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U.S. Business Coca-Cola shares rise as Coke Zero Sugar and new flavours drive sales higher

KAREN BLEIER/AFP/Getty Images

Strong demand for Coca-Cola Co’s zero-calorie drink Coke Zero Sugar, new orange-vanilla cola and flavoured waters pushed the beverage maker’s quarterly sales and profit well above Wall Street estimates, sending its shares up as much as 3 per cent on Tuesday.

The world’s biggest beverage makers, Coca-Cola and PepsiCo Inc, are responding to shifting consumer tastes by tweaking ingredients and experimenting with new flavours that are focused more on health-conscious consumers.

These efforts have helped revive soda sales after a years-long slump.

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Chief executive officer James Quincey said Coke Zero Sugar sales witnessed a double-digit percentage rise, while its new orange-vanilla Coke soda was also a hit.

Sales of carbonated drinks rose 1 per cent, driven by strong performance of its Coke brand, while smaller, immediate consumption packages of its flavoured water and sports drinks drove a 6-per-cent sales increase in the business.

Mr. Quincey is trying to make Coca-Cola a “total beverage company” by adding coffees, teas, smoothies and flavoured waters to a portfolio that has traditionally offered aerated drinks.

It recently made a big bet on coffee with its $5.1-billion acquisition of Costa Coffee and is preparing to launch ready-to-drink Costa products in stores soon.

“They’re making progress with innovations in general … it is still early for a lot of these innovations, but we do like the increased focus that the company is bringing to its core brands and also its coffee products,” Edward Jones analyst John Boylan said.

Coke’s organic sales, which exclude the impact of currency swings and acquisitions, rose 6 per cent, driven by price hikes and bottlers stocking up more products due to Brexit uncertainty.

Revenue rose 5 per cent to $8.02-billion and the company earned 48 cents per share on an adjusted basis.

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Analysts had forecast earnings of 46 cents per share and revenue of $7.88-billion, according to IBES data from Refinitiv.

For the second quarter, the company projected a 6-per-cent boost to comparable revenue, mainly due to acquisitions and divestitures, but said it continues to see an impact from a stronger dollar.

It maintained its organic sales growth forecast of about 4 per cent for the full year.

“We expect the company to over-deliver on the 4-per-cent organic growth guidance this year, driven by innovation, global market share gains, and pricing power,” Guggenheim Partners analyst Laurent Grandet wrote in a note.

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