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Will Coca-Cola and PepsiCo’s Revenue Pick Up in 2019?

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Performance in the first three quarters

Coca-Cola (KO) has been transforming its business through refranchising its bottling business. The company’s revenue declined 11.1% to $24.8 billion in the first three quarters of fiscal 2018. However, excluding the impact of structural headwinds, Coca-Cola reported organic revenue growth of 5%. The strong organic revenue growth resulted from favorable pricing and mix and improved volumes. Coca-Cola’s reported revenue declined 9.2% while organic revenue increased 6% in the third quarter of 2018.

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PepsiCo’s revenue increased 2.6% to $45.1 billion in the first three quarters of 2018. The company’s organic revenue growth was 3.4% in the first three quarters of 2018. PepsiCo’s revenue growth resulted from the performance of its Frito-Lay North America, Latin America, and Europe Sub-Saharan Africa segments. PepsiCo’s third-quarter revenue grew 1.5% to $16.5 billion while organic revenue growth was 4.9%

Revenue expectations

Coca-Cola expects its revenue to grow 4% on an organic basis in 2018, compared to PepsiCo, which forecasted at least a 3% rise in its 2018 organic revenue.

Coca-Cola and PepsiCo are slated to announce their fourth-quarter results in mid-February. Analysts expect Coca-Cola’s revenue to decline 6.4% to $7.0 billion in the fourth quarter of 2018 and fall 10% to $31.9 billion in full-year 2018. The expected decline in revenue reflects the impact of refranchising bottling operations. Analysts expect the company’s revenue to increase 4.4% to $33.3 billion in 2019 as the impact of refranchising fades away.

To boost its revenue, Coca-Cola is focusing on offering healthier beverage options, increasing the pricing of certain products, and continued marketing investments. Coca-Cola is following a segmented approach to boost its revenue. In developed markets, the focus is more on price and mix. In emerging markets, the company is driving higher volume.

Analysts expect PepsiCo’s fourth-quarter revenue to remain almost flat at $19.5 billion. PepsiCo’s full-year 2018 revenue is forecast to rise 1.9% to $64.7 billion. Currently, analysts expect PepsiCo’s revenue to increase 2.8% to $66.5 billion.

We’ll discuss soda giants’ margins in the next part of this series.

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