The Coca-Cola Company today posted quarterly sales growth that surpassed analyst expectations, bolstered by price hikes and steady global demand that helped offset a volume decline in North America.
Here’s the top-level view:
- The beverage giant reported Q4 net revenues grew 7% YOY to $10.8 billion and organic net revenue grew 12%, driven by 9% growth in price/mix and 3% growth in concentrate sales.
- For FY 2023, net revenues jumped 6% to $45.8 billion and organic revenues grew 12%, fueled by 10% growth in price/mix and 2% growth in concentrate sales.
- In the quarter, Coca-Cola’s operating margin was 21% versus 20.5% in the prior year. For the full year, the company’s operating margin was 24.7% versus 25.4% in FY 2022.
- For both the quarter and the full year, the company gained value share in total nonalcoholic ready-to-drink (NARTD) beverages.
“During the year, our people and partners rose to meet new challenges, allowing us to excel globally and deliver in a dynamic world,” said James Quincey, Chairman and CEO, in a statement. “As we begin a new year, we’re confident that our all-weather strategy, powerful portfolio and harmonized system will continue to create value for our stakeholders in 2024 and for the long term.”
In the company’s North America segment, unit case volume declined 1% for the quarter, as growth in value-added dairy and plant-based beverages was more than offset by a decline in water, sports, coffee and tea.
During today’s earnings call, Quincey told investors Coca-Cola chose to deprioritize some bulk water and advanced hydration categories in the U.S. in Q4 while focusing on the normalization and restabilization of its sports drink category, which includes Powerade and Body Armor.
Having seen the success of brands like PRIME and Electrolit, Body Armor last month launched its own line of zero-sugar sports drinks in four flavors: Fruit Punch, Lemon Lime, Orange and Cherry Lime. At BevNET Live Winter 2023, SPINS reported in its presentation that low- and no-sugar is driving growth in beverages with sales of zero-sugar drinks rising 15% year-over-year.
“There’s work to be done in the water and advanced hydration categories and, to a much lesser extent, tea,” said Quincey. “The overall picture is strong growth in sparkling, particularly Coke and Sprite. Good on Smart Water, good on Vitamin Water, good on Topo Chico and very good on Fairlife.”
Price/mix grew 8% in Q4, primarily driven by pricing actions already in the marketplace, timing-related adjustments and favorable category mix.
Quincey said the company is working to regain consumer demand by “evolving packaging options across more distribution points to drive affordability and premiumization.” On the affordability side, Coca-Cola’s 1.25L rPET bottles are now available in 80% of supermarkets nationwide and distribution of its 16 oz. can increased by 14 points in c-stores last year.
“[In terms of] the consumer landscape in North America, one has to not think of it in aggregate. What has been important to understand is there’s a section of the population that has come under pressure from disposable income and they’re very much focused on affordability,” said Quincey.
However, although some consumers have been squeezed by inflation, he said there is another consumer segment that still holds significant purchasing power.
“We’ve seen strong growth for some of the high price point, premium segments like Failife, Core Power and Simply […] so there’s clearly multiple things going on in the landscape,” Quincey elaborated.
Looking ahead, the parent company of BodyArmor and Fresca expects to deliver FY 2024 organic revenue (non-GAAP) growth of 6% to 7%. For comparable net revenues, Coca-Cola forecasts a 2% to 3% currency headwind based on the current rates and including the impact of hedged positions, as well as a 4% to 5% headwind from acquisitions.
During its “Real Magic Untapped” event in New York City last week, Coca-Cola announced the release of a new permanent addition to its flagship cola line: Coca-Cola Spiced, a raspberry and spice-flavored soda offered in original and Zero Sugar varieties. On today’s call, Quincey said that the beverage – set to launch on February 19 – is aimed at increasing connectivity with Gen Z “and the broader consumers driving engagement.”
The event also featured a panel during which Coca-Cola executives discussed the beverage giant’s innovation and marketing strategies for 2024. During the panel, Selman Careaga, president, global category, called Coke Zero Sugar “the most important engine for growth for the company over the past few years,” especially in North America.
“Driving reconsideration is part of a whole overall strategy that we’ve been deploying for a good number of years with the Coke trademark, whether it’s Original Coke, Zero Sugar or even Diet Coke,” echoed Quincey during today’s call. “The execution has allowed us to drive Coke growth across the global business.”