Weight loss drugs and a rise in non-alcoholic beverage options are causing U.S. consumers to buy fewer sodas, impacting major beverage companies.
Despite this trend, Coca-Cola announced strong quarterly earnings on Tuesday, benefiting from global demand for its beverages and subsequently raising its full-year projections. CEO James Quincey expressed optimism regarding the company’s performance, highlighting robust growth in revenue and operating income.
However, North American volume sales dipped by 1% in the quarter. Quincey noted that this decline in the U.S. was largely influenced by “softness in away-from-home channels,” which encompass drinks such as water, sports beverages, coffee, tea, and sodas. The drop in soda sales was somewhat mitigated by strong performance from Coca-Cola’s Fairlife milk and its flagship soda, which ranked first and second in retail sales growth respectively.
To counteract the decline, Coca-Cola is collaborating with food chains to include its sodas in combo meals. Reports suggest that the company is particularly focused on enhancing McDonald’s $5 meal deal, which features a soft drink.
In terms of financial performance, Coca-Cola exceeded Wall Street’s expectations, reporting $12.4 billion in revenue for the second quarter, equating to approximately $0.84 per share. Analysts had anticipated revenues of $11.76 billion, or around $0.81 per share.
The beverage giant has adjusted its growth forecast to predict organic revenue growth between 9% and 10%, an increase from the previous estimate of 8% to 9%.
Pepsi, facing similar challenges, is also struggling to engage U.S. consumers who are increasingly opting for healthier options and weight loss products. In early July, Pepsi attributed its underwhelming second quarter performance to a series of product recalls.