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What Drove Coca-Cola’s Upbeat First-Quarter Revenue?

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Strong top-line growth

Coca-Cola (KO) delivered revenue growth in the first quarter of 2019 after 15 straight quarters of decline in the top line. Despite adverse currency movements, Coca-Cola’s first-quarter revenue grew 5.2% to $8.02 billion and beat analysts’ forecast of $7.88 billion. Coca-Cola’s top line gained from concentrate sales growth of 1% and favorable price and mix growth of 5%.

Excluding the impact of structural changes and currency fluctuations, Coca-Cola’s organic revenue grew 6.0%. Rival PepsiCo’s (PEP) organic revenue growth was 5.2% in the first quarter. Emerging and developing markets experienced a double-digit rise in organic revenue, while developed markets witnessed mid-single-digit growth. Coca-Cola’s unit case volume grew 2% driven by strength in sparkling soft drinks and higher volumes of water, enhanced water, and sports drinks.

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Performance of key divisions

Coca-Cola’s revenue from its Europe, Middle East, and Africa division grew 5.1% to $1.8 billion on a reported basis and 14% on an organic basis. Strong pricing in key markets, the building of inventory by European bottlers to avoid any potential disruption due to Brexit, and higher volumes drove the performance of the division. The division’s unit case volume grew 2% due to strength in sparkling soft drinks and Fuze Tea.

The Latin America division’s revenue declined 10% to $896 million, reflecting lower concentrate sales and 16 percentage points of negative impact from currency headwinds. The division’s organic revenue growth was 6%. Coca-Cola’s unit case volume in the Latin America region declined 1% as higher volumes in Brazil, Peru, and Chile were more than offset by a double-digit fall in Argentina’s volumes.

Coca-Cola’s North America division revenue grew 1.2% to $2.7 billion as the impact of favorable price and mix was partially offset by lower concentrate sales. Organic revenue growth of 1% was driven by price pack management and growth in sparkling soft drinks, juice drinks, and value-added dairy categories.

However, North America’s unit case volume declined 1% due to the shift in Easter timing and the impact of Coca-Cola’s pricing and packaging initiatives, which reflected a focus on value over volume.

Revenues for Coca-Cola’s Asia-Pacific division fell 2.3% to $1.2 billion as unfavorable price and mix as well as currency headwinds more than offset higher concentrate sales. The division’s organic revenue growth was 4%. Unit case volume grew 7% driven by strength in China, Southeast Asia, and India.

Coca-Cola continues to foresee about 4% growth in its organic revenue in full-year 2019.

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