Coca-Cola Beats Profit Estimates After Boosting Drink Prices

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Coke Post Profit That Beats Estimates

Coca-Cola Co., the world’s largest beverage company, posted second-quarter earnings that beat analysts’ estimates after increasing drink prices and cutting expenses.

Excluding some items, profit amounted to 63 cents a share, the Atlanta-based company said in a statement Wednesday. Analysts had estimated 60 cents on average, according to data compiled by Bloomberg.

Higher product prices have helped Coca-Cola weather stagnant sales overseas and changing consumer tastes in the U.S., where soda sales have declined over the past decade. Chief Executive Officer Muhtar Kent has called 2015 a “transition year” as he waits for cost cuts and new marketing to bear fruit. Charging more for beverages has shored up revenue as the company rides out the turbulence.

“While there is more work to do, we remain confident that we have the right plans in place,” Kent said in the statement.

Coca-Cola shares rose 0.7 percent to $41.47 in New York after the results were released. The stock had slipped 2.4 percent this year through the close of trading Tuesday.

In April, Coca-Cola reported its first quarterly sales gain in two years, helped by the higher drink prices. At the time, Chief Financial Officer Kathy Waller said that matching the aggressive pricing growth from the first quarter was unlikely for the rest of the year. Though sales declined in the second quarter compared with a year earlier, the revenue was better than predicted. Sales were $12.2 billion in the period, compared with an average estimate of $12.1 billion.

Smaller Cans

In developed markets, such as the U.S. and Europe, Coca-Cola has focused on selling smaller packages at higher prices per ounce. That effort is paying off in the U.S., where Coke’s smaller soda cans have been a hit, according to Kenneth Shea, an analyst with Bloomberg Intelligence.

“That’s been a home run for them,” he said. “It’s helping their margins.”

Coca-Cola has rolled out a marketing program called “Share a Coke” that puts names and messages on its bottles and cans. Coke is benefiting from a double-digit increase in its marketing budget this year and has gotten traction with the Share campaign, according to Waller.

“It’s worked very well wherever we’ve rolled it out,” she said in an interview.

Overseas Strategy

In emerging markets such as Africa, Coca-Cola continues to focus on boosting sales volume. Globally, volume grew 2 percent last quarter. Net income rose 20 percent to $3.11 billion, or 71 cents a share, from $2.6 billion, or 58 cents, a year earlier.

Soda sales have declined for 10 straight years in the U.S., according to Beverage Digest, hurt by concerns about excess sugar and artificial sweeteners. Coca-Cola, PepsiCo Inc. and Dr. Pepper Snapple Group Inc., the largest soda makers in the country, all lost market share in 2014. Smaller companies such as energy-drink maker Monster Beverage Corp. gained ground.

To cope with the industry’s shifting fortunes, Kent is working to cut $3 billion in annual expenses. He’s also sped up bottling divestitures and trimmed the compensation plan in response to criticism from Wintergreen Advisers, an investment firm run by David Winters.

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