Your Coke cost 4% more in North America last quarter, and just 1% more globally

Coca-Cola reported October–December revenue of $11.8 billion, up 2% but missing the FactSet consensus of $12.05 billion; net income rose 3% to $2.3 billion and adjusted EPS was $0.58, $0.02 above estimates. Global unit case volumes grew 1% (led by the U.S., Japan and Brazil) with North America up 1%, aided by price increases (North America +4%, global +1%) and strong Coca‑Cola Zero Sugar sales (+13%), while juices and dairy lagged. The company guided to 4%–5% organic revenue growth for 2026 and introduced affordability measures (7.5‑oz mini cans) as it navigates consumer divergence by income; shares fell about 4% premarket. Management transition announced: COO Henrique Braun will become CEO on March 31, with James Quincey moving to executive chairman.

Analysis

Market structure: Coca‑Cola’s Q4 shows resilience — U.S. unit case volumes +1% and North America +1% alongside a +4% price increase — implying intact pricing power in non‑alcoholic beverages versus broader consumer staples. Winners include concentrate producers, premium water (Topo Chico, Smartwater) and aluminum can suppliers; losers are lower‑income targeted juice/dairy lines and value‑oriented private labels. The supply/demand signal is one of inelastic demand for core sparkling and premium bottled water, supporting margin upside if input costs stabilize; modestly firmer aluminium and sugar demand is possible but not structurally disruptive.

Risk assessment: Near term (days–weeks) volatility risks center on investor reaction to the revenue miss and CEO transition; medium term (3–12 months) risks include accelerated downtrading by middle‑income consumers and bottler pushback on price passthrough. Tail risks: regulatory sugar taxes, water/sourcing constraints, major bottler disputes or recalls could be company‑level shocks >20% share moves. Hidden dependency: Coke’s economics rely on bottlers’ willingness to accept higher concentrate prices and absorb packaging cost inflation — monitor bottler margins and price cadence.

Trade implications: Given small EPS beat but revenue miss, the risk/reward favors a measured buy of KO versus broader staples; expect organic revenue 4–5% in 2026 to be the baseline for a re‑rating if volumes hold or accelerate. Use relative trades (long KO vs short PEP) to isolate beverage pricing vs snack exposure and implement options (6–9 month call spreads) to limit premium paid while capturing potential re‑rating. Rebalance sector exposure toward defensive beverages and away from discretionary foodservice names if consumer stress indicators (weekly chain store sales) deteriorate >1.5% MoM.

Contrarian angle: Consensus focuses on the revenue miss; investors underappreciate premiumization and product mixes — Coke Zero Sugar +13% and Smartwater/Topo Chico strength imply higher ASP durability. The stock dip (~4% premarket) may be overdone if the mini‑can rollout (price elasticity test) and bottler cooperation drive share gains; conversely, if bottlers balk, downside could exceed the current selloff. Historical parallel: 2015–2017 pricing cycles show Coke can re‑accelerate organic growth after strategic pack innovation within 2–4 quarters, a useful horizon for this trade.

Key Decisions for Investors

• Establish a staged long position in KO (total 2–3% of portfolio) over 4–6 weeks: buy 50% now, add remaining 50% on any further weakness >5% intraday; target 12‑18% upside over 12 months, stop‑loss at −10% from average entry.
• Implement a relative pair: go long KO (1% portfolio) and short PEP (1% portfolio) to isolate beverage pricing exposure; target spread tightening of 5–8% in 3–9 months, cut if spread widens by 6% or if KO volumes fall >2% QoQ.
• Use options to express bullish view with limited capital: buy a 6–9 month KO call spread (buy nearer‑the‑money, sell ~10–15% OTM) sized to 0.5% portfolio risk to capture upside from re‑rating after two positive monthly volume prints or successful mini‑can rollout metrics within 90 days.
• Reallocate 2% from consumer discretionary/foodservice positions into consumer staples beverage names (overweight KO and related large caps) if weekly consumer confidence falls >2% and chain store sales decline >1.5% MoM; reverse if Coca‑Cola reports two consecutive monthly volume declines >1%.
• Monitor these triggers closely for position adjustments over next 60–120 days: U.S. unit case volumes (weekly/monthly cadence), bottler margin commentary, mini‑can SKU velocity in c‑stores, and input cost moves (aluminum/sugar) — take profit or trim if organic revenue guide misses the 4% floor or if bottler disputes emerge.