Coca-Cola Sells More Drinks But Less Soda
Coca-Cola sold more drinks in the first quarter, but it wasn't because of soda.
The world's biggest beverage maker said Tuesday that its global sales volume for soda fell for first time in at least a decade. The drop was offset by stronger sales of noncarbonated drinks such as juice, and overall volume rose 2 percent.
A stronger dollar contributed to an 8 percent decline in profit for the quarter.
Gary Fayard, the company's chief financial officer, attributed the decline in sodas partly to the timing of Easter, which falls in the second quarter this year instead of the first.
"It's not as concerning to us as it would look at first pass," he said in a phone interview.
He also noted that the soda results were hurt by results in Great Britain, where the company maintained pricing despite switching to smaller bottles. For the full year, Fayard said he expects global soda volume to be positive.
Coca-Cola Co. sells a wide variety of drinks, including Sprite, Minute Maid, Powerade and Dasani bottled water. But the quarterly decline is soda volume nevertheless underscores the pressures the company is facing around its flagship product, both at home and abroad.
Soda has been under fire in developed nations such as the United States for years over concerns that it fuels weight gain. More recently, executives have blamed even steeper declines among diet sodas to concerns about artificial sweeteners.
In North America, soda volume slipped 1 percent in the quarter. Soda volume also took a hit in Mexico as the country instituted a tax on the sugary drinks. Coca-Cola did not disclose the severity of the decline in Mexico, but Fayard said it was in the single-digits.
Coca-Cola gets a big portion of its business from overseas and from soda. Sales outside the U.S. accounts for 81 percent of Coca-Cola's volume. Of that, sodas account for 75 percent of volume.
Coca-Cola isn't alone in its struggles to boost soda sales. PepsiCo Inc., which reports its earnings Thursday, has seen even steeper declines despite stepped-up marketing, including sponsorship of the Super Bowl halftime show.
Although both companies sell a wide array of beverages, sodas remain a big part of their businesses and they're scrambling to figure out ways to stop the declines even as they shift to pushing other types of drinks.
In the year ahead, Coca-Cola plans slash costs and increase marketing spending by $400 million. The company also introduced a version of its namesake soda sweetened with a mix of stevia and sugar in Argentina, with plans to eventually introduce the drink elsewhere.
For the quarter ended March 28, Coca-Cola's net income fell to $1.62 billion, or 36 cents per share. That compares with net income of $1.77 billion, or 39 cents per share a year ago.
Excluding one-time items, net income totaled 44 cents per share, matching analyst expectations.
Revenue fell 4 percent to $10.58 billion. Analysts expected $10.5 billion. Companies like Coca-Cola that do a large portion of their business overseas take a hit to revenue when the dollar is strong, because foreign currencies convert back into fewer dollars.
Shares were up nearly 3 percent at $39.73 in pre-market trading.