Coca-Cola’s (KO) third quarter was better than expected as consumers continue to be picky with their dollars.
As of Wednesday morning, the soft drink giant posted revenue of $11.9 billion, beating expectations of $11.61 billion, although down from $12 billion in the same period a year ago. Adjusted earnings came in at $0.77 per share, above expectations for $0.74.
Higher prices have helped counter factors such as continued pressure from cautious consumers, the prospect of less favorable commodity prices and more challenging trends in international markets.
CEO James Quincey said Coca Cola demonstrated “resilience in the face of a dynamic external environment,” quoted in a company release. The team continues to “address near-term challenges while remaining focused on long-term growth opportunities,” he added.
Coca-Cola shares fell 2% in premarket trading after the report’s release.
Rival PepsiCo (PEP) revised its 2024 sales outlook earlier in October after third-quarter North American and international sales fell short of Wall Street expectations.
In a phone interview with Yahoo Finance, Pepsico CEO Ramon Laguarta said consumers are “very challenged” and are “making a lot of tradeoffs” when it comes to food. According to Laguarta, these considerations weigh most heavily on the snacks sector.
Ahead of the results, JPMorgan analyst Andrea Teixeira wrote that consumers, especially in the US, are “having more choice with less money in their pockets.” That has forced Coca-Cola to raise prices to maintain growth, Teixeira said in a letter to customers.
“Coca-Cola is leveraging its revenue growth management capabilities to offer price points for both single-serve in the convenience and gas channel and multi-serve in larger stores,” Teixeira wrote. She pointed to the example of a single-serve 20 oz. can cost $2.25 to $2.69, compared to $1.99 previously.
She also said management is comparing the cost of eating at home versus eating out, especially for low- to middle-income households.
According to the Consumer Price Index, grocery costs rose 1.3% year over year in September, while dining out costs rose 3.9%. Coke management is working with grocers to explore the area, Teixeira said. One attempt is to ‘market a rotisserie chicken with an affordable price’ [2 liter] bottle, which would still represent a significant savings compared to meals away from home,” she said.
Coca Cola package volumes fell 1% internationally, led by a slowdown in China, Mexico and Turkey, although there was growth in Brazil, Japan and the Philippines.
