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Coca-Cola Revenue Down Causing New Investments in 2014
Posted by: Julie Young (IP Logged)
Date: February 27, 2014 09:37AM

According to Coca-Cola’s fourth quarter 2013 earnings report, GAAP revenue for the company fell on both a quarterly and annual basis. Fourth quarter revenue was 4% lower than fourth quarter 2012 at $11.0 billion while annual revenue was reportedly 2% lower at $46.9 billion. Fourth quarter operating income was also down 4% while full-year operating income fell 5%.

Slower sales appeared to be a factor as the company’s volume growth, which represents the number of 24 eight-ounce serving unit cases sold, grew by only 1% in the fourth quarter and 2% annually. However, currency headwinds were also a reason for the falloffs.

While the GAAP earnings showed signs of a weaker quarter and full-year, non-GAAP reports painted a slightly different picture. When excluding for structural changes and currency factors non-GAAP fourth quarter net revenues were up 4% and annual revenue grew 3%. When considering the exclusions and currency factors fourth quarter operating income was also up 6% on a non-GAAP basis in the fourth quarter with a 6% non-GAAP operating income increase for the full-year. Non-GAAP structural changes included significant investment in the firm’s productivity and reinvestment initiatives. Other non-GAAP factors included bottling operations transactions and derivative hedging activity.

The fourth quarter spotlighted some improvements in the Pacific. Sales volume growth in the segment was up 4% in the fourth quarter while operating income was also up 7%.

Overall, the company showed declines in revenue and operating income for both the fourth quarter and full-year. Annual operating income, however, is on track to meet growth objectives on a non-GAAP basis. In its fourth quarter 2013 earnings comments the company outlined five initiatives to help it improve momentum towards its 2020 Vision. Muhtar Kent, chief executive officer, discussed these five initiatives which included 1) accelerating sparkling growth, led by Coca-Cola 2) strategically expanding the company’s profitable still portfolio 3) increasing media investments by maximizing productivity 4) winning at the point of sale by unlocking the power of the system and 5) investing in the next generation of leaders. Specific emphasis will be placed on media investments in 2014, and the company plans to invest approximately $1 billion by 2016 on this initiative.

Another 2014 highlight for Coca-Cola includes its global partnership agreement with Green Mountain Coffee Roasters (GMCR), announced in February. This global partnership will help Coca-Cola provide single-serve cold beverages globally in conjunction with Green Mountain’s new cold beverage single-serve technology, Keurig Cold. Coca-Cola will pay $1.25 billion to enter into the partnership which will give them 10% minority ownership of the company. Coca-Cola’s investment will help Green Mountain Coffee Roasters improve its cold beverage single-serve technology and Coca-Cola will sell single-serve cold beverage products for use with the new cold beverage system.

Stocks Discussed: KO, GMCR,
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