Coke’s Q4 2013 results were slightly below analyst expectations, and soft global volume growth of 1% in Q4 included flat sparkling growth, not to mention a 3% volume fall in North America soda volumes.
For the three months ending December 31 the company earned $1.78bn, compared to $1.87bn in Q4 2012, while revenue fell short of Wall Street expectations to $11.04bn
On a later investor call Morgan Stanley analyst Dara Mohsenian asked how important a role M&A might play in meeting Coke’s 2020 vision goals – given its healthy balance sheet, low US borrowing costs, and the part played by partnerships.
“Nothing different from before. We’re all excited with the new opportunities for consumption that will be brought to us by the partnership with Green Mountain in time,” Kent replied.
“The key is to fuel the power of partnerships – Coke and its system is an incredible integration of the power of partnerships in every respects. Green Mountain is yet another one,” he added.
Tremendous opportunities in the home…
Kent said at home consumption, “especially in Western markets” lent Coke a tremendous opportunity to gain incremental consumption occasions for its brands through partnerships like the one with Green Mountain.
“When you think about how beverages are consumed at home. Look at trends in the next 10 years – people will spend more time at home, work more at home,” he said.
“Home is going to be a more important place for consumers – we need to be present there with different technologies, different packaging, different ways to serve our brands. That’s why this partnerships like these will be important for us going forward over time.”
Returning to the question, Kent said: “Our thinking hasn’t really changed regarding bolt-on acquisitions – if we see opportunities we’ll get them – like Innocent…and so forth, and continue to leverage new partnerships over the remaining six years of our 2020 vision.”
Sceptical analyst goes on offensive
The call also saw a slightly tetchy response from Kent to a question from Ali Dibadj, an analyst at Bernstein, who said: “I guess the main frustration I’m hearing from investors…is that there’s a feeling that the company isn’t doing enough to change itself given secular changes in the world around.
“There’s a continued emphasis on the Coca-Cola way and history, which is respectable, and volumes, market share, spending more on marketing, blaming some short-term externalities,” Dibadj added.
“But it’s been a little while now that we’ve seen tougher volumes, the North America profit pool contrinues to shrink, there’s only $1bn cost savings when your competitors are doing more…there’s limited movement on refranchising and health innovation so far.
‘Yes, we’ve hit a speed bump, but…’
“So might the company ever believe it needs to focus on new levers of shareholder value creation, like pricing up even more, fewer promotions, massive cost cutting, big portfolio renovation change or indeed returning even more cash to shareholders?
“Should investors expect bigger, bolder changes from Coke to meets this very different world? he added, or the same ‘status quo’ going forward?”
“I disagree with you. We have a great portfolio of brands and the best consumer products system in the world – I believe our programs will work and have worked, we’ve significantly out-performed and grown since 2010,” Kent replied.
“Yes, we’ve hit a speed bump, but that makes us even more focused and resolute on our road to 2020, and I’ll share at CAGNY on Friday the very reasons why Ibelieve in our future.”