Coca-Cola results top estimates as zero-sugar, smaller pack sizes boost sales

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By Juveria Tabassum and Jessica DiNapoli

(Reuters) -Coca-Cola’s third-quarter results exceeded Wall Street’s expectations on resilient demand for its zero-sugar drinks and Fairlife in the U.S., and its sodas in some international markets despite cautious spending worldwide.

The company also maintained its annual sales and profit targets even though CEO James Quincey flagged a challenging overall environment, sending its shares up 3% on Tuesday.

“Affordability and value are really important and we understand that and know that it’s important that we find the right packages at the right price point to keep that consumer in our base,” CFO John Murphy told Reuters in an interview.

Coca-Cola, which is set to launch its cane sugar trademark soda in the U.S. in the fall season, is planning to offer mini 7.5-ounce single-serve cans, priced at less than $2 in U.S. convenience stores to target lower-income consumers.

To draw well-off consumers, it has invested in zero-sugar beverages and pricier energy drinks such as Powerade, while increasing production capacity for Fairlife milk in the U.S.

Company executives said in a post-earnings call that growing local competition in markets such as India and China was posing challenges.

“Actually there’s a big overall shift to a little more localness, not just from a competitive point of view… I don’t think it’s just about affordability,” CEO Quincey said.

Unit volumes grew in the Europe, Middle East and Africa segment, but were flat in Latin America and North America, and down about 1% in the Asia Pacific region in the third quarter. 

Growing demand for lower-calorie products was one of the factors impacting sales of its trademark coke, CFO Murphy said. 

U.S. consumers have become more health-conscious—a phenomenon that has taken off in the backdrop of a rise in weight-loss medication use, as well as the Make America Healthy Again movement under President Donald Trump’s administration.

“RECOVERING FROM BOYCOTT”      

Murphy said the demand for its trademark coke is also recovering from a “significant impact” from a boycott after a viral video of the company laying off Latino staff and reporting them to Immigration and Customs Enforcement. 

Reuters in February found no public evidence that the company had reported its migrant employees to ICE. 

“This year has been tougher than certainly we expected, and I think perhaps the Hispanic community in general would have expected,” Murphy said.

The world’s largest beverage company’s third-quarter revenue of $12.46 billion topped estimates of $12.39 billion, according to data compiled by LSEG. 

Like its rival PepsiCo, Coca-Cola also expects its revenue and profit to benefit from a weaker dollar.

Earlier this month, PepsiCo topped quarterly estimates on growth in international markets and demand for healthier drinks, as it doubles down on offering affordable pack sizes for its salty snacks. 

In the third quarter, Coca-Cola reported volume growth of 1% compared to a 1% drop in the prior quarter, while prices grew 6%.

Excluding items, the company earned 82 cents per share, beating expectations of 78 cents, as higher prices boosted margins.

(Reporting by Juveria Tabassum in Bengaluru and Jessica DiNapoli in New York; Editing by Arun Koyyur)