Coca Cola (NYSE:KO) has long been one of Wall Street’s thermometers to test the world’s economy. The company’s Q3 2013 results are living proof of what the International Monetary Fund advised in their last global growth predictions: developing markets are increasingly more volatile, which reflects multinationals -- including Coca-Cola.
The U.S. soda giant registered a 3 percent year-on-year drop in its Q3, with earnings of $12 billion worldwide. When broken into regions, Asia and Africa fell 4 percent, and the Pacific region 9 percent. Europe grew 10 percent. And Latin America remained the same.
The results come as a surprise -- the Q1 2013 registered an increase of 4 percent in Latin America, according to Bloomberg. Looking at past years, Latin America was considered the main reason for the company’s growth; in 2011, for instance, Coca-Cola’s earnings in the region grew 13 percent.
What has changed? Between social upheaval, inflation and commodity crisis, Latin America has had a rough year -- which might have affected the world’s leading soft drink.
Mexico’s Crusade Against Sugary Drinks
Mexico had huge news this last summer: It lead the ranking of obese countries in the world, surpassing even the formerly undefeated champions, the United States. A third of Mexicans are overweight -- a full percentage point over the number of overweight Americans.
In order to fight the trend, President Enrique Peña Nieto’s administration, which has had a very intense year of political reforms, included sugary drinks in the list of items that will have a tax increase. If the fiscal reform is approved, a liter of soda will go up a peso in price, from the current 12 (90 cents).
While it is too early to blame the tax on drops in sales, Coca-Cola was one of the first companies to express worry over the measure. Mexico is currently the largest consumer of soft drinks in the world, with 46 gallons of soda consumed in average per person -- and an increase in price, however small, could mean serious harm.
Venezuela Does Not Need It (And Bolivia Might Not Need It Either)
It is not news for everybody that former Venezuelan leader Hugo Chávez was not the U.S.’ biggest fan. The late Comandante’s incendiary speeches against capitalism and the northern neighbor were a common practice during the 14 years Chávez was in power.
Coca-Cola, just as many other American products, had its share of the derision. During a 2011 speech, Chávez famously said that “Venezuela can live without Coca Cola.”
“Coca-Cola isn’t indispensable,” he said. “Who said it is necessary?”
The speech was brought back in May, when a strike paralyzed the Venezuelan Coca-Cola plant in the central-western city of Valencia, and made sales drop 15 percent. The strikers restarted operations after 24 days, in which their demand for better wages was not met. Strikers were even required to make up for the lost hours.
However, this was not the biggest threat the company has had in the continent. Bolivian President Evo Morales announced the expulsion of Coca-Cola in Bolivia by December 2012, marking the Mayan end of the world. According to Foreign Minister David Choquehuanca, the date marked the end of capitalism and the start of a culture of life in community-based societies.
Therefore, Coca-Cola was to be banned in favor of mocochinche, a locally produced peach-flavored soft drink.
The government later said that the words had been taken out of context, and that it was not planning on banning the drink.
#BoikotCocacola, Or The Power Of Social Media
In this day and age, nobody is safe from scrutiny and no words ever get lost. When Coca-Cola's CEO in Spain, Marcos de Quinto, made some unfortunate comments towards a religious organization in September, Latin America did not take it lightly.
De Quinto made some insensitive comments towards the Christian group Hazte Oír, when it commanded the company to remove its ads from a controversial Spanish reality show. The CEO called the group “fanatics” and “intolerant.”
“May God spare from groups like ‘The Guardians of the Faith,’ who want to tell us what shows to watch, what books and newspapers to read, what party to vote for,” De Quinto posted on Twitter.
The remarks were taken as a direct attack on Christians, and it spurred an outcry in Latin America -- currently the continent with most Catholics in the world. The hashtag #boikotcocacola became a trending topic in Colombia, Ecuador, Peru and Panama and thousands of Twitter users vouched to stop buying the products.
Coca Cola fell 0.8 percent on Sept. 5, a performance that was deemed “surprising” by Wall Street analyst Amanda Alix.
Coca-Cola's Earnings Do Not Grow In Latin America; What Are the Reasons Behind The Stagnation?
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