Coca-Cola's fastest-growing drink has no sugar in it — and a $20 billion tax case hangs over everything

Every figure in this article is drawn from Coca-Cola's earnings releases and investor announcements, or from reporting by CNBC, CNN, Axios, Bloomberg Tax, Al Jazeera, Forbes and the trade press as attributed. Sections marked as analysis are identified as such.

For most of this decade, Coca-Cola's growth formula was an elegant trick: sell roughly the same amount of liquid, charge more for it. Fiscal 2025 was the trick at its purest — organic revenue up 5 per cent, of which four points were price and mix, while global case volume was flat — and it ended with a wobble, as the fourth quarter missed revenue estimates for the first time in five years on softness among budget-stretched shoppers.

Then came this year's second quarter, reported July 28, and the formula inverted. Revenue rose 7 per cent to $13.4 billion; organic growth of 6 per cent was built on four points of volume and only two of price; global case volume grew 5 per cent, led by India, China, the United States and Brazil. Margins expanded, earnings beat for a fifth straight quarter, and full-year guidance went up. Coca-Cola is, for the first time in years, growing mainly by selling more drinks.

"We delivered another strong quarter by staying close to the changing needs of our consumers and customers," said chief executive Henrique Braun — and the name is part of the story. Braun, the Brazilian operator who ran the company's international engine, took over on March 31, with James Quincey moving up to executive chairman after nine years. The volume turn is his first exhibit.

It is worth pausing on how unusual the machine's steadiness is. Through a change of chief executive, a presidential intervention in its recipe, a novel class of appetite-suppressing drugs, aluminium tariffs imposed and struck down, and a nine-figure tax war, Coca-Cola's operating margin expanded and its guidance rose. Almost nothing about the environment cooperated; the results did anyway.

The bottle politics built

No product of 2025 said more about the era than the cane-sugar Coke. In July of that year, the president of the United States announced that Coca-Cola would make its flagship with cane sugar; the company confirmed a version of it on its next earnings day. The reality was narrower than the headline: a line extension, not a recipe change — a 12-ounce glass bottle launched in October in select markets, while flagship U.S. Coke keeps corn syrup. Finance chief John Murphy called it "a measured rollout," constrained by American cane-sugar supply and glass-bottling capacity. Mexican Coke, made with cane sugar, had been on U.S. shelves for years all along.

As corporate diplomacy, it was a masterpiece: one bottling line's worth of concession, national-news coverage, and a president satisfied. As beverage economics, it changed almost nothing — which was precisely the point.

Drinking in the GLP-1 era

The deeper current is chemical rather than political. On an earnings call last October, Quincey gave the clearest big-company account yet of what weight-loss drugs do to beverage demand: GLP-1 users "tend to drink less full sugar soft drinks, but they tend to drink more diet soft drinks," along with more hydration, coffee and "a big shift towards protein drinks" — while cautioning it is "still ultimately early days to know the full cycle."

Look at what is actually growing and the hedge reveals itself. Coca-Cola Zero Sugar grew 16 per cent last quarter, in every region. Diet Coke has stabilised after decades of decline. About 68 per cent of the portfolio is already low- or no-calorie. And fairlife — the protein-and-milk business acquired for a rounding error in 2014 — has grown to roughly $4 billion in retail sales by trade-press accounts, with demand so far ahead of supply that a $650 million New York plant came online this year to add 30 per cent more capacity. The company most associated with sugar on Earth has quietly arranged itself so that sugar's decline is its growth engine.

The ledger items

Three others matters frame the year. The IRS transfer-pricing case is the giant: Coca-Cola paid $6 billion in back taxes and interest in 2024 to pursue its appeal, and losing outright could add up to roughly $14 billion more — total exposure north of $20 billion, about two years of net income. Appeals-court arguments in June went encouragingly, with one judge calling the government's retroactivity "a bit of a due process violation"; the decision is pending.

Costa Coffee, the $4.9 billion 2019 acquisition Quincey conceded "has not quite delivered," went through a sale process that reportedly collapsed in January when bids fell short; Coca-Cola keeps it, for now. And the AI Christmas advertising saga completed its second lap: another generated holiday remake, another round of "AI slop" backlash — and, per independent ad testing, another strong score with ordinary viewers, supporting the company's view that online outrage and consumer rejection are different things. "The genie is out of the bottle," its generative-AI chief shrugged. Shareholders, meanwhile, received the 64th consecutive annual dividend increase.

Analysis: the durability question

The following section is analysis, drawn from the reported facts above.

The bull case writes itself: volume growth has returned without sacrificing pricing, the portfolio is pre-hedged against the century's biggest consumption shift, the emerging-market engine (India, China, Brazil) is running, and a home World Cup is pouring fuel on the North American summer. A company that spent five years proving it could grow without volume is now growing with it.

The sceptic's questions are equally clear. How much of the volume rebound is World Cup and weather rather than trend? The fourth quarter of 2025 showed what happens when stretched consumers meet premium pricing. And the IRS case is the rare risk that is both enormous and binary — a $20 billion outcome would dwarf every operational win of the Braun era before it has properly begun.

What is not in question is the sophistication of the machine. In eighteen months, Coca-Cola absorbed a presidential product mandate at the cost of one glass bottle, turned the weight-loss-drug panic into a marketing case for its zero-sugar line, milked — literally — a dairy brand into a $4 billion growth engine, and swapped chief executives so smoothly the market barely blinked. The product is sugar water. The company is a hedge fund with a secret formula, and it has not misplaced the formula yet.

Sources

• Coca-Cola Q2 2026 earnings release, July 28, 2026 — revenue $13.4B (+7%), organic +6% (volume/price split), case volume +5%, margins, Zero Sugar +16%, raised guidance; Braun quote; CNBC coverage.
• Coca-Cola Q4/FY2025 release, February 10, 2026 — fiscal 2025 organic +5% (price-led), flat case volume, free cash flow; CNBC — the first quarterly revenue miss in five years.
• Coca-Cola announcement and CNBC, December 10, 2025 — Henrique Braun named CEO effective March 31, 2026; Quincey to executive chairman.
• CNN and Axios, July 2025, and CNN, October 21, 2025 — the cane-sugar announcement and the actual line-extension launch; CFO Murphy's "measured rollout" remarks via Bloomberg.
• FoodNavigator's coverage of the Q3 2025 earnings call, October 21, 2025 — Quincey's GLP-1 remarks, portfolio calorie mix, Diet Coke stabilisation; fairlife retail-sales figures per trade press; Coca-Cola release — the $650M Webster, New York fairlife plant.
• Al Jazeera, June 22, 2026, and Bloomberg Tax — the IRS case: $6B paid, up to ~$14B additional exposure, Eleventh Circuit oral arguments June 25, 2026, Judge Lagoa's retroactivity remark; decision pending.
• FoodNavigator, January 14, 2026 — the reported end of the Costa sale process; Quincey's "has not quite delivered" assessment as previously reported.
• Forbes, November 4, 2025, and NBC News (2024) — the AI holiday-ad backlashes; System1 ad-testing counterpoint; the "genie" quote from Coca-Cola's generative-AI lead.
• Coca-Cola investor release, February 19, 2026 — the 64th consecutive annual dividend increase, to $0.53 quarterly.

Figures are in U.S. dollars as reported. The fairlife retail-sales figure is trade-press sourced rather than a filing. The Costa sale's collapse is reported, not company-announced. The IRS exposure combines amounts paid and potential additional liability as characterised in the cited coverage; the appellate decision had not been issued as of publication.