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3,900 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | $7.6 billion, which is down approximately $290 million versus the prior year due to higher other tax payments, higher capital expenditures and cycling some working capital benefits from the prior year. Our balance sheet is strong, and our net debt leverage of 1.7 times EBITDA is below our targeted range of 2x to 2.5x. If you include our latest estimate of $6.1 billion related to our fairlife contingent consideration payment, which we expect to make in the first half of 2025, our expected net debt leverage would be at the low end of our target range. As James mentioned, our powerful portfolio, amplified by our system's unique capabilities gives us confidence in our ability to deliver on our updated 2024 guidance. We now expect organic revenue growth of approximately 10% and comparable currency-neutral earnings per share growth of 14% to 15%. Based on current rates and our hedge positions, we now anticipate an approximate 5-point currency headwind to comparable net revenues and an approximate 9-point currency headwind to comparable earnings per share for full year 2024. We continue to expect comparable earnings per share growth of 5% to 6% versus $2.69 in 2023. While it is too early to provide specific guidance on 2025, we do want to share some considerations based on what we know today. We're encouraged by our underlying performance and believe we're well positioned to deliver on our long-term growth opportunity. We expect pricing from intense inflationary markets to moderate in 2025 and recycling the impact of currency devaluations from these markets in 2024. With respect to our commodity environment, we expect prices on industrial materials to remain relatively stable, while agricultural commodities will continue to face volatility and higher prices. We will continue to invest behind our brands as we have been doing, while at the same time we will leverage a range of productivity levers to drive efficiency and effectiveness across our P&L. We expect elevated net interest expense resulting from the deposit made |
3,901 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | to drive efficiency and effectiveness across our P&L. We expect elevated net interest expense resulting from the deposit made related to the ongoing IRS tax dispute and upcoming fairlife contingent consideration payment. Regarding currency, if we assume current rates on our hedge positions, there would be an approximate low single-digit currency headwind to comparable net revenues and an approximate mid-single-digit currency headwind to comparable earnings per share for full year 2025. Many factors could impact both our currency outlook and broader business between now and when we expect to provide guidance in February. With our all-weather strategy, we've delivered comparable earnings growth for many years now. We have numerous levers to continue to do so. So in summary, successfully executing our strategy in an ever-evolving operating environment, we're confident in our ability to deliver on our objectives in 2024 and over the long-term. We're clear on the direction we are heading in the system. And we continue to invest with our bottling partners to drive sustainable long-term growth. With that, operator, we are ready to take questions. |
3,902 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: [Operator Instructions] Our first question will come from Steve Powers from Deutsche Bank. Please go ahead. Your line is open.
Steve Powers: Thanks very much. Good morning. So James, it sounds like momentum sequentially improved through the third quarter from a unit case perspective, which is welcome news. I guess given that as you look forward, how confident are you that you can return trends to positive growth in the fourth quarter? And how much of any expected improvement trajectory is within your control through some of the initiatives you detailed in the prepared remarks versus the system being essentially more dependent on a less -- just a less adverse macro backdrop? Thank you.
James Quincey: Thanks, Steve. Clearly, we were not as happy as we could have been in the third quarter with volume, and we focused on adapting quickly and saw improvements through the quarter. So July was the bump and things improved in August through September. I largely believe that it's within our control to return to growth. Actually, the macro environment, I'm sure we'll touch on later, is showing a degree of resilience. There are lots of puts and takes, but a degree of resilience. So I think it's firmly about getting our flywheel of the marketing innovation, the price pack and the execution of the system, and that we can get back to growth, which is very much implicit in our algorithm and our expectations going forward through the fourth quarter into 2025.
Operator: Our next question comes from Dara Mohsenian from Morgan Stanley. Please go ahead. Your line is open.
Dara Mohsenian: Hi, good morning. Just wanted to focus on the mix component within price mix. You mentioned it was 3% in the quarter. Great result. How sustainable is that as you look going forward out to 2025? And maybe can you talk about some of the key efforts on that front? |
3,903 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Yes. Let me break the mix -- I mean, mix has got a lot of different components in it country, category, channel, affordability or premiumization. In the third quarter, there are a couple of pieces of mix that I wanted to call out. One, which I see is enduring and ongoing and one which I see as more temporary. The enduring and ongoing piece is, of course, we're focused on not just driving the growth of affordability options, whether they be smaller packages, smaller multipacks at better entry price points or refillables depending on where you are in the world as a key part of responding to those consumers that are under disposable income pressure, which tends to be a headwind, but also focusing on premium segments whether that be premium waters or fairlife or some of the Coke SKUs to get the mix to be up. And so the more enduring piece is that ongoing management of affordability and premiumizations to drive our mix. The bit that was more temporary, which is relatively atypical in the last number of years, remember that the average price in emerging markets is lower than average price in the developed economies. Typically speaking, the emerging markets grow faster, so mechanically they are a headwind in price mix because they obviously have a lower price. In this quarter, atypically, the emerging markets have grown slower or have declined relative to the major economies, U.S., Europe, Japan, Australia. And so that actually has a kind of automatic stabilizer effect, which is that it makes price/mix go up. And of course, we're expecting, as we go through the fourth quarter into next year, to go to a more normal construct where we'll see decent results in the developed economies and faster growth in the emerging markets, and that will then have a normal shape -- more normal shape to its volume and a more normal shape to its price mix. So I think we feel good about where this is likely to go.
Operator: Our next question comes from Lauren Lieberman from Barclays. Please go ahead. Your line is open. |
3,904 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Lauren Lieberman from Barclays. Please go ahead. Your line is open.
Lauren Lieberman: Great. Thanks. I would love to hear a bit more about those adapted-quickly items, James, that you kind of spoke to. So believing in our control, there's a lot there, right? So I just would love if we could get some more maybe tangible examples of what you're doing to adapt quickly that is having -- you're able to execute quickly and have a quick payback. And since you teased the macro, let's get your view on the macro environment as well. Thanks. |
3,905 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Sure. I mean I don't think my view on the macro environment is going to take us too far. It's basically two big thoughts. One, at a global level, the consumer and the economies, I mean, the IMF report came out yesterday, is relatively resilient and relatively stable on a global basis. Clearly, there are a set of puts and takes between geographies, between income levels. But the macros in aggregate are a sum of a shifting set of puts and takes, but resilience in aggregate. Exactly how that will turn out, I'm not sure next year, probably different puts and takes, but again, resilience on overall basis. In terms of the tangible examples, I mean, it's a question where affordability, like, are we pressing hard on making the availability of certain affordable options even more expansive? Have we brought -- bringing forward, for example, investments in cold drink equipment so that we can upscale the availability of cold product, remembering, for example, that the Southern Hemisphere is just about to go into its summer, can we get further faster in terms of doing that, which will then tend to drive more volume growth. Are we applying the right adjustment to the mix of the marketing messaging? And how do we tweak that now that we have a more agile marketing model with the ongoing transformation, we're able to adapt the messaging. So to really get in there and get those things. And then in some parts of the world, it's about adapting the messaging to the situation. I mean some countries, for example, where the economics are very poor, it's not so much about the marketing, it's more about the availability and the entry price points. So we've always got to work with our local bottlers to drive what's the right system answer and really fine-tune our relevance with the consumers the retailers in that country in this moment.
Operator: Our next question comes from Bryan Spillane from Bank of America. Please go ahead. Your line is open. |
3,906 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Bryan Spillane from Bank of America. Please go ahead. Your line is open.
