The Coca-Cola Co. “can adapt to anything that comes at us,” whether it is the threat of a 25% tariff in the US on aluminum, an uptick in use of GLP-1 drugs suppressing consumption or other “potential regulatory changes,” such as state or federal bans on specific food additives, executives brashly declared yesterday.
“We do scenario planning on regulations, on economics and all sorts of things and we will adapt as and when they come,” CEO and Chair James Quincey told investors and market analysts yesterday during the company’s fourth quarter earnings call.
His bravado comes a day after President Donald Trump said he would impose a 25% tariff on imports of steel and aluminum into the US with “no exceptions, no nothing” for allies, including Canada and Mexico, with which he recently used the threat of tariffs to obtain enhanced boarder control commitments.
Unlike the tariff threats Trump posed against Mexico and Canada earlier this month, the tariffs on imports of steel and aluminum may not be as easy to sidestep because they are based in economics rather than a tool to enact non-trade policies.
At the same time, commodity prices continue to fluctuate as does demand – especially as more Americans are prescribed GLP-1 agonist drugs for weight loss and dramatically shift and reduce their consumption of some types of foods and beverages.
Interested in learning more about the impact of GLP-1 drugs on food and beverage sales?
FoodNavigator's Positive Nutrition Interactive Broadcast Series recently examined the impact of anti-obesity drugs on the sale and developement of food and beverages, including the challenges and opportunities arising alongside the return of weightloss culture.
The discussion included a presentation from Spate on how TikTok is influencing food consumption, consumer research from ADM on designing companion products to meet the needs of GLP-1 RA users and a panel discussion on developing Ozempic-era foods and beverages, including insights from Nestle, Daily Harvest, dsm-firmenich, ADM and Mattson.
“It is a dynamic macro environment out there. As commodities change, for whatever reason – up or down – our No. 1 objective is to look at how we mitigate through that. And whether it is the recent aluminum tariffs or any other tariff-based, weather-based or any other variation in the input commodities,” the company has strategies to minimize their impact, Quincey said.
“One, we have hedging programs in place that look to assure supply and price going out. Secondly, as the relative prices of different sources of ingredients and imports change, of course, we look at mitigation, productivity, efficiency, adjusting where we get our materials from,” he explained.
Is the threat of an aluminum tariff over-exaggerated?
As for Trump’s ongoing threat of tariffs, Quincey said, The Coca-Cola Co. is “predominately a local business when it comes to making each of the beverages. The vast majority of everything that is consumed in the US is made in the US. Similarly, we are in virtually every country around the world. And so, while it is a global business, it is very local.”
The Coca-Cola Co. also has options when it comes to packaging, so if aluminum becomes too expensive or difficult to source, the company can pivot to plastic or other materials, Quincey said.
“If one package suffers some increase in input costs, we continue to have other packaging offerings that will allow us to compete in the affordability space,” he said. “So, for example, if aluminum cans become more expensive, we can put more emphasis on PET bottles, etc.
Quincey also downplayed the potential impact of a 25% increase in aluminum.
“We are in danger of exaggerating the impact of the 25% increase in aluminum price relative to the total system. It is not insignificant, but it is not going to radically change a multi-billion dollar US business,” he said.
He explained that packaging is “only a small component of the total cost structure,” and discouraged investors and analysts from concluding that this is a “huge swing factor in the US business,” because it is not – “It is a cost” that “will have to be managed.”
He agreed it “would be better not to have it relative to the US business,” but said, “we are going to manage our way through.”
Coca-Cola sees little impact from GLP-1 drugs
The threat of GLP-1 drugs to The Coca-Cola Co. and beverage sector more broadly is likewise overstated, suggested Quincey.
While he agreed that “we continue to see anecdotal evidence of the impact of GLP-1s on consumption of food and beverages, so far, our take is it is not a big aggregate factor for the beverage industry or the non-alcoholic industry.”
For support, he pointed to the 1% increase in volume of sales for the company in the fourth quarter in North America, where he said, “we continue to see pretty sustained momentum.”
As a “total beverage company,” Quincey added, the Coca-Cola Co. has a significant toolbox of ingredients to adapt to shifting consumer demands as well as changes in the regulation of ingredients.
Ultimately, he concluded, “we will continue to manage and mitigate and adjust and be agile and flexible through the year.”