Coca-Cola booked stronger-than-expected sales in the third quarter as it hiked prices around the world.
The beverage giant raised its revenue expectations for the second time this year. Coke said Tuesday that it now expects organic revenue growth of 14% to 15%, up from the 12% to 13% it predicted at the end of the second quarter.
Coke’s prices were up 7% over the same period last year. Coke Chairman and CEO James Quincey said consumers have been generally resilient in the face of food price inflation, which is at 40-year highs in some markets like the United Kingdom.
But Coke saw consumers start to trade down to smaller package sizes or private-label competitors to cut costs in the July-September period, particularly in Europe.
“The impact of inflation running ahead of wages is starting to come through,” Quincey said.
Still, Quincey said Coke is confident it can hang on to its customers. For more cost-conscious shoppers, Coke has introduced value packs with smaller-size bottles in the U.S., Japan and other markets. And Coke will continue to try to attract customers on the higher end of the market with offerings like its premium sleek cans.
“It will help us get through what is going to be a tighter situation over the next 6 to 12 months,” Quincey said.
Revenue rose 10% to $11.1 billion in the July-September period. That was ahead of the $10.5 billion Wall Street forecast, according to analysts polled by FactSet.
Volume rose 4% globally, but it saw a further 12% gain because of higher prices and the mix of products sold. That was offset by an 8% decline due to the impact of the strong dollar.
Shares rose 1% in morning trading.
Coke has raised prices throughout the year to account for higher ingredient and freight costs. Coke had locked in prices for some commodities in 2022, but will see those costs rise next year, Coke President and Chief Financial Officer John Murphy said.
“It’s still unclear as to how commodities will trend over the next six to 12 months,” Murphy said.
The company also spent more on marketing in all its major markets as stadiums, movie theaters and other venues welcomed back big crowds. China was one exception; pandemic lockdowns continued to impact sales there.
Sales of sparkling soft drinks rose 3%, led by strong demand for Coca-Cola Zero Sugar. Sports drinks and flavored waters gained 6%, while coffee sales rose 5% as Costa stores rebounded from pandemic-related closures last year. Juice and dairy sales were flat.
Coke’s net income rose 14% to $2.8 billion. Adjusted for one-time items, the Atlanta company earned 69 cents per share. That also beat analysts’ forecasts of a 64 cent profit.
Coke’s results mirrored rival PepsiCo, which also raised its earnings forecast this month after boosting prices by 17% in the third quarter.