The Coca-Cola Company reported improved operating margin and earnings per share driven by pricing actions amid a “dynamic external environment.”
Net revenue declined 2% to $11.1 billion during Q1 while organic revenues grew 6%. Coke did see a lift in its operating margin, up 32.9% (compared to 18.9% in Q1 2024) as pricing rose 5% across segments.
“During the quarter, some markets improved sequentially, while other markets faced macroeconomic uncertainty and geopolitical tensions that impacted consumer confidence and consumption behaviors,” said CEO and chairman James Quincey in prepared remarks. “We’re getting more granular and tailoring our execution to be local in key geographies, categories and channels.”
Organic revenue was up 6% across segments. Latin America rose the highest in the quarter to 13%. Consolidated unit case volume rose 2%; yet, the North America and Bottling Investments segments saw volumes drop 3% and 17%, respectively.
As with any global business, the impact of tariffs and how Coke was adapting to the evolving trade environment was the main topic of conversation during the first quarter earnings call. Coke executives stressed the “local” nature of its business structure and how it has leveraged its direct regional ties to improve margins in certain markets.
Quincey pointed to its “Hecho en Mexico” campaign as an example of how Coke is building back trust amid a dip in consumer sentiment.
“The imperative is to make the global brand locally relevant,” he said during the question-and-answer section of the call. “In the moments of geopolitical tension, one of the key strategies is to reinforce ‘Made In’ or ‘Made By.’”
Despite the optimism, Coke leadership emphasized that there was still a lot of uncertainty ahead with Q2 expected to be “choppy” but “manageable.”
Coke maintained its 2025 organic revenue growth outlook at between 5% and 6%, but the company did lower its comparable currency neutral EPS (non-GAAP) growth to 7% to 9%, slightly down from 8% to 10%.
The decision to maintain its full-year forecast comes in contrast to PepsiCo which lowered its earnings predictions last week. Similar to Coke, KDP also held strong in its FY2025 outlook.
“There’s still a lot of volatility out there with emerging markets,” said president and CMO John Murphy. “Each quarter has its own personality nowadays, and so I’d look at the full year versus the dynamics of any one quarter.”
Looking toward specific brand growth, Quincey highlighted that Fairlife has become “a very big business” with “high double-digit percent growth rates.” To keep up with the ultra-filtered milk and protein shake brand’s velocities, Coke has been prioritizing capacity throughout its network, and expects a “major capacity uplift” coming at the end of the year.
After launching its prebiotic soda Simply Pop during the quarter, executives were asked how the company was strategizing around consumer demand for functional ingredients in drink options. Quincey said that Coke would “follow the consumer” when it comes to chasing trends in wellness, but he expects macro ingredient trends like high-protein to have a more lasting impact.
“At the end of the day, [consumers] generally want their beverages to taste good, and adding certain ingredients affects the taste,” he said. “Taste is still going to remain primary, but to the extent that customers are willing to trade taste for ingredients, then absolutely we’ll follow that trend.”