Bryan Spillane: Thanks operator. Good morning, James. Good morning, John. I guess a question about North America. And our observation through this quarter or over the summer was just, I guess, a little bit of softness overall in just discretionary spending, so that kind of expressed in small-format stores, convenience and gas, I think also maybe a bit in foodservice. So can you just maybe talk to that? Are you seeing the same thing? And is there maybe just a little bit of a recession, if you will, on impulse purchases right now? And if so, just what do you think changes that? |
3,907 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: I think it's -- honestly, I think it's more of a mix. There's clearly part of the consumer landscape where there's pressure on disposable income. If you look -- I mean it depends whether you want to take measures of consumer confidence or measures of consumer sentiment. I know that sounds like the same thing, but depending which source you look at, one's going up, one is going down. So there's a mixed bag. I would say there is some softness in aggregate, but it's very marginal in the total industry landscape. The beverage industry is still pretty robust. There's growth in total dollars. Having said that, we talked about in previous quarters there's a set of consumers exhibiting value-seeking behavior, whether they're looking for combo deals when they're in away from home, particularly quick-service restaurants, whether they're looking for going and getting lower price point purchases of beverages, whether that's a smaller pack size or a smaller number of packs in multipack, that's out there. But there's just a -- also strong purchasing power in other segments of the marketplace, which is somewhat offsetting. I mean, witnessed the strong momentum, for example, in fairlife. But net-net, I think the U.S. marketplace has remained pretty resilient given what is -- given the China -- trajectory macroeconomically speaking that we come through.
Operator: Next question comes from Chris Carey from Wells Fargo. Please go ahead. Your line is open. |
3,908 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Next question comes from Chris Carey from Wells Fargo. Please go ahead. Your line is open.
Chris Carey: Hi good morning everyone. Yes, this has been somewhat addressed, but I think I'd maybe be a little bit more specific. The stock is off a bit premarket on what appears to be around 2025 earnings growth given your outlook for FX and net interest expense going into next year. And I think the lesson from this year and really in recent years, has been your ability to overcome these substantial effect headwinds and other headwinds and still deliver on reported EPS growth. James, John, you both expressed some confidence in the prepared remarks on innovation, delivering against longer-term targets. So I guess, can you just touch on maybe some of the lessons of 2024 areas which really allowed you to overcome what was the substantial FX, it still is, headwind this year and still deliver your reported earnings objective, whether pricing RGM innovation, whatever that may be, and what feels durable going into next year? I know you've touched on it, but just trying to get down to what's really driving the stock today. And then maybe importantly, then I'm done, but just the areas where you have a bit more of a heightened focus or a sense things, maybe slowing in Mexico, India, some of these lingering turbulent issues in the Middle East, anything that comes to mind? So basically, just you've got momentum into confronting these headwinds next year, but the environment is also evolving. And I'd just maybe like to put a little bit of a finer bow on that. Thanks.
James Quincey: Sure, Chris. I think you're going to win this year's prize for the longest question.
Chris Carey: I expected that. |
3,909 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Look, let me start and then I'll -- John will probably want to weigh in too. We have for a number of years and very deliberately chose the expression, the all-weather strategy because as we have all lived, we've been through a lot of very atypical years in the last 5, 7 years. And we wanted to make the point by calling an all-weather strategy, look, we cannot predict like what's going to happen next year. We know some elements, and John will talk about them, but there are many other things that are going to happen. But we're going to pull the levers to get there and drive the business forward, trying to deliver on top line at the end of the top of the algorithm and underlying EPS growth. A couple of things that I think are worth noting about 2024 and its implications into '25. There's a difference, particularly if we talk -- I mean, firstly, FX, as you said, the mid-single-digit call for next year is less than it is this year, although obviously interest is high. There's a difference in FX, if it's coming from the, let's call them, the G10 economies, which are, let's call -- name Europe because it's the simplest example. If there's a big devaluation of the euro, there's not likely to be a lot of pass-through inflation in the short term in the European marketplace, and that's going to be much harder for us to deal with, but not impossible. If there's a big devaluation in an emerging market, you tend to get more immediate pass-through of the inflation. And so you can see that in 2024. In 2024, almost all the FX headwind is a consequence of devaluations in the emerging markets. And actually, the G10 bucket is broadly flat, I believe. And so that you do have -- if it's coming from the emerging markets, there's a little more of a link back to above-normal pricing on the top line, which, again, you see in the year-to-date in 2024. So, there's a piece of next year where we, and John will get into it, where you've got to some extent see G10 is different to the to the emerging markets, and some of the |
3,910 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | and John will get into it, where you've got to some extent see G10 is different to the to the emerging markets, and some of the emerging markets stuff is linked to the top line. And then obviously, within that, we have to manage each of the marketplace. Because if there's high inflation, there's likely to be a big push on affordability and a big shift in the marketing and innovation mix. So, there's a set of kind of framework approaches depending on what sort of our problem is occurring in the marketplace. But again, let me finish my thought and then hand over. In the end, we're pursuing all-weather strategy. Some years the headwinds will be greater than others, but we're going to pursue a strategy to get over the line in terms of trying to drive some growth. And there's a lot that can still happen before next year and will come with a complete picture in February. John, do you want to add? |
3,911 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | John Murphy: Maybe, Chris, if I could touch upon some of the lessons that we've learned, not just this year but really over the last few years. First one I'd say is it's really important through the thick and thin of all of this is to stay very focused on investing the right way behind our brands and that is something we will continue to do. I think, secondly, in the last couple of years, having an even sharper understanding as to where your profit drivers are underneath the global portfolio at the country casualty level and then making sure that we're over-allocating resources to support those larger profit pools both in the base of the business and as we think about growth going forward is really important. And doing that in partnership with our bottlers around the world and we've seen that being a big source of the momentum over the last couple of years. I think the third area that I would highlight and I know it's a topic across many companies going into 2025, is that you can never take your foot off the productivity accelerator. And in that context, I think the learning is that that you've got to build into your overall way of doing business as opposed to have it as an end-of-year project that you need to kind of deliver something in the next six to 12 weeks to save the quarter. So, we've got a lot of levers we've talked about it in the past that are available to us, whether it's through marketing investment line, our operating investment line, operating expense investment line, or through our supply chain. And we will continue to go after the opportunities that come at us. And so when you take all of those together, I think that's what we see creating that flywheel of growth on the top line, and then the ability to sustain and expand margins down through the P&L from there.
Operator: Our next question comes from Bonnie Herzog from Goldman Sachs. Please go ahead. Your line is open. |
3,912 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Bonnie Herzog from Goldman Sachs. Please go ahead. Your line is open.
Bonnie Herzog: Hi, thank you. Good morning. I actually wanted to circle back to North America. Your organic sales growth was very strong at 12%, which caught most of us by surprise. And growth was primarily driven by the double-digit price mix. So, hoping for a little bit more color behind that in terms of rate versus mix in the market. And then ultimately, how sustainable that is and I guess, second, I'd be curious to hear if you believe you've maybe reached a point where you've pushed too far in terms of pricing. And if so, how will you modify your pricing strategy or RGM capabilities going forward. James, you did touch on this, certainly a greater focus on affordability, so maybe an example or two would be helpful to hear. Thanks so much. |
3,913 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Sure, Bonnie. Firstly, in North America, Q3, the price/mix, half, in round numbers, half of it is price and half of it is mix. So price closer to rate. The mix is being driven by some of the de-price -- some of the kind of lesser focus on case pack water, but a heavy investments behind brands like fairlife, Topo Chico, some of the nutrition staff, Coca-Cola. And those tend to be mix positive. So there's clearly a consequence, actually John just talked about it, really being choiceful about where we invest behind which brands, in which countries, in which channels. And that's coming through in North America, which is why you got about half of that coming from mix and half of it coming from price or right. Clearly, there's a balance there with some of the affordability actions we're doing, but that's the basic setup. And if we just home in on price for a second, so you're getting roughly half of that in price, and that then starts to look a lot like the trajectory of CPI that has been coming down. And what we see going forward is there'll continue to be inflation in the input costs whether that be labor, particularly some of the agricultural commodities, some of the packaging costs as well, are still going to be increasing in cost, although at a lower rate. So again, we see us heading towards a more normalized level of pricing going into next year and kind of landing in a more normal zone as kind of -- some of that tracks down at kind of similar rates to CPI. Of course, we continue to be very choiceful about where we invest for affordability options and where we invest for premiumization options. I'm not sure, I think mix will always be four or five points. But certainly, we would look for continued growth in the North American business.
Bonnie Herzog: All right. Thank you.
Operator: Our next question comes from Filippo Falorni from Citi. Please go ahead. Your line is open. |
3,914 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Filippo Falorni from Citi. Please go ahead. Your line is open.
