Key takeaways
- The Coca-Cola Company topped analyst expectations in Q1 with net sales up 12%
- While acknowledging the inflationary pressures in 2026, Coca-Cola highlights a tried and tested playbook for dealing with difficult situations
- The company is increasing its focus on small, affordable treats such as mini cans: a strategy which is already showing early success
Despite a difficult macroeconomic environment, Coca-Cola topped analyst expectations in the first quarter of the year.
The key? Staying close to the consumer, and innovating accordingly, says Coca-Cola’s new CEO Henrique Braun, who took on the top role in March.
In today’s market, that means offering a mix of both compelling value and premium offerings.
Coca-Cola's Q1
- Global unit case volume grew 3%
- Net revenues grew 12%; organic revenues (Non-GAAP) grew 10%
- Operating income grew 19%; comparable currency neutral operating income (Non-GAAP) grew 12%
- EPS grew 18% to $0.91; comparable EPS (Non-GAAP) crew 18% to $0.86
Like other global FMCG companies, Coca-Cola has to worry about the impact of the conflict in Iran; disruption to global supply chains, commodity sourcing, and inflation.
And the unpredictability of the global landscape was particularly evident in Q1, said Braun, speaking to analysts in yesterday’s earnings cal.
“During the quarter, the external environment differed greatly across our markets,” he said.
“While many consumers remain resilient, others are under pressure due to persistent inflation, greater macroeconomic uncertainty and volatility driven by the conflict in the Middle East.”
Even within the US, the market varies enormously. In a K-shaped economy, it’s a tale of two shoppers. Higher-income households rise along the upward arm of the ‘K’, while lower-income households fall or stagnate along the lower arm.
That means companies need to have products to suit both sets of consumers.
Over the last few years, Coca-Cola has built up its premium portfolio with great success: such as with ultra-filtered premium milk Fairlife, lifestyle water brand Smartwater, and smoothie brand Innocent.
There’s been less noise, however, about the affordability end of the portfolio. But that’s changing, with Braun putting the spotlight on the importance of these products.
“The consumers that have pressure today are the low-income consumers, and we are really dialling up our affordability options in order to get closer to them.”
That could mean, for example, more accessible price points. Here, smaller cans are already proving a winner.
It was a segment Coca-Cola has been quietly building up for years: with smaller pack sizes a way to reduce calorie consumption by limiting the amount of sugar in each serving and occasion.
Smaller pack sizes are also a great way to appeal to the GLP-1 consumer.
And now, in the context of inflation, mini-cans offer an affordable luxury.
Coca-Cola launched single-serve mini cans of Coca-Cola, Coke Zero, Cherry Coke, Sprite and Fanta Orange in convenience stores in January. Previously, these 7.5oz drinks had only been available in multi-packs in grocery stores. But now, these mini cans offer an affordable, spontaneous treat at any point of the day.
And these single-serve mini-cans are already seeing a ‘strong performance’, says Braun.
It’s a strategy that more and more FMCG companies are set to turn to. Diageo’s new CEO, Dave Lewis, has noted the acute challenges that inflation and cost-of-living challenges put on spirits.
His answer, too, is to double-down on smaller pack sizes: making premium products available at affordable price points.
Dealing with disruption
The conflict in Iran, global supply chain disruption, and surges in the price of oil have all raised concerns about inflation.
It’s an issue that Coca-Cola is well aware of: but believes it has the right capabilities, skills and experience to deal with the uncertainty that FMCG businesses currently face.
“The environment is fluid,” acknowledges John Murphy, CFO. “And it’s difficult, at this stage, to say exactly how it’s going to play out.”
The Coca-Cola Company, the main entity, is less exposed: but Coca-Cola’s bottlers could be more exposed: with costs of aluminium and PET linked to the oil price.
The bottler view
Coca-Cola Europacific Partners, the world's largest Coca-Cola bottler, serving nearly 600 million consumers, also reported its Q1 results this week, with revenue up 9.1%.
"While the consumer environment remains challenging and the full impact of the situation in the Middle East is uncertain, we are resilient," said Damian Gammell, CEO, CCEP.
He added that the bottler has already been managing questions of price, value and cost-of-living pressures for a number of quarters: and will continue to assess the situation.
The bottler has reaffirmed its full year guidance for 2026.
But Murphy is still confident in the way the Coca-Cola System works: between The Coca-Cola Company in Atlanta and its bottlers around the world.
“We have a playbook that we’ve had to use now for quite a few years on a range of disruptions, and it’s a playbook that’s working well for us.
“We have our RGM capabilities, we have our cross-enterprise procurement group that works with the vast majority of our system partners on both resiliency and productivity initiatives.
“And each market is different: so the way we use these various levers will vary by market and we have confidence that decision making at the local level will allow us to navigate, as well as we can, through this.”
“It’s important to keep agility at the centre of this equation, and the way we’ve operated over the last three, four, five years has given us confidence on that front.”
Coca-Cola provides model for FMCG in difficult times
RBC Capital rates Coca-Cola as 'outperform', because the company is doing exactly what a good FMCG should do.
Coca-Cola is 'acting like a true staples company', says Nik Modi, equity analyst.
The company's Q1 results "reaffirm our view that the company is well-positioned to navigate today's challenging macro environment," he said. "Its capabilities enable best-in-class agility, providing multiple levers to deliver balanced organic growth, while management's measured approach to guidance reflects appropriate prudence."
Meanwhile, Aarin Chiekrie, equity analyst at Hargreaves Landsdown, agrees that the company is well-positioned to deal with the uncertainty of the Middle East conflict.
"We think the group's large scale and formidable pricing power should allow it to offset these impacts through increased efficiencies and higher prices, without denting demand too much," he said.
