Coca-cola's Q4 profit beats expectations

Feb 09, 2016, 12:24 PM EST
Source: Lawrence Whittemore/flickr

Coca-cola's Q4 profit beat expectations due to cost-cutting and cheaper commodities.

Reuters reports:

The soda maker's revenue fell 8 percent, but surpassed analysts' average estimate, boosted by price hikes and the company's bet on smaller can and bottle sizes. Coca-Cola's shares rose about 1 percent to $43.02 in morning trading on Tuesday. The company, which is targeting $3 billion in annual savings by 2019, has been cutting costs through job reductions and selling some of its bottling operations and factories. Coca-Cola said on Tuesday it would refranchise all its North America bottling operations by the end of 2017, three years earlier than expected, and also refranchise its bottling operations in China. The refranchising would significantly reduce capital needs, while boosting margins and returns, the company said.

Coca-Cola's global sales volume rose 3 percent in the fourth quarter ended Dec. 31. "In the United States, in particular, we have a price-pack architecture strategy promoting the mini cans and the 8-ounce glass bottles," Chief Financial Officer Kathy Waller told Reuters, adding that the strategy was doing well in the region. The company is expanding the smaller-package strategy globally, Chief Operating Officer James Quincey said on a media call. Sales in China slowed in the quarter, the company said. China, together with Mexico, Brazil and Japan, accounted for nearly a third of the company's 2014 global sales volume.

Forbes writes:

Coca-Cola continues to face declining soda consumption in the U.S. and its Diet Coke sales have been particularly bad. During the quarter, sales of Diet Coke fell 5%. (For the year, Diet Coke was down 6%.) This was offset by growth in other sodas, like Coca-Cola (1%), Sprite (3%) and Coke Zero (7%). In an effort to spur sales, the company has been experimenting with smaller beverages — like mini-cans and 8 oz. glass bottles — and last year purchase transactions grew 3%, outpacing 1% unit case volume growth. “Our strategic focus on driving consumption in smaller package sizes is continuing to pay off,” said chief financial officer Kathy Waller in a blog post on Tuesday. Meanwhile, Coca-Cola has been placing increased emphasis on non-carbonated beverages and has seen success. During the quarter it saw an 8% rise in packaged water, 6% growth in tea, 5% growth in juice and juice drinks and 2% growth in sports drinks.