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Coca-Cola's profit dips as soda declines at home

Published: Tuesday, July 16, 2013 11:46 a.m. CDT
Caption
(Wilfredo Lee)
In this Monday, July 15, 2013 photo, Coca-Colacans are shown in Doral, Fla. The Coca-Cola Co. reports quarterly financial results on Tuesday, July 16, 2013.

NEW YORK – Coca-Cola sold less soda in North America in the latest quarter, with the company blaming unusually bad weather for weak results at home and abroad.

Still, the drop continues a trend that has seen declines in three of the past four quarters amid criticism that sugary drinks fuel obesity rates

The world's largest beverage company, which also makes Dasani, Minute Maid and Powerade, said Tuesday that its second-quarter profit fell 4 percent. Global volume rose 1 percent, boosted by sales in emerging markets. But in North America, volume slipped 1 percent.

That included a 4 percent volume drop for sodas.

"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 blame the weather when they deliver disappointing results.

When asked whether 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 were down 2 percent in midmorning trading.

The impact of the weather clouded the underlying challenges Coca-Cola has been facing in North America and other developed markets, where soda's image is coming under fire. Earlier this year, for example, Coca-Cola began airing TV ads addressing obesity for the first time.

Along with rival PepsiCo Inc., which reports its second-quarter results next week, Coca-Cola is also trying to come up with a soda that uses a natural, low-calorie sweetener. The challenge is that such sweeteners often have a bad aftertaste. Notably, Coca-Cola has not rolled out a midcalorie version of Fanta and Sprite using stevia that it tested last summer.

Nevertheless, executives at both companies have expressed optimism that natural, lower-calorie sodas can halt the industry's slide.

Coca-Cola, based in Atlanta, has also been pushing its bottled teas, water and sports drinks. It sold more of such uncarbonated drinks in North America for the period, but not enough to offset the decline in sodas.

During the quarter, volume for Europe also declined 4 percent, with Coca-Cola noting the impact of severe flooding in parts of Germany and central Europe. By contrast, the region encompassing Africa, the Middle East and Russia saw a 9 percent gain in volume. The Asia region rose 2 percent, with volume in China even from a year ago.

For the second quarter, Coca-Cola Co. said it earned $2.68 billion, or 59 cents per share. That's down 4 percent from $2.79 billion, or 61 cents per share, a year earlier.

Excluding one-time items, the company said it earned 63 cents per share, in line with Wall Street expectations.

Revenue slid to $12.75 billion, short of the $12.95 billion analysts expected, according to FactSet.

Looking ahead to the second half of the year, however, executives expressed confidence that the weather would even out and that results would improve.

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