Coca-Cola Meets Expectations in Fourth Quarter

Coca-Cola’s ability to drive organic growth last year through price/pack architecture bolsters our belief in its wide moat, and we believe this strategy will allow for further value gains in both developed and developing markets. In developed markets, the firm has been able to revive its carbonated soft drink portfolio by emphasizing smaller pack sizes and reduced-sugar colas (Diet Coke, Coke Light, Coke Zero), all of which have fewer calories per serving than traditional soft drinks. This strategy has proved successful, with sugar-free cola sales in the U.S. outpacing growth in the overall sparkling portfolio. In developing markets like Brazil, where macroeconomic challenges have dampened volume growth, the firm has been able to market more affordable beverage packs that should help stabilize volume declines without weighing on gross margins. Still, we don’t expect annual price/mix contributions of the same magnitude (13%) to persist the next few years without impacting unit case volumes, which declined 1% last year, and stand by our modest 2% Latin American volume growth forecast.

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