Coke shares lose fizz over weak US sales

Post Staff Report
July 27, 2016
Coca-Cola has practically given up on selling more soda in the US — and instead are focusing more on getting customers to pay more for the soft drinks they are already buying.
The soda giant on Wednesday reported that it was able to eke out a 1 percent rise in unit shipments in the US in the second quarter — bringing 2016’s shipment to break-even compared with last year.
The minuscule gain in unit shipments combined with price increases was enough to raise total revenue in the period by 2 percent — but even that was less than Wall Street expected.
That worried investors.
Shares of the Atlanta company were off 3.5 percent in Wednesday morning trading, to $43.31 — nearly wiping out all of 2016’s gains.
Coke also cut its full-year organic revenue growth forecast to 3 percent, down from its previous forecast of 4-5 percent growth.
“Strong performance in some of our largest and most developed markets, including the United States, Mexico and Japan, was offset by difficult external conditions in many of our emerging and developing markets, including China and Argentina,” Chief Executive Muhtar Kent said in a statement.
The company said its China bottling operations posted weak volume performance, while sales of juice were also hurt.
Some Latin American economies, including Venezuela and Argentina, are facing high levels of inflation amidst political instability, weighing on revenues of several multinational companies. The region accounted for 9 percent of Coca-Cola’s total revenue in 2015.
Coke said it would reassess local market initiatives in such markets where external headwinds have proven to be more severe than originally forecast.
The company’s net operating revenue fell 5.1 percent to $11.54 billion, the fifth straight quarter of decline. Wall Street was expecting $11.63 billion.
Coke and smaller rival PepsiCo have been struggling as consumers increasingly turn health conscious and cut back on fizzy drinks and opt for teas, fruit juices and smoothies.
Coke has responded by building its non-carbonated drinks portfolio, expanding beyond North America and cutting costs by re-franchising its bottling operations.
Net income attributable to shareholders rose 11 percent to $3.45 billion, or 79 cents per share, in the quarter.
Excluding items, the company earned 60 cents per share — beating estimates of 58 cents.
With Post wires