Jul 27, 2016 2:24 PM
Coca-Cola cuts sales outlook amid weak international demand
The Associated Press
ATLANTA (AP) — Coca-Cola cut its sales forecast for the year on Wednesday, but says it's making changes to address declining soda demand in the U.S. and key international markets.
The world's biggest beverage company said global volume was flat in the second quarter as a decline in soda sales was offset by stronger sales of non-carbonated drinks. The last time its quarterly soda volume fell was in early 2014.
The maker of Fanta, Sprite and Powerade had warned earlier this year that its soda volume was being pressured by rougher economic conditions in emerging markets, where sodas tend to account for a higher portion of sales.
During an earnings call, Coca-Cola President James Quincey said the company's results were dragged down by weakening demand in key markets outside the U.S. He said Coca-Cola's namesake soda and juice drinks suffered declines in China as a result of economic uncertainty. The company plans to focus on affordability for rural and blue-collar customers in the country, while pushing premium offerings for higher-income customers, he said.
Although soda remains the flagship beverage for Coca-Cola and its rival PepsiCo Inc., the companies say they are focusing on categories with more potential. To offset the declines in soda volume in the U.S., they're also raising prices and putting the drinks in mini-cans or glass bottles to market them as more premium.
Quincey noted that the company's premium water saw gains in China during the quarter, and that water brands including SmartWater are performing well around the world.
In Venezuela, Coca-Cola noted it had to temporarily shut down production as a result of a sugar shortage. Since the situation could occur again amid the country's economic turmoil, Quincey said the company introduced a version of Coke Zero, which is made with artificial sweeteners.
That gives people in Venezuela another sugar-free option if they don't like the version of Diet Coke sold in the country. The proportion of diet sodas the company sells in international markets is often far less than in the United States.
For the year, Coca-Cola said it now expects overall sales to climb 3 percent, after stripping out the effect of currency fluctuations, acquisitions and divestitures. That's compared with its previous forecast for organic sales growth of 4 percent to 5 percent.
It expects comparable earnings to decline 4 to 7 percent, implying earnings of $1.86 to $1.92 per share. That's short of the $1.94 per share analysts were forecasting.
Coca-Cola's total revenue for the quarter declined 5 percent to $11.54 billion, missing the $11.69 billion analysts expected. But it said pricing helped lift "organic" revenue 3 percent.
The Atlanta-based company earned $3.45 billion, or 79 cents per share, for the quarter. Adjusted earnings were 60 cents per share, two cents more than analyst expected.
Coke shares fell 3.6 percent to $43.26 in afternoon trading.