Coke fizzes as net income rises in first quarter

Coke, as it tries to fend off Pepsi and other upstart competitors, has been diversifying beyond sugary drinks

Cans of Coca-Cola Co. Diet Coke brand soda move along a conveyor belt at the Swire Coca-Cola bottling plant in West Valley City, Utah, U.S., on Friday, April 19, 2019. The Coca-Cola Co. is scheduled to release earnings figures on April 23. Photographer: George Frey/Bloomberg
Powered by automated translation

Coca-Cola, locked in a renewed battle for global beverage sales with rival PepsiCo, rose in early trading as its push beyond sugary drinks helped it beat on profit in the first quarter.

The beverage giant got a boost from better sales in China, where chief executive James Quincey said bottled water and trademark Coke are performing well. Global unit case volume, a key measure for Coke, rose 2 per cent, fuelled by a 7 per cent spike in Asia Pacific, according to Bloomberg.

Still, volumes slipped in North America, where both Coke and PepsiCo have boosted advertising spending as they battle for customers in an increasingly crowded beverage market.

Organic sales, which exclude the impact of currency swings and acquisitions, rose 6 per cent. Price hikes and stockpiling by its bottlers due to Brexit uncertainty also helped sales, Reuters said.

Revenue rose 5 per cent to $8.02 billion, and the company earned 48 cents per share on an adjusted basis.

Analysts had forecast earnings of 46 cents per share on revenue of $7.88bn, according to Refinitiv IBES.

Net income attributable to the company rose to $1.68bn, or 39 cents per share, in the first quarter ended March 29 from $1.37bn, or 32 cents per share, a year earlier.

“The bigger and smaller players are being very active - it’s a vibrant industry that’s growing,” Mr Quincey said. “It means we have to up our game.”

Coke, as it tries to fend off Pepsi and other upstart competitors, has been diversifying beyond sugary drinks. The company said it will release Costa ready-to-drink coffee in the second quarter, its latest push to boost sales with new kinds of beverages. Mr Quincey to date hasn’t laid out its strategy for the UK chain, which Coke bought for $5.1bn.

Coke shares rose as much as 4.2 per cent in early trading, before paring some of the gains. The stock has been about flat this year through Monday’s close, trailing the 14 per cent gain for PepsiCo.

Grappling with currency pressure and geopolitical tensions, the company previously said earnings would essentially be flat this year, and it reiterated that outlook on Tuesday. The company also said it got a boost in the quarter from bottlers in the UK building inventory ahead of Brexit.

The robust results mirror rival PepsiCo’s strong start to 2019. Coke, which has raised prices to offset higher costs, said it logged double-digit growth for Coca-Cola Zero Sugar globally, with its orange vanilla flavor in the US particularly strong.

In the US, the beverage giant is also benefiting from easing transportation costs. A trucker shortage has hampered consumer companies for more than a year, and while freight costs are still increasing, the situation has stabilised, Mr Quincey said.

“It’s just normally bad now, rather than off the charts,” he said.