Coke profits get health kick in third quarter

(Reuters) - Coca-Cola Co’s quarterly revenue and profit topped Wall Street expectations on Tuesday, as investments to cater to changing consumer tastes paid off with higher sales of its sugar-free sodas and vitamin waters.

A Coca-Cola truck makes its way through downtown Los Angeles, California, U.S., October 24, 2018. REUTERS/Mike Blake

The world’s biggest beverage maker, like rival PepsiCo Inc, has been building a portfolio of non-carbonated drinks and doubling down on its investments in enhanced waters such as electrolyte-filled smartwater.

Coke also paid $5.1 billion for the world’s second-largest coffee chain Costa earlier this year and took a stake in Kobe Bryant-backed sports drink BodyArmor in a bid to court a younger demographic that prefers sipping lattes over gulping big sodas.

Chief Executive Officer James Quincey played down media reports in recent weeks that the company is looking at cannabis-infused drinks in North America as a wave of legalization spreads across Canada and some U.S. states.

“We don’t have any plans at this stage to get into this space,” he told a post earnings call with analysts, adding that the pace of acquisitions in the quarter should not be taken as a sign of how the company would proceed from here.

“M&A of course is not a strategy in and of itself – it’s an enabler of our strategy.”

Organic revenue, or sales from its core beverage business, rose 6 percent in the third quarter, led by double-digit volume growth for Diet Coke and Coca-Cola Zero Sugar.

Volumes, a key indicator of demand, grew 2 percent in the quarter, roughly stable from a year ago. Carbonated drinks grew 2 percent in the quarter, while water and sports drinks, up just 1 percent in the previous quarter, grew 5 percent.

“(We are) starting to see growth coming back into water as we’ve done a bit of de-prioritizing and moved more into premium and innovation,” Quincey said.


Earlier this year the company launched new slim line Diet Coke cans along with flavors including ginger lime and feisty cherry. It promised earlier this month to introduce two new variants of its smartwater brand on the U.S. West coast.

The strategy, which follows Quincey’s appointment last year, has drawn support from Wall Street analysts and investors.

A 2 percent gain on Tuesday took its shares back into positive territory for this year and compared to a near 6-percent decline for Pepsi and an almost 5- percent drop in the S&P consumer staples index over the same period.

Net income attributable to the company’s shareholders rose 30 percent on the year in the three months ended Sept. 28.

Excluding one-time items, Coca-Cola said it earned 58 cents per share, beating analysts’ average estimate by 3 cents, according to Refinitiv data.

Revenue fell 9 percent to $8.25 billion, due to the disposal of its low-margin bottling operations, but beat expectations.

“We are impressed with Coca-Cola’s ability to deliver a strong and balanced top line, suggesting that its refranchising and portfolio transformation are paying off,” Wells Fargo analyst Bonnie Herzog said.

Reporting by Aishwarya Venugopal in Bengaluru; Editing by Sriraj Kalluvila and Patrick Graham