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. Last Updated: 07/27/2016

Falling Coke Sales Blamed on Product Recalls

NEW YORK -- The Coca-Cola Co.'s major bottler in Central and Eastern Europe has reported an unexpectedly steep drop in first-half volume sales.

The bottler, Coca-Cola Beverages, attributed the 5 percent decline in volume, measured in cases sold, to severe economic problems in Russia, the Kosovo conflict, the company's recent bottled-water recalls in Poland and bad publicity from Coca-Cola beverage recalls in Belgium and France, which were handled by a different bottler.

Shares in Coca-Cola Beverages, traded on the London Stock Exchange, fell 6 pence, or 4.4 percent, to 131 pence ($2.04) on Tuesday in response to the news. The stock has fallen nearly 20 percent since it was first sold a year ago.

The news was the latest headache for Coca-Cola Beverages, which was spun off from another bottler, Coca-Cola Amatil, in late 1997. The Coca-Cola Co. owns 50.1 percent of the stock.

Andrew Conway, a beverage analyst at Morgan Stanley, said that the bottler's return on invested capital is just 1.3 percent - the lowest of the major Coke and Pepsi bottlers.

Although falling sales in Russia were not a surprise, the impact of the recalls was greater than expected on the dozen or so other countries where the bottler does business. The results revealed that demand for Coca-Cola products in Europe suffered broadly from consumer fear of contaminated soda, even in areas not included in the recalls.

"It's the negative publicity that has been associated with it," said Chelsea Allen, a spokeswoman for the bottler. "It affected the whole of Europe."

The bottler recalled 170,000 cases of its products in Poland on July 1 after mold was found inside glass bottles used for Coke, Fanta and other drinks. Another recall, of 180,000 half-liter bottles, was ordered around the same time after Polish government scientists detected coliform bacteria in Bonaqua Plus, a purified water sold by Coke. The bottler said the bacteria resulted from poor maintenance at a plant in Poland, which was scheduled to reopen Wednesday.