Filippo Falorni: Hi, good morning everyone. I wanted to ask on the margin outlook going forward. This year, you realized very strong gross margin, operating margin expansion, a lot of it driven by the refranchising activity with the underlying kind of being offset by currency. As we think about going forward, you guys both talked about leverage on the productivity line, maybe some inflation in the agricultural commodities, can you talk us through like the balance of the levers for margin expansion into next year? And anything we should be thinking about, assuming no other franchising activity? Thank you. |
3,915 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | John Murphy: Sure. Thanks for the question. First of all, it's a huge area of focus and has been. We're currently tracking to have our highest gross margin level since pre-COVID and expect that underlying expansion to continue, notwithstanding, the offsets that you just mentioned. For 2025, as we as we laid out in the script, some of the considerations for 2025 is a more normalized pricing environment. James has touched upon that. We would continue to look to offset the FX headwinds with some underlying expansion through our RGM and cost efficiency efforts. I've highlighted some of the challenges we have on the agricultural commodity front, and we see that being part of just the equation we need to manage. We are, as I said earlier, looking at a number of levers on both the revenue and the cost lines, our ongoing elevation on the RGM front, the optimization of – on the promotional front within the innovation space, things like simplification of product specs, for example, can free up a lot of dollars. The way we have been working with our very diverse supplier base across the world, not only for certainty of supply, which is a huge priority in a number of markets, but over time to leverage the scale of the system, et cetera. So there's just a lot of opportunity and it's not any one big thing that's going to make or break the numbers. But I think it's our continued ability to bring all of these levers to play that's going to make the difference. And I think that's represented in the consideration set that we framed for 2025.
Filippo Falorni: Great. Thank you.
Operator: Our next question comes from Andrea Teixeira from JPMorgan. Please go ahead. Your line is open. |
3,916 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Andrea Teixeira from JPMorgan. Please go ahead. Your line is open.
Andrea Teixeira: Thank you and good morning, everyone. James, John, you mentioned that volumes improved as you exit the quarter, but implied organic sales growth for Q4 even after you raised, it's closer to, I believe, 6% from 9% in Q3, if my math is correct, and you have the extra two days. I'm hoping to see if you can help us bridge the most recent trends and how to think about Q4. And separately, just a clarification. There are some recent news on potential ban in the sale of CSDs and snacks in schools Mexico. I know that historically the impact of the sugar tax was not relevant at all. But just wanted to hear how you're positioning cases if it materializes? Thank you. |
3,917 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Let me go in reverse order. I haven't read all the news in Mexico, I'm not sure it's happening yet. But we largely sell a no-sugar set of portfolios recommendation towards schools and that's part of our global approach. So I'm not sure how that matters, or not sure how that's going to impact the business. I'd imagine that's going to be very small, if at all. In terms of Q4, I mean, I would unpack it and say, look, part of what is important here is what is going to be the flow-through from some of these high inflation marketplaces. If you take the impact of high inflation, it's clearly been slowing down or lesser impact as we've gone through the year. And so you're going to see potentially less impact in the fourth quarter from that. In terms of where we're going, in terms of CSDs, yes, clearly, there's going to be a pickup in terms of price -- in terms of inventory, sorry. And I don't think you quite got to the right number yet. I think it's probably implicitly a little higher. But we can certainly follow-up on that one. I think it's going to be a strong outlook. Because at the end of the day, in my simple way of thinking about things, if you take out all the moving pieces in the craziness of what goes on, at the end of the day, if I take out the high-inflation markets out of the price/mix in Q3, you get 6%. Volume was minus 1%, that's 5%. That's right in the range of top end of our growth algorithm, the same as it has been each quarter so far this year and in previous years. And if you just want to look at it in simple terms, excluding high inflation, I'm expecting us to say bang at the top end of our long-term growth algorithm.
Andrea Teixeira: Thank you.
Operator: Our next question comes from Kaumil Gajrawala from Jefferies. Please go ahead. Your line is open. |
3,918 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Kaumil Gajrawala from Jefferies. Please go ahead. Your line is open.
Kaumil Gajrawala: I'm going to go for the award for the shortest question. Since the news is so new with McDonald's and potential food contamination. I think they're your largest customer. Is there anything we should know about how it would impact your business?
James Quincey: Kaumil, yes, I think you've got a pretty short question there. Look, I think obviously, hearts go out to the people who have been affected by the contamination. Certainly, we're a big partner of McDonald's, they're a big partner of ours. We'll be helping them in any way we can as they work through whatever is happening here. Clearly, the information is very thin on the ground as it relates to those of us further away from the situation. Certainly, when one looks at what's in the media so far in terms of the states that have been affected, I would say, at this stage, it's not going to be a large, significant impact the business.
Operator: Our next question comes from Robert Ottenstein from Evercore. Please go ahead. Your line is open.
Rob Ottenstein: Great. Thank you very much. Your CSD business in the U.S. is performing quite a bit better than it has than a number of years ago. And I'd like to kind of get your sense of the drivers on that? Is it Zero Sugar products? Is it better engagement with younger drinkers? It market share gains? And then more specifically, this year, some of the data that that we're looking at seems to suggest CSDs are retaking market share from energy drinks. So lots of pieces there, but I'd love to get your assessment of what's going on. Thank you. |
3,919 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Yes. Thanks Rob. Well, firstly, I'm tempted to go what's driving the growth of the soft drinks as all of the above, in terms of what we've been doing to make our brands more relevant. I think the North America teams have done a good job across the portfolio, to be fair. I mean if you look at the third quarter. Coke Trademark grew volumetrically speaking. The other sparkling beverages grew volumetrically speaking. I mean, within the Coke Trademark, Coke Original was broadly flat, and Coke Zero was double-digit growth, and even Diet Coke grew. So I think there's been a strong leveraging of the ongoing marketing transformation, paired with an improving set of execution by the bottling system, work on the RGM and the pack mix, and execution in the marketplace, that are bringing greater strength to the sparkling beverage business in North America. It's certainly been the accumulation of many quarters work and it's starting to show through both when you look at the third quarter and also if you were to look at -- if that's an improving trend through the year.
Operator: Our next question comes from Charlie Higgs from Redburn. Please go ahead. Your line is open.
Charlie Higgs: Yes. Hi, James, John, Robin, hope you are all well. I'd like to dig into the unit case volumes down 1% in Q3 a bit more, please. And if you could maybe just quantify or contextualize some of the consumer hesitancy that's happened in Q3. Was it about the same as Q2 better or worse? And then also some of the impacts from the portfolio trimming you're doing. I'm just trying to get a sense of like the clean volume performance in Q3. And then just building on that, maybe you could touch a bit more on Trademark Coke, Coke Zero accelerating to 11%? Are you confident, James, that that's incremental and not coming from Coke Classic? Thanks. |
3,920 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: We can break down the volume in lots of different ways. The first and most important piece of the puzzle, I sort of mentioned it earlier, is the relatively atypical makeup of volume in Q3. In other words, there was actually good performance from volume -- in volume terms across the developed economies. So North America, although it was flat, it had growth in the sparkling beverages and it had growth in the kind of the premium stills, if you like, across multiple categories, and we had deprioritized some of the case pack water. So actually North America had a good performance. Europe grew, Japan grew, Australia. And they grow -- not only did they grow, it -- the pressure had actually come from emerging markets. And that pressure in the emerging markets was concentrated in a set of markets, some with temporal factors and some with some ongoing issues. The temporal factors are more -- for example, Mexico was cycling in this quarter a very strong Q3 last year. Brazil continues to be good, but Mexico was cycling strong Q3 last year, which made Latin America looked like it came off. But actually, we still think the momentum is good there. India had a particularly heavy monsoon in a number of states, and that affected the volume in India. Actually, by the way, heavy monsoons tend to be a good predictor of agricultural yield, which would be then better next year. That's clearly going to be a temporary factor and we'd be looking for India to return to growth. Parts of the world that are on the more ongoing pressure are particularly China and the Eurasian markets or Eurasia and the Middle East. Clearly, here, we still see a couple of things going on. One, in China, yes, the economy is kind of not taking off. But some of what's going on with choices we've made. We chose to deprioritize some of water, in equivalent terms, case pack water. And we focused on growth in the sparkling beverages in China, so actually Coke grew volumetrically in the third quarter in Japan. So it's clearly about -- some of it's about |
3,921 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | in China, so actually Coke grew volumetrically in the third quarter in Japan. So it's clearly about -- some of it's about the choices we make, but we need to focus more on the things we can control in China to have better marketing, innovation and execution. But we see light at the end of the tunnel and long-term investment opportunities for the China business. The Eurasia business is more of a confluence of factors, the spillover from the Middle East conflict, plus there's a set of markets there that are undergoing quite significant macroeconomic adjustments and that is also coming together to kind of create a relatively big headwind volumetrically speaking. |
3,922 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Bill Chappell from Truist Securities. Please go ahead. Your line is open.
