COCA-COLA HAS been hit by a large writedown in the value of the US operations of its largest bottler. Coca-Cola Enterprises (CCE) yesterday announced a $5.3 billion (€3.35 billion) non-cash writedown in the value of its business, citing higher commodity costs and declining demand from increasingly frugal US consumers.

The move led Coca-Cola, which owns about 35 per cent of CCE, to take a $1.1 billion writedown in its second-quarter results, reducing its earnings per share by 40 cents to 61 cents, 23 per cent down on the same period last year.

CCE bottles and distributes 80 per cent of Coca-Cola's drinks in the US. It also distributes in the UK and other parts of Europe and handles about 18 per cent of Coca-Cola's total sales.

CCE chief executive John Brock said "deteriorating economic trends have accelerated volume declines for sparkling brands and water" - in particular for the 20oz bottles of soda and Dasani mineral water that are a standard offering in US convenience stores.

As a result of the writedown, CCE reported a second-quarter loss of $3.17 billion or $6.52 per share on net revenues of $5.9 billion. Mr Brock said CCE would respond to rising commodity prices with a round of price increases in September.

Coca-Cola itself said sales volume in sparkling beverages fell 4 per cent during its second quarter, citing continued weakness in demand from restaurants and fast-food outlets.

Both CCE and Coke reported strong volume growth in sales of more expensive soft drinks, such as the Glaceau-enhanced water drinks and Fuze juices.

The company reported a 5 per cent increase in international case volume and a 3 per cent increase for the group overall. CCE's shares lost more than 3 per cent to $16.10. Coke shares were down more than 3 per cent at $50.27.