* Second-quarter N. America unit case sales volume flat
* Adjusted earnings $0.64/share vs estimate $0.63
* Sales fall 1 pct to $12.57 bln vs estimate $12.83 bln
* Stock falls as much as 4.2 pct in early trading
(Adds CEO's and analyst's comments)
By Anjali Athavaley
July 22 Coca-Cola Co is still grappling
with a problem even as sales of traditional Coke rise in North
America: U.S. consumers are drinking less diet soda.
The world's largest soda maker said on Tuesday that global
sales volume rose 3 percent in its second quarter, boosted by
growth in sparkling beverages. Sales were helped in part by the
fact that Easter fell in the second quarter this year.
But Coke reported lower-than-expected quarterly revenue as
sales volume in North America, its biggest market, was flat
partly because of a decline in diet Coke sales. JP Morgan
analysts had expected volume to be up 1 percent to 2 percent in
North America, which accounted for 45 percent of total revenue
in the second quarter.
Coke's Chairman and Chief Executive Officer Muhtar Kent said
that while the drop in diet Coke sales had improved from the
first quarter, "we recognize we have more work to do here."
Coke, like rival PepsiCo Inc, has been struggling
with declining soda sales in developed markets like the United
States as consumers become more health conscious.
In a conference call on Tuesday, the company attributed the
slipping diet Coke sales to insufficient marketing, a shift
toward natural sweeteners and consumer skepticism about the
safety and quality of artificial sweeteners.
One bright spot in the quarter: Sales volume of regular Coke
rose 1 percent in North America. Kent cited demand for smaller
packages of the product, which Coke has found to have generated
more "brand love."
The company said that its still beverage volume in North
America - which includes flavored water - grew 1 percent,
although juices and juice drinks drew lower volume as Coke
raised prices to cover higher commodity costs.
Shares of Coca-Cola, which also makes Sprite, Minute Maid
and Powerade, fell as much as 4.2 percent to $40.61 in early
trading and recovered to $41.17 by early afternoon. The stock, a
Dow component, has slipped 0.3 percent this year. The Dow Jones
industrial average has climbed about 3.3 percent so far
Stephen Powers, a beverage analyst at UBS in New York,
called the results "mildly disappointing" in a research note,
pointing out that global volumes slightly missed expectations
and North American margins were not up as much as hoped.
The company's net income attributable to shareholders fell
to $2.60 billion, or 58 cents per share, in the second quarter,
from $2.68 billion, or 59 cents per share, a year earlier.
Excluding items, Coke earned 64 cents per share.
Revenue fell 1 percent to $12.57 billion.
Analysts on average had expected earnings of 63 cents per
share, on revenue of $12.83 billion, according to Thomson
Coke also said its adjusted earnings per share would be hurt
by 2 cents in the second half of the year due to the
restructuring of its juice operations in Russia and the
separation of its Brazilian bottling operations last year.
(Reporting by Anjali Athavaley in New York and Siddharth Cavale
in Bangalore; Editing by Maju Samuel, Savio D'Souza, Jilian
Mincer and Jan Paschal)