Bill Chappell: Thanks. Good morning. To dig a little bit further into fairlife, I guess maybe the size of it at this point, are we nearing $1 billion? How much impact is it having on mix and kind of the prospects as we look to next year? Can it continue to expand or do you have tougher comparisons? Because it's really been a big driver particularly in the past kind of 12, 18 months and just trying to understand the prospects going forward and how much impact it's now having on North American overall sales? Thanks. |
3,923 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Thanks, Bill. Well, for sure, it's going to be $1 billion brand. It's certainly passed that mark a while ago. I think firstly, like one of the most kind of I think standout facts about the North American businesses, and I think we said it in the script, is the two biggest brands in terms of retail dollars added to the North American beverage landscape by any brand across the whole industry is Coca-Cola Trademark and Fairlife. And that shows you, I think the ability to take something that's been around for 138 years and make it continue to be relevant and take something that's not much more than a decade old and make that relevant too. And so yes, it's having an impact on mix because largely we're consolidating a vertically integrated business and so there's a mechanical effect at the revenue line, which is part of that slightly outsized contribution for mix that I talked about earlier, but it's also delivering on the bottom line. But just to allay fears that somehow that means that the rest of the business is not doing well, no. The North America ex-fairlife is also growing top line, gaining, doing well, and growing profits. So both engines are firing, or all the engines are firing, and it's not just one engine, which I think is very important to understand, and it can certainly continue to expand. I mean, clearly next year we're going to be cycling a very strong year, and we are in the process, as previously advertised, about bringing online more capacity than New York plant is being dug out of the ground or built out of the ground as we speak. And so we will be aiming to blend in that capacity. Clearly, it's going to be hard to cycle this year's numbers until we get the capacity, but I think there's huge opportunity and demand in the marketplace. We just need to continue to run, keep it relevant, and bring online the capacity.
Operator: Our next question comes from Kevin Grundy from BNP Paribas. Please go ahead. Your line is open. |
3,924 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Kevin Grundy from BNP Paribas. Please go ahead. Your line is open.
Kevin Grundy: Great, thanks. Good morning, everyone. James, I was hoping to pivot to the alcohol strategy and learnings there. I think it's gotten a little bit less attention from investors more recently. The company has about a few years in or so to the strategy, extending some of the brands. You have a number of different partners in the space with a number of different trademarks. Maybe comment, number one, sort of broader learning's here a few years in. And then two, which opportunities you think are more scalable globally and can become a more meaningful part of the portfolio. Thank you. |
3,925 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Yes. It's a couple of years in, still very early days. I would advertise here a kind of an overall learning that most things take a decade to work out whether they're going to arrive at scale, a minimum 7 years. And that's true, even if you look back at the beverage industry, the most successful of any brands, it was very hard to tell whether we're really breaking through to scale until about year 7 and it took at least till year 10 to get scale and often much longer. So a few years is still relatively early days in terms of really building out something at scale. So that's point number one. Two, we've been taking a measured approach to work out what will work. And we've got some good learnings, and we've pivoted where things didn't work, and we've kind of continued to advance where things are working. I think in terms of -- you kind of -- implicit in the question is like, is one of these going to work and the other is not going to work? I don't think I see this category that way. I don't think there's going to be one killer SKU that is 50% of the market. I think it's going to be much more -- the alcohol industry has more variety and more variety-seeking behaviors. And therefore, I think it's going to be more about us using a combination of some partnered ready-to-drink offerings like Jack and Coke, Bacardi and Coke, Absolut and Sprite, complemented with a set of our own brands, ARTD, like Simply Spiked or Minute Maid, in a portfolio effect. And I think it's going to be about having a robust portfolio of choice, is going to be the approach that is likely to do well in ARTD. And if you look around the world at the few markets, and there are only relatively a few, where ARTD is a meaningful percentage of the beer, relative to beer, then that's the characteristic that stands out. So the question is, can we put together a bundle that could be effective, not just in share terms, which I think is possible, but in terms of making ARTD a relevant size category?
Kevin Grundy: Very good. Thank you. |
3,926 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | Kevin Grundy: Very good. Thank you.
Operator: Our next question comes from Robert Moskow from TD Cowen. Please go ahead. Your line is open.
Robert Moskow: A quick question. You expect price/mix to decelerate next year. Some of it's due to North America, some of it's due to hyperinflationary markets. So do you expect any benefit to volume from that? Like is there elasticity assumption? You did sound very positive about volume into 2025. Thanks.
James Quincey: Yes. There is a certain mechanical effect to price/mix and volume. In other words, I'm expecting 2025 to be the inverse of the third quarter. In other words, I would expect the emerging markets to retake their more traditional position of growing faster than the developed economies, which will obviously contribute to volume growth, but instead of -- but it won't contribute to a positive price/mix. So I think there will be some stabilization in that kind of relationship such that next year is going to look more like essentially what this year looked like, which is where you've got some volume growth, a more normal level of volume growth, a more normal level of pricing, with a kind of a top-up of what will still be a residue amount of high-inflationary countries. And that's likely to be where 2025 is heading.
Robert Moskow: Thank you.
Operator: Our last question today will come from Carlos Laboy from HSBC. Please go ahead. Your line is open.
Carlos Laboy: Yes, good morning, everyone. I have a North America-specific question. Can you tell us more about the improving system digital capabilities are being built that you might find most promising as you look forward to accelerating volume and revenue growth? And how are you compelling the bottlers to make investments behind these capabilities? |
3,927 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Yes. Sure, Carlos. I mean, from a bottling system point of view, I think in a way, it's the expansion of the digital engagement with the retail system. I mean there was always the electronic ordering in the modern trade, and that's been around a long while. What's really interesting about what's going on is more in the kind of mom-and-pop traditional trade or independent trade part of the marketplace, which is not just the ability to provide a platform, which allows the retailer to engage with the ordering system 24/7 rather than waiting for the pre-seller to turn up. They can engage to add product order -- add to order, they can register service request for the coolers or for merchandising material. But also as we start to get into AI, the system can also start interacting with the retailers with suggested orders and the engagement, not just from the retailer to the bottler in terms of ordering a service that's actually from the bottler to the retailer suggesting orders because of whatever is happening, there might be some events coming up, there might be people like you buy these sorts of things you should add. And so we really see a combination of enhancement to the market developers who are out there. It's not going to go from being a human system to an entirely electronic system. I think it's going to be about the enablement of the humans to be as productive as they can be, whether those are pre-sellers, market developers or the retail operators themselves. And so I think it's very exciting, and the bottlers are leaning in to the investments in this area.
James Quincey: So with that, just to conclude, we think we're well positioned to deliver on our ambitions to 2024 and over the long term. We're certainly managing near-term uncertainty as we continue to build our system for long term. And we're confident we will create sustainable value for our stakeholders. Thanks for your interest, your investment in the company, and for joining us this morning. |
3,928 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. |
3,929 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: At this time, I'd like to welcome everyone to the Coca-Cola Company's Second Quarter 2024 Earnings Results Conference Call. Today's call is being recorded.[Operator Instructions] I would now like to introduce Ms. Robin Halpern, Vice President and Head of Investor Relations. Ms. Halpern, you may now begin.
