Coca-Cola’s weak earnings no surprise: Americans drink less soda
Coca-Cola Co. earnings Tuesday showed the beverage maker’s key business -- soft drinks -- is fizzling as more health-conscious Americans drink less soda.
The company’s second-quarter volume growth came in well below expectations, showing declines in some parts of the world. Executives blamed currency exchange head winds, weak consumer confidence and wet, chilly weather.
Net income for the quarter that ended June 28 fell 4% from the year-earlier quarter to $2.68 billion . Adjusted earnings came in at 63 cents a share.
“Our second-quarter volume results came in below our expectations,” said Muhtar Kent, Coca-Cola’s chief executive. “While we are not happy with our performance, we did gain global volume and value share in total nonalcoholic ready-to-drink beverages as well as in sparkling and still beverages in the quarter.
In the U.S., however, Coca-Cola and others are struggling to adapt to a trend that is keeping executives awake at night: Americans, per capita, are drinking less soda. In 2012, Americans consumed an average of 42.4 gallons of soda. That’s down from more than 50 gallons consumed in 2005.
Statistics show that soda consumption is now at a 26-year low. Health advocates have cheered the decline, having long warned that consumption of the carbonated beverage has caused obesity rates to rise over the past few decades.
Americans instead are reaching for teas, juice and other noncarbonated options. Coca-Cola reported that its still beverage volume grew 5% in the second quarter, bolstered by strong sales of the company’s ready-to-drink teas and bottled water, named Gold Peak and Dasani, respectively.
By comparison, soda volume declined 4% in the second quarter. That trend spells trouble for the beverage maker. Soda sales account for roughly 60% of its U.S. revenue.
That’s why Coca-Cola and others are aggressively expanding product lines and aggressively marketing their drinks in other parts of the world.
Coca-Cola stock was down down 75 cents, or 1.8%, to $40.26 in midsession trading.
[For the record, 11:35 a.m., July 16: An earlier version of this post reported that Coca-Cola Inc.’s earnings came in well below expectations. It was volume growth that failed to meet projections, not earnings.]
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