After a Drop of 14% in Profit, Coca-Cola Presents a Growth Plan

October 21, 2014 - Finance
After a Drop of 14% in Profit, Coca-Cola Presents a Growth Plan

Recently, the soda giant announced a new timeline for the sale of their bottling operations and cost-cutting measures. This followed a 14% drop in their quarterly profit, due to a weak market for soda beverages. They said that the plans would include refranchising or handing back approximately two-thirds of their bottling territories in North America, by 2017. A large portion of their remaining territories will go through the same process by 2020.

This is Coca-Cola’s clearest timeline to date. The Atlanta-based company is seeking to sell their bottling operations to various franchisees, as they attempt to eliminate the low-margin and capital intensive business involving distribution. Coca-Cola has a target of saving $3 billion by 2019. This is a major increase from the $1 billion savings that was reported for their February announcement. The announcement didn’t settle well with investors, because their shares were down by 6% on the same day as the announcement. Overall, they have 1.8% for the year, while the value of S&P 500 is up by 4.3%.

For almost a decade, carbonated soft drink sales have declined in the U.S. The increase of health consciousness has caused consumers to look down at diet sodas and their artificial sweeteners. Along with weak sales in the U.S. and Europe, Coca-Cola is suffering from major emerging markets experiencing poor economic conditions.

In an attempt to diversify their business, Coca-Cola has accumulated small stakes in companies from fast growing markets. With some companies, the beverage giant has eventually acquired them. At the beginning of the year, they purchased 10% of Keurig Green Mountain Inc. In May, they purchased an additional 16% and became the largest shareholder of Keurig. In August, they acquired 16.7% of Monster Beverage Corporation. Analysts reported that Coca-Cola’s investors continued to agitate for additional cost-cutting, despite the announcements that had been made.