Weight loss medications and a rise in non-alcoholic beverage options are causing a decline in soda purchases among consumers in the United States.
Despite these challenges, Coca-Cola reported strong earnings for the second quarter, fueled by robust global demand for its beverages. This success led the company to increase its full-year guidance. CEO James Quincey expressed optimism about the quarterly results, highlighting solid top-line and operating income growth amid a shifting market landscape.
However, Coca-Cola experienced a 1% decline in volume sales in North America. During an earnings call, Quincey attributed this drop to weakened performance in “away-from-home channels,” which encompass categories such as water, sports drinks, coffee, tea, and sodas. The decline was somewhat mitigated by the popularity of Fairlife milk and Coca-Cola’s flagship soda, which saw significant retail sales growth.
To counter the decrease in sales, Quincey noted that Coca-Cola is collaborating with food chains to incorporate its soda into combo meal offerings. The company is reportedly working with McDonald’s to enhance the fast-food chain’s $5 meal deal that includes a soft drink.
Coca-Cola surpassed Wall Street’s expectations for the quarter, generating $12.4 billion in revenue, equating to about $0.84 per share. Analysts had anticipated revenue of $11.76 billion, or approximately $0.81 per share. The company has also increased its forecast for organic revenue growth to between 9% and 10%, up from the previous estimate of 8% to 9%.
Like Coca-Cola, Pepsi is facing challenges in attracting U.S. consumers who are leaning towards healthier options and products geared towards weight loss. A Gallup poll indicates that young adults in the U.S. are consuming significantly less alcohol than before. Additionally, Pepsi recently cited a series of product recalls as a factor contributing to its muted performance in the second quarter.