For the last few years, the growth story for Inside Value selection Coca-Cola (NYSE:KO) and rival PepsiCo (NYSE:PEP) has been in the non-carbonated portion of the beverage business.

Last quarter when I looked at Coke's results, I noted that carbonated sales volume was up 3% while non-carbonated was up 5%. This quarter carbonated matched non-carbonated with 5% growth in sales volume. On the surface 5% doesn't sound like impressive growth, but when you have a large amount of fixed costs, each incremental portion of revenue drops largely to the bottom line. It's this ability to leverage its operations that helps turn modest sales growth into much better earnings growth.

The financial details and year-over-year comparison can be found in the Fool by Numbers published yesterday. Overall the results were strong and the company did particularly well in developing markets such as Brazil, Russia, and China. However, Japan and North America, the company's two largest markets, remained a bit of a disappointment.

Japan is a hyper-competitive market for soft drinks. There is competition from not only Pepsi, but from Asahi, Suntory, Kirin, Ito-en, and other smaller players. Coca-Cola is still the dominant force in carbonated beverages, but the competition in bottled teas and athletic drinks is intense. Coke believes it has begun to turn things around in Japan. The company did show a sequential increase in sales volume during the quarter and on its conference call pointed to some success with its ready-to-drink coffee efforts (quite popular in Japan), but Coke still saw its overall share of the market in Japan decline. Because Japan is a very profitable market for Coke, the recovery here will require continued attention.

Coca-Cola is not the sexy growth story that Hansen Natural (NASDAQ:HANS) has been the last few years, but the company also isn't priced as a sexy growth story. Coca-Cola need only maintain cash flow growth in the neighborhood of 5% to 8% a year to be a market beater for investors, and given the company's recent results, such a performance is beginning to look more and more achievable. The 2.8% dividend yield certainly doesn't hurt, either.

Coca-Cola is a Motley Fool Inside Value selection. To find out why, take a free trial today.

With the weather getting cooler, Fool contributor Nathan Parmelee misses being able to quickly grab a bottle of hot tea at the convenience store like he could in Japan. At the time of publication he had no financial interest in any of the companies mentioned. The Motley Fool has an ironclad disclosure policy.