Weight loss medications and non-alcoholic alternatives are influencing American consumers to reduce their soda purchases.
In a significant industry move, Mars, the maker of M&M’s, is set to acquire Kellanova, the company behind Pop-Tarts, in one of the year’s largest transactions.
Despite these shifts in consumer behavior, Coca-Cola announced strong second-quarter earnings, bolstered by consistent global demand for its beverages, prompting the company to enhance its full-year revenue outlook.
“We are encouraged by our second-quarter results, which showcased solid growth in both topline and operating income amidst a changing market,” stated Coca-Cola CEO James Quincey.
Nevertheless, in North America, the company experienced a 1% decline in volume sales during the quarter. Quincey explained in a conference call that the volume drop in the U.S. was attributed to “softness in away-from-home channels,” which includes sales of water, sports drinks, coffee, tea, and soda.
This decline was somewhat mitigated by the success of Coca-Cola’s Fairlife milk and its flagship soda, Coke, which ranked first and second in retail sales growth, respectively, for the quarter.
To counteract the downward trend, Coca-Cola is collaborating with food chains to incorporate its sodas into combo meals. Specifically, it has partnered with McDonald’s to enhance the appeal of the fast-food chain’s $5 meal deal, which includes a soft drink.
Overall, Coca-Cola exceeded Wall Street expectations, reporting revenue of $12.4 billion for the second quarter, translating to about $0.84 per share. Analysts had anticipated revenue of $11.76 billion, or roughly $0.81 per share.
The company has now adjusted its forecast for organic revenue growth to between 9% and 10%, a revision from its previous estimate of 8% to 9%.
Similarly, Pepsi has faced challenges in attracting U.S. consumers, who are leaning more towards products that emphasize weight loss and healthier lifestyles. A Gallup poll indicated that young adults in the U.S. are consuming significantly less alcohol than before. Earlier in July, Pepsi cited multiple recalls as a contributing factor to its lackluster second quarter.