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Rediff News  All News  » Business » Emerging markets keep Coca-Cola bubbling

Emerging markets keep Coca-Cola bubbling

February 14, 2008 12:39 IST
Coca-Cola on Wednesday said that quarterly sales to North American restaurants and other food service outlets declined 3 per cent in a sign that economic pressures are affecting Americans' traditional enthusiasm for eating out.

The company attributed the fourth-quarter fall to the "challenging restaurant industry environment".

However, the world's largest non-alcoholic drinks company said that it re­mained well-placed to face any slowing in US consumer demand, as it reported results supported by strong international growth.

"Growth in our emergent markets remains robust even as headwinds are developing in the US economy," said Muhtar Kent, chief operating officer.

Neville Isdell, chief executive, said he did not expect economic problems in the US to spill over significantly to other economies, and that the company would be able to manage "what might be a half a per cent decline - at the worst - in overall global growth".

"We don't see there being a major impact on the emerging economies . . . there will be one or two countries in the developed world where there have been housing bubbles where we think there will be some pull back," he said.

In spite of the problems in the restaurant business, the company said total unit case volume in North America increased 1 per cent in the quarter against the same period last year, with retail sales up 2 per cent.

The positive growth was delivered by sales of the Glaceau enhanced water brand, acquired for $4.1bn in May, which saw sales more than double during the quarter against a year ago.

North American sales of fizzy drinks, including its trademark Coke drinks, fell 2 per cent. However these drinks did gain market share in its category which has lost some ground to the increased popularity of enhanced waters, teas and juices.

Coke said it planned to launch its recently acquired Glaceau enhanced water products internationally in the "very near future", following expansion into Canada in the second quarter of this year.

This month, the company continued its push to extend its drinks range in the US with a 40 per cent investment in Honest Tea, a San Francisco-based producer of organic teas and juices which was set up in 1998.

Globally, Mr Isdell said that trademark Coke had seen its highest growth since 1998, with strong growth in emerging markets including China, India, Russia and Brazil.

Mr Kent is expected to succeed Mr Isdell as chief executive in July.

Coke's earnings per share rose 12 per cent on an adjusted basis to 58 cents, beating Wall Street's expected 55 cents, on a 24 per cent increase in operating revenues to $7.3bn.

Its shares were down just less than one per cent at $59.35 at lunchtime in New York.

Jonathan Birchall in New York, FT