Bubbling Inflation Isn't Harming Coca Cola And Pepsi's Fizz

On Monday, The Coca-Cola Company KO reported first quarter earnings that topped estimates thanks to resilient demand and increased prices. beat. PepsiCo.Inc PEP followed on Tuesday, beating both earnings and revenue estimates for its first quarter and even raising its full-year outlook. 

Coca Cola’s First Quarter Figures

Net income attributable to shareholders amounted to $3.11 billion, or 72 cents per share, rising from $2.78 billion, or 64 cents per share earned in last year’s comparable quarter. Putting restructuring charges, tax matter and other items aside, earnings amounted to 68 cents per share, topping Refinitiv’s survey of analysts who expected on average 64 cents. Coca Cola’s net sales rose almost 5% as they came close to $11 billion while organic revenue, revenue that excludes acquisitions, rose 12% mainly on the back of higher prices of the company’s drinks. But Coca Cola’s operating margin slipped to 30.7% from 32.5% a year earlier due to higher operating costs, increased marketing spending, investments, as well as a strong dollar.

The Muted Effect Of Increased Prices  

If the impact of higher prices and currency changes is excluded, the unit case volume shows a growth rate of 3%. But North America was flat, while Europe, the Middle East and Africa fell 3%. The earthquake in Turkey also harmed demand in the region for its tea whose volumes shrank 3%.

Latin America and the Asia Pacific region remained strong. 

The Stars Are Coke Zero, Coffee And Water 

The sparkling soft drinks unit experienced 3% volume growth. Moreover, Coke Zero Sugar saw volume rise 8%.  The coffee business saw its volume rise 9% and water business expanded 5%, with the total unit experiencing a 4% volume growth. 

Reiterated Forecast For 2023

Organic revenue growth is expected in the range between 7% to 8% while earnings per share are expected in the range between 4% and 5%.

Pepsi’s First Quarter Figures

The beverage and snacks reported revenues of $17.85 billion for the quarter ended on March 25th, topping Refinitiv’s expectation of $17.22 billion as net sales rose 10.2%. Organic revenue, which excludes the impact of acquisitions and divestitures, grew 14.3%.

Adjusted earnings amounted to $1.50 per share, also topping Refinitiv’s expectation of $1.39. Pepsi made a net income of $1.93 billion, that translates to $1.40 a share, dropping significantly from last year’s $4.26 billion and $3.06 a share.

Pepsi’s Key Units

The beverage business grew 1% while the food business shrank 3%. Across all categories, volumes dropped 2% while prices were up 16%. 

Organic revenue of Frito-Lay North America grew 16% and PepsiCo Beverages North America’s organic revenue also rose 12%, both delivering double digit net revenue growth. 

Improved 2023 Guidance

Pepsi expects full-year organic revenue to rise 8%, up from previous forecast of 6%. It also sees core constant currency EPS rising 9% as opposed to previously guided 8%.

Pepsi Did It A Bit Differently

It is undoubtable that both Pepsi and Coca-Cola dominate global carbonated drinks field. Results show that their sales strategies are resonating with consumers who are willing to pay the higher prices. However, back in February, Pepsi paused price hikes while Coca Cola continued ahead, saying it will continue raising soda prices globally this year but in a moderate manner. 

2 In 1 Takeaway

Both Pepsi and Coca Cola got a lift from higher prices and are enjoying steady demand. The healthy food trend doesn’t seem to be in the air as much as sodas, coffee, Doritos, Lay’s and sodas seem to be as popular as ever.