Weight loss medications and non-alcoholic alternatives are leading U.S. consumers to reduce their soda purchases.
Despite this trend, Coca-Cola reported strong earnings for the second quarter on Tuesday, bolstered by high global demand for its beverages, prompting the company to raise its annual forecast.
Coca-Cola CEO James Quincey expressed optimism about the second-quarter results, highlighting robust topline and operating income growth amid a shifting market.
However, the company noted a 1% decline in volume sales in North America during the same quarter. Quincey explained that this drop was largely due to decreased sales in away-from-home channels, which encompasses water, sports drinks, coffee, tea, and soda products.
This decline was somewhat mitigated by the success of Fairlife milk and the performance of Coca-Cola, which ranked in the top two for retail sales growth during the quarter.
To tackle the sales drop, Quincey stated that Coca-Cola is collaborating with food chains to integrate its sodas into combo meal offerings. Reports suggest that the company is working with McDonald’s to enhance its $5 meal deal that includes a soft drink.
Despite the challenges, Coca-Cola exceeded Wall Street’s expectations. The company reported $12.4 billion in revenue for the second quarter, translating to approximately $0.84 per share. Analysts had projected revenue of $11.76 billion, or around $0.81 per share, according to FactSet.
Coca-Cola has raised its forecast for organic revenue growth to a range of 9% to 10%, an increase from the earlier prediction of 8% to 9%.
Meanwhile, Pepsi is also facing challenges in attracting U.S. consumers who are increasingly leaning toward weight loss products and healthier choices. Additionally, a recent Gallup poll indicates that young adults in the U.S. are consuming significantly less alcohol than before. In early July, Pepsi attributed its modest second quarter performance to a number of product recalls.