Earlier this week, I opined that it's been 17 straight quarters since pop icon Coca-Cola (NYSE:KO) last missed one of Wall Street's earnings targets. As of yesterday morning, you can make that 18.

Investors seemed generally pleased with Coke's performance, bidding the shares up on the news that volume shipped rose 6%, sales were up 19%, and profits per diluted share grew 15%. Am I the only one who thinks there's something funny with those numbers? I mean, it's great that Coke was able to grow revenue from product shipped at more than three times the amount of product shipped. But what's with the slower-than-sales-growth profits?

What's with that
The "what" that goes with that relationship between profits and sales, it seems, is that rising commodity costs cut deeply into gross margin -- a fact that jibes with what Pepsi (NYSE:PEP) told us last week. Coke's revenue may have increased rapidly, but cost of goods sold (COGS) lapped it roundly, rising 27% year over year. That cost Coke a good 240 basis points' worth of gross margin during the third quarter.

The good news for Coke shareholders is that, unlike Pepsi, it managed to make up some of the margin lost to COGS by holding selling, general, and administrative expenses to just 16% growth. (The other good news is that when you peer past the arcane accounting of GAAP, Coke's cash profits closely resembled revenue growth. Free cash flow was up a cool 19%.)

Sugar can rot your profits
Let's look more closely at the COGS problem, though, because I think it's important to not just Coke, but also Pepsi, Hansen (NASDAQ:HANS), Cadbury-Schweppes (NYSE:CSG) -- really, everybody who's anybody in the pop industry. The situation is essentially as follows:

Oil prices are rising. In an effort to find alternatives to pricey oil, the U.S. government encourages the production of even pricier ethanol. This diverts corn crops to ethanol production and away from high fructose corn syrup production. Good news for ADM (NYSE:ADM) and Verasun (NYSE:VSE), which sell ethanol; bad news for anyone who buys corn syrup, the constrained supply of which is raising prices for sweeteners. The only way around this supply bottleneck, it seems to me, would be for the soda makers to return to their roots and use sugar to sweeten their concoctions -- but here they would run headlong into the fact that the cheapest ethanol is made from sugar cane (hello, Cosan (NYSE:CZZ)).

The good news here is that Coke CFO Gary Fayard sees commodity costs starting to "moderate." The bad news is that, until the ethanol fad finishes playing itself out, we can expect to see corn syrup continuing to rot away margins.

Meanwhile, Coke continues to earn outsize profits for investors who heeded Motley Fool Inside Value's advice to buy the stock. What? No one told you that value guru Philip Durell was recommending Coke? Well, that's an easy fix. Don't miss his next recommendation -- pick up your free trial subscription to the newsletter today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.