Weight loss medications and non-alcoholic alternatives are causing American consumers to reduce their soda purchases.
Despite this trend, Coca-Cola announced strong second-quarter earnings, thanks in part to solid global demand for its beverage products, which has led the company to raise its full-year guidance.
“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.
However, Coca-Cola experienced a 1% decline in volume sales in North America during the quarter. Quincey explained in the earnings call that this decrease for the U.S. segment was due to “softness in away-from-home channels,” which encompasses products like water, sports drinks, coffee, tea, and sodas.
This decline was partially countered by strong sales of Fairlife milk and Coca-Cola soda, which ranked first and second in retail sales growth for the quarter.
To tackle the volume drop, Coca-Cola is collaborating with food chains to integrate its sodas into combo meals. Reports indicate that the company is partnering with McDonald’s to enhance the fast-food chain’s $5 meal deal, which features a soft drink.
Overall, Coca-Cola exceeded Wall Street’s expectations, recording $12.4 billion in revenue during the second quarter, equating to approximately $0.84 per share. Analysts had anticipated revenue of $11.76 billion, or around $0.81 per share, according to FactSet.
The company has now revised its forecast for organic revenue growth to between 9% and 10%, an increase from the previous estimate of 8% to 9%.
Similarly, Pepsi is facing challenges in engaging U.S. consumers, who are progressively leaning towards products that emphasize weight loss and healthier lifestyles. A Gallup poll also indicates that young adults in the U.S. are consuming significantly less alcohol than before. In early July, Pepsi attributed its disappointing second-quarter results to a series of product recalls.