Dive Brief:
- Coca-Cola saw a 7% dip in net revenue to $10.6 billion for the third-quarter, down from $11.4 billion in the year-ago period, and an uptick in global volumes, according to the earnings report the company released Wednesday.
- "We continued to see solid revenue results in our developed markets with 2% unit case volume growth and a continued focus on price realization," Chairman and Chief Executive Officer Muhtar Kent said in a statement. "The United States, Japan and Western Europe delivered standout performance underpinned by innovation and world-class marketing."
- The company beat Wall Street estimates of $10.5 billion, and the company reported 3% organic revenue growth, excluding currency headwinds and the impacts of acquisitions and divestitures. Adjusted earnings at $0.49 per share also surpassed analysts' expectations of $0.48 per share.
Dive Insight:
Soda may be in a downturn, but nonalcoholic beverage sales continue to thrive. Through recent investments and acquisitions, such as Suja cold-pressed juices and L.A. Aloe, maker of the Aloe Gloe brand, Coca-Cola has more strongly positioned itself in the better-for-you beverages category. Chairman and CEO Muhtar Kent said in a statement that the company had increased its value share of the nonalcoholic RTD beverage category for the 37th consecutive quarter.
Organic revenue grew across Coca-Cola's regional markets, with the largest gains coming from Latin America (11%), followed by 3% organic growth in North America and 2% organic growth in Europe/Middle East/Africa, while Asia Pacific remained flat. However, that revenue spike in Latin America was offset by currency headwinds and high levels of inflation in certain Latin American countries. That, along with ongoing divestitures of Coca-Cola's bottling business, contributed to the company's reported revenue dip for the quarter.
Sparkling beverage case volume was flat in most regions but then offset by a 2% decline in Latin America. At this point, even flat sales should be encouraging for Coca-Cola and other soda makers. The RTD beverage market continues to become more saturated with better-for-you options. Keeping soda at a steady pace enables Coca-Cola to bring in enough revenue to make the investments and acquisitions needed to better align its portfolio with those fast-growing categories. If soda sales plummet, Coca-Cola may not have as much additional capital with which to make those investments.
Coca-Cola is also in a time of transition as it sheds its bottling business to focus on producing concentrate, which is more profitable. But in the interim, Coca-Cola's quarterly net income will likely continue taking a hit until the deals are complete and the company adjusts earnings results to its new business model.