Nov 12, 2004 3 min read

ATLANTA (AP) – The Coca-Cola Co. is lowering its long-term targets for earnings and sales volume growth amid continuing weakness in key markets including North America. But the world’s biggest soft drink company also plans to boost spending on marketing its core brands. Coca-Cola shares gave ground Thursday as its new chairman and chief executive Neville Isdell laid out a grim explanation for why Coke is struggling.

“We have underperformed since 1997,” said Isdell, a former bottler who was named CEO in May to replace the retiring Doug Daft.

He said the company was slow to push the water, juice and other non-carbonated drinks consumers want as they become more health-conscious, and let its marketing slip. “The emerging consumer trends in health and wellness were missed,” he said. “We stopped driving carbonated soft drinks, and we’re the world leader.”

The company said it expects sales volume growth of 3 percent to 4 percent, down from its previous targets of 5 percent to 6 percent.

It also projects operating income growth of 6 percent to 8 percent, compared to 10 percent previously. Coke is projecting earnings per share growth in the high single-digits, which had been 11 percent to 12 percent. The company said it expects continuing weak results to persist into 2005 in key markets.

including North America, Germany and the Philippines.

In a two-hour speech that was mostly pep talk, Isdell and other executive pleaded with investors for patience in the short term in exchange for higher profits in the long term.

Isdell said 2005 “is not going to deliver the kinds of returns that are going to be acceptable to me, as a shareholder. … But we can’t save our way to prosperity, we have to grow our way to prosperity.”

Among the plans to boost growth: much more advertising. The company plans to spend an additional $350 million to $400 million on marketing next year. The company does not disclose how much in total it spends in this area. Most of this money will go to advertise its core brands, the company said.

Coke executives said the company will also shift its ads from local, promotional types to big-media buys that could span an entire country or continent. Clips were shown of a Christmas ad to show in Europe and North America, along with a more-subdued ad coming to the Islamic world.

“Our advertising has not been as consistently effective as it needs to be in recent years,” said chief marketing officer Chuck Fruit. Since 2000, he said, there has been “too much local stuff” and “too little attention to brand-building iconic advertising.”

Most of the marketing spending will be outside the United States, Isdell said. In North America, there could be more sponsorship deals, such as Coke’s presence on the TV show “American Idol.”

Besides its flagship soft drink, Coca-Cola makes Diet Coke, Sprite and Fanta as well as water, juices, coffee and sports drinks.

Coca-Cola shares were down 51 cents to $40.66 in midday trading on the New York Stock Exchange.

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On the Net:

http://www.coca-cola.com

AP-ES-11-11-04 1246EST