Sun | Nov 27, 2022

Coke shares hit all-time high as new drinks win customers

Published:Wednesday | July 24, 2019 | 12:13 AM
Dasani sparkling water, a Coca-Cola product, on display at a market in Pittsburgh.
Dasani sparkling water, a Coca-Cola product, on display at a market in Pittsburgh.

Coca-Cola shares hit a record high after the company upped its full-year revenue expectations and said it’s winning customers with new drinks like low-sugar sodas and iced coffees.

Shares of Coca-Cola Company rose 5.5 per cent to US$54.07 in early trading Tuesday. Coke’s shares first rose above US$50 in early June.

Chairman and CEO James Quincey said product innovation is helping the company gain global market share. New and reformulated products – like Coca-Cola Plus Coffee and lower-calorie Simply juices – now account for 25 per cent of the company’s revenue, up from 15 per cent two years ago, Quincey said.

The world’s largest drink company also sees plenty of room for growth. Quincey said 80 per cent of the world’s population lives in developing markets like Africa, India and China, where commercial beverages make up just one-quarter of drink consumption. In developed markets, commercial beverages account for three-quarters of consumption.

“That’s a huge opportunity in front of us,” Quincey said. “We’re seeing good growth this quarter and have been seeing it for a while.”

Coke posted second-quarter earnings of US$2.61 billion, or 61 cents. Earnings, adjusted for one-time gains and costs, came to 63 cents per share, which is a penny better than expected, according to analysts surveyed by Zacks Investment Research.

Revenue was US$10 billion, also beating expectations.

The Atlanta company projected organic revenue growth of 5 per cent for the year. That’s equal to its growth in 2018 and better than the 4 per cent organic revenue growth the company initially forecast in January.

Coke said it still expects full year earnings growth between 1 per cent and negative 1 per cent.

Coke said its first energy drink, Coca-Cola Energy, launched in Europe during the quarter and saw some sales success. The company plans to expand sales of the new product to 20 markets by the end of this year.

Coke’s acquisition of British coffee shop chain Costa Coffee – which was completed earlier this year – is also paying off. New drinks like Coca-Cola Plus Coffee and chilled, low-sugar Costa Coffee beverages saw growth in the April-June period.

Sales of Coke’s namesake soft drinks rose 3 per cent in the quarter, thanks to double-digit growth of Coca-Cola Zero Sugar and new products like Coca-Cola Orange Vanilla.

Coke recorded some softness in older products like Dasani bottled water and Minute Maid juices. But in those cases, higher sales of premium products like Smartwater and Simply juices made up for some of the shortfall.

Overall volume was up in every market but North America, where it fell 1 per cent. Quincey said a transition to smaller can sizes – which command higher prices – is one reason for the decline. Pricing rose up 4 per cent in the region.

Shares of Coke’s archrival PepsiCo Inc are also trading near record highs as consumers transition to healthier drinks and snacks that command higher prices. Pepsi’s second-quarter earnings and revenue also beat Wall Street’s forecasts earlier this month.