Coca-Cola Raises Fiscal-Year Guidance Amidst Global Inflation and Private Label Competition
Coca-Cola Co. has raised its fiscal-year guidance after facing challenges in the second quarter due to global inflation and private label competition. The company’s net income attributable to Coca-Cola Co. shareowners increased by 34% to $2.55 billion, or 59¢ per share on the common stock, compared to the previous year’s second quarter. Net revenues also grew by 6% to $11.97 billion, with organic revenues increasing by 11% due to price/mix growth and concentrate sales.
James Robert B. Quincey, the CEO of Coca-Cola, noted that competing macro forces impacted their markets in the second quarter. While supply chain pressures eased and energy prices pulled back from record highs, global inflation remained elevated, and geopolitical tensions persisted in certain markets. Despite these challenges, Coca-Cola expects fiscal-year organic revenues to increase by 8% to 9%, up from the previous guidance of 7% to 8%.
Quincey emphasized the impact of the global inflationary environment on consumers and business across different regions. Developed markets like North America and Western Europe are experiencing moderate inflation, but there is a willingness among consumers to switch to private label brands in some categories. Consumers are increasingly cost-conscious and seeking value. In response, Coca-Cola aims to provide affordable and premium propositions to customers, focusing on delivering value through basket and incidence growth.
The trend of switching to private label brands is more prominent in Europe and the United States, particularly in water and juices, as opposed to soft drinks and colas. In terms of unit case volume, Coca-Cola’s performance in the second quarter remained steady compared to the previous year. While volume in sparkling soft drinks remained even, declines in Europe, the Middle East, and Africa offset the strong performance in Asia Pacific and Latin America. Volume in water, sports, coffee, and tea also remained even, with sports drinks experiencing a 3% decline driven primarily by BodyArmor and Powerade in the United States.
In North America overall, unit case volume declined by 1%. Increases in sparkling flavors and juices, value-added dairy, and plant-based beverages were counterbalanced by declines in water, sports drinks, coffee, tea, and trademark Coca-Cola. In Europe, the Middle East, and Africa, unit case volume declined by 5%, but Quincey expressed optimism about Europe’s performance in the second half, particularly when excluding the impact of Russia.
Through the first half of the fiscal year, Coca-Cola’s net income attributable to shareowners increased by 21% to $5.65 billion, while net revenues grew by 5% to $22.95 billion. However, commodities like sugar and juice remain elevated in price, despite favorable freight rates.
Coca-Cola remains focused on addressing the challenges posed by global inflation and private label competition. By staying consumer-centric and partnering with customers, the company aims to provide affordable and premium products that deliver value to consumers. Although inflation and private label competition continue to impact their markets, Coca-Cola’s raised fiscal-year guidance reflects their confidence in navigating these challenges and driving organic revenue growth.
