Weight loss medications and alcohol-free alternatives are leading U.S. consumers to reduce their soda purchases.
Coca-Cola reported strong earnings for the second quarter on Tuesday, buoyed by robust global demand for its beverages and subsequently raised its full-year projections.
“Our second-quarter results were encouraging, showcasing solid growth in topline and operating income amidst a changing market,” stated James Quincey, CEO of Coca-Cola.
In North America, however, the company experienced a 1% decline in volume sales during the quarter. Quincey explained in an earnings call that the drop in U.S. sales was linked to “softness in away-from-home channels,” affecting its water, sports drinks, coffee and tea, as well as soda products.
Despite the overall decline, Coca-Cola’s Fairlife milk and its flagship soda, Coke, emerged as top performers in retail sales growth during the quarter.
To address the sales downturn, Quincey noted that Coca-Cola is collaborating with restaurants to include its sodas in combo meals, with efforts reportedly underway with McDonald’s to enhance the fast food chain’s $5 meal deal, which features a soft drink.
Coca-Cola’s performance exceeded Wall Street predictions, reporting $12.4 billion in revenue for the second quarter, amounting to approximately $0.84 per share. Analysts had anticipated revenues around $11.76 billion, or roughly $0.81 per share, according to FactSet.
The company has now revised its outlook for organic revenue growth to between 9% and 10%, raising it from an earlier estimate of 8% to 9%.
Similar to Coca-Cola, Pepsi has faced challenges in attracting U.S. consumers who are increasingly inclined towards weight-loss products and healthier lifestyle choices. A Gallup poll indicates that young adults in the U.S. are consuming significantly less alcohol than in the past. In early July, Pepsi cited a series of product recalls as a factor contributing to its underwhelming performance in the second quarter.