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Coca-Cola raises revenue forecast as soda demand defies price hikes

·2 min read
FILE PHOTO: Coca-Cola crates are pictured in Abuja

By Uday Sampath Kumar

(Reuters) - Coca-Cola Co lifted its full-year revenue forecast on Tuesday, encouraged by buoyant demand for sugary sodas in the face of price increases to combat higher costs.

Global sales volumes rose 8% in the second quarter, the company said, powered by growth in both developed and emerging markets, while average selling prices increased about 12%.

The Dow component's shares were up 2.2% in early trading, while the broader market was down after top U.S. retailer Walmart Inc cut its full-year profit expectations on a slowdown in discretionary spending.

"Coke's results are testament to its brand value because consumers are unwilling to trade down to other colas, despite increasing prices," CFRA analyst Garrett Nelson said.

The results highlight the resilience of packaged food makers, especially in the United States, as consumers prioritize spending on eating at home rather than at restaurants.

Coca-Cola Chief Executive James Quincey said the company would increases prices further in markets where costs were increasing and aim to pass most of them to consumers before a potential recession.

Rival PepsiCo Inc also provided similar views last week. The company said it had not seen any slowdown in demand and added there was room for prices to go further up.

Coca-Cola was preparing for an economic downturn with investments in smaller and cheaper packaging, Quincey said, but added the company's products have historically been among the last to see a slowdown in demand during recessions.

Net revenue rose 12% to $11.3 billion in the quarter ended July 1, beating analysts' expectations of $10.55 billion, according to Refinitiv IBES data.

Still, the results laid bare the impact of higher expenses. Comparable operating margin fell to 30.7% from 31.7%.

Organic revenue, which excludes the impact of a stronger dollar, is expected to rise 12% to 13% in 2022, compared to prior expectation of 7% to 8% increase.

(Reporting by Uday Sampath in Bengaluru; Editing by Sriraj Kalluvila)