Coca-Cola’s Solid Quarter Drives Hope for Turnaround
NEW YORK (TheStreet) — U.S. consumers are still shunning aspartame-sweetened Diet Coke, but luckily for the beverage giant, consumers are embracing other areas of its vast drinks portfolio.
On Wednesday, Coca-Cola (KO – Get Report) reported net sales of $12.2 billion, beating analyst estimates for $12.07 billion. Organic revenue growth, which strips out the effects of currency, rose 4%. Wall Street was looking for organic revenue growth of about 3%. Adjusted earnings came in 3 cents ahead of estimates of 63 cents a share.
At the heart of Coke’s better-than-expected results was the performance of its North America business, where organic revenue and profits rose 5% and 8%, respectively. The segment’s pricing rose 4%, as the company successfully raised prices on 12-ounce soda cans and 2-liter bottles.
Volume for non-carbonated beverages, which Coke refers to as “still beverages”, rose 4%, driven by double-digit growth in the Smartwater brand and tea lines Gold Peak and Honest Tea. The pace of growth for the still beverage business quickened from the 2% seen in the first quarter. Stronger volume compared to the first quarter also found its way to Coke’s sparkling business, which includes carbonated beverages like Coca-Cola and Sprite, in the second quarter.
Overall volume in the sparkling category increased 1% during the quarter, marking a turn from the 1% drop realized in the first quarter. Coke continued to find success with smaller can sizes of its traditional namesake cola, which are designed for customers seeking to control their calorie intake. Sales of mini cans increased by a mid-teens percentage, Coke execs said on a Wednesday morning earnings call.
One area that wasn’t too kind to Coke in North America was diet soda sales. Coke did not disclose sales trends for its Diet Coke line in North America, only noting the brand continues to “struggle” in the U.S. Global volume for Diet Coke fell 7%.
But, according to recent data from Beverage Digest, Diet Coke’s U.S. volume fell 5.2% in the second quarter. Coke’s challenged results in diet colas mirrored those of rival PepsiCo (PEP – Get Report). Beverage Digest estimates Diet Pepsi’s volume fell 8.5% in the second quarter.