Sparkling results but Coke CEO warns of 'prolonged' global economic crisis

16-Jul-2012 - Last updated on 18-Jul-2012 at 15:29 GMT

Strong Coca-Cola brand performance in India – which saw overall growth of 35% – underpinned three per cent growth in the year to date for the Coke in sparkling beverages, but the firm warned of a 'prolonged crisis' worldwide on the economic front.

During an analyst call following the firm's Q1 and H2 results announcement yesterday, William Pecoriello, an analyst at Consumer Edge Research congratulated chairman and CEO Muhtar Kent for Coke's impressive results against a "tough global macroeconomic backdrop".

However, given these headwinds, Pecoriello asked Kent what gave him confidence that Coke could continue its strong performance into H2 2012?

Kent said that Coke was focused on long-term growth with its bottling partners, where the firm had cornered 40% of non-alcoholic ready-to-drink (RTD) value growth (totalling $65bn or €53bn) in 2010 and 2011.

"That said, we're naturally keenly aware of how turbulent the economic landscape is today and will continue to be this year. And we've said many times before during the past few years that we may hit a bump in the road, given the continued volatility in the macro environment, but that we're focused on meeting our long-term growth targets and realising our 2020 Vision," he added.

China 'cooling off'

But Kent warned of unseasonable weather in Europe during Q1 and "tremendous...negative consumer sentiment brewing".

He added: "And as you go around the world, I think certainly there is a sentiment that this is going to be a prolonged crisis, that the high levels of unemployment are here to stay, both in Europe as well as in the United States, and also that there's a little cooling-off of economies in Asia, particularly China."

Atlanta-based Coke said it grew global beverage volumes 4% in Q2 2012 (5% in the year to date), while Q2 net revenues grew 3%.

Western recessions drag on

The firm noted volume growth in key emerging markets such as India (20%), Russia (9%), China (7%) and Brazil (6%), but said volume performance remained soft in European regions.

Central and Southern Europe and Northwest Europe and Nordics both suffered 5% declines in the quarter, due to the ongoing recession and unfavorable weather.

Beyond India, Russian Coke brand volumes were up 23%, the Philippines 7%, while in Brazil (4%), Germany (3%) and Mexico (1%) volumes also grew.

Worldwide still beverage volumes rose 9% in Q2 and in 2012 to date, with Coke claiming volume and value gains across all the still beverage categories in which it competes.

RTD teas grew 13% by volume in the quarter, packaged water grew 10% and energy drinks 21%.