Monday, 20 May 2019

New flavors lift Coca-Cola results; shares rise

LONDON: Strong demand for Coca-Cola Co’s zero-calorie drink Coke Zero, new orange-vanilla cola and flavored waters pushed the beverage maker’s quarterly sales and profit well above Wall Street estimates, sending its shares up 2.2 percent.

The world’s biggest beverage makers, Coca-Cola and PepsiCo Inc, are responding to shifting consumer tastes by tweaking ingredients and experimenting with new flavors that are focused more on health conscious consumers.

These efforts have helped revive soda sales after a years-long slump.

Chief Executive Officer James Quincey said Coke Zero sales witnessed a double-digit percentage rise, while its new orange-vanilla Coke soda was also a hit.

Sales of the company’s carbonated drinks rose 1 percent, driven by strong performance of its Coke brand, while smaller, immediate consumption packages of its flavored water and sports drinks drove a 6 percent sales increase in that business.

Quincey is trying to make Coca-Cola a “total beverage company” by adding coffees, teas, smoothies and flavored waters to a portfolio that has traditionally offered aerated drinks.

It recently made a big bet on coffee with its $5.1 billion acquisition of Costa Coffee and is preparing to launch ready-to-drink Costa products in stores soon.

“They’re making progress with innovations in general … it is still early for a lot of these innovations, but we do like the increased focus that the company is bringing to its core brands and also its coffee products,” Edward Jones analyst John Boylan said.

Coke’s organic sales, which exclude the impact of currency swings and acquisitions, rose 6 percent, driven by price hikes and partly benefiting from bottlers stocking up more products due to Brexit uncertainty.

Revenue rose 5 percent to $8.02 billion, and the company earned 48 cents per share on an adjusted basis.

Analysts had forecast earnings of 46 cents per share on revenue of $7.88 billion, according to Refinitiv IBES.

For the second quarter, the company projected a 6 percent boost in comparable revenue from acquisitions and divestitures, but continues to see an impact from a stronger dollar. It maintained its core sales growth forecast for the full year.

“We are impressed with Coca-Cola’s ability to deliver a strong topline, suggesting that its refranchising (and) portfolio transformation are paying off,” Wells Fargo analyst Bonnie Herzog said.

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