Robin Halpern: Good morning, and thank you for joining us. I'm here with James Quincey, our Chairman and Chief Executive Officer; and John Murphy, our President and Chief Financial Officer. We've posted schedules under financial information in the Investors section of our Company website. These reconcile certain non-GAAP financial measures that may be referred to this morning to result as reported under generally accepted accounting principles. You can also find schedules in the same section of our website that provide an analysis of our growth and operating margins. This call may contain forward-looking statements, including statements concerning long term earnings objectives, which should be considered in conjunction with cautionary statements contained in our earnings release and in the Company's periodic SEC reports. Following prepared remarks, we will take your questions. Please limit yourself to one question. Reenter the queue to ask follow-ups. Now, I will turn the call over to James. |
3,930 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Thanks Robin, and good morning everyone. After a good start of the year, we continued our momentum in the second quarter. In a world with a wide spectrum of market dynamics, our all-weather strategy is working. We're winning in the marketplace by leveraging our scale and continuing to foster a growth mindset. Given our strong year-to-date results, we are raising both our top-line and our bottom line guidance today. This morning, I'll start by discussing the current operating environment and reviewing our second quarter performance, then I'll explain how we're enhancing our capabilities to drive more effective and efficient operations, including leveraging digital and tech-enabled innovations to ultimately contribute to our earnings growth. Finally, John will discuss our financial results and the raised 2024 guidance. In the second quarter, we grew volume, generated strong organic revenue growth and expanded margins while continuing to invest in our business, we also gained value share. This culminated in 7% comparable earnings per share growth despite 10% currency headwinds and 2% headwinds from bottler refranchising. Overall, our industry remains attractive and is expanding. We believe we're well positioned to capture the vast opportunities available to us. Across the world, we're continuing to navigate many varying market dynamics locally to deliver our global objectives. In Asia Pacific, we had strong performance across most of our footprints. In ASEAN and South Pacific, the refranchising of the Philippines is off to a good start. In the Philippines, we grew volume by double digits and drove strong value share gains by increasing focus on affordable packages, including accessible price points and refillable offerings. Growth across ASEAN and South Pacific was driven by strong end-to-end execution across our sparkling portfolio. Our business in India recovered nicely from a slower start to the year, driven by Sprite and Fanta, as well as strong local brands such as Thumbs Up and Maaza. Strong |
3,931 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | from a slower start to the year, driven by Sprite and Fanta, as well as strong local brands such as Thumbs Up and Maaza. Strong end-to-end execution across our growth flywheel led to double-digit volume growth. In China, consumer confidence remains subdued. We continue to focus on our core business and invest behind profitable long term growth. Lastly, in Japan and South Korea, we generated volume growth during the quarter and won value share. We successfully relaunched Ayataka, a much loved local tea brand in Japan, and we're also benefiting from stronger execution in e-commerce channels. In EMEA, the external environment remains mixed. In Europe, we saw pressure in our away from home business due to some reduced foot traffic and adverse weather in Western Europe. To capture value, we're investing in several highly anticipated activations, including music festivals, the Euro 2024 Football Championship, and of course, the Paris Olympics. We're increasing our focus on brands with strong momentum across our total beverage portfolio, including Fuze Tea and Powerade, and on promising sparkling innovations such as Coke Lemon and Reformulated Sprite. In Eurasia and Middle east, geopolitical tensions and economic uncertainty continue to impact our business. We're working closely with our local partners to navigate these headwinds while investing for the longer term. In Africa, despite multiple currency devaluations, strong integrated execution led to robust performance across our markets. For example, in Nigeria, our system quickly responded to the intense inflationary environment by focusing on affordable packages, including accessible price points and refillable offerings, and increasing outlet coverage to win both volume and value share. Across Africa, we grew volume in mid-single digits and similarly won both volume and value share. In North America, we generated robust topline and bottom line growth and one value share. Our volume decline was driven by softness in away from home channels. To offset this, we're |
3,932 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | line growth and one value share. Our volume decline was driven by softness in away from home channels. To offset this, we're partnering with foodservice customers to market food and drink combo meals to drive traffic and beverage incidents. Excluding mainstream packaged water, at-home volumes held up well. Fairlife and Trademark Coke finished number one and number two as the at-home retail sales growth leaders for the industry during the quarter. Our juice business also had a strong quarter and recent innovations including Sprite Chill and Topo Chico Sabores, are off to solid starts. In Latin America, volume momentum continued, led by strength in Mexico and Brazil. Growth was driven across our entire total beverage portfolio. Coca Cola Zero Sugar had a standout quarter with over 20% volume growth, and we're continuing to take integrated execution to the next level by increasing investments behind cold drink equipment to win share of visible inventory and create additional consumer demand. Finally, in global ventures, despite pressures in key markets such as the United Kingdom and China, we generated organic revenue growth and expanded margins. Costa is driving loyalty through targeted promotions like treat drop and innocent gain value share in Europe. Putting it all together, despite an ever changing external environment, our business remains very resilient. The power of our portfolio, amplified by our system's unique capabilities is a clear advantage. While we're delivering on our near term commitments, we're also building capabilities and innovating across our flywheel to become a more agile, effective and efficient organization. Starting with marketing and innovations. Last year, we stood up Studio X, which is our digital and organizational ecosystem that integrates marketing capabilities and connects them to our global network structure. We're producing tailored content at scale and with speed and are able to measure impact in real time. We're also refining our innovation process to prioritize bigger and |
3,933 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | and with speed and are able to measure impact in real time. We're also refining our innovation process to prioritize bigger and bolder bets, and we're removing barriers to deliver a more holistic approach, shorten the time to launch and improve success rates. We know that innovations that grow in the second year have a much greater odds for multiyear success and deliver far greater impact. So we focused on sustaining investment and have consistently improved second year performance success rates in each of the past four years. Continued innovation successes include Sprite and Fanta reformulations, Fuze Tea in Europe and Minute Maid Zero Sugar in North America, among many others. As a result of these combined initiatives, we have greatly improved our ability to rapidly produce and deliver marketing content, integrate activations with timely innovations and scale successes to drive the greatest impact. One example from the second quarter, Coca-Cola's partnership with Marvel, which featured nearly 40 different limited edition collectible graphics and QR codes on our packaging to connect consumers with unique augmented reality experiences. We collaborated closely with Marvel Studios and the Walt Disney Company and tapped into the best-in-class animation and activation to quickly scale to over 50 markets. As a result of this and other growth initiatives, Trademark Coca-Cola grew volume and won volume and value share during the quarter. Our marketing and innovation transformation journey contributed to Trademark Coke winning creative brand of the year for the first time ever at the Cannes Lions in June. We won 18 different awards at Cannes Lions. Beyond marketing and innovation, we're flexing our muscle in revenue growth management and integrated execution to sustain competitive advantage. Even in markets with very well developed capabilities, there's potential to be even better. For example, Mexico is one of the markets at the forefront of revenue growth management, and has the highest cold drink equipment density in |
3,934 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | Mexico is one of the markets at the forefront of revenue growth management, and has the highest cold drink equipment density in the world. During the quarter, we drove affordability with refillables and premiumization with single-serve transactions. Our system also added over 80,000 coolers year-to-date. Through these and similar initiatives, we grew volume mid-single digits during the quarter, continuing the momentum from the past few quarters. Each day, consumers enjoy approximately 2.2 billion servings of our products translating into about 800 billion servings annually. This kind of scale gives us unique insights into the consumer, which helps us to better tailor offerings. Emerging technologies, including those enhanced by AI, have the potential to create value for retailers and consumers. For example, we're piloting an AI-based price pack channel optimization tool, across several markets that evaluates opportunities, to better tailor solutions to drive incremental volume and revenue. Early results show that the tool helps improve both our offerings, and speed to market. Our system is also piloting an AI-driven initiative to push personalized messages, to retailers with suggested items based on previous orders and market data. Initial pilots indicate that retailers who receive the messages, are over 30% more likely to purchase recommended SKUs, which results in incremental sales for our retailers and the system. We're just scratching the surface of what's possible, and we're taking steps to seize opportunities down the road. To sum it all, while we recognize there's still much work to be done, to capture the vast opportunities available; we're encouraged by our year-to-date results and efforts to improve, every aspect of how we do business. As we look forward to the second half of the year, the external backdrop remains uncertain, including some signs of pressure in various consumer segments across developed markets. However, thanks to the power of our portfolio, and the unwavering dedication of our system |
