Same old song for The Coca-Cola Co - Analysis

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There was a bit of sparkle around The Coca-Cola Co's full-year results release yesterday as it was the first since CEO Muhtar Kent announced he would be replaced this Spring by COO James Quincey.

It was more of the same for brand Coke in 2016

It was more of the same for brand Coke in 2016

In other matters, however, it was business as usual for the soft drinks giant - namely declining volumes amid an ongoing overhaul of its bottler networks and tough FX headwinds.

For some analysts, these familiar refrains are starting to wear thin.

Wells Fargo's Bonnie Herzog said the "song remains the same" at Coca-Cola, and despite a strong performance in North America and other developed markets it "takes Coke bottle glasses" to see through the "fog" of refranchising.

"The unfortunate consequence of this multi-year [refranchsing] process is that it continues to delay the 're-base' year when earnings begin to grow again and management priorities and investor focus shift back to the underlying business performance," Herzog said.

SIG's Pablo Zuanic is also worried about Coca-Cola's stagnation, adding that he expects the company to continue underperforming. The "big picture", he says, if you discount refranchsing's moving parts "is that Coca-Cola's unit case volumes trends have worsened".

Zuanic is particularly worried about sparkling, despite Quincey's robust defence of the category while speaking to analysts yesterday. The COO said Coca-Cola's global sparkling portfolio increased sales two years in a row, however, according to Zuanic, sparkling trends are worsening, with weakness in Coca-Cola's Europe, Middle East & Africa region.

Meanwhile, for CSLA's Caroline Levy, still beverages are a "dilemma" as their growth has not been matched by the emergence of big brands.

"With the lack of dominant stills brands, we believe growing the stills portfolio could involve protracted negotiations with larger bottlers, which are likely to argue for a greater profit split from Coca-Cola," Levy said.

Levy also questions Coca-Cola's offloading of its China bottler assets to its Chinese partners. The analyst says the company's return on the assets was similar in scale to the middling value Anheuser-Busch InBev got for selling SABMiller's stake in the Snow beer joint-venture to China Resources Beer last year. The only difference, of course, is that AB InBev sold the stake to gain approval for the SABMiller takeover, while Coca-Cola made its China deal from its own volition.

Such a scenario highlights just how many hits Coca-Cola is taking as it rushes to complete its refranchising efforts and get back to the real business of selling soft drinks. For analysts, the day that happens can't come quickly enough.

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