Weight loss medications and non-alcoholic beverages are causing American consumers to reduce their soda purchases.
Despite this trend, Coca-Cola reported strong earnings for the second quarter, driven by healthy global demand for its beverage products, leading the company to revise its full-year forecasts upwards.
Coca-Cola’s CEO, James Quincey, expressed optimism about the company’s performance, stating they achieved significant revenue and operating income growth amid a shifting market landscape. However, in North America, the company experienced a 1% decline in volume sales for the quarter. Quincey attributed this decrease to weak performance in out-of-home channels, such as water, sports drinks, coffee, tea, and soda.
The drop was somewhat balanced out by the success of Fairlife milk and Coca-Cola’s flagship soda, which ranked first and second in retail growth, respectively. To counter the sales decline, Quincey noted that Coca-Cola is collaborating with food chains to incorporate its sodas in combo meals, specifically mentioning efforts with McDonald’s to enhance its $5 meal deal that includes a soft drink.
Overall, Coca-Cola exceeded Wall Street expectations, reporting $12.4 billion in revenue and earnings of approximately $0.84 per share. Analysts had predicted revenues of about $11.76 billion and earnings of around $0.81 per share. The company has revised its forecast for organic revenue growth to between 9% and 10%, up from the previous estimate of 8% to 9%.
In a similar vein, Pepsi is also facing challenges in engaging U.S. consumers as they increasingly gravitate towards options that emphasize weight loss and healthy habits. Recent surveys, such as one from Gallup, indicate that young adults in the U.S. are consuming significantly less alcohol than before. Pepsi recently cited a series of product recalls as a factor in its subdued performance during the second quarter.