Coke: Zero Sugar Helps Drive Q3 Sales Growth

The Coca-Cola Company beat analysts’ expectations in the third quarter of 2019, posting a 5% increase in organic sales growth and an 8% rise in net revenue to $9.5 billion, according to a quarterly earnings report released today.

Speaking with investors today, Coke CEO James Quincey attributed much of the growth to overseas gains, including emerging markets in Asia and “positive momentum” in Latin America. In North America, organic revenue growth improved 2% year-to-date, driven largely by the company’s Zero Sugar product lines.

Much of the revenue growth was driven by price/mix growth of 6% and was partially offset by a 2% decrease in concentrate sales. Net income for the third quarter was $2.6 billion, up from $1.8 billion last year. Operating margin was up 26.3%, compared to 29.8% last year. Earnings per share grew 37% to $0.60.

Wells Fargo Securities analyst Bonnie Herzog reported she was “very impressed with [Coke’s] better-than-expected topline.”

Unit case volume improved 2% in the quarter. Among CSDs, the company’s core Coke line grew volumes 3% and retail value was up 6%, Quincey said. Coke Zero Sugar reported robust 14% volume growth globally. Although growth for CSDs was strong, Quincey noted that sales for bottled water have “not been as strong as we’d like,” up only 2%. Juice and dairy categories grew sales 1%, while tea and coffee saw a strong 4% increase.

“Strategy and marketing are only one part of the equation,” Quincey said. “Daily execution in the marketplace is also a critical component. Globally, our bottling partners are aligned and energized. They’re committed to building scale and investing for the future. We’re working with them to collectively raise the bar on consistent execution. Key levers of growth include driving new pack price architectures, increasing the availability of immediate consumption packages, expanding chilled space with more cold drink equipment and growing our customer base.”

The earnings report comes just three weeks after the company announced it will launch Coca-Cola Energy in the U.S. market with four SKUs this January, following an international launch in 25 countries. Quincey noted Coke Energy will face a more competitive marketplace in the U.S., where the energy drink category is more developed.

“The energy category in the U.S. is much more developed than many of the other markets,” he said during the earnings call’s Q&A portion. “And therefore, we are clearly taking an approach of trying to bring new consumers into the category rather than competing for the current ones. And we believe that based on our experiences in the launch markets and our research in the U.S. that doing so with a formula closer to Coke will be more effective.”

Coke’s stock price improved following the earnings report, by nearly 2 points following the opening of the market. At press time the stock was up 2.07% to $54.92 per share.