Coca-Cola sales surprise on worldwide increase
NEW YORK (Reuters) - For the first time since becoming chief executive of Coca-Cola Co (KO.N) in 2008, Muhtar Kent looked at the sales scorecard he carries around all the time and saw no red marks.
That is because the world's No. 1 soft drink maker reported higher fourth-quarter sales volume in all of its worldwide operating segments, something that has not happened in five or six years, Kent said.
"That to me, is a cautiously satisfying thing to see," Kent told Reuters on Wednesday after the company reported better-than-expected sales, helped by market share gains in sodas and noncarbonated drinks and a recovering economy.
Shares of Coke, a component in the Dow Jones industrial average .DJI, closed up less than 1 percent after rising as much as 2.9 percent earlier in the session. PepsiCo, which will report results on Thursday, also rose less than 1 percent.
"It looks like we'll own Coke for the 32nd consecutive year," said Hank Smith, chief investment officer for Haverford Investments, which has been a Coke shareholder since its founding in 1979.
Smith said it was no surprise that Coke saw strong sales in emerging markets, something that has kept it in favor with investors despite an economic downturn.
"But they had good volume growth in the developed world as well, and that's a nice added kicker," Smith said. "We're very encouraged to see these results in light of the challenges on the commodity inflation front."
Since Coke bought its North American bottling operations in October, costs for commodities such as corn, juice, plastic and metal have a bigger impact on its profit margins.
The company said it planned to raise prices on beverages in the United States this year as it faces $300 million to $400 million in cost increases from commodities. Kent declined to give details except to say the increases would vary by market and keep Coke competitive with rivals like PepsiCo Inc (PEP.N) and Dr Pepper Snapple Group Inc (DPS.N)
Coke's comments diverged from those of its second-largest bottler, Greece-based Coca-Cola Hellenic (CCH) HLBr.AT, which said earlier on Wednesday that tough market conditions would prevent it from being able to raise prices enough to keep up with soaring ingredient costs.
Both Coke and PepsiCo acquired their North American bottlers last year as a way to improve performance by cutting costs, speeding innovation and giving themselves more control over distribution.
Coke's fourth-quarter net income rose to $5.77 billion, or $2.46 per share, from $1.54 billion, or 66 cents per share, a year earlier.
Excluding items, earnings of 72 cents per share met the analysts' average estimate, according to Thomson Reuters I/B/E/S.
Net revenue jumped 40 percent to $10.5 billion, topping the analysts' forecast of $10 billion. The bottler acquisition accounted for the bulk of the gain.
Price increases, and selling a larger proportion of higher-priced drinks, added 2 percentage points of growth, as sales in convenience stores -- where drinks are refrigerated and usually cost more -- started to recover after getting hammered in the recession.
Kent said in the interview that he expects that recovery to continue throughout 2011.
GAINS IN ALL AREAS
Worldwide sales volume rose 6 percent in the quarter. Excluding the distribution of some Dr Pepper brands taken over with the bottling purchase, volume was up 5 percent.
Including the benefit of those brands, Coke's volume rose 8 percent in North America, 5 percent in Latin America, 2 percent in Europe, 14 percent in the Eurasia and Africa segment, and 1 percent in the Pacific region.
However, one dark spot was China, where volume fell 3 percent, due in part to a tough comparison with a year-earlier period that saw a 29 percent increase. Coke also said it was not uncommon to see swings in quarterly sales trends in China, due to the change in timing of the lunar New Year.
Excluding the Dr Pepper brands, organic volume rose 3 percent in North America, an acceleration from 2 percent gains in the third and second quarters.
Excluding the new brands, volume of carbonated drinks rose 3 percent worldwide. The flagship Coca-Cola brand saw volume rise 4 percent, driven by gains of 37 percent in Russia, 20 percent in Turkey and 10 percent in India.
Volume for beverages such as Powerade sports drink, Minute Maid juice and vitaminwater rose 9 percent, with gains of 7 percent in North America and 11 percent internationally.
Coke shares closed up 0.4 percent at $63.15 on the New York Stock Exchange.
(Reporting by Martinne Geller; Editing by Lisa Von Ahn, Dave Zimmerman and Bernard Orr)