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Coca-Cola’s Still Beverages Deliver Strong Volumes in 3Q15

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Volumes in 3Q15

Coca-Cola’s (KO) overall unit case volume rose by 3% in 3Q15 on a year-over-year basis. The third quarter, which ended on October 2, 2015, witnessed a 2% growth in sparkling beverage volume and a 6% rise in still beverage volume.

Growth in sparkling beverage volumes was driven by higher volumes from trademarks Coca-Cola, Sprite, and Fanta. However, Diet Coke volumes fell by 8%. The 3Q15 still beverage volume growth was a result of 4% growth in ready-to-drink tea, 5% growth in sports drinks, and 11% growth in packaged water.

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Still beverages continue to rule

The preference for still beverages is rising around the world, reflecting consumer preference for healthier beverages and the growing aversion to carbonated soft drinks. Coca-Cola’s peers are also experiencing a higher growth rate in their still beverage volumes. In 3Q15, PepsiCo’s (PEP) North America Beverages segment’s volumes rose by 3%, as a 10% rise in still beverage volume was partially offset by a 2% fall in soda volumes. Dr Pepper Snapple Group (DPS) reported a 2% rise in its 3Q15 bottler case volume driven by a 4% rise in still beverage volume and a 2% rise in carbonated soft drink volume.

Volume growth by segment

3Q15 volume growth based on beverage category in Coca-Cola’s segments was as follows:

  • Eurasia and Africa: sparkling (up 3%), still beverages (up 6%)
  • Europe: sparkling (up 2%), still beverages (up 12%)
  • Latin America: sparkling (up 1%), still beverages (up 6%)
  • North America: sparkling (down 1%), still beverages (up 7%)
  • Asia Pacific: sparkling (up 3%), still beverages (up 6%)

The portfolio holdings of the iShares S&P Global Consumer Staple ETF (KXI) have a 5.0% exposure to Coca-Cola.

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Growth avenues

Coca-Cola is looking for various options to boost its still and sparkling beverage volumes. In August 2015, Coca-Cola (KO) bought ~30% stake in Suja Juice, a California-based manufacturer of organic juices. The popular Suja Juice brand will enhance Coca-Cola’s still beverages portfolio. In its 3Q15 conference call, Coca-Cola’s chairman and CEO (chief executive officer) Muhtar Kent revealed that the company recently received regulatory approval for the acquisition of the beverage business of China Culiangwang Beverages Holdings, a producer of plant-based protein drinks. Coca-Cola had initially announced this transaction in April 2015.

Coca-Cola’s strategic deal with Monster Beverage (MNST) will help the company take advantage of the high-growth energy drinks market. Through a strategic deal with Keurig Green Mountain (GMCR), some of Coca-Cola’s brands will be available through the at-home carbonation Keurig Kold system, which was launched in September 2015.

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