Teas, coffee and water deliver for Coca-Cola

Group beats sales and profit projections in fourth quarter as it spins out bottling units

 Coke’s results validate its strategy of becoming a marketing and drink-formulation company rather than a bottler. Photograph: Reuters

Coke’s results validate its strategy of becoming a marketing and drink-formulation company rather than a bottler. Photograph: Reuters

 

Coca-Cola’s push to diversify its drinks and spin off company-owned bottlers is bearing fruit. The company posted sales that beat analysts’ estimates in the fourth quarter as it sold more teas, coffees and vitamin water, and reformulations. Profit also topped projections.

Coke’s results validate its strategy of becoming a marketing and drink-formulation company rather than a bottler. The company has been in flux since it began offloading its bottling operations to independent owners. With that largely completed, investors can start to judge the results.

The shares gained as much as 3.8 per cent to $46.47 in early trading in New York. The stock had fallen 2.4 per cent so far this year through Thursday’s close.

Coke has been successful in raising prices while maintaining consumers’ attention with new products, said Wells Fargo and Co analyst Bonnie Herzog in a research note.

“While flat unit case volume growth remains a concern, we are encouraged by positive momentum in many international markets,” she said.

Chief executive James Quincey (53) has been working to slim down the company. After taking the helm in May, he vowed to cut costs by an additional $800 million, extending a productivity push started by his predecessor Muhtar Kent.

Revenues

Profit was 39 cent a share, excluding some items, 1 cent higher than analysts’ average estimate. The company sees the same measure growing 8-10 per cent this year. Revenue of $7.5 billion compared with an estimate of $7.4 billion.

On an unadjusted basis, Coco-Cola maker reported a net loss of $2.75 billion, or 65 cent per share, mainly due to a $3.6 billion charge related to the new tax law. A year earlier the company had posted a profit of $550 million, or 13 cent per share.

The company’s margins improved by 3.15 percentage points, largely due to divestitures of lower-margin bottling businesses.

“While there is still much work to do, I am encouraged by our momentum as we head into 2018,” Mr Quincey said in the statement.

In addition to adding new products, the company wants to revive one of its biggest sellers: Diet Coke. – Bloomberg