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Coca-Cola’s Developed Markets Performance in 3Q16

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Key segments

The Coca-Cola Company (KO) operates through five key segments: EMEA (Europe, the Middle East, and Africa), Latin America, North America, Asia-Pacific, and Bottling Investments. In 3Q16, only the company’s North America and Asia-Pacific segments reported growth in net revenues.

The organic revenue of the EMEA, Latin America, North America, and Asia-Pacific, and Bottling Investments segments grew by 2%, 11%, 3%, 0%, and 2%, respectively, in 3Q16. Organic revenue excludes the impact of currency fluctuations, acquisitions, and divestitures.

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Key takeaways

According to Coca-Cola’s Chief Executive Officer Ahmet Muhtar Kent, developed markets delivered a strong performance in 3Q16, driven by a 2% rise in unit case volume and a focus on price realization. Specifically, the US, Japan, and Western Europe had a strong quarter driven by the company’s innovation and marketing efforts.

The organic revenue growth of the North America segment was a result of strategic pricing actions and favorable product and package mix. Coca-Cola and its rival soda makers are trying to mitigate the impact of weakness in carbonated soft drink volumes through increased pricing and by promoting smaller packages that carry higher margins. In 3Q16, the organic revenue of PepsiCo’s (PEP) North America Beverage segment rose 3%. Notably, Coca-Cola and PepsiCo together account for 9.5% of the iShares Global Consumer Staples ETF (KXI).

The organic growth in Coca-Cola’s Japan market was attributed to recent innovations like the extensions of the Ayataka tea trademark and the Olympic campaign. Meanwhile, the 11% organic revenue growth of the Latin America segment was driven by new product launches and marketing efforts in the Mexico market. The 2% organic revenue growth in the Bottling Investments segment was driven by the North American bottling operations and an improvement in the China market.

Overall, the company continues to expect challenges in certain developing and emerging markets like Argentina and Venezuela.

The next part of this series discusses Coca-Cola’s margins in 3Q16.

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