Weight loss medications and a rise in non-alcoholic alternatives are causing American consumers to hold back on soda purchases.
Despite this trend, Coca-Cola reported strong earnings for the second quarter, driven by robust global demand for its products, which led the company to increase its full-year revenue guidance. “We are encouraged with our second-quarter results, which delivered solid topline and operating income growth in an ever-changing landscape,” stated CEO James Quincey.
However, Coca-Cola experienced a 1% decline in volume sales in North America during the quarter. During an earnings call, Quincey attributed this decline to “softness in away-from-home channels,” which encompass a range of products including its water, sports drinks, coffee, tea, and soda offerings.
This dip in sales was somewhat counterbalanced by growth in its Fairlife milk brand and its signature soda, Coca-Cola, which ranked first and second in retail sales growth for the quarter. To counteract the decrease, Quincey mentioned that Coca-Cola is collaborating with restaurant chains to incorporate its soda into meal combos. The company is reportedly working with McDonald’s to enhance the fast-food chain’s $5 meal deal that includes a soft drink.
Overall, Coca-Cola exceeded Wall Street’s expectations, reporting $12.4 billion in revenue for the second quarter, or approximately $0.84 per share, surpassing forecasts of $11.76 billion and around $0.81 per share as estimated by FactSet.
The beverage giant has now raised its forecast for organic revenue growth to a range of 9% to 10%, up from the prior estimate of 8% to 9%.
Similarly, Pepsi is facing challenges in attracting U.S. consumers who are increasingly focused on health-conscious products. Young adults in the U.S. are reportedly consuming significantly less alcohol, according to a Gallup poll. In early July, Pepsi cited a series of product recalls as a reason for its lackluster performance in the second quarter.