The Coca-Cola Company saw its revenues grow 11% in 2022 as it raised prices for its beverages, but it is preparing for uncertain economic conditions ahead.
Inflationary pressures and geopolitical challenges continue to affect the Atlanta-based giant’s business of selling beverages around the world.
In the fourth quarter of 2022, “the environment remained dynamic as inflation, geopolitical tensions, pandemic-related mobility restrictions and currency volatility persisted,” said Coca-Cola CEO James Quincey during an investor conference call Tuesday.
Coke ranks among Atlanta’s best known brands and is an economic bellwether. Its portfolio includes carbonated beverages, energy drinks, juices and teas sold in nearly every nation on earth.
The company hiked prices last year, while using marketing campaigns to try to keep customers drinking Coca-Cola beverages.
“Prices have been going up,” Quincey acknowledged in an interview on CNBC. With wages increasing, “there is money in the consumers’ pocket.” But, he added that “clearly the lower-income consumers are under pressure.”
While the company grew net operating revenues 11% for the year, some of its costs grew even faster, with a 17% increase in cost of goods sold. Its consolidated net income was $9.57 billion, down 2% year-over-year.
Economic outlook
“As we look to 2023, many uncertainties remain in the macro economy, whether from economic policies, consumer demand, inflation, supply chain, war and geopolitics,” Quincey said. He expects revenue growth to slow later in 2023.
In the United States, a recession is expected but hopes are to avoid a severe downturn with millions of job losses. “The situation seems to be moderating without causing a hard landing,” Quincey said.
In Europe, consumer demand is softening and that’s likely to continue this year, Quincey said. South Africa’s energy crisis is hampering its economic growth. In Latin America, Argentina continues to have severe inflation and economic challenges, while other countries are performing better. In Asia, “the reopening of China is going to be a positive for the business,” he said.
Last year, Coke’s business took a hit from the suspension of its business in Russia as many U.S. companies withdrew following Russia’s invasion of Ukraine. Other challenges included pandemic restrictions and the surge in COVID-19 cases in China.
Unit case volume, a key sales measure, was up 5% for the full year — starting off at 8% growth in the first quarter and ending with a 1% decline in the fourth quarter.
That includes growth in Brazil, India, Great Britain and Mexico that was offset by the suspension in Russia. In North America, unit case volume was flat in the fourth quarter.
A bright spot in the quarter was 9% growth in Coca-Cola Zero Sugar, while juice, dairy and plant-based beverages declined 7%.
Marketing to the world
To keep drawing consumers to its beverages in spite of global economic turbulence, Coke has been pursuing advertising campaigns catered to different markets, including food-and-Coke combo deals in Vietnam, sponsoring the Rock in Rio music festival in Brazil and the Cricket World Cup, which will be held in India this year.
In the United States, Coke last year launched Minute Maid Aguas Frescas, an example of “leveraging Gen Z insights,” Quincey said. The company is also launching more premium products like canned Jack and Coke debuted last year and more drinks in sleek or smaller cans.
Looking to 2023, Coca-Cola chief financial officer John Murphy said he expects revenue to grow while inflation will continue to push up operating costs. The company is forecasting 4-5% growth in comparable earnings per share.
“We don’t know what’s going to happen,” Quincey said. “But we do know we’ve generated a lot of momentum, a lot of flexibility and a lot of agility to be able to manage through what’s going to come at us.”
Coca-Cola by the numbers
Net operating revenue
2022: $43 billion
2021: $38.66 billion
Consolidated net income
2022: $9.57 billion
2021: $9.8 billion
Unit case volume
2022: Up 5%
2021: Up 8%
Source: Coca-Cola Company
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