Coca-Cola Joins Pepsi In "Dumping Sugar And Sweetening Earnings" - Coca-Cola (NYSE:KO), PepsiCo (NASDAQ:PEP)

Both Rivals Manage to Top Earnings Estimates

On Friday, the beverage giant reported its third quarter earnings and managed to exceed analysts' estimates. Coca-Cola Co's KO healthier strategy represented with its Zero Sugar line and smaller can sizes proved successful as it drove revenue growth. Coca Cola did it once again despite that soda consumption is declining in North America.

Q3 Earnings Report

The Coca-Cola Company exceeded $9.4 billion expected by achieving the revenue of $9.5 billion, a rise of 8%. Net income increased from last year's $1.8 billion to $2.6 billion, and shares from 44 cents per share to 60 cents accordingly. Organic revenue also grew by 5% due to higher prices and customers being willing to buy more expensive drinks. But it is Coke Zero Sugar that once again saw double-digit volume growth, 15% to be precise. But Minute Maid and juice brand Simply also saw strong performance in the company's home market. North American organic revenue overall managed to grow by 3% during the quarter.

Expanding Portfolio – New Emphasis

The company has been driving sales by focusing on healthier drinks that contain less sugar as well as smaller packaging. There is weaker performance when it comes to water brands that is also a consequence of the consumer awareness when it comes to plastic. As many companies around the world are forced to rethink their package and make it more environmentally-friendly, Coca-Cola plans to use aluminium for its Dasani cans and bottles.

But when it comes to caffeinated beverages, it has already launched its Coca-Cola Plus Coffee drink in more than 20 markets. Global Caffeinated beverages Market is only expected to grow further, according to Data Bridge Market Research, expecting a CAGR of 6.17% from 2019 to 2026.

Coke Energy is Coming for Red Bull!

The company is also introducing its very first energy drink. Coke Energy is coming to the US with additional zero-calorie options and it is coming for Red Bull, the #71 brand on Forbes' list of world's most valuable brands. Whether people actually get those wings or just enjoy its kick, the company has sold 75 billion cans since Red Bull was introduced in 1987 with a unique marketing strategy built around extreme events.

And There's Pepsi!

Pepsi Co, Inc. PEP has undergone significant changes to improve its operating performance in the recent years of the ‘all-natural trend', and it was surely not the only company that was ‘forced' to get better at what it does. Profits were down in 2019 slightly due to this change in infrastructure as well as increased marketing spending. But, the fizz seems to be getting back with its new CEO who took over one year ago, leading the company to the right investments to succeed in a difficult consumer environment.

During its third quarter, Pepsi also managed to top earnings and revenue expectations with organic revenue growing 4.3% to $17.19 billion, as opposed to $16.93 billion expected. Net income of $2.1 billion did decrease from $2.5 billion from a year earlier, leading to a drop from $1.75 to $1.49 per share but the company's North American segment performed well, showing a 3.5% revenue growth. Moreover, the company expects Bubly will be one of its next billion-dollar brands as the product is continuing to gain market share in the flavored sparkling-water category. Overall, a good North America portfolio.

Outlook

Brexit uncertainty has caused lower consumer sentiment in the U.K and that has affected all businesses without exceptions. It remains to be seen if it will mercifully come to an end so hopefully this sentiment improves, over time of course. The industry's focus has definitely shifted and embraced healthier consumer habits. And then there's the sustainability framework as more consumers rethink their use of plastic so no wonder that the growth of bottled water brands has slowed. Coca-Cola is determined in expanding its drink portfolio to both rivals seem to be successfully riding the new wave of ‘dumping sugar to sweeten earnings' as both companies showed firmer than-expected sales. Coca-Cola will provide its full 2020 outlook in February as it finds the dollar strengthening as opposed to the weakening prognosis that was expected.

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