Back on growth track
Coca-Cola’s (KO) revenue has declined for 15 consecutive quarters due to adverse foreign currency movements and the impact of the refranchising of the company’s bottling territories. Analysts expect Coca-Cola’s revenue to grow in the first quarter of 2019 on a reported basis. Analysts expect Coca-Cola’s first-quarter revenue to rise 3.4% on a year-over-year basis to $7.88 billion. Coca-Cola exceeded analysts’ expectations in all the quarters of 2018.
The company’s top line in the first quarter is expected to benefit from innovation, revenue management strategies, and the impact of mergers and acquisitions. For full-year 2019, analysts expect Coca-Cola’s revenue to grow 9.2% to $34.8 billion. Rival PepsiCo (PEP) reported its first-quarter results on April 17. PepsiCo’s revenue grew 2.6% to $12.88 billion in the first quarter of 2019.
Coca-Cola did not issue specific guidance for the first quarter revenue but expects organic revenue growth of 4% in full-year 2019. This organic revenue growth estimate is lower than the company’s organic growth rate of 5% in 2018. Coca-Cola expects its 2019 revenue to be adversely impacted by currency headwinds and volatile conditions in certain emerging markets.
Will volumes improve?
Coca-Cola’s unit case volume grew 2% in 2018 driven by 3% volume growth in developing and emerging markets and a slight improvement in developed markets. The company’s sparkling soft drink volumes grew 2% last year driven by double-digit growth in Coca-Cola Zero Sugar volumes and strength in the low-calorie and no-calorie offerings of Sprite and Fanta. The company’s focus on expanding its low or no-calorie soda offerings is helping in improving its volumes.
Coca-Cola’s non-soda categories posted the following performances in 2018:
- Tea and coffee volumes increased 1%.
- Water, enhanced water, and sports drink volumes grew 3%.
- Juice, dairy, and plant-based beverage volumes fell 1%.
Coca-Cola is trying to boost the volumes of its non-soda beverages through innovation and by making strategic acquisitions. Coca-Cola acquired coffee company Costa for $4.9 billion to pursue growth in the hot beverages market.
Other strategic deals made last year, including the acquisition of Australian kombucha-maker Organic & Raw Trading Co. and French fruit juice maker Tropico, are expected to boost volumes of non-soda drinks.