Coca-Cola demand rises in fourth quarter but shares slide on tepid outlook
Coca-Cola saw stronger demand globally in the fourth quarter but its shares slipped on investors' concerns about its tepid outlook.
Global unit case volumes grew 1% for the October-December period, led by the U.S., Japan and Brazil, the Atlanta beverage giant said Tuesday. Unit case volumes also rose by 1% in North America, reversing several quarters of flat or declining sales.
But Coke's fourth quarter net revenue was lower than expected, and the company said it expects its organic revenue to rise 4% to 5% in 2026. The company’s organic revenue grew 5% last year, and analysts were expecting close to that this year.
Coke's shares fell 2% in morning trading Tuesday.
Coca-Cola said it's working to turn around weak demand in China, India and some markets in Europe. The company hiked prices 4% in North America and 1% globally during the quarter, but it lowered prices in some markets in Europe and Asia in an effort to boost demand.
Government efforts to curb sugary drink consumption could also weigh on Coke's sales this year. In Mexico, one of Coke's key markets, a tax on sugary drinks went into effect Jan. 1.
In the U.S., some states have begun restricting the foods people can purchase if they're using benefits from the federal government's Supplemental Nutrition Assistance Program, or SNAP. Last month, Indiana, Iowa, Nebraska, Utah and West Virginia became the first of at least 18 states to enact waivers that prohibit using SNAP funds to buy soda.
Coke Chairman and CEO James Quincey said the company believes the SNAP waivers will be manageable, because people will continue to spend cash on certain items if SNAP won't cover them.
“Clearly, we think that, consumers should be allowed to choose, but regulation is regulation,” Quincey said Tuesday in a conference call with investors. “That just puts the challenge on us to give them the category, the beverage, the brand, the pack size, the price point that works for them.”
Last month, the company introduced 7.5-ounce mini cans for the first time at North American convenience stores to help make its soft drinks more affordable.
Coca-Cola Zero Sugar was a strong performer in the fourth quarter, with sales up 13% globally. Water, sports drinks, coffee and tea also saw stronger demand, while juices and dairy products faltered. Coke said last week it will discontinue Minute Maid frozen canned juice sales in the U.S. after 80 years due to declining sales.
Henrique Braun, Coke's chief operating officer and a 30-year veteran of the company, will become its CEO on March 31. Quincey will then become executive chairman.
Braun said he plans to increase Coke's focus on innovation, including finding locally popular brands that the company can invest in and take global. He noted that Santa Clara, a Mexican dairy brand Coke purchased in 2012, recently became a billion-dollar brand.
“The world continues to be really open, and the consumer is looking for more innovation at the local level as well. And that’s where we believe that we can make a bigger difference,” Braun said.
Revenue rose 2% to $11.8 billion in the October-December period, falling short of Wall Street’s expectations. Analysts polled by FactSet expected quarterly revenue of $12.05 billion.
Net income rose 3% to $2.3 billion. Adjusted for one-time items, the company earned 58 cents per share, or 2 cents better then Wall Street had expected.
