Coca-Cola did better than expected Earnings As consumers continue to pay higher prices for soft drinks and juices, it’s further evidence that shoppers are willing to continue spending in the face of record inflation and rising interest rates.
The company, which owns brands such as Sprite and Minute Maid, said on Tuesday that third-quarter revenue increased 10% year-over-year and profit increased 14%.
The biggest drivers were a 12% increase in growth, primarily related to price increases, and a change in the mix of products sold in the fourth quarter. At the same time, the volume of products sold increased by 4%, indicating that consumers are willing to pay more for the company’s products. When Coca-Cola rival PepsiCo reported third-quarter earnings this month, volume growth slowed as prices rose.
Coca-Cola’s results underscore that consumers are willing to continue buying their favorite products despite pressure from higher prices at grocery stores and gas stations.
“Consumers have remained resilient in the face of these pressures,” Coca-Cola Chief Executive James Quincey said on a conference call with investors. However, he later added that he would see a new shift in consumer behavior as “the effects of inflation leading ahead of wages are beginning to emerge.” This has led to people postponing purchases of “high-priced” items and looking for cheaper alternatives to other products.
Goldman Sachs analyst Bonnie Herzog said of Coca-Cola, “Their ability to ensure they offer affordable options to price-sensitive consumers is very important.” That’s what they did very well.”
Investors are watching closely as big companies start reporting their latest quarterly results to get a sense of the health of the economy and where inflation is headed. The Federal Reserve is stubbornly campaigning to bring down high inflation by raising interest rates that raise borrowing costs for businesses and consumers.
Food and beverage giants such as Coca-Cola, Pepsi, Procter & Gamble and Nestle all reported significant price increases in their earnings reports this month. This points to persistently high food costs, a key driver of overall inflation in recent months. Some companies have warned that their profit margins have been squeezed, but most have been able to pass on the higher costs to consumers.
Chipotle Mexican Grill prices could rise up to 15% year-on-year before falling to 11% early next year, the company’s chief financial officer Jack Hartung said Tuesday. said on a conference call with investors. Management said the high prices are deterring low-income consumers from dining at Chipotle.
“There is continued pressure on low-income consumers,” Chipotle Chief Executive Brian Nicholl said on a conference call.
Coca-Cola has raised its revenue and profit growth forecasts for this year, saying it is “driven by underlying top-line momentum” heading into next year where it is expected to continue growing. “The company expects global inflation to continue to impact its costs across the board, and it expects commodity prices to remain volatile.