‘It’s our fault’ if we can’t grow US business, bullish Coke CEO insists
During an investor call earlier this week, following the beverage giant’s third quarter (Q3) results presentation, analyst Caroline Levy from Credit Agricole Securities tackled Kent on Coke’s prospects within a mature US market.
Coke grew US unit case volumes 5 per cent during the quarter and in the year to date, with quarterly net revenue up 148 per cent, primarily due to the takeover of bottler CCE's former US operations, but also the firm’s success in passing price increases on to retailers.
The company’s overall revenue grew to over $12.24bn (€8.81bn) for the 3 months ending September 30, compared with $8.42bn (€6.06) for the same period of 2010, while consolidated net profit rose to $6.96bn or €5.01bn ($6.07bn: Q3 2010).
Sparkling US growth?
Levy asked Coke’s CEO whether beverage producers in the US market simply had to, “throw up our hands and say that as a market the industry can’t grow, even though you can maybe get some brands growing within it. Or do you see hope for sparkling growth?”
But Kent said that Coke had grown US sales since Q2 2010, while the country had the best demographics of any Western nation, which would see its population grow 30m by 2020.
“Everyone that has bet against the US in the past has lost, and I respectfully believe that we’ll get it right from a macro perspective here,” Kent said.
He added: “So we have every reason to believe that this business, that if we can’t grow, it’s our fault. Simple as that. And we won’t accept that. And therefore, we are growing and will continue to grow.”
‘Moderate’ growth targets
Coke had never said the US market was going to grow at the same rate as India or China, Kent said, but the firm was targeting “moderate growth rates” in the country, through leveraging on products such as Coke Zero (with continued double-digit US growth) and acceleration in sparkling and still beverages.
Within Europe Coke’s sales slowed in Q3 in comparison with Q2, with the company blaming “very cold weather” that hit Europe’s summer selling season and ready-to-drink teas and sports drinks in particular, while sales volumes fell in central and southeastern Europe (Italy and Greece).
During the same call, Kent admitted to William Pecoriello, an analyst with Consumer Edge Research, that Coke’s most challenging areas were the Western markets.
But he insisted that Coke’s strategy – which will see it invest over $25bn (€18bn) with multi-year projects across developing markets including Malaysia, The Philippines, China, Vietnam and Russia – was sound.
“You have these investments that are working for us, despite the challenging environment, despite the confused consumer, and despite the fact that the general [trading] environment is certainly much worse than ideal,” Kent said.
