The Coca-Cola Company releases FY14 results

US market holds hope for Coca-Cola; while RTD tea boosts billion dollar brands

By Rachel Arthur contact

- Last updated on GMT

Coca-Cola's results exceeded company and analyst expectations
Coca-Cola's results exceeded company and analyst expectations

Related tags: The coca-cola company, Revenue, Coffee

The Coca-Cola Company says the US market can help offset global challenges in 2015, warning that 2015 will be a ‘transition’ year while initiatives take hold.   

The beverage giant has been gaining ground in still beverages globally with 4% volume growth in its results for FY14. It champions successes such as Gold Peak tea (a premium brand in the US which graduated into a billion dollar brand in FY14) and investments in Keurig Green Mountain and Monster Beverage Corporation.

But Coca-Cola is also eyeing up Africa as a "long-term growth engine"​ for the company, with the recent formation of Coca-Cola Beverages Africa to serve 12 high-growth countries.

Political hot-spots

The company said it is pleased with its latest quarter (ending December 31), with its performance exceeding both company and analyst expectations. It saw global volume grow 2% over the full year, and 1% in the quarter.

North America – the biggest market – net revenues rose by 2% in the quarter, while gaining volume and value share in sparkling and still beverages, juice, juice drink and RTD tea categories.

The gains are important as the company sees a volatile consumer environment globally, a potential deflation environment in Europe, shaky prospects in political hot-spots, and ‘continued softness’ in a number of emerging and developing markets – but an improving environment in the US.

Although quarterly consolidated net income was down 55%, the company points to the impact of changing the exchange rate used to measure Venezuelan subsidiaries, and the costs associated with refranchising and its cost-cutting program.

Net operating revenue in FY2014 dropped 2% (From $46.9bn in year ending Dec 31 2013, to $46.0bn in year ending Dec 31 2014), while net income fell 17% ($8.6bn for 2013 to $7.1bn in 2014).

gold peak tea
Gold Peak Tea

Diversified portfolio

Thanks to a diversified global portfolio, Coca-Cola says it has been able to gain global value share in both non-alcoholic RTD sparkling beverages and – in particular - still beverages.

Global still beverage volume grew 2% in the quarter and 4% for the full year, driven by growth in ready-to-drink tea, sports drinks and packaged water.

In an earnings call to investors yesterday, Muhtar Kent, chairmand and CEO, The Coca-Cola Company, pointed to the success of Gold Peak Tea (a premium US tea brand), Fuze Tea (worldwide tea brand), and Lohas (Japanese water brand) – each of which have become billion-dollar brands.

Billion dollar babies

fuze tea small
Fuze tea became a billion dollar brand in less than three years

“This brings our total number of billion dollar brands to 20, out of which 14 are still brands,” ​said Kent. “Just five years ago we had 14 billion dollar brands. Since 2010, on average, we’ve added more than one new billion dollar brand each year to the list.

But Coca-Cola wants to keep diversifying, marked by recent investments with Keurig Green Mountain and Monster Beverage Corporation.

“Today the average household globally consumes 26 beverages per day and of these 26 beverages only 1.4 are Coca-Cola company brand,” ​Kent said.

“Our opportunity to capture more beverage [occasions] is just immense. And for that reason we've announced strategic investments in Keurig Green Mountain and Monster Beverage Corporation: both of these investments underscore not only our ability to adapt to changing consumer trend but also our commitment to accelerate innovation.”

Eyes on Africa

In November Coca-Cola announced it was joining forces with SABMiller and Gutsche Family Investments to create a new bottling business, Coca-Cola Beverages Africa. By combining the bottling operations of the non-alcoholic ready-to-drink beverage businesses, CCBA will serve 12 high-growth countries, accounting for around 40% of all gobal Coca-Cola beverage volumes in Africa.

Coca-Cola pinpoints a fast growing population, rising disposable personal income, and increased per capita consumption as drivers of the African market.

“Importantly, Coca-Cola Beverages Africa will have the scale, resources and efficiencies to fund the investment required to capture the strong long term growth potential in Africa,” ​Kent said. “These markets will be long term growth engines for our company so it is absolutely critical that we invest sufficiently today to prime those engines for decade to come.

A transition year

Kent warned 2015 will be a ‘transition year,’ while initiatives take hold in a volatile macroeconomic environment.

In October, it announced a $3bn programme of cost savings up to 2019. This included re-franching two-thirds of its North American bottling territories by 2017, and a considerable portion of the remaining territories by 2020. 

It also recently announced plans to axe at least 1,600 jobs.  

Kent said the company was making solid progress on its cost-saving initiatives, and these were shown by the positive signs in the latest quarter.

“While we’re making solid progress we have more to do,” ​he added.

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