Coca-Cola performed strongly on organic growth and operating margin in the third quarter, as revenue continues to be affected by headwinds from the company’s North American refranchising programme.
Net revenue of $9.01 billion was down 14.6% on the same period last year, but beat consensus estimates by around $240 million. Total unit case volume was stable, with slight growth in emerging and developing markets helping to offset poorer performance elsewhere.
As for the bottom-line, operating income was $2.12 billion – down 6.6% on last year – but operating margin improved considerably, gaining the equivalent of 4%. Organic revenue was up, too: growth of 4%, driven by a 3% improvement in pricing.
Coca-Cola’s chief executive officer, James Quincey, said: “I am encouraged with our progress and results in the quarter. Our performance reflects the strength of an organisation that is focused on delivering against its financial commitments while also making substantial structural and cultural changes.”
The company expects to complete its North American refranchising effort by the end of this year, assigning any remaining company-owned bottling territory to new or existing partners. Earlier this week, Coca-Cola North America (CCNA) announced that president Sandy Douglas would retire at the start of next year, once the refranchising initiative is complete, with the current head of CCNA’s Minute Maid business set to replace him.
Nearly 80% of company-owned volume in the US has now been transferred to new ownership, with the remaining 20% expected to come in the next two months. In Africa, Coca-Cola reached a major milestone, agreeing conditions for the transferral of Anheuser-Busch’s 54.5% stake in Coca-Cola Beverages Africa.
But the measures have taken their toll, with massive year-to-date impairments from restructuring being reflected in Coke’s revenue.
EMEA: Volume growth and price mix growth were both up 1%, underlining strong concentrate sales growth in the Middle East & North Africa, outpacing concentrate sales performance in Western Europe. The company gained value share in juice, dairy and plant-based beverages, while there was high-single-digit growth in Coke’s Turkey, Caucusus and Central Asia unit, and mid-single-digit growth in Eastern Europe.
Latin America: Price mix growth of 10% was primarily driven by the Mexican market – though volume in Mexico declined 1%, affected by “cooler weather, higher amounts of rain, and a softening consumer environment”. Unit case volume for sparkling soft drinks declined in the mid-single digits, primarily due to Brazil and Venezuela, contributing to an overall high-single-digit decline in all of Brazil and central America.
North America: Price mix growth of 2% reflects the continued execution of the company’s disciplined occasion, brand, price and package strategy, as well as strong rate and mix growth in the foodservice and on-premise channel. Sparkling soft drinks price mix grew 3%. Unit case volume was even – including in sparkling soft drinks, where growth in Sprite was balanced by a comparable decline in Diet Coke.
Asia-Pacific: Price mix growth of 1% included a negative impact from geographic mix, which was driven by growth in India and China outpacing performance in Japan. Unit case volume growth of 3% was driven by low single-digit growth in the Greater China and Korea business unit and high single-digit growth in the India and Southwest Asia business unit. For the third quarter in a row, trademark Coca-Cola accounted for over half of the incremental volume growth in the operating segment, driven by strong performance of Coca-Cola in China.
Juices, dairy drinks and plant-based beverages performed well for Coke in a number of regions: the categories gained Coke share in Asia-Pacific and EMEA, and also recorded low-single-digit growth in Latin America. But carbonate sales managed to avoid further volume decline, meaning that the picture this quarter is less bleak than it could have been.
Coca-Cola’s juice, dairy drinks and plant-based beverages cluster saw 1% growth on a global basis – as did its tea and coffee products – but its water, enhanced water and sports drink offerings witnessed a 1% decline. In the US, Coke has launched a new sports drink as part of its Vitaminwater range, dubbed Vitaminwater Active, which it’s hoping will inspire athletic consumers in need of refuelling and rehydration.
© FoodBev Media Ltd 2018