Coca-Cola looks to home as US outpaces rest of world

New York

COCA-COLA Co, after years of counting on overseas markets to fuel its expansion, is once again looking homeward for growth.

The company's North American sales rose 2 per cent in the fourth quarter, the biggest domestic gain in two years. That outshone the performance of international divisions, where sluggish local economies and a strong dollar eroded sales.

Coca-Cola is benefiting from a resilient US consumer who's willing to pay higher prices than many overseas customers. Juice and tea sales also are propelling gains in North America, the company said. Emerging markets, meanwhile, have seen growth stall - especially in Asia.

Chief executive officer Muhtar Kent spotlighted the reversal on a conference call with media: "The other day someone asked me, 'What do you think is the most exciting emerging market you see in the world today?' and I actually said, 'It's the United States of America.'"

Fourth-quarter profit amounted to 44 US cents a share, excluding some items, the Atlanta-based company said on Tuesday. That topped the 42 cents estimated by analysts, according to data compiled by Bloomberg. While revenue dropped 1.5 per cent to US$10.9 billion, that also exceeded projections. Analysts had predicted sales of US$10.8 billion.

The results sent Coca-Cola shares 2.8 per cent to US$42.40 in New York, the biggest one-day increase in almost two months. Prior to the gain, the shares had dropped 2.3 per cent this year.

Mr Kent, 62, also has been trimming expenses and selling more premium-priced beverages. He aims to pare US$3 billion in annual costs as part of an effort that will eliminate jobs and boost productivity.

As he works to keep US sales growing, Mr Kent has to overcome mounting concerns over obesity and artificial sweeteners. Still, that challenge is less daunting in the short term than Coca-Cola's overseas woes. Like many US businesses with a global footprint, Coca-Cola has seen the strong dollar crush the value of its international sales.

Currency fluctuations will continue to weigh on results in the first quarter and the remainder of 2015, the company said on Tuesday. Currency will crimp revenue by five percentage points and profit by seven to eight points in the year. Holding currency constant, earnings growth will be in the mid-single digits, similar to the rate in 2014, Coca-Cola said.

While emerging markets are still going to be key to Coca-Cola's success in the long run, they're no longer the reliable growth engines they once were, said Jack Russo, an analyst at St Louis-based Edward Jones & Co. "We got spoiled - we're used to some pretty good growth numbers coming out of these various locations," he said.

Against that backdrop, North America is increasingly important, he said. "We are seeing the US economy improve."

In the fourth quarter, every one of the company's regional divisions besides North America saw sales decline. Asia posted the worst drop, at 10 per cent, while Europe dipped 2 per cent.

Leaving out the currency impact, Coca- Cola's biggest revenue growth came from Latin America last quarter, with a 14 per cent increase. That was followed by 5 per cent gains in North America and Africa-Eurasia. The Asia-Pacific region still lagged behind, with a one per cent sales decline. BLOOMBERG