For a long time, PepsiCo (NYSE:PEP) has been eating the lunch of Inside Value selection Coca-Cola (NYSE:KO). Part of this was because of PepsiCo's strength in salty snacks, but another large part of it was its earlier focus on non-carbonated beverages. Coca-Cola's results for the first quarter are further confirmation that the company is awake and fighting back.

Coca-Cola's revenue increased 17% on a 6% increase in unit case volume. After backing out one-time items from this year and last, the company's earnings increased by 14% to $0.56 per share. Operating cash flow increased by 34% compared with last year, and free cash flow increased by a slightly smaller margin because Coca-Cola increased its capital spending.

The big picture looks very good, but no company is perfect, and Coca-Cola does have some problems to fix in North America, where volumes fell by 3% and operating income fell by 11%. The culprit was sparkling beverage sales. Remember when soda was known as a carbonated beverage? All kidding aside, there was some underlying good news for the North America business. Revenues still increased as sales of Powerade and other non-carbonated beverages increased and sales volumes of Coke Zero continued to increase at double-digit rates. Without the Coke Zero line -- I love the Cherry Coke Zero myself -- the results in North America likely would have been worse. The company also said that Coca-Cola Classic and Diet Coke gained some market share. So while the North America business isn't strong, it does appear fixable and the company isn't sitting still.

Coke is also rolling out Diet Coke Plus, a version of Diet Coke with vitamins added. This might sound odd on the surface, but if you take a look at most of the energy drinks peddled by Hansen (NASDAQ:HANS), Red Bull, and others, you'll see they're basically carbonated beverages full of sugar with vitamins added. Meaning the only difference between many energy drinks and soda is that they added vitamins to the sodas. I have no idea whether consumers as a group will pick up on how small the differences are between energy drinks and soda, but adding vitamins to soda is a logical bet.

Coke appears to be out of the woods and a formidable competitor once again. The company also plans to continue buying back up to $3 billion of stock this year and yields a plump 2.7%. As long as Coke can post free cash flow growth of 7% or 8% a year, the company's investors should end up pretty happy in the long term.

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At the time of publication, Nathan Parmelee had no financial position in any of the companies mentioned. The Motley Fool has an ironclad disclosure policy.