Consumers in the U.S. are holding back on soda purchases, influenced by the growing popularity of weight loss drugs and non-alcoholic alternatives. Despite this trend, Coca-Cola reported strong earnings for the second quarter, largely due to significant global demand for its beverage lineup, which led the company to increase its full-year outlook.
Coca-Cola’s CEO James Quincey expressed optimism about the company’s performance, noting solid revenue and operating income growth in a rapidly changing market. However, he acknowledged a 1% decline in volume sales in North America, attributing it to a downturn in “away-from-home channels,” which includes water, sports drinks, coffee, tea, and sodas.
The decline in soda sales was somewhat mitigated by the success of Fairlife milk and the strong performance of Coca-Cola itself, which ranked first and second in retail sales growth for the quarter. To address the volume drop, Coca-Cola is collaborating with restaurants to incorporate its products into combo meals, specifically working with McDonald’s to enhance its $5 meal deal that includes a beverage.
Coca-Cola’s earnings exceeded Wall Street predictions, reporting $12.4 billion in revenue, approximately $0.84 per share, compared to the anticipated $11.76 billion and $0.81 per share according to FactSet. The company has now raised its forecast for organic revenue growth from the previous estimate of 8%-9% to a new range of 9%-10%.
Similarly, Pepsi is facing challenges in engaging U.S. consumers, who are increasingly opting for products focused on weight loss and healthier lifestyle choices. A Gallup poll indicates that young adults in the U.S. are consuming significantly less alcohol than before. In early July, Pepsi attributed its lackluster second quarter to a series of product recalls.