Coca-Cola lifts annual forecasts as price hikes fail to dampen soda demand
Coca-Cola (KO.N) raised its annual sales and profit forecasts earlier this week, as a round of price increases failed to deter consumers mainly in international markets from spending more on the beverage giant’s sodas, energy drinks and juices.
Shares of Coca-Cola rose nearly 1 per cent in premarket trading as the company also posted a surprise increase in second-quarter revenue.
Coca-Cola has been foraying into newer regions in Asia and Europe to keep its revenue growth intact, while offering budget friendly options such as 12-ounce slim cans and a wider variety of drinks including Coke Spiced to cater to different price points in the market.
The company has also been less aggressive in pushing the envelope on prices, compared with rival PepsiCo (PEP.O).
Coca-Cola’s average selling price rose 9 per cent in the second quarter, the Sprite maker said, while unit case volumes increased 2 per cent.
However, Coca-Cola saw volumes in the North American region fall by 1 per cent as consumers turned cautious about spending and dining out.
Fast food chains including McDonald’s and KFC-owner Yum Brands, which are some of the biggest sellers of beverages made by Coca-Cola and PepsiCo, are already bearing the brunt of tighter consumer budgets.
PepsiCo CEO Ramon Laguarta told Reuters in July that consumers across all income levels are now stretched and have become price-sensitive.
“Coca-Cola has played a blinder at a time consumers are carefully considering value … Keeping existing customers happy gives them the scope to win over new drinkers at a time some of its rivals, such as PepsiCo,” said Danni Hewson, head of financial analysis at AJ Bell.
Coca-Cola forecast fiscal 2024 organic sales to grow between 9 per cent and 10 per cent, compared with its previous expectation of an 8 per cent to 9 per cent rise.
The company expects annual adjusted profit to increase between 5 per cent and 6 per cent, compared to the prior forecast of a 4 per cent to 5 per cent rise.
Coca-Cola’s second-quarter net revenue rose 2.9 per cent to $12.31 billion beating LSEG estimates of $11.76 billion.
Its adjusted profit came in at 84 cents per share, compared with the expectations of 81 cents.