Dive Brief:
- Coca-Cola reported a 4.6% drop in revenue to $11.43 billion for the third quarter, even though volumes increased. Foreign currencies were a major factor, as a 12 percentage-point headwind on per-share earnings, and the company said those fluctuations would hurt fiscal year results more than anticipated.
- Noncarbonated beverages drove volume improvement, particularly sports drinks and tea with 5% volume growth and packaged water with an 11% increase. Soda volumes did increase by 2%, with an 8% decrease for Diet Coke offsetting Coke Zero growth.
- Organic revenue actually grew by 2%, led by pricing increases and smaller packaging.
Dive Insight:
In terms of a strategic investment, Coca-Cola has begun to slip behind its main competitor, PepsiCo. Once a potential target for Anheuser-Busch InBev and 3G Capital, both rumored deals have since faded, according to The Wall Street Journal.
Also less attractive to investors is Coca-Cola's "rapid unwinding of bottling investments," The Wall Street Journal reported. Coca-Cola "has signed letters of intent with three U.S. bottlers to grant expanded distribution territories in seven states as part of its ongoing efforts to refranchise half of Company-owned U.S. bottler-delivered volume by the end of 2017," according to MarketWatch. Last month, Coca-Cola also announced the National Product Supply System, a new plan to streamline its production system in the U.S.
Overall soda volumes did increase slightly, which is a good sign for Coca-Cola, which is positioned as the leader of an ailing soda industry. But volumes for Diet Coke continue to decrease in the mid- to upper-single digits, as it has in past quarters, as diet soda continues to fall out of favor with health-conscious consumers that no longer feel diet soda is the answer to cutting out sugar and calories. Diet soda recently received FTC approval to keep the word "diet" on its labels.
One potential driver for Coca-Cola is the recently launched Keurig Kold, which could put Coca-Cola products in more consumers' homes in a new form of packaging (single-serve pods), luring consumers back to soda.