3,935 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | segments across developed markets. However, thanks to the power of our portfolio, and the unwavering dedication of our system employees, we are confident we will deliver on our updated 2024 guidance and longer-term commitments. With that, I'll turn the call over to John. |
3,936 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | John Murphy: Thank you, James, and good morning, everyone. In the second quarter, we delivered strong results. We grew organic revenues 15%. This consisted of 2% unit case growth. Concentrate sales were ahead of volume by four points, driven primarily by timing of concentrate shipments, and some disruptions in the global supply chain that we partly expect, to reverse next quarter. Our price/mix growth of 9% in the quarter was primarily driven by two items: one, approximately five points of intense inflationary pricing, across a handful of markets to offset significant currency devaluation. And two, an array of pricing and mix actions across our markets. Excluding the impacts from concentrate shipment timing and pricing from markets with intense inflation. Organic revenue growth during the quarter was at the high end of our long-term growth algorithm. Comparable gross margin was up approximately 200 basis points, driven by underlying expansion, and the benefit from bottler refranchising partially offset by currency headwinds. Comparable operating margin expanded approximately 120 basis points. Comparable operating margin expansion was less than comparable gross margin expansion, due to less benefit from bottler refranchising and greater currency headwinds to comparable operating margin. Putting it all together, second quarter comparable EPS of $0.84 was up 7% year-over-year despite 10% currency headwinds and 2% headwind from bottler refranchising. Free cash flow was approximately $3.3 billion, down approximately $700 million versus the prior year, due to higher tax payments, cycling working capital benefits from the prior year and higher capital expenditures. We continue to take actions, to achieve a fit for purpose balance sheet that, will best support our growth agenda. During the quarter, we raised approximately $4 billion in cash by issuing long-term debt for general corporate purposes. This may include pre-funding upcoming payments related to the IRS tax case and the Fairlife contingent consideration. With |
3,937 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | This may include pre-funding upcoming payments related to the IRS tax case and the Fairlife contingent consideration. With respect to our IRS tax case, which we continue to vigorously defend. We're making progress to our next steps, and we expect we will be able to move forward an appeal by the end of the year. Given the continued outperformance of Fairlife, we recorded a charge of $1.3 billion during the quarter. Our estimated final payment related to this acquisition is $5.3 billion, which will be made in 2025. We are encouraged by Fairlife's performance and the value it has created for our company. So far this year, we've realized nearly $3 billion in gross proceeds from bottler refranchising and streamlining our equity investments. We'll continue to prioritize higher growth businesses, and take passive capital off the table. Return on invested capital is 24%, up approximately five points from three years ago. Our balance sheet is strong, as demonstrated by our net debt leverage of 1.5 times EBITDA, which is well below our targeted range of 2 to 2.5 times. We have ample capacity to pursue our capital allocation agenda, which prioritizes investing to drive further growth, continuing to support our dividend and staying dynamic, agile and opportunistic. As James mentioned, we're proactively managing our portfolio to deliver on our commitments. Our updated 2024 guidance reflects the momentum of our business in the first half of the year, and our confidence in our ability to execute on our plans during the second half of this year. We now expect organic revenue growth of 9% to 10%, and comparable currency-neutral earnings per share growth of 13% to 15%. Bottler refranchising is still expected to be a four to five-point headwind, to comparable net revenues. And we now expect a one to two-point headwind, to comparable earnings per share. Based on current rates and our hedge positions, we now anticipate an approximate five to six-point currency headwind, to comparable net revenues and an approximate eight to |
3,938 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | we now anticipate an approximate five to six-point currency headwind, to comparable net revenues and an approximate eight to nine-point currency headwind, to comparable earnings per share for full year 2024. This increase in currency headwind is driven by a small number of intensive treasury markets, while the rest of the currency basket is relatively neutral to our results. All in, we now expect comparable earnings per share growth of 5% to 6% versus $2.69 in 2023. There are some considerations to keep in mind. We expect unit cases and concentrate shipments to be relatively in line with each other for the full year 2024. Please keep in mind there are two extra days in the fourth quarter. Taking everything into consideration, we expect earnings growth during the remainder of 2024, will be weighted towards the fourth quarter. To summarize, we're encouraged by our track record and the underlying momentum of our business. Our system remains incredibly focused and motivated to drive growth. We're continuing to drive quality top line growth, expand margins, grow comparable earnings per share and improve the return profile of our business. And we're confident we will deliver on our guidance, and longer-term objectives. With that, operator, we are ready to take questions. |
3,939 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: [Operator Instructions] Our first question comes from Dara Mohsenian from Morgan Stanley. Please go ahead. Your line is open.
Dara Mohsenian: Hi, good morning. It'd be helpful to get an update on North America, given questions around consumer spending. Can you just discuss any demand impact you're seeing on your business, any variance in channel performance and how that informs your view going forward? And then also as we transition to a more normalized cost environment, can you give us any perspective on what's a more sustained price mix run rate going forward in North America? Thanks. |
3,940 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Yes, sure. No problem, Dara. Firstly, overall, it'd be fair to say that the consumer sentiment in aggregate is actually pretty strong, pretty resilient. Within that, there are some softer spots, particularly, I think, which has been relatively put out there already some softness in away-from-home channels, with a little lower traffic and some increase in value seeking for combo meals. So definitely, there's a piece of the lower income consumers, which are either going out slightly less. But when they do go somewhere looking for greater value through combo meals. And then, of course, in the at-home channels, there's a slightly greater focus by those consumers on getting kind of value deals or promo deals. Having said that, there are just as much consumers spending on more premium categories or more premium price points and experiences. So that's all aggregating out at a sort of resilience, for the average overall consumer. Within that, I think we've done very well. We've seen strong growth across the portfolio. We saw a strong growth in Coke trademark in Fairlife, in Topo Chico and juices itself and in aggregate, we won value share in the quarter. So broad-based growth, some hotspots in terms of demand up demand down. But overall resilience for the consumer. And as you look out, the first thing that I think is worth underlining in North America, in particular, is the nature of the price mix. Remember that our North American business, a typically compared to the other parts of the world, we consolidate a set of vertically integrated businesses and a set of franchise kind of concentrate businesses, such that the growth of a channel or a category can produce a mix effect independent of pricing in the marketplace. As you look at the 11 points of price mix in the second quarter in North America, it's important to understand that, only half of that is actually price. The other half is mix. So when the juice drinks and Fairlife and the juice business grows, Topo Chico grows and Dasani is weaker, you get a |
3,941 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | is mix. So when the juice drinks and Fairlife and the juice business grows, Topo Chico grows and Dasani is weaker, you get a mechanical business mix effect that, makes the price mix look like it's gone up, but it hasn't really in the marketplace. So think of it as half of it is business mix, and half of it is real pricing in the marketplace, which gets you to a much more logical match, to the level of inflation that's going out - going on in the marketplace in general, such that I think in North America and actually overall in general, around the world, excluding the high - the intense inflation markets John mentioned in the comments. We see that inflation is largely coming into the landing zone, yes, central banks would like to squeeze out another point or so. But generally, we're getting there, and I think that's reflected in our price mix. We still have input costs that are going up, typically, the agricultural ones rather than the metal, or commodity-based ones. But in the end, our strategy remains yes, there'll be cost inflation, yes, we'll look to put it through. Yes, we'll work on productivity. But any pricing we're going to take, we're going to have to earn with the marketing and the innovation and the execution. But it is, as I said earlier, approaching the normalization zone. |
3,942 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Lauren Lieberman from Barclays. Please go ahead. Your line is open.
