5 Takeaways from Coca-Cola’s Last Earnings Call

William is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

An investor can learn a great deal by studying the transcript of a company’s earnings call. Executives, with their inside knowledge of the company, can shed light on its fundamentals when discussing and answering questions. By studying the transcripts of Coca-Cola’s (NYSE: KO) last earnings call on Oct. 16, I came up with five takeaways that shed insight on the company as an investment.

1.) Consumer choice – CEO Muhtar Kent highlighted quarterly growth in sparkling and still beverages at 3% and 10%, respectively. Mr. Kent wants the global consumer to have the choice between bottled water and the trademark Coca-Cola, with options for full calorie, low calorie, or no calorie at all.

2.) Obesity challenge – Mr. Kent also acknowledged the obesity problem in North America and confronts the issue through community cooperation and education. He discussed the effort on Coca-Cola’s part to make sure people know how to choose the right beverage for themselves and their families. Coca-Cola is committed to making calorie information more transparent.

Cola-Cola will benefit from these types of efforts. If people see Coca-Cola making the effort to curb obesity they will continue to buy the “healthier” items, such as bottled water and juices. It could also take future political and legal pressure off of them.

3.) Opportunities in under-penetrated markets - Mr. Kent discussed parts of the world where Coca-Cola can still expand its presence. Thailand, which according to Coca-Cola’s 2011 annual review had only 93 servings per capita, experienced double digit gains of 19%.

Mr. Kent also highlighted several opportunities for growth in the Latin American region. He feels that Colombia, Ecuador, and Peru have room to grow. Peru and Colombia had 208 and 127 servings of per capita, respectively, in 2011 versus more penetrated areas such as the United States, which had 403 servings per capita. Growth in still beverages outpaced sparkling beverages in Latin America as well. This region experienced growth of 5% in case volume overall. Coca-Cola invests heavily in marketing in this area.

The most recent financial results of Coca-Cola’s Latin American bottler, Coca-Cola Femsa (NYSE: KOF), highlights the potential for Coca-Cola. In the Central America region it reported a 2% overall growth in volume, driven by a 2% growth in sparkling beverages and a 12% growth in still beverages.

Revenue in South America gained 10% for the quarter, driven mainly by growth in Venezuela, Argentina, and Colombia due to price increases.

Sparkling beverages volume decreased slightly in South America, versus a 21% increase in still beverage volume. Water sales grew 10% in that region, indicating the desire for clean water and healthy beverages there.

4.) Making good use of social media - Coca-Cola has the highest number of likes on Facebook (NASDAQ: FB) for any brand, with 54 million at last count. This shows the investment world that Facebook has its uses. In 2011 Coca-Cola cut spending on advertising to invest in social media. It looks like the investment is paying off.

In Germany, Coca-Cola partnered with online music platform Spotify to deliver Coca-Cola exclusive content. Teenagers created Coca-Cola sponsored playlists and shared them on Facebook.

5.) Challenges in Europe - Despite the challenges in Europe Coca-Cola experienced growth of 1%. Double digit unemployment, new taxes in France, and the various sovereign debt crises will continue to provide challenges for Coca-Cola and other multinational companies.

Conclusion

These five points highlight the optimism and willingness of the executives at Coca-Cola to meet global beverage demands and tastes. Muhtar Kent wants to grow both the sparkling and non-sparkling beverage segments. He also wants the consumer educated on making the proper beverage choice and the impact of various beverages on public health. Many opportunities lie in the Pacific and Latin American regions. Coca-Cola makes efficient use of the advertising dollar in social media, and grew in Europe despite macroeconomic challenges in that region. An earnings call transcript provides plenty of food for thought for investors.

Drink Up, Investors

There is absolutely no question that Coca-Cola has been great to long-term shareholders, but the company faces some new threats to its continued market dominance. The Motley Fool has recently compiled a premium research report containing everything you need to know about Coca-Cola. If you own or are considering owning shares in the company, you’ll want to click here now and get started!


stockdissector has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Facebook and The Coca-Cola Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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