beverages as well as in the juice and juice drinks, ready-to-drink tea and packaged water categories as it continued to strengthen their brands and product portfolio across key markets and categories.

Global sparkling beverage volume grew 1% in both the quarter and full year driven by growth in brand Coca-Cola, Sprite and Fanta. Brand Coca-Cola was up 1% in the quarter and grew slightly for the full year, rounding to even.

Global still beverage volume grew 2% in the quarter and 4% for the full year driven by growth in ready-to-drink tea, sports drinks and packaged water. Volume growth in these beverage categories was partially offset by a decline in juice and juice drinks, due in part to price increases to cover higher input costs.

Chairman and CEO Muhtar Kent said the company’s progress in 2014 against five previously announced strategic priorities (listed below) is “laying the groundwork for accelerated top- and bottom-line growth in the future and delivering the long-term shareowner value you expect.”

He noted five points in a conference call:
1. Targeting Disciplined Brand and Growth Investments: “We substantially increased our media investments in markets and categories where our media was underfunded relative to the market opportunity, where we had the right price/package architecture, and where we had clear executional alignment with our bottlers. We are seeing initial success, including in North America, where our incremental media investments coupled with our segmented price/pack strategies drove revenue growth in our sparkling portfolio through strong 4% price/mix in the second half of the year. This gives us confidence that when we invest in our brands, align on a system plan and focus on execution, we see positive results.”

2. Driving Revenue and Profit Growth, with Clear Portfolio Roles Across Markets: “We expanded our market segmentation, recognizing that each of our markets has a specific role in order to drive sustainable revenue growth,” Kent said. “Some markets focus on price realization, others on volume and the remainder on a balance of the two. Importantly, our proxy statement will be coming out in the coming weeks and you will see the revised incentive metrics which will add revenue growth directly aligned to these market roles.”

3. Refocusing on Our Core Business Model: “We also made headway in refranchising our bottling operations, both in the U.S. and internationally. In North America, we closed several refranchising transactions in 2014 and laid out a clear path and timeline to refranchise the remaining territories. Specifically, we refranchised territories representing approximately 5% of the U.S. bottler-delivered business in 2014 and have already signed definitive agreements to continue refranchising a similar amount in the first half of 2015. These agreements -- along with our ongoing work -- give us confidence that we will continue to accelerate our rate of refranchising each year and achieve our goal to retain a maximum of about one-third of the U.S. bottler-delivered business by the end of 2017. And it is our intent to refranchise the remaining territories by 2020 at the latest.”

4. Driving Efficiency through More Aggressive Productivity: “We embarked upon an expanded productivity plan that will result in a total of $3 billion in annualized savings by 2019… and our efforts are on track. We’ve begun work on reducing positions that are no longer aligned to our growth priorities or are deemed redundant as we streamline our operations. While this is never an easy process, it is absolutely essential to ensuring that our business is wired for greater speed, responsiveness and innovation. And importantly, it frees up the resources we need to reinvest in the business to accelerate growth.”

5. Streamlining and Simplifying Operations: “We announced the streamlining of group functional layers and began standardizing key processes across our business units. This will not only reduce our cost structure, but – more importantly – will create a more nimble organization that is wired to act rapidly in today’s dynamic landscape.”