Coca-Cola (KO +0.31%) is back to setting sales records. The beverage giant this week announced that volume in its core away-from-home drink categories finally surpassed 2019 levels as parts of the world started emerging from the pandemic.
Coke's report wasn't all good news, though. Profit margins fell despite higher prices across the portfolio. And the company still faces soaring costs that it needs to offset with savings and price hikes.
But the wider outlook is great for Coke's beverage business. Let's look at some of the standout figures in this latest announcement.
Image source: Getty Images.
1. Organic revenue: Up 16%
Organic sales rose 16% through late December. That boost was better than expected. It was also enough to beat rival PepsiCo's (PEP 0.38%) 13% increase for its core beverage business. Coke's business was hit harder by social distancing efforts earlier in the pandemic because it sells more on-the-go beverages at places like restaurants. That's why its no surprise to see revenue bounce back more quickly as people returned to normal mobility patterns.
Coke said Q4 marked the first time since the pandemic started impacting the business that volume has returned to record territory for its on-the-go drinks. "We focused on our key strengths and emerged stronger," CEO James Quincey said in a press release .
2. Prices: Up 10%
Coke achieved most of its growth through higher sales volumes, but prices are jumping too. They soared 10% in Q4 and were up 6% for the full year.
Both Coke and PepsiCo are finding room to pass along higher costs to consumers, who continue to purchase more high-margin products in the snack and beverage niches. For Coke, that includes energy drinks, teas, and sports drinks.
3. Margin: Down 5 percentage points
But even a 10% increase in prices wasn't enough to preserve profit margins this quarter. Coke's non-GAAP operating margin fell to 22.1% of sales from 27.3% a year ago as the company spent more heavily on transportation, labor, and inputs like aluminum and glass. The company also boosted advertising spending to take advantage of rebounding demand.
The good news is that the extra spending paid off, and Coke gained market share across its major competitive categories.
4. Cash flow: Up $2.8 billion
The business showed off its financial strength in 2021 with cash flow at $12.6 billion, $2.8 billion higher than the previous year. This success is a testament to Coke's market-leading efficiency. It implies many more years of rising cash returns ahead for investors through dividends and stock buybacks.
5. Outlook: Growth of 7% to 8%
Coke is projecting that organic sales will rise by as much as 8% this year, which would represent faster gains than shareholders saw before the pandemic struck, even compared to 2021's strong rebound. Earnings should expand even more quickly -- by as much as 10% after accounting for currency swings.
Coke didn't reveal its new dividend payment for 2022 as that announcement typically comes in the days following its Q4 release. Meanwhile, Pepsi pushed its dividend higher by 7% and launched a large stock buyback program. Coke's upcoming dividend hike should be similarly strong, given the record growth and surging cash flow in the business as it kicks off a new fiscal year.
