Shares of Coca-Cola Co., the world’s largest beverage company, dropped the most in more than two years Tuesday after North American soft-drink demand shrank and its once effervescent growth in emerging markets showed signs of slowing.
Fourth-quarter net income slid 8.4 percent to $1.71 billion, or 38 cents a share, from $1.87 billion, or 41 cents, a year earlier, Atlanta-based Coca-Cola said. Sales fell 3.6 percent to $11 billion in the period, missing the average analyst estimate compiled by Bloomberg.
“We know our business responds to marketing,” Chief Executive Officer Muhtar Kent said in a call with reporters. While some jobs may be lost as a result of planned cost cuts, he said that other jobs might be created.
Kent, facing sluggish demand worldwide, has embarked on a plan to cut $1 billion in annual costs by 2016, aiming to reduce supply and data-management expenses and overhaul marketing programs. Still, the company has been slow to react to health concerns about its drinks, as well as the growing desire for beverages that aren’t carbonated colas, said Ali Dibadj, an analyst at Sanford C. Bernstein & Co.
“The changes that the company is making just aren’t enough,” Dibadj said. “Many investors aren’t sharing the confidence that management does of the company’s future.”
Coca-Cola Co. shares fell $1.46, or 3.8 percent, to close Tuesday at $37.47, after falling as much as 4.3 percent during the day, the biggest intraday decline since August 2011. The shares had dropped 5.8 percent this year through last week, compared with a 0.5 percent decline for the Standard & Poor’s 500 index. Pepsi Co Inc., the company’s biggest competitor, also slid 5.8 percent in that period.
Global sales volume grew just 1 percent last quarter, less than the 3 percent rate Coke posted a year ago. Sales volume in North America fell 1 percent. Excluding some items, profit was 46 cents a share, matching the average of 16 analysts’ estimates compiled by Bloomberg.
With soft-drink sales slowing in markets such as the U.S. and Mexico, savings from the new cost-cutting program will be plowed into marketing its brands directly to consumers, Coca-Cola said.
Coke has implemented a “multifaceted” approach to try to reverse slower soft drink sales, Kent said Tuesday during a conference call. The effort will target concerns that soft drinks cause obesity and feature innovation in sweeteners and packaging, Kent said.
Sales volume of carbonated soft drinks in Coke’s North America unit declined 3 percent in the fourth quarter. Sales volume in the Latin America division was little changed. China volume increased 5 percent, helping increase volume for Coca-Cola’s Pacific region by 4 percent.
Coca-Cola agreed earlier this month to buy a 10 percent stake in Green Mountain Coffee Roasters Inc. for about $1.25 billion and work with the maker of Keurig coffee brewers to introduce a system for producing single serve cold drinks.
In December, Kent shook up his management team to speed efforts to improve the company’s North American distribution system. As part of the move, the company said that Steve Cahillane, president of Coca-Cola Americas, would leave and his unit would be dissolved.
Information for this article was contributed by Candice Choi of The Associated Press.
Business, Pages 24 on 02/19/2014