Blog: Coke and its fizz (a headline writer's dream)
Olly Wehring | 22 July 2008
This past seven days has been a tough one for the Coke brand. Late last week, The Coca-Cola Co. reported a fall in second quarter earnings, as the company took a hit on a non-cash impairment charge at bottler Coca-Cola Enterprises.
Things looked altogether bleaker, however, for two of its bottlers. CCE reported a second-quarter net loss of US$3.2bn. Meanwhile, over in Charlotte, Coca-Cola Bottling Consolidated announced plans to shed 5% of its workforce.
Beverage analysts at Goldman Sachs removed Coca-Cola Co from its Americas conviction buy list last week on the back of the "mixed" second-quarter earnings report. The deteriorating US economy is taking few prisoners and Coke is proving no exception.
"We now expect the drag from a weak US along with a tempered international backdrop to hold performance back," said analyst Judy Hong.
The problem Coke and its bottlers face is that the issue of declining volumes in its traditional CSDs is being made all the more serious by soaring raw material costs. The Coke family looks set to announce price rises to try and counter the problem, but one can only foresee this affecting volumes even further.
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