Insight – Coca-Cola Enterprises sees bottled water in US drag on Q2
The company, which sells most of Coca-Cola Co.'s North American volumes as well as being Coca-Cola's sole licensed bottler in six European countries including the UK, reported a return to profit in the three months to the end of June, on flat sales in the period.
In North America, total quarter two volumes for Coca-Cola Enterprises (CCE) were down by 3.5% year-on-year, despite "solid growth" for Coca-Cola Zero - up by 15% - and the addition last year of Monster brands pushing energy drinks sales up by 25%.
In a webcast this afternoon, chairman and CEO John Brock noted that "volume in the (North American) on-premise category, a key segment of higher-margin, single serve sales, continues to decline. In addition, we continue to see volume softness in several segments, including water".
While CSD volumes performed satisfactorily, Brock said: "Demand for still beverages remains soft, driven by water." CCE's main water brand in North America is Dasani.
In Europe, meanwhile, CCE's water business delivered a 15% lift in second-quarter sales, driven by the acquisition of the Abbey Well water brand in the UK late last year.
When asked in the webcast about CCE's relationship with Coca-Cola, Brock said it was "as good as it's ever been".
"In terms of going forward, we need to think about how we can be even more transparent, more seamless and more virtually integrated (with Coca-Cola)," he continued. "We are really thinking long and hard about all the things we can do as a complete system in North America, not just CCE and The Coca-Cola Co."
Going forward, CCE said it expects North American sales to rise slightly for the full-year, although volumes would decline. Cost of goods per case is also expected to increase, driven principally by the mix impact of increased sales of purchased finished goods and increased commodities cost. Operating profits for the year are forecast to increase by around 10%.
In Europe, full-year sales should lift in a mid single-digit range, with both volumes and cost of goods per case forecast to rise slightly. Like North America, European operating profits for 2009 are expected to rise by around 10%.
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