Coca-Cola reported first-quarter earnings and sales Monday that easily beat expectations: Sales rose 16% to $10.5 billion, beating Wall Street expectations of $9.8 billion. Earnings of $2.8 billion, or 64 cents a share, are up 24% from a year ago — topping the consensus estimate of 58 cents a share.
Rising prices were a major driver of the strong numbers. Coca-Cola said its price/mixture, a measure of how much it charges customers, rose 7% globally and 11% in North America.
“The overall inflationary environment will be here for some time. For how long, no one knows,” Coca-Cola Chief Financial Officer John Murphy said in an interview with CNN Business Monday morning.
The pressure on commodity prices and wages will continue, Murphy said. But he added that the company has the flexibility to raise prices, especially as it offers more premium products.
However, Coca-Cola recognizes that some consumers feel more uncomfortable with higher prices than others.
That’s why CEO James Quincey said during a conference call with analysts Monday that the company is testing refillable packaging in Latin America and Africa and returnable glass bottles in parts of the southwestern United States.
Quincy said the goal of these initiatives is to reduce waste and give consumers financial incentives to use reusable bottles.
“When I look back on the past two years, one of the biggest findings was that we used that time to clean out the closet. Now we’re rebuilding it again,” Murphy said. “It’s important to stay disciplined and keep a close eye on which brands are doing well. We need to keep the portfolio pruned.”
Traders flocked to consumer staples companies such as Coca-Cola as they provide stability in sales and profits at a time of geopolitical turmoil and concerns over rising Fed rates and inflation. Coca-Cola also pays a fixed dividend yield of approximately 3%.
The Coca-Cola Company continues to perform well internationally even as the recent surge in Covid-19 cases is worrying investors. The company’s sales jumped 34% in Latin America and 13% in Europe, the Middle East and Africa.
As part of its global strategy, Coca-Cola continues to invest heavily in emerging markets, Murphy said.
“We have to stay close to these markets and adapt as necessary,” Murphy said. “Investing during volatile times will allow you to win.”
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