Weight loss medications and non-alcoholic alternatives are causing U.S. consumers to hesitate when it comes to purchasing sodas.
Despite the trend, Coca-Cola announced strong second-quarter earnings on Tuesday, driven by solid global demand for its beverage lineup, leading the company to increase its full-year expectations.
“We are encouraged with our second-quarter results, which delivered solid topline and operating income growth in an ever-changing landscape,” stated James Quincey, CEO of Coca-Cola.
In North America, however, the company experienced a 1% decline in volume sales for the quarter. Quincey explained during the earnings call that the decline in the U.S. was partly due to “softness in away-from-home channels,” which encompasses soft drinks, as well as water, sports drinks, and coffee.
The decline was somewhat offset by the popularity of Fairlife milk and Coca-Cola’s flagship soda, which ranked first and second in retail sales growth for the quarter.
To address the sales drop, Quincey mentioned that Coca-Cola is collaborating with food chains to integrate its beverages into combo meals. The company is reportedly partnering with McDonald’s to enhance the appeal of its $5 meal deal, which includes a soft drink.
Overall, Coca-Cola exceeded Wall Street’s expectations, reporting $12.4 billion in revenue for the second quarter, translating to approximately $0.84 cents per share. Analysts had predicted around $11.76 billion in revenue, or about $0.81 cents per share.
Additionally, Coca-Cola revised its forecast for organic revenue growth, now estimating between 9% and 10%, up from its previous estimate of 8% to 9%.
Similarly, Pepsi is also facing challenges in attracting U.S. consumers, many of whom are shifting towards products that support weight loss and healthier lifestyles. A Gallup poll indicates that young adults in the U.S. are consuming significantly less alcohol than in the past. In early July, Pepsi attributed its lackluster second quarter to a series of product recalls.