Weight loss medications and non-alcoholic alternatives are causing U.S. consumers to hold back on soda purchases. Despite this trend, Coca-Cola reported strong second-quarter earnings, bolstered by global demand for its products, leading the company to raise its full-year projections.
Coca-Cola’s CEO, James Quincey, expressed optimism about the company’s second-quarter results, which showed solid growth in both revenue and operating income in a changing market. However, the North American market saw a 1% decline in volume sales. Quincey attributed this decrease in the U.S. to reduced sales in “away-from-home channels,” which encompass water, sports drinks, coffee, tea, and soda.
This decline was somewhat mitigated by the success of Coca-Cola’s Fairlife milk and its signature Coke brand, both of which ranked highly in retail sales growth for the quarter. To counteract the downturn, Quincey revealed that Coca-Cola is collaborating with fast food chains to include their sodas in combo meals, with specific initiatives ongoing with McDonald’s to enhance their $5 meal deal that features soft drinks.
Despite the challenges, Coca-Cola exceeded Wall Street expectations, reporting $12.4 billion in revenue for the second quarter, translating to approximately $0.84 per share. Analysts had predicted revenues of $11.76 billion, or around $0.81 per share.
The company has adjusted its forecast for organic revenue growth upwards to between 9% and 10%, compared to the previous estimate of 8% to 9%.
In a similar vein, Pepsi is facing challenges in appealing to U.S. consumers who are increasingly focused on health-conscious products and weight loss. Recent trends indicate that young adults in the U.S. are consuming less alcohol, according to a Gallup poll. Pepsi cited product recalls as a factor in its weaker performance during the second quarter.