In response to the outbreak of the deadly coronavirus, governments worldwide imposed varying degrees of economic lockdowns. The effects devastated businesses that relied on people leaving home.
Thankfully, companies developed several effective vaccines against COVID-19 and are administering them now. As of this writing, nearly 4 billion doses have been put into arms around the world. As a result, several governments removed mobility restrictions, and many businesses welcomed guests back in person. The quarterly earnings results from PepsiCo (PEP 3.62%), Coca-Cola (KO 1.50%), and Chipotle (CMG 0.40%) all show a boost in revenue when restrictions eased.
Nearly 4 billion doses of a vaccine against COVID-19 have been administered worldwide. Image source: Getty Images.
PepsiCo
In its second quarter, PepsiCo reported organic revenue growth of 12.8% compared to the same quarter a year ago. The growth was split almost evenly between an increase in product consumption and an increase in prices.
Folks were leaving their homes more often during the quarter and bought more beverages and snacks from convenience stores and gas stations -- locations where prices are relatively higher than grocery stores. The trend is expected to continue as economies continue to reopen worldwide.
Management raised revenue and earnings-per-share guidance for the rest of 2021 to 6% and 11%, respectively.
Image source: Getty Images.
Coca-Cola
In its second quarter, Coca-Cola reported revenue that grew by 42% from the same quarter last year. Management expects this rebound to sustain, and raised revenue and earnings-per-share targets for the rest of the year. In the U.S., most restrictions on dining at restaurants were removed in the quarter, so people returned to dining at their favorite establishments.
Although folks had the option to order for delivery or pick up from those locations, dining inside was not an option for almost a year. Unsurprisingly, when ordering for delivery or pickup, people purchase beverages from restaurants less frequently. As you may already know, prices for drinks at restaurants are much higher than in grocery stores. The same is true for most non-grocery locations.
The company has spent years developing exclusive relationships with restaurants, theme parks, and other entertainment venues, many of which were closed in 2020, so it stands to benefit from the reopening of economies.
Chipotle
Chipotle was forced to adapt quickly at the pandemic onset. It needed to reach consumers through digital channels to make sales while its restaurants were closed to in-person dining. The strategy worked, and the company's digital sales surged during the pandemic. Now that economies are reopening, Chipotle's recovered 70% of its in-person business.
Importantly for Chipotle, sales to folks who dine inside are more profitable because they tend to include higher-margin drinks. Some digital orders are for delivery, which comes with higher fulfillment costs.
Interestingly, Chipotle has maintained 80% of online sales despite recovering such a large part of in-person purchases. Management believes it can sustain the dual robust sales channels over the long term and raised its average unit volume (AUV) expectations to $3 million from $2.5 million.
Investors cheered the news, and Chipotle stock was up by double digits in the day following the report.
Investor takeaway
It is clear from the earnings results of these three food and beverage companies that folks are leaving their homes and going outside more often. What's more, they are spending money away from home. As vaccinations against COVID-19 progress, that could add fuel to the reopening trade.
Countries with lower access to vaccines are behind on reopening their economies. If they can speed up their vaccination rates, it could add to the next leg of economic reopening, removal of travel restrictions, and bring businesses a step closer to a return to normalcy.
