Coca-Cola records ‘solid’ quarter as net revenue increases by 5%

Coca-Cola has recorded a solid start to its current financial year, reporting net revenue 5% higher than the same period 12 months ago and operating income almost 30% stronger.

Net revenues for the quarter grew by 5% to reach $8.02 billion, while operating income stood at $2.34 billion – 29% higher than the first quarter of 2018.

As a result, Coke has reaffirmed its guidance for the year, expecting approximately 4% growth in organic revenue and 10-11% growth in comparable, currency-neutral operating income.

It was a particularly good quarter for the Europe, Middle East & Africa business unit, where revenue growth of 5% helped offset revenue decline in other regions – particularly Latin America. Volume growth was strongest in Asia-Pacific at 7% – five percentage points higher than the consolidated average across the whole business.

Coca-Cola CEO James Quincey said: “We’re encouraged by our first-quarter results as our disciplined growth strategies continue to deliver strong underlying performance. We remain confident in our full-year guidance as we continue to make progress on our transformation as a consumer-centric total beverage company.”

Coke’s Global Ventures unit, which it set up at the end of last year, has taken its first strides towards success with upwards of 200% revenue growth recorded in this quarter.

Reported revenue during the quarter benefited from the closing of Coke’s acquisition of Costa Coffee. Operating income also grew as a result of the Costa acquisition, which Coca-Cola claimed had undergone “a smooth transition”.

Global Ventures was established last November to identify and nurture the next series of fast-growing opportunities, as well as to scale acquisitions such as Costa Coffee. It is led by Jennifer Mann, a former head of Coca-Cola Freestyle who before her appointment to Global Ventures was Coke’s chief people officer.

Elsewhere within unit, volume grew by 1% as strong growth in Innocent smoothies and energy drinks was partially offset by a double-digit decline in the doğadan tea business in Turkey. At the end of March, the business unveiled the first energy drink under its Coca-Cola brand, available first in Hungary and Spain before expanding to other markets in Europe.

Region-by-region breakdown

In North America, price/mix grew 4% for the quarter, driven by strong pricing and mix within the sparkling soft drink portfolio, in addition to a benefit from product mix. Unit case volume declined 1%, largely due to the impact of pricing and package initiatives executed in the market as well as the timing of Easter. For the total portfolio, transactions outpaced volume performance, reflecting continued focus on value over volume.

Price/mix grew 9% for the quarter in Latin America, largely driven by strong performance in Brazil and pricing in Argentina. All business units achieved positive price/mix in the quarter.
Unit case volume declined 1% as growth in Brazil, Peru and Chile was more than offset by a double-digit decline in Argentina. Mexico volume declined 1% in the quarter, partially due to pricing and package initiatives executed in the market to optimise revenue.

The company gained value share in non-alcoholic ready-to-drink (RTD) beverages, driven by solid share performance in Brazil, in addition to the majority of category clusters.

In Europe, the Middle East and Africa, price/mix grew 10% for the quarter due to strong pricing in the majority of key markets and the benefit from bottler inventory build related to Brexit, which contributed to positive geographic mix and also caused concentrate sales to grow ahead of unit case volume. Unit case volume grew 2%, as growth across the majority of markets was partially offset by declines in Zimbabwe and the Middle East. Growth was led by sparkling soft drinks and the continued growth of Fuze Tea. Operating income grew 7%, despite a 15-point currency headwind and – again – the company gained value share in non-alcoholic RTD beverages, led by solid share performance across Europe.

And in Asia-Pacific, price/mix declined 2% for the quarter, largely driven by geographic mix due to growth in emerging and developing markets outpacing developed markets. Unit case volume grew 7% due to positive performance across all key markets, with the exception of Australia. Volume growth was led by China, Southeast Asia and India.