Coca-Cola's net profit fell 17% last year, carbonated beverage growth slowed

Summary: In the context of the global economic slowdown, the performance of multinational beverage giant Coca-Cola (NYSE: KO) is also not very optimistic. A few days ago, Coca-Cola’s earnings report showed that the company’s net revenue for the fiscal year 2014 was US$45.998 billion, down from US$46.654 billion in FY2013. In the global market, water, juice and carbonated beverages are basically saturated, especially Coca-Cola's absolute advantage of carbonated beverages is a downward trend. In the context of slowing global economic growth, the performance of multinational beverage giant Coca-Cola (NYSE:KO) is also less optimistic

A few days ago, Coca-Cola’s earnings report showed that the company’s net revenue for the fiscal year 2014 was $45.998 billion, down 2% from the 46.654 billion in fiscal 2013. The net profit attributable to shareholders of the company was $7.098 billion, compared to the 2013 fiscal year. US$8.584 billion fell by 17%, of which net profit fell by 55% in the fourth quarter.

Coca-Cola said yesterday (February 11) to the "Daily Economic News" reporter that three brands in the company's ready-to-drink tea and mineral water categories grew at a faster rate, with sales exceeding $1 billion in 2014.

Some analysts pointed out that this also shows that in the case of relatively shrinking carbonated beverage market, Coca-Cola's market growth rate is likely to rely more and more on other categories. In the past two years, the company has also increased its diversification and expanded its product categories to cope with carbonated beverages. The growth rate is slowing down.

Net profit fell 55% in the fourth quarter

     In the fiscal quarter ended December 31, 2014, Coca-Cola's net revenue was $10.872 billion, down 2% from $11.040 billion in the same period last year; net profit attributable to shareholders of the company was $770 million, compared to the previous year. The same period of 1.71 billion US dollars fell by 55%.

Some analysts believe that although Coca-Cola's fourth-quarter revenue and net profit fell, it was better than analysts' expectations.

From the background of the beverage industry, the growth rate of the soft drink industry has slowed down in the past few years, while the emerging tea drinks, coffee drinks, and sports-functional beverages have relatively faster growth. It is worth noting that, coincided with the disclosure time of the earnings report, Coca-Cola also announced that it has added three new brands with annual sales of $1 billion, all of which are from ready-to-drink teas and mineral waters. The number of members of the $100 million brand club has increased to 20.

“Coca-Cola's global focus on creating local innovative brands and working with a wide range of local bottling partners has successfully doubled the number of billion-dollar brands in the next decade.” Mutekang, Chairman and CEO of Coca-Cola, gave "We are taking practical steps to seize the huge growth opportunities in the global non-alcoholic, ready-to-drink beverage industry," the Daily Economic News reporter said in a statement.

In response to the current state of the company's development, Mu Taikang has also proposed measures to improve the company's performance in the future, including streamlining the operating model and a huge savings target of 3 billion US dollars. The company said that by 2019, the annual cost savings target will increase to $3 billion, while streamlining the operating model, and implementing plans for re-joining most of the North American companies' regions before the end of 2017.

Speed ​​up the expansion of the category

     As can be seen from the above-mentioned Mutekang's statement, the company believes that the opportunity for rapid growth in the future may be in addition to the carbonated beverage category – which is also consistent with the company's continuous expansion of the category in the past two years.

As early as 2002, Coca-Cola began the transformation of non-carbonic business. In the following years, Coca-Cola successively carried out a series of acquisitions, including other categories other than carbonated drinks, such as bottled water.
From the recent series of actions of Coca-Cola, the diversification of its categories is getting faster and faster. The company urgently needs to find new growth categories to make up for the slowdown in the growth of carbonated beverages and to find new profit growth points.

At the end of 2014, Coca-Cola announced its entry into the high-end milk market; in August 2014, as part of the asset swap agreement, Coca-Cola announced a $2.15 billion acquisition of a 16.7% stake in the functional beverage manufacturer Monster Beverages; prior to this, Coca-Cola was still in Kerry Ge-Green Mountain Company develops a new type of cold drink.

It is worth noting that FUZETEA, which just entered the Coca-Cola “Billion Dollar Club”, was launched in 14 R&D centers in China and promoted to 14 international markets around the world. The company said that the brand will continue to be launched in other markets this year.

In this regard, Lei Yongjun, chairman of Beijing Putianshengdao Enterprise Planning Co., Ltd. commented that in the liquid non-alcohol small packaging market, there are five categories of water, juice, carbonated beverages, milk-containing beverages and milk, in the global market, water, Juices and carbonated beverages are basically saturated, especially for carbonated beverages where Coca-Cola has an absolute advantage.

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