Share a Coke and World Cup marketing fail to lift Coca-Cola profits

World Cup marketing activity and the launch of the popular Share a Coke initiative into new territories, including its biggest market the US, failed to lift Coca-Cola’s global profit and revenue in its second quarter.

Coca Cola 460
World Cup marketing activity failed to prevent a decline in profit and revenue in Coca-Cola’s second quarter.

Revenue slipped 1 per cent year on year to $12.6bn, while net income dropped 3 per cent to $2.6bn in the the three months to 27 June, despite the world’s largest soft drinks maker growing the volume of products sold in the period. Analysts had estimated Coke would report revenues of $12.8bn.

Coke was particularly impacted by “significant” commodity price increases and flat fizzy drink sales in North America. In its first quarter, Coca-Cola reported its first sparkling beverages decline in 15 years.

Its European business unit was an outlier in terms of performance, reporting 7 per cent increases in both revenue and operating income in the quarter. Coke said this was the result of a “strong” marketing activation around the FIFA World Cup, a shift in the Easter holiday and stabilising economic conditions in certain markets, such as the UK.

Globally, the company’s bottom line has been hit by restructuring and increased marketing costs as it looks to make $1bn in productivity savings by 2016, the majority of which it will invest back into marketing.

Speaking on a call with investors, Coca-Cola’s CEO Muhtar Kent gave an update on the five-point marketing-led turnaround plan.

Accelerating global sparkling growth, led by brand Coke, is one of the key priorities. Kent said global sparkling brands grew in volume by 2 per cent on the same quarter the previous year, although he admitted that there is “still work to do” across Diet Coke brands, which marked mid-single digit decline.

He pointed to the Share a Coke campaign, which was rolled out to more than 80 markets this year, for “reviving the romance of brand Coke, driving household penetration and increasing consumption frequency”.

Kent also said efforts to introduce smaller-sized packs contributed to 60 per cent of the growth experience by Coke in the year to date.

Elsewhere, Coca-Cola’s ambition to increase brand investment by maximising productivity is “on track”. Kent said this was demonstrated by the “full-scale activation” of the FIFA World Cup campaign, which used the single creative idea of “the world’s cup” across more than 170 markets. The campaign achieved more than 2 billion impressions and Coca-Cola’s official World Cup song charted in the top 10 in more than 40 countries, Kent added.

Coke expects to “fall in the corridors of [its] long-term growth algorithm” in the second half of this year, with Kent adding that this quarter show the “steady progress” the company is making to restore its financial momentum.

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