Coca Cola Earnings Call Spotlight: Balancing Profit Growth Versus Sacrificing Market Share

On Tuesday, Coca Cola Company (NYSE:KO) released its fourth quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Balancing Profit Growth vs Sacrificing Market Share

Bill Pecoriello – Consumer Edge Research asked: Looking at 2012, we’re likely going to see a significant step up in competitive spending in North America and maybe some other markets. Gary, you talked about sustaining a price premium in the market. Muhtar, you talked about the long-term brand building strategies.

How are you thinking about balancing profit growth goals against sacrificing any market share? In the event that the stepped up spending is greater than you expected in any one market for any one given year, what extent do you use portfolio management, etc.?

I am mostly referring to North America for the stepped-up spending.

Muhtar Kent – Chairman and CEO responded: Let me address North America first. We’ve achieved a pretty healthy price mix in the fourth quarter, 2 percent including a rate increase in retail pricing of sparkling beverages at 4 percent in North America. Our brand strength continues with brand Coca-Cola of 1 percent in the same quarter.

I think it will be right to assume that this kind of rational pricing would continue in terms of rate for 2012 because I think there is never a room in business for irrationality over the long-term and that’s how I would project. I think we are going into this from a point of strength.

Our brands are stronger, our system is much stronger, our metrics for customer service are much, much better, and I see us continuing with our momentum. I think pricing actions should continue into 2012 in terms of rationality; we anticipate taking additional pricing on key segments of the business through this year in accordance with our normal commercial practices.

We manage a very broad portfolio of our business. That’s how I would reference it. In terms of international, I think you heard Gary talk about a 3 percent price mix.

I believe that’s a testament again to the strength of our international business, which continues to be able to generate good price mix on top of good volume and still growing our market share. Those are the key metrics for international.

Challenging Markets from a Consumer Standpoint

Mark Swartzberg – Stifel Nicolaus asked: I’d like to follow-up, zeroing in on some of those externals that you are describing, those dislocations you mentioned in regions like the Middle East and some of the other more recently, more challenging markets.

When you think about what’s going on in some of those markets from a broader consumer standpoint and what the Coca-Cola Company can do about those things, how are your packaging initiatives changing? How are you thinking about spending money at the poll level in terms of how you’re proposing folks take an additional interest in your products in those markets?

Muhtar Kent – Chairman and CEO responded: First, our brands are getting stronger. We are continuing to invest and you will see us continue to invest. What happens in a quarter is not the result of our investments in that quarter or the previous quarter, but what are our investments were three, four, five, six quarters ago.

We will continue to invest, our brands continue to gain share and if you look at our share results overall, right now in the world, both in sparkling and in still beverages, it is an all-time high. Brand metrics for sparkling as well as still beverages are trending in a very healthy manner. So, brand health investments, stronger system, better alignment, all basically works in our favor even in times of volatility and we’re seeing that manifest itself.