AP Business

Coke’s strong quarter fueled by higher prices, China rebound

Coca-Cola Co. reported higher-than-expected sales in the first quarter as it continued to hike prices and its business in China improved.

Revenue rose 5% to $11 billion for the January-March period, the company said Monday. That beat Wall Street’s expectations. Analysts polled by FactSet had forecast revenue of $10.8 billion.

Coke Chairman and CEO James Quincey said higher demand at restaurants and robust new year celebrations in China were a stark comparison with last year, when a new variant of the coronavirus depressed demand.

But higher prices also boosted sales. Pricing and mix __ which includes changes in package sizes __ contributed 11% to its revenue growth while concentrate sales rose 1%. Price and mix grew by 12% in each of the previous three quarters.

Quincey said Coke is trying to satisfy customers looking for value, with deals on multi-packs and refillable bottles in some markets, like Latin America. But it’s also pushing pricier premium drinks, like soft drinks in slim cans or a new line of cocktail mixers from its Simply juice brand.

“We seek to meet the consumers where they are and where their pockets are,” Quincey said during a conference call with investors.

Overall, Coke’s soft drink sales rose 3%, led by strong demand for Coke Zero Sugar. Water sales rose 5%, but demand for sports drinks fell 1%.

Coke said it’s still seeing inflation in commodity costs and wages, although freight and oil prices are coming down. The Atlanta company expects both prices and inflation to moderate as the year progresses. Coke expects organic revenue growth of 7% to 8% this year, which would be half the 16% growth it delivered in 2022.

Unit case volumes jumped 10% in Asia in the first quarter as COVID-related shutdowns ended in China. Quincey said Coke’s China business remains below pre-pandemic levels, but the company is “cautiously optimistic” and has resumed marketing in China. Coke also grew its business in India by adding retail partners offering promotions on multi-packs.

In North America, sales were flat. Higher sales of soft drinks, juice and dairy were offset by lower sales of water, sports drinks, tea and coffee. Case volumes fell in Europe, where growth in some markets was offset by the suspension of business in Russia and the February earthquake in Turkey.

Operating income fell 1% as Coke invested heavily in marketing. The company announced in February that it was among the first to partner with the artificial intelligence company Open AI and the consulting firm Bain and Co. to experiment with ChatGPT and DALL-E in its marketing. Last month, Coke launched a promotion that lets customers make digital art using material from the company’s archives. Coke also launched a campaign for its Smartwater brand that targeted consumers using geolocation apps. Coke is starting to see increased engagement from younger customers as a result of those efforts, Quincey said.

Adjusted for one-time items, the Atlanta beverage giant earned 68 cents per share. That also beat analyst forecasts of 65 cents.

Coke’s shares rose less than 1% Monday.

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