The popularity of weight loss drugs and non-alcoholic alternatives is causing a shift in consumer behavior, leading many to refrain from purchasing sodas, particularly in the United States.
Despite these market challenges, Coca-Cola reported strong second-quarter earnings on Tuesday, benefiting from robust global demand for its beverage offerings and subsequently raising its full-year outlook.
“We are pleased with our second-quarter results, which show solid revenue and operating income growth amidst a changing market environment,” stated James Quincey, CEO of Coca-Cola.
However, in North America, Coca-Cola experienced a 1% decline in volume sales during the quarter. Quincey noted during the company’s earnings call that the decrease in U.S. division sales was due to “softness in away-from-home channels,” encompassing various products like water, sports drinks, coffee, tea, and sodas.
This decline was somewhat mitigated by the success of Fairlife milk and the Coca-Cola brand itself, which ranked first and second in retail sales growth for the quarter.
To counteract the volume drop, Quincey mentioned that Coca-Cola is collaborating with food chains to integrate its sodas into combo meals. The company is reportedly working with McDonald’s to enhance its $5 meal deal, which includes a soft drink.
Overall, Coca-Cola exceeded Wall Street’s forecasts, reporting $12.4 billion in revenue during the second quarter, equating to about $0.84 per share—higher than the anticipated $11.76 billion and $0.81 per share as estimated by FactSet.
The company has now adjusted its organic revenue growth forecast to between 9% and 10%, raising its previous estimate of 8% to 9%.
Similarly, Pepsi is facing difficulties in attracting U.S. consumers who are increasingly focused on health and weight loss. According to a Gallup poll, young adults in the U.S. are consuming significantly less alcohol than before. Earlier in July, Pepsi attributed its underwhelming second-quarter performance to a series of product recalls.