As Americans struggled amid the worst recession in decades, beverage giant Coca-Cola (KO) relied on its large global operations to pick up the slack. It turned its laser focus on the two big international markets where the growth is: India and China. The strategy has paid off as consumers in the two giant Asian nations responded by buying its beverages with gusto. In its fourth-quarter earnings report, Coke says sales skyrocketed 29% in China, and 20% in India.The stellar performance in those two countries and in parts of Latin America helped offset a slowdown in North America. Overall, Coca-Cola reported 55% growth in fourth-quarter net profit from the same period last year to $1.54 billion, or 66 cents a share, in line with analysts' expectations. Revenue for the quarter increased to $7.51 billion from $7.13 billion. Coca-Cola's shares were trading up 3.3% in midmorning to $54.40.
"Over 80% of our total business is international, we truly have a global footprint and we are seeing the benefits of that," says Coke CEO Muhtar Kent in an interview.
"No matter what happens in the short-term macroeconomic storm," he says, "there will be 1 billion new people entering the urban middle class in the next 10 years, which will create a huge demand for the nonalcoholic ready-to-drink beverages that we are known for."
Global Tastes Call for Changes
As American consumers slashed spending, Coca-Cola volume fell in the last three quarters – declining 1% in the fourth quarter, 4% in the third quarter, and 1% in the second quarter. Worldwide, though, the company saw a 5% increase in sales of its "unit case" volume, a measure of all Coca-Cola drinks. Each unit case contains 24 drinks, each with 8 ounces.
Today, given the importance of international markets on Coca-Cola's businesses, changing drink preferences globally are also propelling growth trends in its product portfolio. While fizzy drinks continue to see some growth, the noncarbonated beverages are growing faster.
Coca-Cola's international sales of noncarbonated still beverages soared 14% in the quarter, while sparkling beverages increased 5%. Kent says part of the reason is that still beverages are a smaller part, only 20%, of its total portfolio and have more room to grow.
Getting Juiced From Juice
Nevertheless, in China, Coke's Minute Maid Pulpy is a hugely popular drink, while in India, its mango drink Maaza is the country's best-selling juice drink. Both are noncarbonated.
Kent emphasized in a conference call with analysts that the company made juice a major priority two years ago and that it was instrumental in tripling its internal sales volume and led to a doubling of its share of the global juice business. Expect more of the same. Said Kent: "Juice is a major opportunity in the coming years."
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