Coca-Cola’s limited edition flavours, as well as price hikes, powered a surprise rise in quarterly revenue amid sluggish demand in the packaged food industry, sending its shares up about 3%.
Volumes in the sparking drinks segment, featuring flavours such as Sprite winter spice cranberry and Fanta Beetlejuice, returned to growth in the fourth quarter, rising 2% after being flat in the previous quarter.
The director of Consumer Staples Research at Redburn Atlantic Charlie Higgins said, “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.”
Volumes rose across Coca-Cola’s global markets in the fourth quarter, with North America up 1%.
Executives said on a post-earnings call they expect inflationary pricing to moderate through the year.
Tariffs
US President Donald Trump’s 25% tariffs on aluminium imports could increase costs for the company’s domestic business, but executives said they had other affordable packaging solutions to turn to, such as plastic bottles.
Truist analyst Bill Chappell said, “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.”
Offerings
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.
Brian Mulberry, Client Portfolio Manager at Zacks Investment Management – which holds shares in Coca-Cola – said, “The diverse offerings have proven buoyant in the face of consumers cutting back on sugary drinks, that is important to long-term demand structures.”
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% to 6% was at the upper-end of its long-term target, while comparable profit growth outlook in the range of 2% to 3% fell shy of expectations.
Fourth-quarter comparable net revenue rose 4.2% to $11.40 billion, compared with a 2.47% drop predicted by analysts.
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