The Coca-Cola Company is experiencing a post-lockdown rebound as net revenues jumped up 42% to $10.1 billion in the second quarter, according to an earnings report this week.
Coke reported organic revenue growth of 37% in Q2, including a 26% increase for concentrate sales as the on-premise channel reopens and an 11% increase in price/mix. Operating income was up 52%. Operating margin was 29.8%, compared to 27.7% in 2020 and comparable operating margin (non-GAAP) was 31.7%, up from 30.0% last year.
Unit case volume was up 18% in the quarter, with both developed and developing markets posting double-digit increases. Globally, CSD sales were up 14%, led by the U.S., Brazil and India. Trademark Coca-Cola sales grew 12% while flavored brands (such as Sprite and Fanta) rose 18%.
Juices, dairy and plant-based beverage sales were up 25%, led by Minute Maid and fairlife in North America. Hydration drinks grew 21%, with double-digit sales worldwide, and sports drinks increased 35%, driven primarily by Powerade in North America. Tea sales were up 18% and coffee grew 78%, led by the reopening of Costa retail stores in the U.K.
In North America alone, unit case volume grew 17% due to the recovery of the fountain business as COVID-related lockdowns lift and mobility returns to pre-pandemic levels. Price/mix was up 12% and operating income grew 94%.
The results surpassed analyst expectations, with a Goldman Sachs Equity Research report calling the results “impressive,” and noting that “It’s clear that [Coke] is rebounding from a recovery in consumer mobility (consistent with [Pepsi]) with a rebound in away-from-home channels” that has driven growth above 2019 levels. Credit Suisse was optimistic for the company’s continued performance, suggesting that “raised guidance could be conservative given momentum” and noted that Coke’s fundamentals were “solid pre-pandemic” and is “set to emerge stronger from the COVID crisis” due to strategic and organizational changes made by the company.
Speaking to investors and analysts during a call yesterday, Coke CEO James Quincey noted that although the company’s quarter showed a strong global performance, he noted certain markets still heavily affected by the pandemic like India and Southeast Asia have been slower to recover and volume sales remain impacted.
This summer, the company announced it would reformulate its Coca-Cola Zero Sugar line, which Quincey noted has seen double-digit growth in dollar sales and volume sales year-over-year. He noted the new formulation is already available in 50 markets and is now rolling out to the U.S., with additional markets to go online later this year.
Quincey added that the company is focusing on several key brands across its portfolio, including new innovations from Smartwater, Gold Peak Tea and Dunkin’ RTD coffees, as well as distribution pushes for sparkling water brands AHA (now launching in China) and Topo Chico.
Topo Chico Hard Seltzer, which Coke launched this year in partnership with Molson Coors Beverage Company, is now available in 17 markets worldwide with plans to be in 28 markets by the end of the year, he said.
While he said Coke is “still very much in the learning phase” when it comes to the flavored alcohol category, Quincey said the hard seltzer’s global performance varies country to country based on whether the category already exists in the market or not. While the line’s footprint in the U.S. is still small, he noted it had “good traction” and has done particularly well in Texas, California and Florida.
“We understand [Molson Coors is] very bullish, lots of display activity, so we’re looking to see that continue to expand,” Quincey said. “We’re conscious that the overall hard seltzer category has come down in terms of its overall growth rates in the U.S. That’s not ultimately that big of a surprise to us because it is a category that has been predominantly an at-home channel category, much less bars and restaurants category. And so as people have gone back out, clearly, some of those occasions have moved from at-home to away-from-home.”