Weight loss medications and non-alcoholic beverages are causing U.S. consumers to hold back on soda purchases.
Despite these trends, Coca-Cola reported strong second-quarter earnings, bolstered by robust global demand for its beverage offerings, which led the company to raise its full-year forecast. “We are encouraged by our second-quarter results, which demonstrated solid topline and operating income growth in a shifting market,” stated James Quincey, CEO of Coca-Cola.
In North America, however, the company’s volume sales dropped by 1% during the quarter. Quincey attributed the decline in their U.S. division to “softness in away-from-home channels,” affecting categories like water, sports drinks, coffee, tea, and sodas. Nevertheless, the decline was partially offset by sales of Fairlife milk and strong retail performance of Coke, which ranked first and second in sales growth during the quarter.
To combat the volume drop, Coca-Cola is collaborating with food chains to include its sodas in combo meals. Reports indicate that the beverage giant is partnering with McDonald’s to enhance the fast-food chain’s $5 meal deal that features a soft drink.
Coca-Cola outperformed Wall Street expectations this quarter, posting $12.4 billion in revenue, translating to approximately $0.84 per share. Analysts had predicted revenue of $11.76 billion, or about $0.81 per share, according to FactSet.
The company now anticipates organic revenue growth of 9% to 10%, an increase from the earlier forecast of 8% to 9%.
Like Coca-Cola, Pepsi is facing challenges in attracting U.S. consumers, who are increasingly opting for weight loss-focused products and healthier choices. A recent Gallup poll indicated that young adults in the U.S. are consuming significantly less alcohol. In early July, Pepsi cited a series of product recalls as a factor contributing to its weaker second-quarter performance.