Consumers in the U.S. are increasingly holding back on soda purchases due to the rise of weight loss medications and non-alcoholic beverage options.
Despite this trend, Coca-Cola reported strong second-quarter earnings, fueled by robust global demand for its beverage products, prompting the company to raise its full-year forecasts. “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. Quincey explained that the decrease in the U.S. division was primarily due to “softness in away-from-home channels,” which includes water, sports drinks, coffee, tea, and sodas.
The sales drop was somewhat alleviated by Coca-Cola’s Fairlife milk and its flagship product, Coke, which performed well in retail sales growth, ranking first and second, respectively, in the quarter.
To counter the decline, Quincey noted that Coca-Cola is collaborating with food chains to incorporate its soft drinks into combo meals. Specifically, the company is partnering with McDonald’s to enhance the fast food chain’s $5 meal deal that includes a beverage.
Overall, Coca-Cola exceeded analysts’ expectations, reporting $12.4 billion in revenue for the second quarter, translating to about $0.84 per share. This figure surpassed the anticipated revenue of $11.76 billion, or approximately $0.81 per share, according to FactSet.
The company has now adjusted its organic revenue growth forecast to between 9% and 10%, increasing from its prior estimate of 8% to 9%.
Pepsi is also facing challenges in attracting American consumers, who are shifting towards products that align with weight loss and healthier living. A Gallup poll indicates that young adults in the U.S. are consuming significantly less alcohol than before. In early July, Pepsi cited a series of product recalls as factors contributing to its weaker second-quarter performance.