By Laura McGuire
Coca-Cola Co raised its annual revenue and profit forecasts after beating quarterly results on the back of higher pricing, with demand for its sodas remaining resilient at a time when consumers are cutting back on non-essential spending.
The company’s shares rose about one per cent in premarket trading on Wednesday.
The results point to steady consumer spending on sodas, snacks and other essential items and little to no resistance to the multiple prices hikes undertaken to offset the impact of rising costs aggravated by supply chain snags and the Russia-Ukraine conflict.
“Consumers have shown an unwillingness to trade down to private label cola or beverage brands and have largely accepted the recent price increases,” CFRA Research analyst Garrett Nelson said.
Earlier this month, rival PepsiCo also raised its annual revenue and profit forecasts for a second time this year after beating second-quarter results, easing worries over a slowdown in demand due to price hikes.
Coca-Cola’s average selling prices rose 10 per cent in the second quarter, while in North America volumes declined one per cent , showing little impact to demand with overall unit case volumes remaining flat.
Some analysts said the focus on volumes as a major driver of revenue will become more prominent as price hikes start to moderate in the second half of the year.
“This whole idea of resiliency likely becomes less topical as we get into the back half of the year and pricing begins to come down,” Wedbush analyst Gerald Pascarelli said.
The maker of Sprite and Fanta now expects organic revenue growth of 8 per cent to 9 per cent for the full year, compared with a prior forecast of an increase of 7 per cent to 8 per cent.
Coca-Cola forecast full-year core earnings per share to rise between 5 per cent and 6 per cent, compared with previous expectation of a 4 per cent to 5 per cent increase.
Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Shounak Dasgupta at Reuters
