Weight loss medications and non-alcoholic alternatives are leading U.S. consumers to reconsider soda purchases.
In a significant business move, Mars, the company known for M&M’s, is acquiring Kellanova, the maker of Pop-Tarts, marking one of the year’s largest transactions.
Despite this trend, Coca-Cola announced strong earnings for the second quarter, largely driven by robust global demand for its beverage products, which prompted the company to raise its full-year financial outlook. CEO James Quincey expressed optimism about the results, highlighting solid revenue and operating income growth amid changing market conditions.
However, in North America, Coca-Cola experienced a 1% decline in volume sales for the quarter. Quincey noted during the earnings call that this dip was influenced by reduced activity in away-from-home channels, encompassing water, sports drinks, coffee, tea, and sodas.
The company managed to partially counteract this decline with its Fairlife milk and its flagship product, Coke, which gained prominence in retail sales growth for the quarter. To further mitigate the volume drop, Quincey revealed Coca-Cola is collaborating with restaurants to include its sodas in combo meals, specifically mentioning efforts with McDonald’s to enhance its $5 meal deals that feature a soft drink.
Overall, Coca-Cola performed better than analysts anticipated, reporting revenues of $12.4 billion or $0.84 per share, surpassing the forecast of $11.76 billion and approximately $0.81 per share. The company is now projecting organic revenue growth of 9% to 10%, an increase from its prior estimate of 8% to 9%.
Similarly, Pepsi has faced challenges in capturing the interest of U.S. consumers, who are gravitating toward healthier lifestyle choices and weight loss products. A Gallup poll indicates that young adults in the U.S. are consuming significantly less alcohol than in the past. In early July, Pepsi attributed its lackluster second-quarter performance to several product recalls.