Bottles of Coca Cola at a supermarket in Sarajevo, Bosnia and Herzegovina, on Oct. 29, 2024.Dado Ruvic/Reuters
Coca-Cola’s KO-N limited edition flavors of its sodas and price hikes powered a surprise rise in quarterly revenue amid sluggish demand in the packaged foods industry, sending its shares up about 3 per cent.
Volumes in the sparkling drinks segment, featuring seasonal flavors such as Sprite winter spice cranberry and Fanta Beetlejuice, returned to growth in the fourth quarter, rising 2 per cent, after being flat in the prior quarter.
In contrast, rival PepsiCo PEP-Q last week reported a 3 per cent drop in volume for its two biggest segments of North America beverages and Frito-Lay North America for the fourth quarter.
“That’s probably the key difference versus Pepsi. Pepsi has been losing share in North America in sparkling beverages and Coca-Cola has been outperforming in no-sugar and sparkling in particular,” said Charlie Higgs, director of Consumer Staples Research at Redburn Atlantic.
Volumes rose across Coca-Cola’s global markets in the fourth quarter, with North America up 1 per cent.
Executives said on a post-earnings call they expect inflationary pricing to moderate through the year.
U.S. President Donald Trump’s 25 per cent tariffs on aluminum imports could increase costs for the company’s domestic business, but executives said they had other affordable packaging solutions such as plastic bottles to turn to.
“Coca-Cola looks like one of the safest plays in what has become a minefield of challenges for the broader consumer staples group due to GLP-1, tariffs, foreign exchange and other issues,” said Truist analyst Bill Chappell.
Under CEO James Quincey, Coca-Cola has expanded its portfolio in North America to include brands such as premium Fairlife milk and sparkling water Topo Chico.
“The diverse offerings have proven buoyant in the face of consumers cutting back on sugary drinks, that is important to long-term demand structures,” said Brian Mulberry, Client Portfolio Manager at Zacks Investment Management, which holds shares in Coca-Cola.
Coca-Cola is also capturing demand in emerging markets such as India by catering to more local tastes, as well as offering packages at different price points.
The company’s annual organic revenue growth forecast of 5 per cent to 6 per cent was at the upper-end of its long-term target, while comparable profit growth outlook range of 2 per cent to 3 per cent fell shy of expectations.
Fourth-quarter comparable net revenue rose 4.2 per cent to $11.40-billion, compared with a 2.47 per cent drop expected by analysts.
Earnings of 55 cents per share beat expectations by 3 cents.