Coca-Cola “Held The Stage Again” with Strong Quarterly Results

World’s leading carbonated soft-drink company, The Coca-Cola Company (NYSE:KO) has reported robust operating results in the June quarter. The company’s net revenues increased by 6% to US$10.0 billion in the June quarter as compared to the previous corresponding period.

Condensed Consolidated Statements of Income (Source: Company Reports)

During the June quarter, the company continued to gain market share in the non-alcoholic ready-to-drink beverages space, which directly resulted in more sales over the period. The concentrate sales growth of 4% and price/mix growth of 2% amalgamated were the main reasons behind the revenue growth, which further aided the company to increase its EPS by 12% to US$0.63.

In the Sparkling Soft Drink space, the company continued to perform well and reported 4% volume and transaction growth in trademark Coca-Cola. The performance of Coca-Cola Zero Sugar brand was also encouraging, as it has provided double-digit volume growth during the June quarter, which is in line with the last seven quarters.

The company’s emphasis on innovation and improved marketing strategy further polished the company’s performance over the quarter. Products such as Coca-Cola Plus Coffee is a testament to the company’s endeavor to bring something new and refreshing to its customers.

On 4th of July, Coca-Cola brought back nostalgia for a large audience of hit series “Stranger Things” when they turned on Netflix to binge watch the third season of the show and saw series characters drinking mid-80s ‘New Coke’. This was a master-stoke by the company, right on trend with its modernised marketing strategy.

In the June quarter, the company also launched its much-anticipated Costa Coffee ready-to-drink (RTD) chilled product in the markets of Great Britain, which was a strategic move in diversifying its products and reaching a new audience. In the second half of 2019, the company is planning to roll out interesting products in additional markets to make sure that the products reach to more and more customers.

In addition, the Costa Coffee brand is also expanding via a new agreement with Coca-Cola HBC AG, which will cater to various consumer and customer requirements.

During the June quarter, a much anticipated first energy drink of Coca-Cola brand was successfully introduced in several European regions. Coca-Cola Energy ingredients include caffeine, guarana extracts, B vitamins and no taurine, making it a great product for the energy drink market. This product has gulped success in many countries and is currently available in 14 countries, including Australia, Japan, and South Africa, among others. It is expected that by the end of this year, Coca-Cola Energy will reach to 20 markets, including countries like Brazil and Mexico.

Since Coca-Cola’s initial investment in the “innocent” business in 2009, the innocent team has taken the business from numero uno smoothie brand in the United Kingdom to numero uno chilled juice brand across Europe and is now expanding into Asia for the first time through a targeted rollout, starting in Tokyo.

During the June quarter, Coca-Cola made solid progress on its World Without Waste goals for recycling, recyclable packaging and the use of recycled materials, which includes the following milestones:

• During the June quarter, Bottlers from all over world continued to bring in more brands in 100% recycled PET packaging, for example the green tea brand Hajime Ichinichi Ippon in Japan, San Luis water in Peru, Viva water in the Philippines, the Romerquelle and Valser water brands in Austria and Switzerland, respectively and many more. It is expected that by the end of 2019, 100% rPET bottles will be launched for Chaudfontaine, smartwater and Honest.
• During the quarter, Coca-Cola Australia and Coca-Cola Amatil announced that by the end of this year, 70% of all PET bottles will be totally manufactured from 100% rPET material.
• In June quarter, Coca-Cola Great Britain and Coca-Cola European Partners informed about a switch from green to clear bottles for Sprite in their markets, which is a smart move in revamping recycling.
• During the June quarter, Coca-Cola Beverages Philippines announced its first large investment in the recycling facility for Southeast Asia region by confirming the investment in $19 million state-of-the-art, food-grade recycling facility, which will recycle plastic bottles into new bottles.

With regards to the Bottling Investments, the company confirmed in its release that it has no plans to hamper its majority stake position in Coca-Cola Beverages Africa (CCBA).

In Europe, the Middle East and Africa division, the company’s price/mix increased by 1% in the quarter while its unit case volumes grew by 2% over the period. Although the company’s operating income in the region declined by 5% on pcp, the comparable currency neutral operating income (non-GAAP) has increased by 9%.

In the Latin America region, the company’s price/mix increased by 5% in the quarter, while its unit case volume grew by 1% with growth across the majority of key markets.

In North America, price/mix grew 4% for the quarter, driven by sparkling soft drinks and unit case volume declined by 1%, partially due to package initiatives executed in the marketplace and impact of pricing. The operating income in the North America region substantially increased by 10% in the June quarter.

In the Asia Pacific region, although the price/mix declined 3% for the quarter, the unit case volume grew 7% driven by broad-based growth across almost all key markets. Further, the operating income in the Asia Pacific region grew by 4% in the quarter.

2019 Outlook - For the full year 2019, the company expects to deliver 5% growth in organic revenues while its operating income (currency neutral) is expected to achieve a growth of 11% to 12%. In 2019, the company projects its EPS to grow in the neighborhood of -1% to 1% versus $2.08 in 2018. The underlying effective tax rate in 2019 is expected to be 19.5%. In 2019, the company expects to report cash from operations of around $8.5 billion and capital expenditures of around $2.4 billion.

Stock Performance: On New York Stock Exchange (NYSE), Coca-Cola Company ended day’s trade at a price of US$53.78, down 1.01% intraday, with a market capitalisation of US$229.432 billion as on 24th July 2019. Coca-Cola’s Australian subsidiary, Coca-Cola Amatil Limited (ASX: CCL) at the time of writing on 25th July 2019 (AEST 01:40 PM), the stock of CCL was trading at a price of $10.460, down 0.476%, with a market capitalisation of circa $7.61 billion. For the past 6 months period, CCL’s shares have exhibited 23.85% of return as on 24th July 2019.

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