Coca-Cola’s 2Q15 Soda Volume: Can Investors Expect Improvement?
Coca-Cola’s 2Q15 Earnings: What Can Investors Expect?
Soda beverage volumes
Carbonated soft drink (or CSD) volumes remain a concern for soda beverage manufacturers, especially in developed markets like the United States. A report from Beverage Digest in March 2015 indicated that US CSD volumes declined for the tenth consecutive year in 2014. According to Beverage Digest, the CSD volumes of beverage giants Coca-Cola (KO) and PepsiCo (PEP) declined by 1.1% and 1.4%, respectively, in 2014. US CSD volume growth for Dr Pepper Snapple (DPS), the third-largest soda manufacturer in the United States, was flat in 2014.
North American beverage volumes in 1Q15
Coca-Cola’s unit case volume reflects the unit cases of its products sold directly or indirectly by the company and its bottling partners to customers. In 1Q15, Coca-Cola’s unit case volumes for sparkling beverages in North America declined by 1% while its still beverage volumes increased by 2% from the comparable quarter of the previous year. The decline in Coca-Cola’s 1Q15 soda volumes in North America was mainly caused by a decline in Diet Coke volumes.
Diet versions of sort drinks have been underperforming regular soda beverages due to consumers’ aversion to artificial sweeteners like aspartame. In April 2015, PepsiCo announced that it will replace the aspartame in its Diet Pepsi with a blend of sucralose and acesulfame potassium. But, given that even the replacement sweeteners are artificial, it’s difficult to predict the acceptance of the new Diet Pepsi.
Coca-Cola released a statement in April 2015 to reveal that it has no plans to replace aspartame in Diet Coke and that its ingredients are safe. Coca-Cola is trying different strategies to improve its sparkling beverage sales. The company’s investment in Keurig Green Mountain (GMCR) is one example.
Coca-Cola makes up ~9.0% of the Consumer Staples Select Sector SPDR Fund (XLP) and 0.9% of the SPDR S&P 500 ETF (SPY).
Beverage volumes in international markets
In 1Q15, Coca-Cola’s still beverages posted positive volume growth in all regions except Asia Pacific. Coca-Cola’s soda volume growth was flat in Europe and Latin America in the first quarter. The company’s Eurasia & Africa segment and its Asia Pacific segment reported 4% and 6% growth, respectively, in their sparkling beverage volumes.
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