Coca-Cola: Higher Prices Drive Revenue Growth

Written by: Aarin Chiekrie | Hargreaves Lansdown

Coca-Cola’s organic revenues grew 15% to $10.1bn in the fourth quarter, driven upwards by higher average selling prices.

Underlying operating income rose 21% to $2.1bn. This reflects the strong revenue growth but was partially offset by higher operating costs and marketing spending.

Net debt fell slightly from $26.8bn to $25bn, while full-year free cash flow also fell by $1.7bn to $9.5bn.

Looking to 2023, organic revenue growth of 7% to 8% is expected. Excluding currency headwinds, Coca-Cola is expecting underlying earnings per share (EPS) to grow by 7% to 9% from this year’s base of $2.48 per share.

The shares were broadly flat in pre-market trading. 

The beverage giant Coca-Cola is showing why it’s such a global powerhouse. Despite a cost-of-living crisis to contend with, the group’s exceeded its own guidance by growing full-year organic revenues 16%. Iconic brand power was to thank for this, as loyal customers have kept coming back for more of the group’s infamous fizzy drinks. This meant that despite higher average selling prices, total volumes actually rose by 5% this year.

Coca-Cola’s diversification has undoubtedly played a large part in its resilient sales too. The group owns other household favourites like Fanta, Sprite and Schweppes. Adding to the mix the recently acquired BODYARMOR sports drinks, this opens a new channel of growth. But in the short term it’s certainly put slight strain on the balance sheet. That’s why we were glad to see the net debt figure start to creep downwards in today’s results.

And while the group is anticipating further revenue growth next year, it did issue a few words of caution to flatten expectations. Mid-single digit inflation is expected to persist into next year, which has the potential to take some of the fizz out of profit growth. But overall, we think this is an impressive set of numbers. Its key brands have been extremely resilient amidst a period of high inflation.

Related: Barclays: Expensive Trading Mistakes and Weaker Than Expected Performance