Weight loss medications and non-alcoholic alternatives are causing consumers in the U.S. to reduce their soda purchases. Despite this trend, Coca-Cola reported strong second-quarter earnings, benefitting from robust global demand, leading the company to raise its full-year outlook.
“We are encouraged with our second-quarter results, which delivered solid topline and operating income growth in an ever-changing landscape,” stated James Quincey, CEO of Coca-Cola.
However, the company’s volume sales in North America saw a 1% decline during the quarter. Quincey attributing this drop to “softness in away-from-home channels,” which encompass soda, water, sports drinks, and coffee products.
The impact was somewhat mitigated by the success of Fairlife milk and Coca-Cola’s signature beverage, which ranked first and second respectively in retail sales growth for the quarter.
To counter the decline, Coca-Cola is collaborating with food chains to incorporate their soda into combo meals. Reports indicate that the company is partnering with McDonald’s to enhance the fast-food chain’s $5 meal deal, which includes a soda.
Coca-Cola outperformed analysts, reporting $12.4 billion in revenue for the second quarter, translating to approximately $0.84 per share. Analysts had projected earnings of $11.76 billion, or roughly $0.81 per share, according to FactSet.
The company now forecasts organic revenue growth of 9% to 10%, an increase from its previous estimate of 8% to 9%.
Similarly, Pepsi is facing challenges in attracting U.S. consumers, who are increasingly leaning towards weight-loss oriented products and healthier choices. A Gallup poll has indicated that young adults in the U.S. are consuming significantly less alcohol than in previous years. In early July, Pepsi attributed its subdued second-quarter performance to a series of recalls.