Not Always Coca-Cola

Coke had its worst day in a decade

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What's going on?

Coca-Cola’s stock had its worst day in a decade on Thursday, falling 8% after the company reported a decidedly flat quarter and a weak 2019 outlook (tweet this).

What does this mean?

Coca-Cola grew its profit by 21% last quarter, as investors expected. But the details took some of the fizz out: the company’s overall sales volumes didn’t grow at all compared to last year, and actually shrank in North America (responsible for over 40% of its business, according to FactSet) and at Coke’s signature sparkling drinks division.

2019’s not likely to get much sweeter: Coca-Cola’s forecasting lower revenue growth than investors were predicting. With a strong US dollar likely to reduce the value of the 60% of Coke’s total profit that’s made overseas, the company’s 2019 profit prediction also came in lower than expected.

Why should I care?

For markets: New products = higher prices.

Coca-Cola’s falling volumes were likely down in part to the company raising prices by 4% on average last quarter. It’s something other companies selling “staples” have struggled with of late: retailers who sell products on to customers want to keep prices low and competitive. But Coca-Cola found ways to increase prices (and profits): new products and smaller package sizes (partly in response to sugar taxes) also capitalize on consumers’ ongoing shift toward healthier foods and drinks.

The bigger picture: Retail dipped in December.

New data on Thursday showed an unexpected drop in December’s US retail sales – the biggest in almost a decade. Surprised investors sold off stocks on fears that the economy may be weaker than previously suggested. But there may yet be a further twist in the retail tale:  Mastercard data showed an increase in US online purchases in November and December, Amazon had a record holiday season, and some early signs from big retailers were positive. American giant Walmart’s latest results are due on Tuesday: these should give a big clue about the true state of retail’s health.

Originally posted as part of the Finimize daily email.

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