Yesterday, CCE reported Q3 2013 net sales of $2.2bn (+5%) and net income of $289m (+9%) with CEO John Brock welcoming a return to growth despite “persistent macroeconomic headwinds, a challenging consumer and customer environment and dynamic competitive conditions”.
Q3 volumes rose 2.5%, Brock said, due to better weather and marketing initiative such as the ‘Share a Coke’ campaign: sparkling drinks grew circa. 4% and energy 15%, but still drinks fell 5%.
Wells Fargo analyst Bonnie Herzog wrote in a note yesterday: “Bottom line – CCE delivered against a difficult backdrop,” mainly due to very strong July sales for Coke's anchor bottler in Western Europe.
High unemployment hurts
Nonetheless, Herzog said was concerned by the still drinks decline (driven by a 6% fall in waters) and the fact that “sunny days in July mask underlying challenges”, with unemployment hovering at 8-9% throughout CCE’s markets, “which negatively impacts immediate consumption and mix”.
“Consumers eat more at home and purchase value-oriented multi-packs,” she warned.
Addressing GB sales on the earnings call, Nicolas Ceron, Societe Generale Cross Asset Research, said: “Britvic cited their carbonates business as growing stronger than yours in volumes and having good positive pricing.
“Could you explain why you’re losing so much share against Britvic in carbonates?”
Hubert Patricot, president of CCE’s European Group, replied: “We have to look on them mid-term perspective. So year-to-date, we are gaining share on carbonates.
“But what happened is, generally, you have some variations per quarter, and this quarter they performed.”
Jury still out on Suntory’s arrival
Patricot said it appeared that Britvic, which he described as a “solid competitor” in Great Britain, had benefited from incremental IC distribution and “favorable prior year hurdles” as it lapped the impact of the damaging Fruit Shoot recall (due to use of a defective new sports cap) last year.
Reporting its full year results for the 52 weeks to September 29 2013, Britvic outperformed the market and grew GB carbonate revenues 8.6% due to average price increases of 2% and volume growth of 6.7%.
Damian McNeela, Panmure Gordon analyst, wrote in a note last week on Britvic’s results that Pepsi (which the firm bottles in GB) took both volume and value share from Coke during Britvic’s Q4.
“For the full year we understand that Pepsi managed to hold volume share and grew value share modestly, which we believe is a good performance given the strong gains made last year,” McNeela wrote.
Discussing the issue further yesterday, Patricot said: “We are quite confident that on a full year basis, we will continue to gain share on the carbonates and on the cola segments, both in volume and value.”
Addressing Suntory’s recent takeover of GSK brands Ribena and Lucozade, Patricot said it was too early to assess the impact of that acquisition, but acknowledged “good competition in Europe”.