Volume in the category increased 1% internationally, with marked strength in India, up 31%, and Japan, up 12%. Brazil, China, Great Britain and South Africa also reported gains in the space. North America posted a 4% decline in carbonated beverages.
The company said its marketing programs, which include the new global campaign "Open Happiness", have "positively impacted sparkling beverages and improved brand health." Open Happiness launched in January and was featured during the Super Bowl.
Hitting the right audience
"The campaign is successfully connecting the brand with key target audiences, teens and moms, driving recruitment and retention," CEO Muhtar Kent said during a conference call with analysts. Mr. Kent also pointed out that the accompanying "Open Happiness" single has landed on the Top 40 iTunes pop chart.
Coke Zero, which made its first Super Bowl appearance under the "Open Happiness" umbrella, was a significant bright spot for the company. Volume increased by 25% in North America, the 12th consecutive quarter of double-digit growth.
Still, despite the company's push in carbonated beverages, non-carbonated beverages continued to outperform, in line with industry trends. Volume across that category increased 3% in North America during the quarter, led by gains in Powerade and several juice brands.
Powerade volume increased 17%, while PepsiCo's Gatorade, the category leader, seemed to suffer. During PepsiCo's first-quarter earnings call, execs said the brand has seen declines in the past year. The two brands have grabbed headlines in recent weeks. At the beginning of the month, Powerade introduced a new campaign, which takes aim at Gatorade. And the brands are now embroiled in a lawsuit.
Coca-Cola also highlighted strong performance from its Simply and Minute Maid juice brands. Both brands' orange juice products saw unit sales increase during the quarter, according to Information Resources Inc., while PepsiCo's Tropicana dealt with sales declines after its packaging revamp.
Earnings, sales slide
Coca-Cola said earnings declined 10% to $1.36 billion, while sales slipped 3%. Mr. Kent said the company remains on track to deliver $500 million in savings by the end of 2011.
Executives also addressed PepsiCo's $6 billion bid for its two largest bottlers. Following Pepsi's announcement, industry watchers began speculating that Coca-Cola would follow suit and purchase its largest bottler, Coca-Cola Enterprises. Mr. Kent didn't specifically address that question, though he told analysts the company believes its franchise model is "the best way to win in the marketplace." He added, "We're pleased with the positive forward momentum we're generating here in North America, and the spirit of collaboration with our bottlers, not just here in North America, but across the whole world have never been better."
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