Coca-Cola revenues decline 10% hurt by refranchising operations in the year

USA – The Coca-Cola Company’s net revenues declined by 6% in the fourth quarter and 10% to US$31.9 billion for the full year impacted by refranchising of company-owned bottling operations and currency headwinds.

Concentrate sales grew 3% and this together with price/mix growth contributed to organic revenues which climbed 3% in the year.

Operating margin expanded 516 and 585 basis points for the quarter and full year, respectively attributed to divestitures of lower-margin bottling operations and the company’s ongoing productivity efforts.

The company has managed to transform its beverage portfolio including the continued launch of low-calorie and zero sugar beverages and revamping the Diet Coke range.

As consumers move away from ‘sugar’ laden beverages and carbonated soft drinks continue to fall, the company is turning its focus to a more consumer centered portfolio.

The company is moving away from capital-intensive and low-margin business of bottling in the US and shift to the concentrate business.

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Fourth-quarter net income came to $870 million, or $0.20 per share, compared with a loss of US$2.75 million, or $0.65 per share in the same three months last year.

A drop in net sales was blamed on currency volatility in addition to increasing transportation and import costs in some markets.

Sales decreased in emerging markets like Central America, but jumped in India and Eastern Europe, led by Coca-Cola Zero Sugar sales.

Coca-Cola Zero Sugar posted double digit growth, coffee and tea rose 1% while sports drinks, water, and enhanced water grew 3%.

The no-calorie sparkling soft drinks portfolio registered an 8-point acceleration in retail value growth led by North America where the company led innovation in the iconic Diet Coke brand.

According to the company, sparkling soft drinks revenue jumped 2% during the full year, while plant-based drinks, juice, and dairy dropped 1%.

To grow its portfolio in line with changing consumer tastes, Coca Cola unveiled two new Diet Coke flavours in the US this year.

The company made bold acquisitions including Costa Limited, which provides a platform to build a global coffee business, and a strategic partnership with BODYARMOR, a sports drink company.

“I am pleased with our strong organic revenue and earnings growth in 2018. Our results demonstrate progress in our transformation as a consumer-centric, total beverage company and the power of a more strategically aligned system,” said James Quincey, CEO of The Coca-Cola Company.

“Coca-Cola has established a strong foundation to capitalize on long-term growth opportunities and drive sustained shareowner value.”

2019 looking forward, the company has forecasted a 4% growth in organic revenues.

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