Weight loss medications and non-alcoholic alternatives are causing U.S. consumers to reduce their soda purchases. Despite this trend, Coca-Cola reported strong second-quarter earnings, attributing part of the success to high global demand for its beverages, which led the company to increase its full-year financial outlook.
“We are encouraged by our second-quarter results that showed solid top-line and operating income growth in a changing market,” stated James Quincey, Coca-Cola’s CEO.
In North America, however, Coca-Cola experienced a 1% decline in volume sales during the quarter. Quincey explained in an earnings call that this decrease was largely due to weak performance in away-from-home categories, which encompass water, sports drinks, coffee, tea, and sodas.
The decline in sales was somewhat mitigated by Coca-Cola’s Fairlife milk brand and its flagship soda, Coke, which ranked first and second, respectively, in retail sales growth during the quarter.
To address the volume dip, Coca-Cola is partnering with food service chains to integrate its sodas into combo meal offerings. Reports indicate that the company is collaborating with McDonald’s to promote the fast food chain’s $5 meal deal, which includes a soft drink.
Overall, Coca-Cola’s performance exceeded Wall Street expectations. For the second quarter, the company reported revenue of $12.4 billion, equating to approximately $0.84 per share, surpassing analysts’ forecasts of $11.76 billion and $0.81 per share, according to FactSet.
The company has raised its forecast for organic revenue growth to between 9% and 10%, up from its previous estimate of 8% to 9%.
Pepsi is also facing challenges in engaging U.S. consumers, who are increasingly favoring products linked to weight loss and healthier lifestyles. Notably, a Gallup poll indicates that young adults in the U.S. are consuming significantly less alcohol. Earlier in July, Pepsi cited a series of product recalls as a contributing factor to its sluggish second-quarter performance.