In Emerging Markets, Coke Is Still "It"

To put the Coca-Cola's "disappointing" quarter into perspective: The brand's net income in the third quarter was $1.9 billion (about 81 cents per share), up from $1.89 billion a year earlier. By volume, its overall sales still climbed 2% (after a 4% rise in the second quarter and a 2% rise in the first).

But is Coke in trouble? Granted, the brand is an icon and will never be gone. But even as sales of carbonated soda drinks (like Coke) rose1% in the quarter, those snazzier drinks the kids like so much, like Vitaminwater, rose 7%.

In established markets, Coke's brand building efforts are in maintenance mode. It is hard, even dangerous, for the brand to take any drastic new direction to compete with the "hottest new thing." At best, the brand can fiddle with its delivery, such as offering a new 90-calorie mini can.

Where Coke's brand is making strides is emerging markets. In the spirit of its devotion to these emerging markets, Coke's strategy includes programs like sponsoring "happiness ambassadors." And this focus is paying off. Despite a drop in sales in the US, Coke saw third quarter growth in India (+37%), China (+15%) and Brazil (+3%). Over the last three years, a full quarter of the brand's growth has come from emerging markets.