USA – The Coca-Cola Company has reported a 15% fall in net revenues in the third quarter as refranchising activities hit its returns in a year of economic uncertainty.
While reported net revenues continued to be impacted by a headwind from refranchising, the Company delivered broad-based organic revenue (non-GAAP) growth as well as profit growth in its latest update.
“I am encouraged with our progress and results in the quarter,” said James Quincey, President and Chief Executive Officer of The Coca-Cola Company.
“Our performance reflects the strength of an organization that is focused on delivering against its financial commitments while also making substantial structural and cultural changes.”
Net revenues declined 15% to $9.1 billion, impacted by an 18% headwind from the ongoing refranchising of bottling territories while core business organic revenues also grew 4% with price/mix growth of 3%.
Total unit case volume was even in the quarter despite continued economic challenges in certain Latin American markets.
Emerging and developing markets saw improving trends, achieving slightly positive unit case volume growth. This was offset by the performance in developed markets, which was negatively impacted by weather and the cycling of strong results from the prior year.
The company has reported progress on its multi-faceted transformation into a more consumer-centric company, including its continued innovations in zero-sugar sparkling soft drinks such as the recent launch of Coca-Cola Zero Sugar in the United States in the quarter.
It has also increased its product line into new category clusters beyond sparkling soft drinks, such as the recent acquisition of the Topo Chico premium sparkling mineral water brand in the United States.
In Japan, it introduced Coca-Cola Coffee Plus while in Spain it introduced Royal Bliss, premium mixers in glass bottles offered in restaurants and bars.
Significant progress has also been reported in its North American bottler refranchising program and the transition of temporarily acquiring majority ownership of Coca-Cola Beverages Africa until it is refranchised, with the aim of making it a capital-light organization.
Under the refranchising program, almost 80% of Coca-Cola Refreshments’ (CCR) U.S. volume has now been transitioned to new ownership, with expectation to complete the refranchising of CCR in the United States within the coming weeks, the company reported.
“As a result of the successful refranchising process we are about to conclude, our U.S. system is economically and strategically aligned and built to serve changing consumer needs for the next era of growth,” said Quincey, reporting that a new bottler Liberty Coca-Cola will soon be announced, covering the Northeastern United States region.
We’re transforming into an organization that is smaller in revenue, but larger in terms of profit margin and more acutely focused on innovation, brand-building and creating a stronger, even more consumer-centric portfolio,” said Quincey.