Coke's Profit Slips as U.S. Soda Sales Fizzle

Mark Lennihan/AP NEW YORK -- Coca-Cola's (KO) fourth-quarter profit fell as the world's biggest beverage maker once again sold less soda in North America. The maker of Sprite, Dasani and Vitaminwater water said Tuesday that sales volume declined 1 percent in North America. That reflected a 3 percent decline in soda, which offset improved performance by noncarbonated drinks such as Powerade. Last week, PepsiCo (PEP) also said its soda volume fell in the "mid-single digits." Coca-Cola also saw slower growth in emerging markets such as India and China. Overall, global sales volume rose just 1 percent in the quarter as a result. The Atlanta-based company said it would intensify its cost-cutting to produce another $1 billion in savings by 2016, much of which would be reinvested into marketing. "We know our business responds to marketing," CEO Muhtar Kent said in a call with reporters. While some jobs may be lost as a result of the cost cuts, he noted that other jobs might be created. Although Coca-Cola and PepsiCo are tapping emerging markets for growth and sell a wide array of beverages, pressure is mounting for the two companies to figure out how to get soda sales moving in the right direction at home. Americans have been cutting back on soda for years as beverage aisles have grown increasingly crowded with options such as Monster energy drinks or Sparkling Ice waters. Soda is also blamed for making people fat and, more recently, industry executives have blamed concerns about artificial sweeteners for a decline in sales of diet sodas. In fact, Kent said the soda decline in North America over the past year was "largely due to softer Diet Coke volumes." But he stressed that the company was working with "credible third parties" to address any "misperceptions" about soda, but didn't specify whom. He expressed confidence that soda in North America can still grow and just needs improved marketing, innovation and on-the-ground sales execution. Coca-Cola is testing new ventures in the meantime. The company rolled out a drink called "Coca-Cola Life" sweetened with sugar and stevia in Argentina last year. In the latest quarter, Kent said soda volumes in the country rose by a high-single-digit percentage. Earlier this month, the company also said it was buying a stake in Green Mountain Coffee Roasters (GMCR) and teaming up with the company on a machine that would let people make Coke drinks and other cold beverages at home. For the three months ended Dec. 31, Coca-Cola earned $1.71 billion, or 38 cents a share. Not including one-time items such as the restructuring of its bottling operations overseas, it earned 46 cents a share, in line with Wall Street expectations. A year ago, the company earned $1.87 billion, or 41 cents a share. Revenue fell to $11.04 billion, short of the $11.31 billion Wall Street expected. Its stock was down more than 4 percent to $37.31. Why is the battle between Coke and Pepsi -- two ultimately similar types of sugar water -- the most important struggle in the history of capitalism? Simply put, their rivalry transcends time, distance, and culture. It has divided restaurants, presidents, and nations. It has been waged in supermarkets, stadiums, and courtrooms. Its many foot soldiers include Santa Claus, Cindy Crawford, Michael Jackson, Max Headroom, Bill Gates, and Bill Cosby. In 1886 an Atlanta chemist introduced Coca-Cola, a tasty "potion for mental and physical disorders." Pepsi-Cola followed seven years later, though it would be decades (and two bankruptcies) before Coke acknowledged the company in the way it had other competitive threats: lawsuits. Pepsi-Cola had made hay during the Depression. Like Coke, the drink cost a nickel, but it came in a 12-ounce bottle nearly twice the size of Coke's dainty, wasp-waisted one. But by the 1950s, Pepsi was still a distant No. 2. It nabbed Alfred Steele, a former Coke adman, who arrived embittered and ambitious. His motto: "Beat Coke." Coca-Cola refused to call Pepsi by name -- the drink was "the Imitator," "the Enemy," or, generously, "the Competition" -- but it began tinkering with its business (and imitating Pepsi) to stay ahead. In 1979, for the first time in the rivalry's history, Pepsi overtook Coke's sales in supermarkets. It didn't last, and by 1996, declared that the cola wars had ended. Since then Pepsi, with its increasing focus on health and snacks, has as good as surrendered. America's favorite two soft drinks? Coke and Diet Coke. Winner: Coke 1. Coke vs. Pepsi Ford, founded in 1903, and GM, which came along nine years later, have been warring for 101 years. The epitome of crosstown rivals -- their headquarters are just 11.5 miles apart -- they face off every day on dealer lots and in motor sports. Both maintain operations to scour the other's new products. In 2011, Ford marketing chief Jim Farley was quoted as having said, "I hate them and what they stand for." Meanwhile, GM chairman and CEO Dan Akerson recommended sprinkling holy water on ailing Ford luxury brand Lincoln. "It's over!"