Coca-Cola stock dips after citing category growth, inflated prices in earnings report
Yahoo Finance Live anchors examine Coca-Cola shares amid announced price hikes for the consumer brand and the growth seen across its drink categories.
Video Transcript
- Coca-Cola announcing it plans to raise prices next year as part of its quarterly earnings report this morning. Also in that report, a look at what consumers are and are not buying from Coca-Cola. As you can see, shares down a bit. Coca-Cola Zero Sugar and coffee products leading sales gains for the quarter with coffee up 11%, and Coca-Cola zero. Sugar up 9%, Seana.
SEANA SMITH: Yeah, certainly. It looks like people might be prioritizing those lower-calorie beverages if you take a look just in terms of the growth that we are seeing there. Also, coffee. You always need coffee. I don't think it's a huge head-scratcher why maybe the growth there.
- Recession-proof. COVID-proof.
SEANA SMITH: Exactly.
- Everything-proof.
SEANA SMITH: It makes a lot of sense. All right. So let's take a look at what we did not see working here for Coca-Cola in that quarter. The popularity of some of their categories fell. You can see it on your screen. Juice, dairy, their plant-based division, sales they're falling about 7%. Tea sales there falling 9% in the fourth quarter compared to the levels that we saw a year ago during that same quarter.
Despite these price increases, the fact that it is working on some products, not working on other products, CEO James Quincey, he didn't really say anything in terms of the fact that they won't be really easing those pricing pressures any time soon. In fact, higher prices are pretty likely here, saying that we don't see the runway for those higher prices running out any time soon. Wedbush making the argument that Coca-Cola, given the brand, they have the pricing power. They have the ability to do it.
But we are seeing consumers pull back just a little bit as evidenced in that juice category, and also what we saw there in some of their other categories.
- But that's more based on sugar, I think, and not prices. There's not a lot of disinflationary news in many of these earnings reports. They did see some not great numbers in the sports-drink category. And their CEO says they have to reset ourselves there. They bought Body Armor recently. Those sales were down. And they saw a slight uptick in Powerade, but only up 1% in that category.
So what are they going to buy next? Coca-Cola has a couple of categories out there, one being alcoholic beverages. Next month, we get Jack and Coke in a can, and Zero Sugar Jack and Coke in a can. They're also going to enter an alcoholic Fresca with Constellation Brands, and alcoholic Topo Chico with Molson. So they are all over the space.
On the other hand, there's this Coca Cola move associated with Rosalía Grammy-winning Spanish artist. This is more of a lifestyle, not necessarily a flavor, but an experience for young people. QR codes linking you to songs. Which direction do you think will be more successful?
SEANA SMITH: Well, it's hard to argue against that can, though, we have on the screen right now. It looks like a heck of a lot of fun. I think it's very smart for Coca-Cola to make those partnerships with huge celebrity celebrities, clearly targeting that younger generation.
But when it comes to the future of canned cocktails-- we've talked time and time again on this program-- surveys had shown that Gen Z, a lot of them prefer the mixed drinks. They prefer those types of canned cocktails. I think is a huge home, potentially for Coca-Cola getting into that division, getting into the alcohol business.
- I have to agree with you there. And the alcoholic Frescas? I got to try that. Fresca's delicious.
SEANA SMITH: That sounds very good it.
- Constellation Brands partnership.
SEANA SMITH: Sounds like a good spring-summer drink.
- 12 months a year. But yes, in particular.
