Coca-Cola lifts full-year outlook as it steps up marketing spend

Coca-Cola has raised its annual outlook again after reporting better-than-expected third-quarter results, even after the pandemic softened its performance in August.

Net revenues grew 16% to $10 billion in the three months ended October 1. Net income grew to $2.47 billion, a 42% increase year-on-year—but a reduction from the $2.64 billion it posted in the second quarter.

The results surpassed analysts' estimates and caused Coca-Cola to lift its full-year outlook for organic revenue growth to between 13% and 14%, an increase from its previous range of 12% to 14%.

Chairman and CEO James Quincey told investors the company has been "increasingly resilient through restrictions and lockdowns" and that changes it has instituted are helping the business "emerge stronger" from the pandemic.

The drinks maker has streamlined its portfolio of brands, redesigned its organisational structure, overhauled its marketing approach and focused on growing innovation and digital capabilities since the beginning of Covid.

These changes helped it achieve a swift recovery in Q2 2021, a momentum that has continued into Q3, Quincey said during the company's Q3 earnings call on Wednesday (October 27). 

"I'm sure things will happen in the marketplace that will cause us to want to make further evolutions. But we certainly see the early signs of how the new organisational model could help us both deal and manage through the crisis," Quincey said. "We're confident that as the world begins to move beyond the pandemic, we'll deliver against our long-term growth model, consistently and sustainably over time."

While Coca-Cola cut marketing spend in the early months of the pandemic, it has since "significantly stepped up" spend and expects to reach levels similar to 2019 soon, chief financial officer John Murphy said during the call. Murphy told investors in July the company had "doubled" marketing spend year-on-year.

Its new marketing approach focuses on improving the quality of spend and allocating it in a more targeted manner.

But more changes are on the horizon, as it prepares to reveal the results of its agency review in Q4, Quincey said.

"[The results of the review] will start bringing a structural amount of change next year in the way we interact in our marketing, the enabling spend ecosystem," Quincey said.

Coca-Cola debuted a new brand platform and logo for its trademark soda brand, called 'Real Magic', in September. It is the first time it has refreshed the brand in five years.

The business has recorded an "uneven" recovery around the world depending on Covid lockdowns and vaccination rates, it said. The Delta variant caused a "softer August".

Net revenues grew the most in Latin America, up 41%, followed by a 13% lift in the North America and Europe, Middle East and Africa regions. Asia-Pacific had the lowest revenue increase, at just 3%.

Volume was up 8% in Latin America and the Europe, Middle East and Africa region. It climbed 4% in North America and 3% in Asia-Pacific.