Lauren Lieberman: Great, thanks so much. I'd love to have a similar conversation about Western Europe because James, you mentioned a bit on some -- also slowness in away from home. But the summer sports kind of has already kicked off, June was certainly part of it. And so the weather has been challenging, but maybe a little surprising to see the softness in the unit case volume in EMEA. So I'd love some - just a similar run through as you just did in North America on some of the dynamics, particularly in Western Europe? Thanks. |
3,943 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Yes, sure. So let me first just separate Europe from EMEA, which obviously includes the Middle East and Africa. Africa had a strong second quarter. Volume - good volume growth, building on good volume growth. In the first quarter, price mix. Obviously, there's a lot of swings and roundabouts macro-economically going on in Africa, but actually net-net, the Africa business had a really good quarter, winning volume and value share, managing through the inflation and growth on -- good volume growth and good price growth. The flip side is Middle East. Obviously, the conflict is continuing to affect the business in that part of the world. So there's some headwinds there. And then, if you come to Europe within EMEA, Europe was overall not where we'd like it to be. We'd like to see a little more growth coming out of the European business. And really, it's a complete mix across the countries in Europe. There's more pressure on the away from home in the West than the East. Yes, some of the sporting programs have certainly help, whether it was UEFA that's already happened or Olympics, which is imminently going to start. The sporting has helped, but there's been some pressure on the away from home, as I said in the West, and so the immediate consumption packs have been growing slower there. But the strong programs, but not yet enough to offset the weather in some of the countries, and the same general effect as the U.S. in terms of the lower income consumers seeking a value, and doing less away from home trips. So big picture, Europe, not too dissimilar from the U.S., perhaps a little worse weather and a little more sporting events, but in an aggregate sense, very similar.
Operator: Our next question comes from Bryan Spillane from Bank of America. Please go ahead. Your line is open. |
3,944 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Bryan Spillane from Bank of America. Please go ahead. Your line is open.
Bryan Spillane: Hi. Thanks operator. Good morning everyone. John, just a question for you, two points maybe related to the concentrate shipments. One is, I don't think you've talked about expecting that, they'll line up by the end of the year. But I guess, can you talk a little bit about what's driving this? How much of it is the Red Sea and I don't know, just its maybe more difficult to get stuff around versus, just kind of the regular timing differences. And I guess what's underneath this is, should we expect a little bit more volatility in the near term, just around shipments versus units just simply, because the world's a little bit unsettled right now. And the second, if you can just give us a perspective on how much margin gross margin benefited, from the excess shipments in the quarter? Thanks.
John Murphy: Okay. Thanks, Bryan. So on the first question, yes, we had number of events during the quarter that affected that relationship between unit cases and concentrate. You mentioned a couple of them, the ingestion and the Red Sea and Singapore - in LatAm, we had some restocking in the wake of the floods in Brazil, and in our India operations. We had some stocking up to anticipate some future demand. So a range of factors, none of them with a threat - a common threat to them. Our guidance assumes a more normal second half of the year. But as you rightly highlighted, there is likely to be something ahead of us that, we have not anticipated. And if that were to happen, we'd certainly we certainly advise. But our goal is over the longer haul, is to continue to have cases and gallons in line. And with regards to the gross margin impact, there's a slight benefit on both the gross and operating margins related to the stocking, but it's in the tens of basis points and again, reflected in our guidance a year ago, with that leveling out that we expect. |
3,945 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Bonnie Herzog from Goldman Sachs. Please go ahead. Your line is open.
Bonnie Herzog: All right, thank you. Good morning, everyone. I did want to ask a little bit more about your away-from-home business, James, which you did touch on. I guess I was hoping to hear how much your business in this channel decelerated in Q2 versus Q1 and what your outlook is for the remainder of the year? And then assuming growth in the channel moderates further, how do we think about the impact this may have on your top line and margins? And maybe just touch on any initiatives you've implemented to accelerate growth in this channel moving forward. I think that would be helpful? Thank you. |
3,946 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Yes, sure. Thanks, Bonnie. I don't think it would be worth saying as a big deceleration going on as we come into the second quarter from the first quarter. If you just stand back a bit and look at what happened, and I think we were already calling out some softness in away from home, in the back end of last year. And so, I would characterize it more as there's been a slow build, from the back half of last year through the first and the second quarter. First and second quarter may be a little more negative than the back half of last year. But really, it's been a kind of a slow softening rather than anything major and abrupt and it's not like accelerating off a cliff. It's kind of a slow softening it's kind of just running at a softness level when thinking about away from home in the U.S. And then in terms of what we're doing about it, which is obviously the key question, is we've really got - being more focused. On how can we make sure that we bring to bear in the away-from-home channels in a sense, all the thinking that we have historically done on affordability, and price pack architecture in some of the mom-and-pop and line at home channels, to make sure working with our partners across the different channels that we can provide, whether it's the meal combos, or whatever format of offerings. So that there's a laddering of pricing to allow people to stay within the category and the channel. And so, those are rolling out as we speak. We expect to see them making an impact in the years to go.
Operator: Our next question comes from Steve Powers from Deutsche Bank. Please go ahead. Your line is open. |
3,947 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Steve Powers from Deutsche Bank. Please go ahead. Your line is open.
Stephen Powers: Thank you and good morning. Maybe, John, just to maybe put a wrap around the margin driver conversation and the impact of mix and concentrate timing, et cetera. Year-to-date, the underlying margin performance, both in the quarter and year-to-date, I guess, has been strong. As I'm penciling it outright, I don't - doesn't feel like you're expecting a material difference in the underlying margin performance of the business in the back half despite the slower concentrate sales and some of the macro drivers going, to play that back and confirm that? And if there are any material differences, maybe you could just help us as to what are the other drivers? |
3,948 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | John Murphy: Sure, Steve, thanks. So on gross margin, just to maybe highlight the big drivers typically our underlying performance any structural changes we have in the quarter, most of which nowadays as relates to our refranchising activity and then had a currency impact. So year-to-date, we're reflecting almost 200 basis points of increase. And that's primarily driven by structural and underlying with some offset on currency. And for the second half of the year, typically, the margin profile in the second half of the year is slightly lower than the first half. But I would say the overall trends in the second half of the year will be similar, to what we've seen in the first half. And maybe just to step it down on one - down to the operating margin line, not dissimilar. We have had more benefit on the underlying margin in the first half of the year than on structural. And then the second half of the year, I expect it to be more even. And yet, as we've discussed in prior calls, we sort of reserve the right to stay flexible in the event that we make investment decisions that linked to what's happening in our many markets around the world. But overall direction of travel on both the gross and operating line is our margin profile to be strengthening and to be pretty much in line with some of the previous conversations we've had on this topic.
Operator: Our next question comes from Filippo Falorni from Citi. Please go ahead. Your line is open.
Filippo Falorni: Hi, good morning everyone. I wanted to ask about the Latin America business. It continues to be a very strong driver of your total company growth with very strong unit case volume. Still very strong price mix. There was obviously some temporary impact with the flooding in Brazil. But just curious a, what is working well? I know your baller relationship have improved significantly over the last couple of years. And also just a general sense of how the consumer is behaving in your key markets, Brazil, Mexico and some of the other countries. |
3,949 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Yes. Sure, Filippo. Yes. Latin America had another strong result in the quarter, sustained the volume momentum, as you mentioned, clearly being driven from Mexico and Brazil. It's a pretty broad-based category success story, including not just Coke trademark, but now Coke Zero at 20% volume growth. Obviously, part of this is a long-term capability and momentum building approach with our bottlers in Latin America, really bringing together all of the components of the strategy that we talk about, whether it be the marketing transformation, the focus on innovation, the execution of price packaging in the marketplace, particularly in markets like Latin America, making sure we both have premiumization and opportunities. But also critically important affordability options, whether that be with regular packaging or returnable packaging, but really making sure we have ways of keeping people in the franchise and all executed by the bottling system which has really doubled down, not just on traditional execution, and putting more cool doors out there, but the digitization of their relationships with the retailers. So really, representation of what is possible when all the elements of the strategy of the system are executed in the marketplace. I think it's worth noting that, obviously, yes, strong volume performance of 5%. Please do take in mind that the price mix is heavily affected by the Argentinian high inflation and two-thirds of the price mix is actually, due to Argentina. So that leaves you about roughly 6% for normal inverted e-commerce pricing for the rest of the countries. Nevertheless, a very strong result. In Latin America, very pleasing and looking forward to seeing that continue into the future.
