Zhī tōng cǎi jīng learned that Coca-Cola (KO.US) has released its financial results for the second quarter. The data shows that Q2 revenue increased to 12.4 billion US dollars, up 3.3% year-on-year, which is 0.65 billion US dollars higher than analysts' expectations. Non-GAAP earnings per share were $0.84, exceeding market expectations of $0.81.

Coca-Cola's organic revenue in the second quarter grew 15% year-on-year, far higher than the expected 9.4% growth. Among them, all departments such as Latin America (+28%), Europe, the Middle East and Africa (+30%), North America (+10%), Asia-Pacific region (+4%), bottling investment (+14%) and global venture capital (+1%) achieved growth.

Although consumer demand is more sensitive to price increases, Coca-Cola continues to raise the prices of its drinks. Price/mix grew 9%, higher than the expected 8% growth. Driven by inflation in some global markets, the company raised the prices of its product mix by an average of 9% across regions - about five points of which were driven by pricing in markets that have experienced significant inflation, while the remainder was largely driven by pricing behavior in the marketplace. Although the company raised prices, Coca-Cola's total unit case volume increased by 2% globally, slightly higher than the expected 1.77%.

Looking ahead, thanks to the price increase, and with global demand for its drinks growing in the second quarter, Coca-Cola has raised its revenue and profit expectations for the year. The company currently forecasts that organic revenue growth will be between 9% and 10% this year, excluding exchange rate fluctuations and other factors, higher than the forecast of 8% to 9% in April. The company has also raised its comparable earnings-per-share growth outlook from a previous 4% to 5% to 5% to 6% ($2.82-2.85), higher than market expectations of $2.82.

This result is in sharp contrast to Coca-Cola's main competitor, PepsiCo (PEP.US). PepsiCo's revenue growth announced earlier this month fell below expectations, due to declining demand for beverages and snacks in North America, where budget-conscious consumers are increasingly resisting price hikes. PepsiCo has lowered its full-year revenue outlook, basically reiterating most aspects of its full-year forecast, but currently expects organic revenue growth of 4% for the year, compared with the previous guidance of at least 4%.

PepsiCo has heavily relied on price hikes in the past two years due to higher costs of raw materials and packaging. 4Q 2023 marks the eighth consecutive quarter of double-digit price increases for the company. Prices rose by 5% in 1Q and another 5% in the most recent quarter. However, in its most important market, low-income US consumers, facing sustained price hikes, have reduced the amount of snacks they buy or switched to store brands.

Data compiled by Deloitte shows that consumer spending continues to decline, and consumers prioritize savings to offset higher inflation levels and higher interest rates. After years of price hikes and sales growth, PepsiCo's US business is now struggling. Prolonged inflation in the US has forced many shoppers to cut spending and opt for cheaper private-label brands at supermarkets. With consumers increasingly focused on nutrition and price, the salty snacks category in particular is weak.

However, Coca-Cola's performance also shows signs of weak consumer demand in the North American market. Unit case volume in North America fell by 1%, despite a price-mix increase of 11% in the region. Coca-Cola said that its sales of water, sports drinks, tea and coffee, Coca-Cola trademark and other carbonated beverage brands declined in North America, offsetting growth in its juice, dairy product and plant-based beverage categories.

At the time of writing, Coca-Cola's stock price rose 1.2% before the market opened on Tuesday. As of Monday's close, the stock had risen nearly 10% this year, trailing the S&P 500 index but outperforming PepsiCo.