The CEO of The Coca-Cola Co has said that his firm’s deal with Coca-Cola Enterprises (CCE) will allow it to take its business in North America to “the next level”.
Speaking on the firm’s third quarter earnings call today (19 October), chairman and CEO Muhtar Kent said that Coca-Cola has continued to invest heavily in its brands in North America, to the tune of US$2.5bn last year and 10% than this figure in 2010.
Soft drinks consumption in North America has stalled in recent years and both Coca-Cola and PepsiCo have talked up prospects in emerging markets like Russia, China and India. But, Kent said that the firm was coming back in its heartland.
“When you look back at some of the media reports in middle of 2008, one of the priorities I outlined at that time …was to stabilise and return to sustainable growth in our North America operations,” Kent told analysts. “I think we are in no way declaring victory. We are in the process of stabilising and we are cautiously confident, even in the depths of the most severe crisis that we have had in North America.
“But our investments are paying off, our alignment with bottling partners is paying off and now we can accelerate that with this transaction,” Kent said of the firm’s deal to acquire the North American operations of CCE.
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By GlobalData“I am particularly pleased that we go into this transaction from a position of strength and as I said, the transaction will further enable us to accelerate our momentum,” he said.
The soft drinks giant grew its North America volume sales by 2% during the third quarter with volume and value share gains across most categories. This was driven by a continued focus on a well-defined brand, price, package and channel strategy. Year-to-date volumes grew by 1%, cycling a decline of 2% in the prior year.
“As we begin to benefit from our acquisition, we have an opportunity to take our execution across the entire North America portfolio to the next level,” Kent added. “We have the right long-term strategy in place in our flagship market and we are confident that we are well placed for the next era of winning.”
In Europe, while group volume in the quarter was slightly positive, year-to-date volume declined slightly, cycling a decline of 1% in the prior year period.
“I think its fair to say that as far as the general trends are concerned, if you look at the second quarter to the third quarter, it is an improvement, and I think again Europe has been a little bit a tale of two cities,” Kent said. “The West has performed better with higher per capita in countries like France and the UK but at the same time Eastern and South Eastern Europe is still very challenged in countries like Greece, Romania, the Czech Republic, and Central Europe all remain subdued and consumer confidence remains challenging in those environments.”
He added that countries such as Russia and Ukraine are seen as more volatile markets.
“We said that these countries went into the crisis quicker and deeper and they will come out of crisis quicker and deeper and we are seeing that. In Russia over the next three-year period it will normalise to growth rates of double-digit as we move forward but again you will see some volatility in Russia over the next three years but I think a more gradual return to a high-single and double-digit growth rates.”
Nonetheless, Kent remained optimistic looking ahead.
“We had a strong third quarter and remain on course to grow revenue share and profits in 2010. Integration is on track and our new operating structure in North America will build on momentum. There are tremendous opportunities in all of our geographies and markets.”
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