Coca-Cola's efforts to diversify are paying off as beverage maker tops forecast
Coca-Cola said in a release that net revenues declined 15% to $9.1 billion, which was impacted by the company's ongoing refranchising of its bottling facilities. Analysts forecast revenue of $8.72 billion, according to CNBC. Net income rose to $1.45 billion, up from $1.05 billion in the same period a year ago.
The beverage giant reported that total unit case volume was flat. Its juice, dairy and plant-based beverages, along with its tea and coffee drinks, both grew 1%. Soda sales were unchanged, and water and sports drinks dropped 1%. Organic revenues grew 4%, driven by price/mix growth of 3% and concentrate sales growth of 1%.
- "I am encouraged with our progress and results in the quarter," said James Quincey, president and chief executive officer of Coca-Cola, said in a statement. "Our performance reflects the strength of an organization that is focused on delivering against its financial commitments while also making substantial structural and cultural changes."
As more consumers move away from Coke's signature beverages as part of a broader effort to cut back on sugar, the beverage giant is focusing its attention on improving its existing portfolio and adding more better-for-you products to the mix.
Coca-Cola is reducing the amount of added sugar in its products, and said Wednesday it expects to reformulate more than 500 this year. Its Coca-Cola Zero Sugar, which launched in the U.S. in August, posted double digit growth during the quarter compared to a year ago. By the first quarter of 2018, the company plans to introduce the product globally.
During the period ended Sept. 29, the manufacturer continued to expand its reach beyond soda, announcing in early October that it acquired the Topo Chico premium sparkling mineral water brand for $220 million. Coca-Cola also teamed up with McDonald’s in September to introduce a line of ready-to-drink McCafe Frappes in grocery stores in early 2018.
Efforts to diversify beyond the sodas that are synonymous with Coca-Cola appear to be paying off. The Atlanta company gained or maintained share in sparkling soft drinks, juices, sports drinks, and ready-to-drink tea.
Overall, Coca-Cola posted 1% volume growth in both its juice and dairy products as well as its tea and coffee beverages. Soda-growth was even while water and sports drinks dropped 1%. The fact that it topped analysts revenue forecasts despite flat soda sales underscored its push toward value products — like smaller cans — rather than volume growth, along with efforts to diversify its portfolio.
Bonnie Herzog, a senior analyst for Wells Fargo Securities, gave the company tentative praise in an analyst's note.
"We think (Coca-Cola) continues to do a good job driving relevancy with consumers and leveraging innovation and mix to drive solid pricing growth," Herzog said. "We are encouraged by positive momentum in many intl. markets. However, with flat/neg. unit case volume growth for over a year, work clearly still remains to drive more balanced revenue growth going forward."
For its fiscal 2017 year, Coca-Cola forecast earnings per share to be between unchanged to a drop of 2% from $1.91 in the prior year. It also expects to post organic growth of about 3%.
The drinks maker announced this week that James Dinkins will take over for Sandy Douglas starting next year to oversee Coca-Cola North America. With Dinkins currently in charge of a team that produces, sells, markets and distributes leading brands in juices, natural health beverages, chilled tea and value-added dairy, it wouldn't be a surprise to see Coca-Cola continue to take significant steps going forward to diversify.
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