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Coca-Cola defied sluggish sales in the rest of the consumer goods sector, reporting better than expected revenues in the fourth quarter and volume growth for the full year while continuing to raise prices by as much as a quarter.
The drinks giant said its net revenues in the year to December rose 6 per cent to $45.8bn, driven by average price increases of 10 per cent. Despite the hefty price increases, the volume of drinks sold rose 2 per cent, reflecting solid consumer demand for beverages such as Coca-Cola and Sprite.
“We’re one of the few consumer goods companies that are consistently demonstrating our ability to grow volumes and revenue,” finance chief John Murphy told the Financial Times.
Consumer goods companies, including Coca-Cola’s key rival PepsiCo, have struggled to maintain sales volumes while also raising prices to offset higher operating costs. Unilever last week reported a marginal uplift in sales volumes for the full year of 0.2 per cent, while food giant Nestlé is expected next week to report a 0.1 per cent drop in real internal growth — its proxy measure for sales volumes.
But as overall inflation moderates, companies including Coca-Cola are signalling that price inflation will return to normal levels in 2024.
The company’s operating margin inched down to 24.7 per cent compared with 25.4 per cent the year before, but edged up in the fourth quarter from 20.5 to 21 per cent.
Net income for the full year rose 12 per cent to $10.7bn, or $2.48 a share. In the fourth quarter net income was below expectations, falling 3 per cent to $1.9bn, compared with an expected 10 per cent uplift.
Europe, the Middle East and Africa were the hardest hit by price rises, up 24 per cent in the fourth quarter and 19 per cent for the full year. Unit case volumes were flat while revenues grew 7 per cent in the region. Murphy said a third of the pricing was a result of hyperinflation in Zimbabwe and Turkey.
He added that these markets, as well as Argentina, made up less than 5 per cent of Coca-Cola’s total sales volumes but that they had “created a cosmetic distortion in the near term that I know is catching a lot of people’s attention”.
Murphy said the company would start to moderate pricing this year as inflation normalised, adding that “a normal, moderate approach to pricing” was reflected in its guidance for this year.
The company expects like for like revenue growth of 6 to 7 per cent in 2024, significantly lower than the 12 per cent rise in 2023.
North America was one of the few regions where slower sales indicated consumers were beginning to push back against ever-higher prices. Unit case volumes fell 1 per cent in the full year as a result of lower demand for Coca-Cola’s water, sports, coffee and tea business.
PepsiCo last week reported its first year-on-year revenue decline since 2020 as a result of weak sales in North America. “We’re seeing a bit of a slowdown in the US in both the food and beverage category,” chief executive Ramon Laguarta told analysts.
Coca-Cola said there was an overall 1 per cent volume decline in the fourth quarter as a result of the Israel-Hamas war, both due to supply chain disruptions and depressed demand.
“We see near-term challenges continuing to have an impact,” Murphy said. “At this point it is difficult to predict how long that will last.”
The company’s share price rose about 1 per cent to $60.35 on Tuesday morning.
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