Coca-Cola Amatil (CCL) is an Australasian bottler for US-based The Coca Cola Company, with operations spanning Australia, New Zealand, Fiji, Indonesia and Papua New Guinea.

CCL manufactures, sells and distributes Coca-Cola products, including carbonated soft drinks, mineral waters and other non-alcoholic beverages, plus packaged fruit via its SPC Ardmona business.

The company also sells and distributes the premium spirits portfolio of Beam Global Spirits and Wines.

Profit squeeze

Earlier this year CCL admitted that it was facing increased competitive pressures from rival Pepsi's new low-sugar drink, Pepsi Next, launched in 2012.

This has magnified the pressure on the domestic beverage business, which was already contending with weak volume growth but now has to deal with aggressive competitor pricing activity.

The disparity in price between Coca-Cola and Pepsi Next was as much as 50%, enough of a difference for consumers to switch their cola allegiance.

A combination of weak volume growth and limited ability to raise prices is likely to squeeze CCL's margins and harm profitability.

Also, the SPC Ardmona business continues to be a drag on earnings.

CCL is seeking government support for co-investment with SPC Ardmona, a tacit admission that it simply cannot compete with the cheaper importation of private label packaged fruit and vegetables.

Outlook

Today data showed confidence among Australians during December slid at the fastest pace in seven months.

The Westpac Consumer Confidence Index returned a reading of 105, almost 5% weaker than the 110.3 recorded in November.

Confidence took a dive this month as consumers became more pessimistic about the outlook for the jobs market and the broader economy.

CCL has cited consumer caution as a key factor behind the slowdown of its domestic business and today's Westpac survey is likely to make them even more nervous about the outlook.

In November the company guided for a 5% – 7% fall in FY13 underlying EBIT (the financial year ending this month).

With the Australian beverage business comprising around 70% of group revenue, the recent economic data trends suggests the weakness in CCL's business is likely to persist into FY14.