Coca-Cola gets boost from rising demand and prices

Soft drinks giant raises full-year profit forecast after combatting supply chain issues

Soft drinks group Coca-Cola Co raised its full-year profit forecast on Wednesday ono the back of higher prices and demand for its products.  Photograph: Ramin Talaie/Bloomberg

Soft drinks group Coca-Cola Co raised its full-year profit forecast on Wednesday ono the back of higher prices and demand for its products. Photograph: Ramin Talaie/Bloomberg

 

Soft drinks group Coca-Cola Co raised its full-year profit forecast on Wednesday, indicating that higher prices and demand for its products across the globe were helping it counter a profit squeeze from supply chain disruptions.

The beverage giant’s shares rose 3 per cent in premarket trading as it also beat estimates for third-quarter revenue and profit.

Coca-Cola’s revenue surged 16 per cent to $10.04 billion in the quarter, as the reopening of public venues such as cinemas, stadiums and restaurants across the world led to a rebound in demand for its soft drinks.

Unit case volumes, a key indicator of demand, were up 6 per cent in the reported quarter, with Europe, Middle East, Africa and Latin America markets being their major drivers.

The average value of products sold also rose 6 per cent, after Coca-Cola raised prices to counter some of the impact from surging commodity and freight costs created by clogged shipping ports, a labor shortage and the pandemic.

While demand is expected to remain strong, chief financial officer John Murphy said Coca-Cola was not immune to cost inflation in 2022 or the business impact of potential new lockdowns in some markets due to a spike in Covid-19 cases.

“We do see the world emerging from the crisis a bit like an earthquake. You get more aftershocks, but the consequent aftershocks tend to be smaller than the early ones. And that’s kind of how we see 2022,” Mr Murphy said.

Other companies, including PepsiCo and consumer goods giants Unilever and Procter & Gamble, have warned that they would have to increase prices again to counter persistent supply-chain bottlenecks.

PepsiCo, which raised prices recently, said this month it would likely implement more hikes again early next year to overcome everything from a shortage of Gatorade bottles to a lack of truck drivers.

“While Coke is not immune to inflation, and could see more of it next year, improvements in its operations and new product innovation should help offset at least some of the impact from rising costs,” Edward Jones analyst John Boylan said.

Coca-Cola expects its annual adjusted earnings per share to rise by between 15 per cent and 17 per cent, compared with a prior forecast of a 13 per cent to 15 per cent increase.

On an adjusted basis, the company earned 65 US cents per share in the third quarter, beating analysts’ estimates of 58 cents, according to Ibes data from Refintiv. – Reuters