The world’s largest beverage maker earned $2.68 billion, or $0.59 per share, down from $2.79 billion, or $0.61 per share, in the same period a year ago. Stripping out one-time items, the company earned $0.63 per share in the second quarter, right in line with Wall Street estimates. Revenue dropped to $12.75 billion, shy of the $12.95 billion analysts anticipated.
The Atlanta, Georgia based beverage behemoth reported global volume rose 1% in the period. But in its cash-cow North American market, volume slipped 1%, including a 4% dip in sodas. A slippage in soda sales in nothing new; the figure has fallen in four of the last five quarters.
Challenging economic conditions in China, changing tastes and bad weather in emerging market countries like India were cited for the weak volume growth. Inclement weather is typically faulted for feeble retail sales, not beverages. However, India’s monsoons crushed sales, especially when compared to the explosive growth rate from the region a year ago thanks to a late monsoon season. Meanwhile, consumer spending in Brazil, usually a bright spot for sales, was crimped by a credit crunch.
“This was a confluence of events,” CEO Muhtar Kent said in a conference call. “The portfolio effect of our global business did not work in our favor in this particular case.” As a result, Coke is stepping up efforts in China and other emerging markets to expand Coke’s reach by adding more affordable, smaller package sizes.
More importantly, Kent added, “This is more of an anomaly; we should not see this as a trend or systemic issue.”
Still the soda leader
One trend that cannot be ignored is that consumers are swapping sodas for more bottled water, sports drinks, energy beverages and juices. Sales of carbonated soft drinks (sodas) in the U.S. fell for an eight straight year, posting the largest yearly drop since 2009, according to the annual report on soft drink sales by Beverage Digest.
The March report revealed volume fell by 2.5% for PepsiCo, Inc. (NYSE:PEP), 1% for Coke and 0.5% for Dr Pepper Snapple Group Inc. (NYSE:DPS) . Amid growing cries from nutritionists that sugary sodas are to be blamed for the nation’s expanding waistlines and growing obesity epidemic, soft drinks sales have been in a steady decline since 2005.
But The Coca-Cola Company (NYSE:KO) still claims 42% of the soft drink market, compared with 28.1% for PepsiCo, Inc. (NYSE:PEP)and 16.8% for Dr. Pepper. Among soft drink brands, Coke is tops with a 17% market share. Diet Coke is No. 2 at 9.4%. Taking the No. 3 slot is Pepsi with 8.9%. Mountain Dew, a PepsiCo, Inc. (NYSE:PEP) product, is No. 4. Rounding out the top five is Dr Pepper Snapple Group Inc. (NYSE:DPS).
While Pepsi plays second fiddle in the Cola wars, the company remains a global leader in the beverage and food market. Its diverse portfolio of 22 brands runs the gamut from PepsiCo, Inc. (NYSE:PEP) to Aquafina to Tropicana to Lipton to Quaker Oats to Fritos to Cheetos. Each generates more than $1 billion in annual retail sales.
