Coca-Cola Profit Slips Due To Ingredient Cost Hikes

The Coca-Cola Co. says its net income slipped in the second quarter from a year ago, as rising costs for ingredients offset its expansion overseas.

(AP)  The Coca-Cola Co. says its net income slipped in the second quarter from a year ago, as rising costs for ingredients offset its expansion overseas. The world's biggest beverage maker says revenue growth was powered by higher prices in the U.S. and expansion in emerging markets such as India, where volume rose 20 percent. But the company also paid more for ingredients and saw sales volume in Europe fall four percent. The company blamed economic uncertainty and bad weather in several regions for the drop.

Back in North America, the Atlanta-based company said sales volume rose one percent, while a mix of higher prices and a variety of smaller bottles and cans helped lift revenue five percent. However, volume for its flagship sparkling beverages — or sodas such as Coke and Sprite — fell two percent. As soda consumption in the U.S. continues to decline, Coca-Cola has increasingly been looking past its namesake drink for growth. For example, the company said volume of its still beverages, such as Powerade and Smartwater, rose eight percent in the quarter. Its juice brands rose three percent, driven by growth in its lower-calorie Minute Maid offerings.

Given the saturated U.S. market, Coca-Cola is also increasingly pinning its fortunes on international markets where the ranks of middle-class consumers are multiplying at a rapid clip. In the U.S., for example, Coca-Cola estimates that the per capita consumption of its drinks on average is more than one eight-ounce serving a day. By contrast, consumers in India drink an average of just 12 servings over the span of an entire year.

As a result, Coca-Cola is racing to establish an early dominance in foreign markets that could help determine its growth trajectory in the years to come. Last month, for example, the company said it would accelerate its investment in India to $5 billion over the next eight years. That's more than double the $2 billion it invested since re-entering the country in 1993. When taking into account all the drinks it offers locally, Coca-Cola now has a stable of more than 500 drinks.

For the three months ended June 29, the company said it earned $2.79 billion, or $1.21 per share. That's down from $2.8 billion, or $1.20 per share, in the year-ago period, when there were more outstanding shares. Not including one-time items, the company said it earned $1.22 per share. Revenue rose three percent to $13.09 billion. Analysts polled by FactSet on average expected earnings of $1.19 per share on revenue of $12.89 billion.

Shares of Coca-Cola rose $1.19, or 1.6 percent, to $77.67 in pre-market trading. Earlier this month, Coca-Cola shareholders approved a 2-for-1 stock split, the company's first in 16 years.

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