Coke's Soda Volume Stays Flat, Aided by Zero Sugar--Update

By Austen Hufford Features Dow Jones Newswires

Coca-Cola Co. customers are increasingly filling up on beverages other than its mainstay sodas -- and the company says that is OK.

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The Atlanta beverage giant reported higher-than-expected earnings in its latest quarter even though total soda volume was flat, highlighting the company's new focus on revenue growth over volume growth and its goal to diversify beyond its mainstay carbonated beverages.

Coke's overall beverage volumes during its third quarter were flat world-wide as growth in developing markets essentially offset weakness in developed markets.

The company saw 1% volume growth in both its juice and dairy products as well as its tea and coffee beverages. Soda-growth was flat while volume for water and sports drinks fell 1%.

Shares fell 0.4% in premarket trading to $46.

Coke has been aiming to cut sugar from its products and expand beyond soda as consumers crave beverages seen as more healthy.

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The company rolled out Coke Zero Sugar in the U.S. during the quarter with a big marketing splash, hoping to offset the long slide in volumes of diet and regular colas with a new soda replacing Coke Zero. The company said Wednesday that the new drink had performed well, growing its volume in the high single digits. The company plans to roll out the drink to the rest of its key markets by early next year.

Coca-Cola on Wednesday reaffirmed its full-year earnings outlook, but cut its capital spending plans, saying it will now spend about $2 billion this year, down from an earlier forecast of $2 billion to $2.5 billion.

Coke's top-line was negatively impacted in the quarter by divestitures of its U.S. bottling operations. The company wants to complete the reorganization by year's end and on Wednesday, it said it would complete the refranchise of one of its main U.S. bottlers in the coming weeks. The company said its adjusted operating margin grew to 27.4% from 23.36% in the same quarter last year, largely as a result of the divestitures, a main goal of the initiative.

In all, Coke reported earnings of $1.45 billion, or 33 cents a share, up from $1.05 billion, or 24 a share, a year earlier. On an adjusted basis, earnings grew to 50 cents a share from 49 cents. Revenue fell about 15% to $9.08 billion, largely as a result of the bottling divestitures. Adjusted revenue grew 4%.

Analysts polled by Thomson Reuters were expecting earnings of 49 cents a share on $8.72 billion in sales.

Write to Austen Hufford at austen.hufford@wsj.com

Coca-Cola Co.'s newest diet soda helped the company keep its soda volume flat in the latest quarter as it attempts to expand its portfolio of beverages and hold on to customers who are abandoning sugary drinks.

Coca-Cola Zero Sugar, which the Atlanta company rolled out in the U.S. in August after introducing it last year in the U.K., replaced Coke Zero. Both are sweetened with aspartame and acesulfame K, though Zero Sugar is formulated to taste more like the original Coke.

On Wednesday, the company said the new drink had performed well in its third quarter, increasing its volume in the high single digits. The company plans to roll out Zero Sugar to the rest of its key markets by early next year.

In a call with analysts, Coke's chief executive James Quincey acknowledged that Zero Sugar has cannibalized some sales of Coke Light and original Coke, "but in the net, there is additional volume and additional consumers coming back into the franchise."

Coke's overall beverage volumes during the quarter were flat world-wide as growth in developing markets essentially offset weakness in developed markets.

The company saw 1% volume growth in its juice and dairy products as well as its tea and coffee drinks. Soda growth was flat while volume for water and sports drinks fell 1%.

Mr. Quincey said water volumes fell because the company deliberately cut back on low-margin bulk-water sales in some markets.

Shares fell 0.3% in morning trading to $46.03.

Coca-Cola on Wednesday reaffirmed its full-year earnings outlook, but cut its capital spending plans, saying it will now spend about $2 billion this year, down from an earlier forecast of $2 billion to $2.5 billion.

Coke's revenue fell in the quarter because of divestitures of its U.S. bottling operations. The company expects to complete the reorganization by year's end. The company said its adjusted operating margin grew to 27.4% from 23.36% in the same quarter last year, largely as a result of the divestitures, a main goal of the initiative.

In all, Coke reported earnings of $1.45 billion, or 33 cents a share, up from $1.05 billion, or 24 a share, a year earlier. On an adjusted basis, earnings grew to 50 cents a share from 49 cents. Revenue fell about 15% to $9.08 billion, largely as a result of the bottling divestitures. Adjusted revenue grew 4%.

Analysts polled by Thomson Reuters were expecting earnings of 49 cents a share on $8.72 billion in sales.

Write to Jennifer Maloney at jennifer.maloney@wsj.com and Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

October 25, 2017 11:22 ET (15:22 GMT)