Coca-Cola’s sales remain flat, but its profits are low. The beverage giant posted a message Revenue in the first quarter was $11.30 billion. on Tuesday, beating Wall Street expectations of $10.96 billion even as case volume rose just 1%.
The company unveiled Happy Tears Zero Sugar and a companion “ad kit” available only on the TikTok store to expand its online audience and signed a deal. five year contract with Microsoft this month to use Azure cloud computing software to help with marketing, streamline operations and manage costs. But innovation is not what Coca-Cola has to thank for its sustainability. Instead, the company owes its success to price increases of 13% by product just this quarter.
“We are encouraged by the start of 2024, where we will deliver another quarter of volume, revenue and profit growth against a dynamic backdrop,” Coca-Cola Chairman and CEO James Quincey said in the report. income statement. “We believe our global system is positioned for sustainable success through the right strategies, clear alignment, strong portfolio and strong execution.”
Although the company attributes about half of the price increase to inflation, which rose 0.4% in March and 3.5% over the past 12 months, according to Bureau of Labor Statistics– This is not the only reason why Coca-Cola raised prices. According to revenue, more than half of the price/mixture growth was due to choices it made to compete with competitors in the market.
Of course, Quincy insisted that prices would normalize along with inflation, especially as goods costs like corn syrup and sugar levels.
“Our price levels and inflation cost levels are normalizing as we see them throughout the year,” he told Yahoo Finance.
Price increase scheme
Coke joins the likes of WK Kellogg, General Mills and Molson Coors – companies that was rewarded for continued price increases. Cereal maker WK Kellogg increased prices/mix by 7.5% in the fourth quarter despite a 10.1% decline in sales volumes; Molson Coors saw a similar price/mix increase of 4.2%, despite a slight decline in volume.
Not all consumers are happy with rising prices, which is reflected in slower sales. TikTokers organized a boycott of Kellogg’s products after CEO Gary Pilnick suggested families eat “cereal for dinner” Outrage over the snack makers’ pricing tactics has extended beyond just Kellogg.
“Americans can’t even buy breakfast cereal without facing the consequences of corporate profiteering,” Liz Zelnick of the watchdog group. Accountable.USA said after General Mills’ march income statement falling sales but increasing profits. “As General Mills reports huge profits, it becomes painfully obvious that the food giant’s price hikes were motivated by their greed.”
Companies seem willing to take criticism in stride if it means their price-raising strategy will be successful. Coca-Cola’s attempt to capitalize on higher prices and international sales reflects competition from PepsiCo, which reported similar trends in its April 23 earnings report.
Despite eight consecutive quarters of double-digit price increases and rising prices in the first quarter net price increase of 5%Pepsi saw Increase of 2.7% organic profit last quarter. Sales of Gatorade and Fritos fell, and beverage volumes fell 5%. As with Coca-Cola, PepsiCo CFO Jamie Caulfield said he expects prices to level off as inflation declines.
“We’ve had three years of … huge consumer inflation and that needs to be offset, and I think the cumulative impact of that is putting some pressure on the consumer,” he said. “But we expect this situation to subside over time.”
But as inflation persists, Wedbush analyst Gerald Pasquarelli predicts companies will continue to rely on high costs to turn a profit.
“This will be another year of price-led earnings growth, even though prices have come down,” he told Reuters.