Coca-Cola is set to record stronger sales and profit growth in the fourth quarter compared to PepsiCo as it lured more price-conscious consumers with fewer price hikes.
The duopoly enjoyed by Coca-Cola and PepsiCo in the carbonated drinks sector helped the companies push ahead with price hikes to offset higher input costs during the pandemic and protect margins.
However, data showed more frequent price hikes in the past few quarters by Frito-Lay owner PepsiCo have allowed its main rival to pull in more consumers.
The number of units sold by PepsiCo's beverage business in the United States fell 8% in November and was down 7% in October and December, while for Coca-Cola it rose 3% in December from 1% in October, according to YipitData.
"Pepsi has to be a little more mindful and not jam as much price increases onto the consumers because it's translating to low negative volume growth," Raz Poundardjian, portfolio manager for Carnegie Investment Counsel, said.
The Context
Both Coca-Cola and PepsiCo have enjoyed little to no pushback from consumers on higher prices, but extended periods of elevated levels of inflation have led to customers prioritising their spending.
PepsiCo's beverages had an average price increase of 6.2% in the US during the fourth quarter, while for Coca-Cola it rose 4.5% according to YipitData.
In the carbonated soft drinks category, Coca-Cola's sales growth was 3.8% in the United States, while PepsiCo saw a 0.2% decline for the 12 weeks ended 30 December, NielsenIQ data showed.
The Fundamentals
PepsiCo's overall organic volumes were flat in fiscal 2022 and average pricing rose 14%. Coca-Cola saw volume growth of 5% and an average price mix increase of 11%
PepsiCo will report fourth-quarter earnings on 9 February and Coca-Cola on 31 February 2024
Coca-Cola's net revenue is expected to rise 4.7% to $10.68 billion (€9.9 billion), while adjusted profit is estimated to rise 8.5% to 49 cents per share, according to LSEG data
PepsiCo is likely to report a 1.4% rise in net revenue to $28.40 billion (€26.4 billion) and a 2.9% rise in adjusted profit to $1.72 per share.
