Coca-Cola lifts profit forecast on international soda demand, flags higher costs

By Juveria Tabassum and Alexander Marrow

Oct 27 (Reuters) - Coca-Cola on Tuesday raised its annual profit forecast as soft drink demand held up in markets including India and Brazil, even as it warned of accelerating cost pressures and persistent consumer weakness into 2027.

The company has sought to win over increasingly selective consumers with smaller, cheaper packs in the United States, while also rolling out pricier offerings such as Coca-Cola Cherry Float.

But like other consumer goods companies, Coca-Cola faces higher packaging and freight costs as the US war in Iran drives up commodity prices. The company said in July that aluminum and PET costs had risen more than expected this year.

Diesel prices have jumped to record highs because of the war, pushing up freight and transport costs across industries. Consumer goods bellwether P&G last week raised its estimate of the hit from higher costs to its annual profit.

Coca-Cola executives also warned that pressure on consumers could extend into 2027. CFO John Murphy pointed to weakness in the restaurant industry, which was a slight drag on North American volumes.

"While our own business continues to have a lot of momentum ... I think the underlying pressure across the consumer landscape is there, and I think it will be there for the rest of the year as we go into 2027," Murphy said.

Overall volumes rose about 5%, while prices increased about 1%. Packaged goods companies have also become more cautious about raising prices as consumers focus more sharply on affordability amid higher food and fuel costs.

COSTS RISE, BUT MARGINS HOLD STEADY

A 7.4% increase in third-quarter revenue helped support Coca-Cola's operating margin, which rose to 33.4%.

Growth in India, China, Mexico and Brazil helped lift global unit case volumes as the company focused on local flavors and affordable packs in some markets, Coca-Cola said.

North American volumes were flat, with growth in trademark Coca-Cola sodas and pricier beverages such as fairlife milk helping offset higher input costs and a production disruption earlier this year at its Topo Chico brand.

Coca-Cola's volume growth across sodas and other beverage brands contrasts with rival PepsiCo's struggles with weak US demand for its snacks and sodas.

Coca-Cola now expects comparable currency-neutral earnings per share to grow at least 9% in 2026, up from its previous forecast of 7% to 8%.

"The gap between Coke and peers is widening. As the market debates price increases, those delivering volume growth should outperform," Jefferies analyst Kaumil Gajrawala said.

Revenue for the quarter ended October 2 reached $13.38 billion, beating analysts' estimate of $12.92 billion, according to LSEG data. Adjusted earnings of 91 cents per share also topped estimates of 88 cents.

Coca-Cola's shares were down marginally in early trading. They are up about 33% this year.

(Reporting by Juveria Tabassum in Bengaluru and Alexander Marrow in London; Editing by Anil D'Silva)