As domestic sales slip and sparkling beverages fail to grow Coca-Cola knows it has a problem and has even come up with a solution. Yet as shares sink lower, investors seem unconvinced the beverage behemoth's plan is good enough.
The Coca-Cola Company reported $12 billion in third quarter revenue, flat from the same period last year. Combined with sales declines in the first two quarters of the year the company's year-to-date revenue is down 2%. Net income for the quarter came in at $2.1 billion, down a whopping 14% from last year. At 48 cents, earnings per share were 6 cents below the year prior's results and 4 cents shy of Wall Street analysts' consensus estimate.
Unit case volume grew 1% for the quarter. While Coca-Cola International volume grew 1% in the quarter, volume in North America declined 1%. A 5% decline in unit case volume in Europe was partially offset by 5% growth in Eurasia and Africa, making it clear that much of the company's struggles lie in developed markets. Overall still beverage volume grew 2% in the quarter, with tea contributing 4% and both water and energy drinks volume growing 7%. Sparkling beverage volume was flat for the quarter.
In light of challenges at home and in key business lines Coca-Cola announced a growth plan Tuesday morning. In a separate statement CEO Muhtar Kent said, “We have taken a hard look at our progress to date and realize that while the strategies we laid out at the beginning of the year are on the right track, the scope and pace of our actions must increase. In addition to announcing an expanded productivity program, we are streamlining our operations and further aligning our incentive plans to deliver against our growth objectives."
The plan includes a simplified operating model with a greater focus on local markets, aiming for $3 billion in "annualized savings" per year by 2019 as well as refranchising most company-owned North American bottling territories by the end of 2017 and a many of the remaining territories by 2020. The company will also renew its focus on marketing and will add revenue as a metric in its incentive plan.
Long term Coca-Cola expects earnings per share growth in the high single-digits and net revenue growth in the mid single-digits. The company will have a profit before tax target of 6% to 8%. However in the near future, 2014 and 2015, the company anticipates results to come in below these targets.
Coca-Cola shares were down about 5% to $41.10 in pre-market trading Tuesday. Shares were up 4.8% year-to-date prior to the mornings decline while the S&P 500 was up about 3%. Futures shares of rival PepsiCo were down 0.2% before the opening bell Tuesday to $93.36 but are up 12.8% year-to-date. Pepsi, shielded from some soft drink slide due to a large snack division, reported strong third quarter earnings earlier this month.
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