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Coke rides on sales of healthier drinks

Smartwater, Vitaminwater among the brands giving the cola maker's water sales a boost

Vitaminwater-coke

Strong sales of “premium” water and sugar-free sodas powered third-quarter earnings for Coca-Cola Co.

Coke president and CEO James Quincey said enhanced waters such as the Smartwater, Vitaminwater and Topo Chico brands are helping turn around a slump in water sales at the company.

Sales of water and sports drinks jumped 5% in the July-September period, with particularly strong growth in China and Mexico. Coke said it would launch Smartwater in 20 markets by the end of this year, bringing it to a total of 32 countries.

Global sales of sparkling soft drinks grew 2%, led by low-calorie and no-calorie versions of Sprite and Fanta. Quincey said Coca-Cola Zero Sugar diet soda had its best quarter in 10 years.

Coke said sales of juice, dairy and plant-based drinks dropped 3% due to declining sales in the Middle East and Africa. Tea and coffee sales were also down 2%. Rising demand for Fuse tea failed to offset softness in markets such as Turkey.

Quincey noted the unusual pace of acquisitions and investments in the quarter. That would likely slow in coming quarters, but acquisitions would continue to be an important tool for the company, he said.

“M&A can be like buses. You wait ages, then several come at once,” Quincey wrote in a company statement posted Tuesday.

In August, Coke announced a $5.1 billion acquisition of coffee company Costa Limited, which is expected to close in the first half of 2019. Quincey said Coke was focusing on ready-to-drink coffee beverages and coffee vending machines as well as selling pods and loose beans.

Also during the third quarter, Coke made minority investments in BodyArmor, a sports drink brand, and Made Group, an Australian maker of cold-pressed juice and smoothies. It bought Tropico, a French juice company, and Organic & Raw Trading Co., an Australian maker of kombucha.

Quincey wouldn’t address reports that Coke was also talking to Aurora Cannabis, a Canadian marijuana grower, about cannabis-infused drinks.

“We don’t have any plans at this point to get into this space,” Quincey said on a conference call with analysts.

READ: Coca-Cola reportedly in talks with Aurora Cannabis

Quincey said Coke had named a new Global Ventures team to ensure its acquisitions and partnerships were merged smoothly into its portfolio. Coke executive Jennifer Mann will head that team. Another longtime executive, Brian Smith, will take over as Coke’s president and chief operating officer on Jan. 1. Quincey will remain CEO.

The world’s largest beverage maker posted net income of $1.88 billion in the third quarter.

Operating profits were up in every segment, led by a 14% increase in Latin America.

Coca-Cola’s revenue fell 9% to $8.24 billion in the period, just above analysts’ expectations. Coke said the lower revenue was due in part to the refranchising of local bottling operations. The company has spent the last decade returning ownership of the low-margin business of bottling to local partners.

 

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