July 17, 2013 in Business

Coca-Cola’s troubles continued last quarter

Beverage giants placing hope in natural, low-calorie sweeteners
Candice Choi Associated Press
 
Associated Press photo

Coca-Cola said soda volume in North America fell 4 percent in the second quarter.
(Full-size photo)

NEW YORK – Coca-Cola is struggling to sell more soda in the U.S., and it can’t seem to catch a break.

The world’s largest beverage maker on Tuesday blamed a confluence of factors including unusually bad weather for its disappointing second-quarter results. It cited cold, wet conditions at home and flooding in parts of Europe for weak volume growth globally. Profit declined 4 percent.

The temporary setbacks clouded the underlying challenge the company faces in North America and other developed markets, where soda consumption has been declining for years amid criticism that sugary drinks fuel obesity rates.

In the latest quarter, for example, Coca-Cola said soda volume in North America fell 4 percent. But the figure has declined in 20 of the 26 quarters since the start of 2007, including a 2 percent slide a year ago.

It was flat in four quarters and rose by just 1 percent in the other two quarters.

Still, executives expressed confidence they’d be able to return to growth with greater investments in marketing, new packaging and other tactics.

“I hate to use the weather, but a lot of it was the weather,” Chief Financial Officer Gary Fayard said in an interview on CNBC, apparently acknowledging the frequency with which companies cite the weather when they deliver disappointing results.

When asked if people drink less soda when it’s cold and wet outside, Fayard said that was indeed the case.

“We are an industry that’s susceptible to weather,” he said.

Coke’s shares fell 78 cents, or 1.9 percent, to close at $40.23 Tuesday. Over the past year, the company’s stock is up more than 5 percent.

Looking ahead to the second half of the year, executives expressed confidence that the weather would even out and that business would improve, including in key markets such as India, China and North America.

In the meantime, Coca-Cola and rival PepsiCo Inc. have been trying to come up with a soda that uses a natural, low-calorie sweetener to reverse the slide in U.S. soda consumption. The challenge is that such sweeteners often have a bad aftertaste. Notably, Coca-Cola has yet to roll out a mid-calorie version of Fanta and Sprite using the sweetener stevia that it began testing last summer.

Nevertheless, executives at both companies have expressed optimism that natural, lower-calorie sodas can get soda sales on the path to growth.

“We’re watching, we’re learning,” said Steve Cahillane, who heads the company’s North American and Latin American operations.

To hit back at critics, Coca-Cola also began a TV ad campaign addressing obesity for the first time in January. The ad noted that weight gain is the result of consuming too many calories of any kind, not just soda.

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