We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Elevated Costs Challenge Coca-Cola: How Will the Brand Adapt?
Read MoreHide Full Article
Key Takeaways
{\"0\":\"Inflation, higher logistics and currency headwinds are squeezing KO\'s margins despite revenue growth in Q2.\",\"1\":\"Brands like Coca-Cola Zero Sugar, fairlife, BODYARMOR and Sprite continue to drive growth.\",\"2\":\"Coca-Cola leverages pricing initiatives, \\\"all-weather\\\" strategies and packaging innovations.\"}
The Coca-Cola Company (KO - Free Report) continues to deliver steady top-line growth, but rising costs remain a pressing challenge that weighs on its near-term profitability. In second-quarter 2025, the company reported revenues of $12.62 billion, reflecting 5% organic sales growth, with strength across sparkling soft drinks, hydration and dairy-based beverages. However, higher input costs and currency headwinds pressured margins, testing Coca-Cola’s ability to protect profitability while sustaining global momentum. Gross margin contracted modestly as commodity inflation, transportation expenses and foreign exchange headwinds offset the benefits of pricing actions and productivity programs.
A major cost driver in the quarter was commodity inflation, particularly in sweeteners, packaging materials and logistics. Management emphasized that higher concentrate costs and transactional currency impacts also weighed on results. While pricing initiatives supported revenues, the company’s reported operating margin narrowed, showing that cost inflation is outpacing the benefits of efficiency efforts. Marketing and innovation investments added further expense, as Coca-Cola continues to prioritize brand building despite rising operational costs.
To offset these cost pressures, Coca-Cola is leaning on its “all-weather” strategy, balancing affordability measures in price-sensitive markets with premium innovations in developed economies. Packaging shifts, such as mini cans in North America and refillable in emerging markets, are helping to manage consumer affordability while supporting brand equity. Additionally, categories like Coca-Cola Zero Sugar, fairlife, BODYARMOR and Sprite posted strong growth, showcasing the resilience of its diversified portfolio even under cost inflation.
As costs continue to rise, Coca-Cola’s ability to adapt its portfolio strategy and pricing architecture will be key to protecting margins without compromising market share.
KO’s Rivals Balance Rising Costs
In a fiercely competitive beverage market, PepsiCo Inc. (PEP - Free Report) and Keurig Dr Pepper Inc. (KDP - Free Report) are both contending with persistent cost pressures from inflation and supply chain challenges. Yet, each company is leveraging pricing, productivity and innovation to protect margins while sustaining growth momentum.
PepsiCo acknowledged ongoing cost pressures in second-quarter 2025, but emphasized that these were largely offset by strong price realization, procurement savings and productivity initiatives across its operations. Management highlighted the role of its long-running productivity program, which includes supply chain efficiencies and brewery improvements, in cushioning the impact of inflationary headwinds. By combining strategic pricing actions with operational savings, PepsiCo was able to expand margins while continuing to reinvest in innovation and brand building, positioning the company to manage rising costs without sacrificing growth momentum.
Keurig is facing rising costs from commodity inflation, higher coffee hedges and tariffs, which drove a 110-bps gross margin decline in second-quarter 2025. To tackle these pressures, the company is leaning on pricing actions, targeting the high end of its 3-4% productivity savings goal, and keeping overheads tightly managed. At the same time, KDP is bolstering growth through innovation in energy, sports hydration and coffee, and strengthening its direct-store-delivery network to drive efficiency and scale, ensuring resilience despite the inflationary environment.
The Zacks Rundown for Coca-Cola
KO’s shares have risen 6.4% year to date compared with the industry’s growth of 3%.
Image Source: Zacks Investment Research
From a valuation standpoint, Coca-Cola trades at a forward price-to-earnings ratio of 21.02X, significantly higher than the industry’s 17.42X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for KO’s 2025 and 2026 earnings implies year-over-year growth of 3.5% and 8.3%, respectively. Earnings estimates for 2025 and 2026 have been unchanged in the past seven days.
Image: Bigstock
Elevated Costs Challenge Coca-Cola: How Will the Brand Adapt?
Key Takeaways
The Coca-Cola Company (KO - Free Report) continues to deliver steady top-line growth, but rising costs remain a pressing challenge that weighs on its near-term profitability. In second-quarter 2025, the company reported revenues of $12.62 billion, reflecting 5% organic sales growth, with strength across sparkling soft drinks, hydration and dairy-based beverages. However, higher input costs and currency headwinds pressured margins, testing Coca-Cola’s ability to protect profitability while sustaining global momentum. Gross margin contracted modestly as commodity inflation, transportation expenses and foreign exchange headwinds offset the benefits of pricing actions and productivity programs.
A major cost driver in the quarter was commodity inflation, particularly in sweeteners, packaging materials and logistics. Management emphasized that higher concentrate costs and transactional currency impacts also weighed on results. While pricing initiatives supported revenues, the company’s reported operating margin narrowed, showing that cost inflation is outpacing the benefits of efficiency efforts. Marketing and innovation investments added further expense, as Coca-Cola continues to prioritize brand building despite rising operational costs.
To offset these cost pressures, Coca-Cola is leaning on its “all-weather” strategy, balancing affordability measures in price-sensitive markets with premium innovations in developed economies. Packaging shifts, such as mini cans in North America and refillable in emerging markets, are helping to manage consumer affordability while supporting brand equity. Additionally, categories like Coca-Cola Zero Sugar, fairlife, BODYARMOR and Sprite posted strong growth, showcasing the resilience of its diversified portfolio even under cost inflation.
As costs continue to rise, Coca-Cola’s ability to adapt its portfolio strategy and pricing architecture will be key to protecting margins without compromising market share.
KO’s Rivals Balance Rising Costs
In a fiercely competitive beverage market, PepsiCo Inc. (PEP - Free Report) and Keurig Dr Pepper Inc. (KDP - Free Report) are both contending with persistent cost pressures from inflation and supply chain challenges. Yet, each company is leveraging pricing, productivity and innovation to protect margins while sustaining growth momentum.
PepsiCo acknowledged ongoing cost pressures in second-quarter 2025, but emphasized that these were largely offset by strong price realization, procurement savings and productivity initiatives across its operations. Management highlighted the role of its long-running productivity program, which includes supply chain efficiencies and brewery improvements, in cushioning the impact of inflationary headwinds. By combining strategic pricing actions with operational savings, PepsiCo was able to expand margins while continuing to reinvest in innovation and brand building, positioning the company to manage rising costs without sacrificing growth momentum.
Keurig is facing rising costs from commodity inflation, higher coffee hedges and tariffs, which drove a 110-bps gross margin decline in second-quarter 2025. To tackle these pressures, the company is leaning on pricing actions, targeting the high end of its 3-4% productivity savings goal, and keeping overheads tightly managed. At the same time, KDP is bolstering growth through innovation in energy, sports hydration and coffee, and strengthening its direct-store-delivery network to drive efficiency and scale, ensuring resilience despite the inflationary environment.
The Zacks Rundown for Coca-Cola
KO’s shares have risen 6.4% year to date compared with the industry’s growth of 3%.
Image Source: Zacks Investment Research
From a valuation standpoint, Coca-Cola trades at a forward price-to-earnings ratio of 21.02X, significantly higher than the industry’s 17.42X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for KO’s 2025 and 2026 earnings implies year-over-year growth of 3.5% and 8.3%, respectively. Earnings estimates for 2025 and 2026 have been unchanged in the past seven days.
Image Source: Zacks Investment Research
Coca-Cola currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.