Atlanta-based Coca-Cola has shown consistent growth for years, but like many of its peers, it recently has been struggling with rising costs for raw materials and Americans’ cautious spending habits during the down economy. But, the company’s third-quarter results are the latest sign that despite the tough economic environment, some of world’s top brands, including its bigger rival PepsiCo, continue to prevail by tweaking their strategy.
Coca-Cola, which has more than 500 brands including Fanta, Sprite, Dasani and Minute Maid, has weathered the downturn by investing heavily in its business, increasing money for advertising, new products and plants. The company, like many of other companies, also has turned overseas for growth, particularly emerging markets, such as India and China. And, in North America, it adjusted. It is raising prices and offering smaller package sizes.
The results have paid off. Although Coca-Cola continues to feel the pressure of higher commodity costs, which sent its gross margin down to 60.2 percent from 65.4 percent during the third quarter, the company has been able to offset that with stronger sales growth.
“Over the past few months, we have all seen a downturn in global consumer confidence,” said Coca-Cola CEO Muhtar Kent. “At the same time, the last few months have reinforced our belief in the resilience of the global consumer.”
Coca-Cola reported on Tuesday that sales volume grew five percent worldwide, driven largely by its Coca-Cola brand. The company’s gains were strongest in emerging markets, including a 19 percent increase in volume in India and a seven percent increase in Latin America.
The company also had a gain in North America even though it raised prices about two percent to offset higher commodity and other costs there. Sales volume grew five percent in North America.
Net income rose to $2.22 billion, or 95 cents per share, in the three months ended Sept. 30. That’s up from $2.06 billion, or 88 cents per share, a year ago. Excluding one-time items, it earned $1.03 per share. Revenue rose 45 percent to $12.25 billion. The quarter beat analysts’ expectations of $1.02 per share on revenue of $12.05 billion, according to FactSet.
“We provide consumers with an affordable luxury as they enjoy moments of pleasure for pennies at a time, billions of times every day,” Kent said.
The company increased its share repurchase program. It now plans to buy back as much as $3 billion of its shares by the end of the year up from its prior goal of $2.5 billion.
Coca-Cola’s shares fell 26 cents to close at $66.74.
Coke’s biggest competitor, PepsiCo Inc., also posted solid quarterly results that beat Wall Street estimates as it raised prices on its chips and sodas in the U.S. and grew its overseas business.