ATLANTA — Coca-Cola, the world’s largest beverage company, posted first-quarter profit that beat analysts’ estimates after it enticed consumers to pay more for its drinks.
Excluding some items, profit was 48 cents a share, Atlanta- based Coca-Cola said Wednesday in a statement. Analysts estimated 42 cents, according to data compiled by Bloomberg.
Chief Executive Officer Muhtar Kent has raised drink prices, increased marketing and cut costs as the company struggles to counter a consumer malaise that has spread to emerging markets. The higher prices helped boost revenue 1.3 percent to $10.7 billion, topping analysts’ estimates and marking the first quarterly gain in two years.
“Coca-Cola has been diligent in driving net price realization in the U.S. through both pricing inflation and mix benefits through smaller package formats,” Bonnie Herzog, an analyst for Wells Fargo &Co., said in a note before the results were released.
Higher retail shelf prices and an increased mix of more profitable drinks increased pricing by 3 percent globally, Coca- Cola said Wednesday. That was a bigger gain than the 2.4 percent boost estimated by Wells Fargo. While sales volume in Coca- Cola’s key North America market was little changed, the company boosted pricing there by 2 percent.
Net income fell 3.8 percent to $1.56 billion, or 35 cents a share, Coca-Cola said. The company repeated its forecast that per-share profit this year will grow by a mid-single-digit percentage, excluding the effects of foreign-currency exchange- rate fluctuations.
Currencies hurt income before taxes in the quarter by 6 percentage points and will reduce profit by that measure by 7 percentage points for the year, Coca-Cola said.
Global sales volumes rose 1 percent, led by a 4 percent gain in Eurasia and Africa. European volume rose 1 percent, and Latin America was unchanged.
The U.S. carbonated soft-drink industry’s sales volume fell 0.9 percent in 2014, the 10th straight annual decline, according to Beverage Digest. Coca-Cola, PepsiCo and Dr Pepper Snapple Group, the largest soda makers in the country, all lost share in the market last year as energy-drink maker Monster Beverage added to its position.
Among Coca-Cola’s brands, global volumes grew 1 percent for Coca-Cola, 4 percent for Sprite, 5 percent for Coke Zero and 3 percent for Fanta. The worst performance was a 6 percent drop for Diet Coke, which has been stung by a growing aversion to artificial sweeteners in the U.S.
While Kent works to trim $3 billion in annual expenses, he hasn’t given up on overseas markets like China that have let him down of late. Last week, Coca-Cola agreed to buy China’s Xiamen Culiangwang Beverage Technology Co. for about $400 million in cash, gaining a line of plant-based protein drinks.
Kent’s failure to bounce back from sluggish international growth and mounting obesity concerns in the U.S. has drawn criticism from Wintergreen Advisers LLC, an investment firm run by David Winters. He has said Kent is taking too long to sell bottling assets to independent distributors, failing to cut costs deeply enough and maintaining a bloated employee stock- compensation plan.
Kent has since sped up the bottling divestitures, announced more cost cuts and trimmed the compensation plan. While giving Coca-Cola credit for progress, Winters hasn’t been tamed. Last week, Winters said Coca-Cola should pursue “transformative strategies” similar to the one that saw H.J. Heinz Co. go private and then agree to acquire Kraft Foods Group. That deal was facilitated by Coca-Cola’s largest shareholder: Warren Buffett.
“Coca-Cola’s board and management lack a sense of urgency to address Coca-Cola’s problems and increase shareholder value,” Winters said earlier this month.
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