Coke Drinks Deeply From Emerging Markets, But Q1 Profit Still Falls 14%
Coca-Cola pushed forward with growth in emerging markets, though a series of currency problems and restructuring charges sent the world’s largest beverage company’s profit tumbling.
Net income was $1.75 billion, 39 cents a share, down from $$2.07 billion, 45 cents a share. Excluding items related to restructuring and currency translations, Coke made 46 cents a share. Analysts expected Coke, a Dow component, to earn 45 cents a share.
The balance sheets told the same story as you’ve heard in the past. Coke is doing quite well in emerging markets, where new middle class shoppers are getting a first taste of Coke brands like its namesake cola, Minute Maid and Fanta. Indeed, the company’s business in Eurasia and Africa increased profit by 6% and case volume by 15%, and in Latina America, profit rose by 3% as volume increased 4%. It’s in the developed world, where consumers face economic instability, that Coke struggles. Coke’s Europe unit booked a 2% slip in profit as volume was flat. In North America, Coke’s profit declined by 24%, though volume ticked up 1%.
Coke isn’t alone. Nearly every food and beverage company is putting more in emerging markets as shoppers in the Old World cut back and become more spending conscious. Recall that Kraft Foods executed a spin-off last year to allow its slow-growing North American grocery business to live apart (keeping the Kraft name) form its faster-growing international snack unit (later called Mondelez International). Coke, competing chiefly with PepsiCo and Dr Pepper Snapple Group, said it would invest $5 billion in India by 2020.
Coke’s first-quarter revenue fell by 1% to $11.03 billion.