Coca-Cola bets on pricey sodas, international demand to lift annual sales forecast

Coca-Cola raised its annual organic sales forecast on Tuesday after topping first-quarter results as customers in the US and international markets shell out more money for its pricey sodas and juices.

The soda giant is seeing demand in the US surge mainly in the away-from-home category as consumers venturing out for movies and dining are willing to spend on its Coke sodas and Minute Maid juices.

Coca-Cola, similar to PepsiCo (PEP.O) which also beat its first-quarter results, is enjoying buoyant demand in international markets such as Europe and Latin America where relaunches of Georgia Coffee and Sprite reformulations have bumped up sales.

The company’s first-quarter organic revenue in Europe, Middle East and Africa rose 15 per cent, while in North America it increased 7 per cent.

Overall average selling price rose 13 per cent, while unit case volumes were up only 1 per cent.

“They are doing good in certain international markets, which are a little bit more used to the effects of inflation, and Coca-Cola has frankly a lot of brand power so they are not seeing that kind of erosion,” said Christian Greiner, senior portfolio manager at F/m Investments, which owns shares of the beverage giant.

Coca-Cola is also overhauling their existing products and introducing newer items to spur demand among lower-income customers.

“US still remains in good shape,” CEO James Quincey said in a post-earnings call, adding there is some purchasing power compression among lower-income customers.

Coca-Cola expects fiscal 2024 organic sales to grow 8 per cent to 9 per cent, compared with its prior forecast of a 6 per cent to 7 per cent rise.

First-quarter net revenue rose 2.5 per cent to $11.23 billion, beating LSEG estimates of $11.01 billion. Coca-Cola posted adjusted profit of 72 cents per share, compared with expectations of 70 cents.

Coca-Cola maintained its annual comparable earnings per share forecast of 4 per cent to 5 per cent growth.

“It is encouraging to see the company guide up but on an underlying dollar basis, it looks like everything is going to remain the same,” Wedbush analyst Gerald Pascarelli said.

The company’s shares were down marginally in early trade.