Coca-Cola’s 1st-quarter profit climbs 19 percent as international sales continue to make gains

Coca-Cola 1Q profit rises 19 pct on overseas gains

NEW YORK — The billions Coca-Cola is investing overseas paid off in the first quarter as the world’s largest soft drink maker reported its profit climbed 19 percent thanks to emerging markets like India and Brazil.

That helped to offset persistent weakness in the U.S. and Europe, where shoppers skimped on soda, water, juices and teas for health or economic reasons.

Analysts expected more improvement in the domestic market and results missed expectations, but shares remained relatively strong in trading Tuesday.

Worldwide case volume rose 3 percent, with international case volume growing faster at 5 percent. The company, based in Atlanta, has courted shoppers in international markets as their economies improve, by pitching its drinks as an affordable luxury.

One way for Coca-Cola Co. to sell even more overseas is to add more plants and also the branded coolers that get products in front of potential consumers. CEO Muhtar Kent said the billions the company has spent in countries like China, Brazil, and India is paying off.

In the first quarter, the company added 65,000 of its coolers in Indian retail locations and nearly 3,000 employees to sell its products. India’s case unit volume grew 29 percent. Turkey’s grew 18 percent.

“We see a tremendous opportunity here in these markets,” Kent said Tuesday.

Consumers in Egypt, Africa, Tunisia and Morocco each drink less than 150 8-ounce servings of soft drinks per year. That’s less than half what Americans drink. In countries with comparatively low levels of consumption, unit case volume rose 10 percent over the past three months.

And Coca-Cola’s growth now hinges on that overseas expansion. About three-fourths of Coca-Cola’s revenue during the most recent quarter came from outside North America.

The company has to beat chief rival PepsiCo Inc. and local competitors to these new markets, said Edward Jones analyst Jack Russo. As sales grow in untapped markets, weak sales in North America and Europe will be less relevant.

“There’s so much opportunity it’s almost frightening to think of,” Russo said. “And really, the U.S. and Europe just become sources of cash flow to fund these investments.”

In the quarter ending April 2, Coca-Cola earned $1.61 billion, or 69 cents per share, up from earnings of $1.35 billion, or 58 cents a share, in the same period last year.

Revenue rose 5 percent to $7.53 billion.

Analysts expected earnings of 75 cents per share on revenue of $7.72 billion, according to Thomson Reuters.

Shares fell 85 cents, or 1.5 percent, to close at $54.47 Tuesday.

In North America, total case volume — including soft drinks and juices — fell 2 percent in the quarter. Soft drink volume declined 1 percent, less steep than previous quarters. The company credited its marketing campaigns for the Super Bowl and the Winter Olympics.

Kent said the fountain business, which serves restaurants and other retail spots, improved in North America during the latter part of the quarter, showing people are spending money. But that doesn’t mean they’re returning to soft drinks.

“It’s too early to say whether the category is beginning to improve,” he told investors on a conference call.

Sales of uncarbonated drinks such as water, juices and teas fell 2 percent in North America, but grew 8 percent worldwide, driven by a 12 percent increase outside North America.

Also Tuesday, Coca-Cola named North American President Steve Cahillane to lead a new business unit called Coca-Cola Refreshments. It will incorporate the newly acquired Coca-Cola Enterprises North American bottling operations, North American food service, the Minute-Maid and Odwalla juice businesses and North American supply-chain operations.

The appointment will take effect after Coca-Cola closes on the acquisition of the bottler. That’s expected in the fourth quarter.

In February, the company said it would buy the North American operations of its biggest bottler. The deal will give Coke more control over U.S. distribution and help it get new drinks on shelves more quickly to keep up with changing tastes.

Coke’s announcement followed a similar move by rival PepsiCo Inc., which bought its two biggest bottlers in a $7.8 billion deal.