Key Drivers behind Coca-Cola’s 2Q17 Organic Revenue Growth
Coca-Cola (KO) generated revenue of $9.7 billion in 2Q17, exceeding the consensus analysts’ revenue estimate by 0.5%.
Coca-Cola (KO) generated revenue of $9.7 billion in 2Q17, exceeding the consensus analysts’ revenue estimate by 0.5%. However, the company’s reported revenue fell for the ninth consecutive quarter in 2Q17. Coca-Cola’s reported revenue fell 15.9% on a year-over-year basis in 2Q17. The company’s reported net revenue growth was adversely impacted by 17% due to the refranchising of its bottling territories. Adverse currency headwinds impacted the 2Q17 revenue growth by 2.0%.
Excluding the impact of currency headwinds and structural changes, the company’s organic revenue grew 3.0% in 2Q17.
What drove organic revenue
Coca-Cola’s organic revenue growth in 2Q17 was driven by strong performance in North America, Europe, and Mexico. The company’s 2Q17 organic revenue growth was based on a 3.0% favorable impact of price and mix. Concentrate sales were unchanged in the second quarter on a year-over-year basis.
Growth in expanding areas like Innocent juice in Europe, and innovation in sparkling soft drinks—including the rollout of Coca-Cola Zero Sugar—helped the company’s organic revenue. We’ll discuss Coca-Cola Zero Sugar in Part 4 of this series.
In terms of performance by geographic region, the Europe, Middle East, and Africa region delivered organic revenue growth of 6.0% in 2Q17, driven by price and mix growth of 3.0%, marketing and innovation, and improved alignment with bottling partners. The North America region generated organic revenue growth of 5.0% in 2Q17. This region benefitted from a 4.0% price and mix growth as well as the favorable timing of shipments in the company’s foodservice business.
The 2Q17 organic revenue growth for Latin America was 2.0%. The company continued to face difficult business conditions in Latin America, particularly in Brazil, Argentina, and Venezuela.
The Asia-Pacific region disappointed with a 1.0% decline in its organic revenue in 2Q17 as a result of a 1.0% decline in price and mix.
Rival PepsiCo (PEP) delivered a 2.0% growth in its reported revenue and a 3.1% growth in its organic revenue in 2Q17. High pricing boosted the company’s top line in 2Q17.
Coca-Cola continues to expect its full-year organic revenue to grow 3.0% in 2017. The refranchising of the company’s bottling operations is expected to adversely impact its reported revenue growth in 2017. On an adjusted basis, the company’s 2017 revenue growth is expected to be impacted by an 18% to 19% headwind from acquisitions, divestitures, and structural items (including a refranchising impact).
Let’s look at the company’s volumes in the next part of this series.