Coca-Cola on Tuesday said it would go “back to basics” and re-introduce Coke signs in its home market to reverse declining sales as it reported a 14 per cent rise in first quarter profits.
The world’s largest beverage maker said it would increase the number of hallmark Coca-Cola signs on display in coolers and supermarket aisles across the US and Canada to encourage consumers to buy its core Coke brand.
“You walk around the US market and we’ve lost the drive to create impulse…that’s what we’re bringing back,” said Muhtar Kent, chief operating officer. “Everywhere in the world you have signs saying ‘ice cold Coca-Cola served here’. Not in the US….[we’ve got to go] back to basics.”
Mr Kent’s comments came as the company’s first quarter profits beat analysts’ expectations, but showed a 3 per cent drop in sales in North America, sending operating income in the region down by 11 per cent.
Total net income rose 14 per cent to £1.26bn on strong international sales.
North America has been a drag on the company’s profits growth in recent years as health conscious consumers have shied away from fizzy drinks. The region, which a year ago was the second-biggest contributor to profits after Europe, is now the fourth, having been overtaken by Latin America and the Pacific region.
Neville Isdell, Coke’s chief executive, also blamed poor North American sales on “pricing headwinds” and warned that while the company planned to “win again” in its home market, 2007 would be a weak year. Consumers having being paying more for the Coca-Cola’s soft drinks to compensate for higher aluminium, corn syrup and orange costs.
Still, analysts said the strength of Coke’s overall earnings showed that the company’s restructuring efforts were paying off.
Mark Swartzberg, beverage analyst at Stifel Nicolaus, said: “The management changes that began in mid-2004 and the turnaround that came with it is starting to work.”
Coke’s shares rose $1.32, or 1.6 per cent, to $51.59 in midday trading.
The company is putting particular emphasis on Coke Zero, a sugar-free cola designed to taste like ordinary Coke, a new version of Diet Coke which contains vitamins and minerals, and sales of tea, which are growing rapidly in the US.
It is also introducing a new Coke “grip” bottle to markets around the world and plans to develop its newly-acquired Fuze tea and juice brand.
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