Can Coca-Cola's Emerging Market Growth Offset Flat U.S. Volume?

Globe and Mail

11 hours ago

The Coca-Cola Company KO reports its operational results by geographic segments, broadly classified into two market categories based on economic status and growth dynamics — developed (including the United States, Canada, Western Europe and the mature Asia-Pacific countries) and emerging markets (comprising Latin America, Africa and the Middle East, Eastern Europe and Eurasia, and the emerging Asia-Pacific). The company's first-quarter 2025 results underscore a clear divergence between these two markets, highlighting contrasting dynamics in developed and emerging markets.
Coca-Cola delivered robust performance across emerging markets. India stood out with strong volume growth, expanded outlet reach and increased digital penetration. China returned to growth as portfolio realignments and effective Lunar New Year campaigns paid off. Africa also showed resilience, growing volume despite inflation, through affordable packaging and local campaigns like Sprite Spicy Meals and Schweppes Born Social. In Latin America, markets like Brazil and Argentina offset softer results in Mexico, where Coca-Cola has already launched corrective affordability strategies.
While revenues and profits grew in North America, flat volumes pointed to soft consumer sentiment, especially among Hispanic consumers. External factors like severe weather, calendar shifts and misinformation campaigns affected the Trademark Coke, particularly in the southern United States despite resilience from brands like fairlife, Coke Zero and Topo Chico, the company acknowledges a need for stronger execution and agility to reignite volume growth domestically.
The beverage giant's local-first model and deep market integration across emerging economies offer a valuable cushion against developed-market stagnation. With more than 30 billion-dollar brands and a strong innovation pipeline, Coca-Cola appears well-positioned to leverage high-growth geographies to balance short-term headwinds in the U.S. market.
KO's Competition in the Emerging Markets
PepsiCo Inc. PEP and Keurig Dr Pepper Inc. KDP remain key competitors for Coca-Cola in the United States and emerging markets.
PepsiCo's emerging market performance outpaces its developed markets on strong demand, expanding middle-class populations and localized strategies. While developed markets like North America face volume softness and consumer trade-downs, PEP is capturing growth in emerging regions such as India, Mexico, Brazil and Africa through tailored pricing, localized flavors, and increased investments in manufacturing and distribution infrastructure. The company focuses on affordability, local flavors and digital go-to-market strategies to boost access and penetration. PepsiCo's footprint overlaps significantly with Coca-Cola's in key markets, but its dual-category model offers a strategic edge. As consumption rises in emerging markets, PEP is well-positioned to capture sustained, long-term growth.
Keurig Dr Pepper remains primarily focused on the United States, with limited emerging market exposure compared with Coca-Cola. While it performs well in developed markets, anchored by strong brand portfolios in coffee, carbonated soft drinks and flavored waters, KDP is gradually expanding internationally. Its emerging market strategy includes targeted partnerships, selective brand rollouts and the leveraging of its successful U.S. beverage models in markets like Mexico and parts of Central America. Keurig Dr Pepper's emerging market footprint overlaps with KO's in regions like Mexico, but Coca-Cola holds a stronger position with deeper distribution and broader offerings. Though still in the early stages globally, KDP's focused approach and strong brand portfolio can support steady growth as it builds scale in key high-potential markets over time.
The Zacks Rundown for Coca-Cola
KO shares have rallied 11.8% year to date compared with the industry 's growth of 7.2%.
From a valuation standpoint, Coca-Cola trades at a forward price-to-earnings ratio of 22.62X, significantly higher than the industry's 18.59X.
The Zacks Consensus Estimate for KO's 2025 and 2026 earnings implies year-over-year growth of 3.1% and 8.2%, respectively. Earnings estimates for 2025 have been northbound in the past 30 days, whereas that for 2026 have been unchanged in the same period.
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Coca-Cola currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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CocaCola Company (The) (KO): Free Stock Analysis Report
PepsiCo, Inc. (PEP): Free Stock Analysis Report
Keurig Dr Pepper, Inc (KDP): Free Stock Analysis Report