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Coca-Cola raised its full-year outlook Tuesday after reporting stronger global beverage sales, but its North American business showed a more cautious consumer: the amount of drinks sold was flat, while pricing and the mix of products sold lifted revenue by 1%.
The company said third-quarter revenue rose 7% to $13.4 billion. Global unit case volume, its measure of how much beverage it sells, increased 5%, led by India, China, Mexico and Brazil. Reported earnings per share rose 8% to 93 cents. Comparable earnings, an adjusted measure that excludes certain items, increased 11% to 91 cents.
What the numbers say about shoppers
Revenue can rise because people buy more, because prices increase, or because shoppers choose more expensive products and packages. Coca-Cola’s global price/mix measure rose 1%. That is not a measure of the increase in the price of every bottle or can: it also reflects changes in products, packages and places where drinks are sold.
In North America, growth in Coca-Cola-branded drinks was offset by a decline in water, sports drinks, coffee and tea. The company said pricing actions were partly offset by an unfavorable product mix. Its North American operating income still rose 5%, helped by revenue growth and the timing of marketing spending, partly offset by higher input costs and operating expenses.
The contrast matters for household spending. Coca-Cola’s worldwide growth does not mean American shoppers are buying more drinks. Its North American volume was unchanged, even as the company gained a larger share of the value of the region’s nonalcoholic ready-to-drink beverage market.
Zero Sugar grows faster
Worldwide, Coca-Cola Zero Sugar volume increased 16%, compared with 5% growth for Coca-Cola-branded drinks overall. Water volume rose 8%, while sports drinks fell 3%. Coffee and tea were unchanged.
The company’s operating margin widened to 33.4% from 32.0% a year earlier. Its comparable operating margin rose to 32.9% from 31.9%, with revenue growth and favorable currency movements helping offset increased marketing investment and other operating expenses.
A higher outlook, with conditions
Coca-Cola now expects at least 5% organic revenue growth this year and at least 11% growth in comparable earnings per share. It also raised its free-cash-flow outlook to at least $13 billion, from about $12.4 billion. These are company forecasts, not completed results, and the earnings outlook uses a non-GAAP measure.
The company said its assumptions include the pending sale of its African bottling operations closing in the fourth quarter, subject to regulatory approval. Management is scheduled to discuss the results on an earnings call at 8:30 a.m. Eastern time Tuesday.
JBizNews Desk | Atlanta
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