Weight loss medications and non-alcoholic alternatives are leading consumers in the U.S. to reduce soda consumption. Despite this trend, Coca-Cola reported strong second-quarter earnings, largely due to heightened global demand for its beverages, prompting the company to revise its full-year outlook upward.
Coca-Cola CEO James Quincey expressed optimism about the results, noting the company showed solid growth in both revenue and operating income despite a fluctuating market. However, in North America, the company experienced a 1% decline in volume sales during the quarter. Quincey attributed this dip in its U.S. division to decreased activity in “away-from-home channels,” which encompass products like water, sports drinks, coffee, tea, and soda.
The decrease in sales was somewhat mitigated by the performance of its Fairlife milk brand and its flagship soda, Coke, which led and ranked second in retail sales growth, respectively.
To address the declining sales, Coca-Cola is collaborating with food chains to integrate its soda into combo meals. Reports indicate that the company is partnering with McDonald’s to strengthen the fast-food chain’s $5 meal deal, which includes a soft drink.
In terms of financial results, Coca-Cola exceeded Wall Street’s expectations, generating $12.4 billion in revenue during the second quarter, translating to earnings of approximately $0.84 per share. Analysts had anticipated revenue of $11.76 billion, or about $0.81 per share, according to FactSet.
Coca-Cola has now adjusted its forecast for organic revenue growth to between 9% and 10%, an increase from its previous estimate of 8% to 9%.
Meanwhile, PepsiCo is facing similar challenges in attracting U.S. consumers, who are increasingly leaning towards products focused on weight loss and healthier lifestyles. A recent Gallup poll highlighted that young adults in the U.S. are consuming significantly less alcohol than before. In early July, Pepsi attributed its lackluster second-quarter performance to a series of product recalls.