Fourth quarter margins
Coca-Cola’s (KO) fourth quarter margins might remain under pressure due to currency headwinds and structural changes relating to the company’s bottling and distribution operations. Coca-Cola’s slated to announce its 4Q15 results on February 9.
In the first nine months of fiscal 2015—which ended on October 2, 2015—Coca-Cola’s gross profit margin fell to 60.8% from 61.5% for the first nine months of 2014. Structural changes and foreign currency changes more than offset the company’s positive price mix and a slight decline in commodity costs. Coca-Cola’s operating margin fell to 21% in the first nine months of fiscal 2015 compared to 23.5% in the comparable period of the previous year.
Third quarter margins
In 3Q15, Coca-Cola’s gross margin fell to 59.9% from 61.3% in 3Q14. The company’s operating margin fell to 20.8% in 3Q15 from 22.6% in 3Q14. This decrease was due to structural changes, currency headwinds, and higher advertising expenses. PepsiCo’s (PEP) 3Q14 margin fell to 8.7% from 16.5%, mainly due to a $1.4 billion impairment charge for its Venezuelan operations.
Dr Pepper Snapple’s (DPS) 3Q15 operating margin in 3Q15 improved to 20.7% from 20.0% in 3Q14. Higher sales and the company’s productivity measures helped its margin. Cott’s (COT) margin improved to 3.8% in 3Q15 from 3.5% in 3Q14 due to the addition of the Aimia Foods Holdings and DSS businesses as well as cost and efficiency savings.
Coca-Cola’s productivity initiatives
Coca-Cola’s ongoing productivity program aims to generate $3 billion in annualized savings through 2019. These initiatives involve restructuring the global supply chain, implementing zero-based budgeting, streamlining and simplifying the company’s operating model, and increasing direct marketing investments efficiency.