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Coca-Cola reaps global rewards

By Neil Merrett , 18-Apr-2007

Beverage giant Coca-Cola has started the year on a high, posting its strongest first quarter results in half a decade due to growth in key international markets.

Emerging markets like China and Russia were singled out for driving a 17 per cent rise in global operating income, offsetting increased investment costs and difficulties within Coca-Cola's North American homeland.

 

 

 

The results are likely to serve as a further reminder to processors of the importance of diversifying operations in new products and markets to better adapt to changing consumer habits.

 

 

 

Though investments in restructuring were also up on last year to $795m from $503m in 2006, Coca-Cola stressed that the expenditure had been vital in strengthening sales.

 

 

 

Investments to restructure and expand its bottling and distribution capabilities saw the group as of 1 January this year redraw its regional sales markets.

 

 

 

As part of the group's new regional market structure, its pacific division proved to be somewhat of a mixed bag for the company, with a nominal rise of 2 per cent growth in operating income.

 

 

 

Indonesia, in particular, saw double-digit volume declines.

 

 

 

But problems there hid a 17 per cent income rise in China, attributed to strong performances in still brands like Nestea and minute maid, and also double-digit growth in sparkling beverages.

 

 

 

Coke recently re-jigged its carbonated drinks division to create a 'sparkling' beverages portfolio, to include fast-growing energy drinks too.

 

 

 

China's strong performance was reflected in major markets within the newly formed Eurasia region, where double digit volume growth in Russia and Southern Eurasia resulted in a 36 per cent rise in operating income.

 

 

 

These emerging markets propped up Coke's North American operations, which saw income drop 11 per cent during the quarter.

 

 

 

An ongoing consumer shift away from tradtional carbonated beverage brands saw saels volume dip three per cent.

 

 

 

Coca-Cola president Muhtar Kent said strong international sales would continue to drive profit throughout the year. He also appeared confident of a turnaround in North America

 

 

 

"We know what we need to do in North America and are carefully addressing the issues."

 

 

Threats of a strike by the US-based Teamsters union, which counts 18,000 members at Coca-Cola, may yet give the firm another headache in the region, however.