Coke's namesake sodas see declines in key countries

AP News
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Posted: Apr 20, 2016 12:42 PM
Coke's namesake sodas see declines in key countries

ATLANTA (AP) — Coca-Cola saw the popularity of its namesake sodas decline in key markets around the world during the first quarter, reflecting a mix of changing tastes, challenging economic conditions and a shifting business strategy.

The world's biggest beverage maker said Wednesday that sales volume for sodas like Diet Coke and Cherry Coke that bear its name collectively declined in North America, Europe and the unit including the Middle East and Africa.

Total sales volume rose 2 percent, helped by performance of other sodas like Fanta and strength in non-carbonated drinks like bottled water and sports drinks.

The slip in Coke's namesake drinks comes as big soda brands are being pressured in the U.S. and elsewhere by a proliferation of competition. Soda is also an ongoing target for public health advocates, who blame the drinks for fueling weight gain. Diet Coke has been fading in popularity domestically as well.

As people keep moving away from big sodas, Coke has retooled its strategy to focus on attractive packaging like glass bottles and mini-cans that can fetch more money. Even if people are drinking less soda, the idea is that they'll spend more when they do indulge.

James Quincey, Coca-Cola's president, also noted Wednesday that the economies of emerging markets have been hit harder than developed markets. Since Coke tends to sell more sodas than non-carbonated drinks in those markets, he said that affects the company's global soda sales.

To keep up with changing tastes, Coke and Pepsi have also been retooling their offerings to put more marketing behind options like premium water, bottled teas and juices. Even as Coca-Cola continues to diversify, however, the company is trying to burnish its flagship drink.

This week, Coca-Cola unveiled new cans and bottles of Diet Coke and Coke Zero that include more red and make them more reminiscent of regular Coke. By uniting them under a single brand, the company says it will help give the drinks a more impactful presence on stores shelves, and maximize advertising dollars.

When asked whether the new look could lead to confusion, Quincey noted the company has already tested the concept in some markets and found it worked well.

The new cans are rolling out in Mexico next month, and will spread to other countries this year and next. Coca-Cola said it's still testing its options in the U.S., and that no changes are planned for 2016.

The Atlanta company is also slashing costs as it faces challenges at home and abroad, and refranchising territories back to bottlers, who take charge of manufacturing and distribution.

For the quarter ended April 1, Coca-Cola said its profit fell 5 percent to $1.48 billion, or 34 cents per share, as it was hit by a strong dollar and refranchising charges.

Excluding such one-time items, the Atlanta company earned 45 cents per share. That was a penny more than expected, according to Zacks Investment Research.

Net operating revenue fell 4 percent to $10.28 billion. Organic revenue, which excludes divestitures and currency fluctuations, rose 2 percent, the company said.

Shares of Coca-Cola Inc. dropped $2.05, or 4.4 percent, to $44.55 in midday trading. Its shares are up more than 9 percent over the past year.

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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on KO at http://www.zacks.com/ap/KO

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