Americans are becoming more selective about which packs of soda they choose.
Coca-Cola (KO) and PepsiCo (PEP) are both seeing declining sales volumes in North America. For the cokemaker, volume growth in the region fell by 1% last quarter, offset by an 8% increase in prices.
Rival PepsiCo saw a 6% decline in beverage volume in North America, which was offset by a 9% price increase.
Executives at both companies say U.S. consumers are resilient and optimistic, but say buying habits are changing for some.
” [North America] “Consumers remained fairly resilient throughout 2023 in the face of fear,” Coca-Cola Chief Financial Officer John Murphy told Yahoo Finance by phone. , which was much cheaper than it had been for a long time.”
Murphy said some shoppers, especially low- and moderate-income consumers, are feeling the pinch as their weekly spending increases. He said people are making “more value- and cost-conscious choices”, such as looking for drinks in different pack sizes and price points.
Last quarter, fewer Americans drank water, sports drinks, coffee and tea, but orange juice and cola remained popular.
PepsiCo CEO Ramon Laguarta struck a similar tone last week, telling Yahoo Finance: “Consumer confidence is stronger in the U.S. and consumers are feeling better.”
Laguarta said he believes PepsiCo has a “competitive advantage due to its small size.”
Laguarta said in a recent earnings call that part of the reason for the company’s slowing revenue growth is that North American consumers are under pressure on disposable income, but he remained optimistic. There is.
“We like the fact that we think wages will outpace inflation next year, and we hope that interest rates will fall by the summer, which will create another source of oxygen for household disposable income,” he said. “I’m doing it,” he said. call.
Analyst Brian Spillane told Yahoo Finance that Bank of America is a “buy” on Coca-Cola and PepsiCo because they are high-quality multinational companies that can generate sustainable profits. He said he evaluated it as such.
Investors are looking for “increased sales and volumes” in this sector, and Spillane said it is likely that Coca-Cola’s sales will surpass PepsiCo’s in 2024, although the competition is likely to be close. expected.
Both stocks are down from a year ago, in contrast to the S&P 500 Index (^GSPC), which is up nearly 20%.
The cost of eating out continues to rise (up 5.1% in January compared to the same month last year, according to the latest CPI data) and Americans continue to fall back into pre-pandemic habits.
Murphy noted that despite continued inflation, Americans still want to eat out, go to the movies, travel and seek entertainment. “People are looking for experiences, they’re looking for ways to live life…We’re usually part of that equation,” he said.
Laguarta said the company is also moving toward drinking and eating “away from home.”
Coca-Cola expects organic revenue, excluding acquisitions and divestitures, to increase 6% to 7% in 2024. By contrast, PepsiCo, which has a large snack business in its Frito-Lay division, expects organic revenue to increase 4%.
But Murphy remains on the edge of his seat.
“The core of our thinking is whether we can pivot and adapt to the world we live in to stay close to the consumer…It keeps you on guard.”
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Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter @brooke di palma Or email bdipalma@yahoofinance.com.
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