Weakness in volumes
Coca-Cola’s (KO) global beverage volumes remained flat in 2Q16. The company’s volumes and revenue growth in 2Q16 were impacted by tough macro conditions in several of its emerging and developing markets including China and Argentina. However, the quarter saw a strong performance by its key developed markets including the US, Mexico, and Japan.
Sparkling beverages lose their fizz
In 2Q16, Coca-Cola’s sparkling beverage volumes fell by 1%, while its still beverage volumes rose by 2% on a year-over-year basis. The company’s sparkling beverage volumes were flat in 1Q16 and increased by 1% in 2Q15. The decline in Coca-Cola’s soda volumes in 2Q16 was mainly due to weakness in certain emerging markets.
In 2Q16, the unit case volumes of Coca-Cola’s North America segment increased by 1%. The 3% growth in the segment’s still beverage volumes was partially offset by a 1% decline in the sparkling beverage volumes. The North America segment’s sparkling beverage volumes fell as the growth in Sprite, Fanta, and energy drinks’ volumes were offset by a decline in trademark Coca-Cola volumes.
PepisCo’s (PEP) North America Beverages segment experienced a 4% decline in its soda volumes and a 3% rise in its non-carbonated beverage volumes. Dr Pepper Snapple (DPS) reported a 1% rise in carbonated soft drinks volumes and a 2% increase in non-carbonated beverage volumes in 2Q16.
Focus on stills
The 2% rise in Coca-Cola’s still beverage volumes in 2Q16 was driven by strength in most categories. It was partially offset by a decline in juice and juice drinks mainly due to industry weakness in China. Coca-Cola is focused on capturing growth opportunities in still beverages. Consumers are moving away from soda drinks and opting for healthier options. Together, Coca-Cola and leading energy drinks maker Monster Beverage (MNST) account for 1.9% of the iShares Russell Top 200 Growth ETF (IWY). Coca-Cola has a 16.7% stake in Monster Beverage.
In June 2016, Coca-Cola acquired a minority stake in Aloe Gloe—an aloe water beverage. Aloe Gloe is a certified organic, non-GMO (genetically modified organism), gluten-free drink. Prior to this, Coca-Cola’s strategic acquisitions in the still beverage categories included:
- purchase of Xiamen Culiangwang—a producer of plant-based protein drinks sold in China
- a minority stake in Chi Limited—Nigeria’s leading juice and value-added dairy company
- an ~30% stake in Suja Juice, a California-based manufacturer of organic juices
We’ll look at the performance of Coca-Cola’s international segments in the next part of this series.