Coca-Cola Co. raised its full-year guidance after second-quarter results show continued momentum and consumer willingness to pay higher prices to quench their thirst with the company’s sugary sodas, fruit juices and sports drinks.
(Bloomberg) — Coca-Cola Co. raised its full-year guidance after second-quarter results show continued momentum and consumer willingness to pay higher prices to quench their thirst with the company’s sugary sodas, fruit juices and sports drinks.
The Atlanta-based company now expects full-year organic revenue growth of 8% to 9%, up from 7% to 8% previously. Adjusted profit is expected to grow 5% to 6% from $2.48 in 2022. Coca-Cola said in April that it expected comparable earnings growth of 4% to 5% for the year, including an estimated headwind from foreign currencies of 3% to 4%.
“We are executing efficiently and effectively on a local level, while maintaining flexibility on a global level,” James Quincey, the company’s chief executive officer, said in a statement.
Second-quarter organic revenue, which excludes the impact of currency shifts and acquisitions, was up 11% in the quarter. Analysts were expecting an increase of 8.6%. Adjusted earnings of 78 cents a share exceeded the Bloomberg analysts’ consensus estimate of 72 cents.
The maker of brands such as Sprite and Fanta sodas and Minute-Maid juices said that total unit volume was flat in the most recent quarter while its price mix — or price changes across a range of products and packaging — increased by 10%. In the US total unit volume declined, but was offset by growth in other markets such as Mexico, the company said.
Shares fell less than 1% at 9:43 a.m. New York time.
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The company is confident that consumers will continue to purchase diet beverages made with the popular artificial sweetener known as aspartame despite recent World Health Organization reports that raised health concerns, John Murphy, the company’s chief financial officer, said in an interview.
“Aspartame has been one of the most studied ingredients in the history of the food supply and this is another one of those studies,” Murphy said. “We do not plan to change any our our recipes.”
The price that Coca-Cola pays for key commodities such as sugar, corn and juice is “easing overall,” but still having a mid-single-digit impact on costs, Murphy said. Orange juice prices are high but the company does not have a supply issue with the fruit, as some bottlers are experiencing, he said.
A key question is whether beverage companies have reached “demand destruction” by raising prices, Garrett Nelson, a beverage industry analyst at CFRA, said in an email.
“Coca-Cola continues to exhibit strong price inelasticity of demand, as consumers have shown an unwillingness to trade down to private-label cola or beverage brands and have largely accepted the recent price increases,” he wrote.
Earlier this month, Coca-Cola’s chief rival, PepsiCo Inc., raised its profit outlook for the year, citing consumer resilience to higher prices.
(Updates shares. The headline of a previous version that attributed guidance to events was corrected.)
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