Operator: Our next question comes from Chris Carey from Wells Fargo Securities. Please go ahead. Your line is open. |
3,950 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Chris Carey from Wells Fargo Securities. Please go ahead. Your line is open.
Chris Carey: Hi, good morning. I wanted to ask a question on just balance sheet cash flow, specifically around Fairlife. Clearly, it's a positive development that Fairlife continues to do so well. The liability does, however, continue to grow. John, can you just maybe comment on what you can do, to perhaps limit the negative impact from raising additional capital to cover fair life, to cover the escrow payment, and specifically from a cash flow perspective in the next 12 to 18 months. And perhaps just an overall view, on how you see net interest expense versus income trending as you have some of these major payments ahead? Thanks.
John Murphy: Sure, Chris, thank you. Well, firstly is we're very pleased with the performance of Fairlife, and the end is in sight relative to the overall construct of the deal we have in place there. With regard to the broader free cash flow conversation, yes the sources we have are cash from operations. And in the short-term, as we continue to re-franchise some of our businesses from the proceeds that come in from that. During the second quarter, we also went into the debt market and we issued some long-term debt. And so, it's really a combination of those three that we are managing very closely, to deal with the end of this year and into 2025, on the outflows that we see. Balance sheet remains strong. We go into 2025 with a clear line of sight as to what needs to be taken care of. And yet, as we have discussed on many occasions, relative to our overall capital allocation strategy. We will continue to invest in the business as appropriate, to support the dividend file. We take care of the Fairlife acquisition and the tax payment that is, is on the horizon with relative to the IRS tax case. So all in all, it's going to be an interesting 18 months to work through. But we feel very confident that the work we've done today prepares us well to manage through it. |
3,951 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Andrea Teixeira from JPMorgan. Please go ahead. Your line is open.
Andrea Teixeira: Thank you, good morning. So James, on the price mix in North America, you mentioned about half of the 11.3 in my mix and the other pretty much pricing, but still quite driven by innovation. Can you talk about the cadence of what you expect moving ahead? Of course, you've done amazing well in the team there in terms of the marketing campaigns, and marketing and around packaging and all of that RGM playbook that you have. The booking ahead, is there any additional gains you expect, and how we should be thinking? I guess, broadly, even not only in North America, but also in Brazil and Mexico, how to think of additional gains in there and as well as in India? Thank you. |
3,952 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Sure, I mean, absolutely, we're going to continue to press ahead with the marketing, with the innovation, with the price factor, with the execution. That's the way we earn the right to take a reasonable level of pricing. Clearly, some of the inflationary effects and some of the mix effects, are likely to become more subdued as we go into the back half of the years. So I'm not expecting, for example in North America, half of it is from mix and half of it is from core pricing. I think the mixed piece will start to train down over time and in part it does so, because it starts cycling itself. And so I think it's, the key for me is to look through the kind of the mix and the inflation effects and thinking about core pricing. And if you do that as an overall company level and look at the second quarter in its totality. Again there's, as I said, a big piece of it was inflation. You take it out and you're at the 4-ish percent in core pricing, offer 2% volume. There you are right in the sweet spot of the top end of the algorithm that, we've been looking to deliver on. So I think, the kind of the central assumption is a kind of landing zone for these effects like inflation and mix and starting to see more of the price mix being the core actions across the strategy flywheels driving the business.
Operator: Our next question comes from Kaumil Gajrawala from Jefferies. Please go ahead. Your line is open.
Kaumil Gajrawala: Hi, you delivered 2% case volume growth, and we look across sort of the rest of staples. We're seeing quite a bit of slowdown in volumes. I think you're positive everywhere with the exception maybe of North America. Can you maybe just talk a bit more as you provided your operating environment views, but also AI innovation, new sports, sporting events, these types of things. What should we be looking at over the medium term in terms of volume growth? |
3,953 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Yes, so we as from a strategy perspective, have taken the approach over the last number of years, it cannot say even longer, that it's critically important, particularly when times get tougher to try and keep as many consumers in the franchise as possible, rather than trying to re-recruit them at some later stage. And they're in our focus not just on marketing innovation, but affordability within the price pack architecture. So clearly an objective of ours is not to see negative volumes, and to make sure we keep people in and use all the elements to do that. And so, as you say, we've got 2%. In the corridor, we've got - we've had a run right there. We've talked in the past, it remains true today that the central long-term growth algorithm, we're looking for a revenue of 4% to 6%, and we've set ourselves the ambition of staying in the 5% to 6% range, with a balance of volume and price mix. So that's essentially a way of, you know, if you've split that you're saying 2% to 3% in volume and 2% to 3% in price. We were kind of in that range in the quarter with the 2% volume. So I think in the long run, we'll continue to pursue that. Talked earlier this year that, in the shorter term, it's likely to be slightly more price and slightly less volume, which was kind of exactly what happened in the second quarter. So it would not surprise me, as we go through the rest of the year that that remains true, that we see slightly less volume than the kind of standard algorithm, and slightly more price - as pricing tends towards, inflation tends towards the landing zone. And I think that's likely to be true as we go through - the rest of the summer, hopefully the weather gets a bit better. But we're likely to see that slightly less volume, slightly more price. And probably a repetition of where that volume's coming from in terms of the rest of the year, the positives largely being the developing economies, Latin America, India, Africa, Southeast Asia, and to some extent Japan, and the kind of weighing on it a |
3,954 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | developing economies, Latin America, India, Africa, Southeast Asia, and to some extent Japan, and the kind of weighing on it a little, the kind of parts of North America and Europe channel and income specific and some of the disruptions from the Middle East. But net-net, we think we've got a strong strategy that's playing out and is winning. And we're confident that we can drive that to get the balanced algorithm of growth, through the rest of this year, for our guidance and into the future. |
3,955 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Robert Ottenstein from Evercore ISI. Please go ahead. Your line is open.
Rob Ottenstein: Great, thank you very much. I'd like to go back to North America, but look at it more on a category basis [technical difficulty] that I can think of sparkling is doing better than energy as a sector. I'd love to get your thoughts on maybe what the drivers are there. Second, sports strengths, how your new strategy is working, combining Powerade and BODYARMOR under one management team. And then third, any other particular things that you're seeing on the category side that are worth noting? Thank you.
James Quincey: Yes, sure Robert. So definitely North America had a good second quarter. The standouts in terms of growth, clearly, actually what's interesting is actually if you look at the Nielsen Universe, and you look at which two trademarks provided most dollar retail growth in Q2, and the answer is Fairlife and Coca-Cola. And so, in a way, you can see that as a sort of microcosm for the overall strategy working. You've got broad ends of the portfolio working and it's being executed in the marketplace and driving really substantial growth. So good performance by Fairlife, good performance by the overall Coca-Cola with growth obviously being led by Coca-Cola Zero. In the sports category, getting better. We had some positive volume growth in BODYARMOR and Powerade. And we're really starting to see, the kind of stabilization with the marketing and the innovation, and some packed price work going on there. We're not yet gaining all the share we want again, but we've stabilized and starting to turn the corner with some of those innovations on Zero and Flash I.V. and Powerade power. So a good kind of step forward and turning the corner and clearly looking to do better. I'm not sure there's much more to say, great quarter and long may at last.
Operator: Our next question comes from Peter Grom from UBS. Please go ahead. Your line is open. |
3,956 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Peter Grom from UBS. Please go ahead. Your line is open.
Peter Grom: Thanks operator and good morning. I guess I just wanted to follow-up on Robert's questions specifically on energy drinks Sprite. I mean, it's one of the few categories where we've seen a pretty notable change here. So, do you have any perspective James on what maybe driving the weaker performance. And then as you look ahead, would you anticipate maybe some of this pressure to be short-lived? Is there something you're seeing that would suggest this weakness can persist through the balance of the year and into maybe '25? Thanks. |
3,957 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Sure. Well I think therefore. You need to kind of break it up a bit. I mean firstly look, we've had a great partnership with Monster, created tremendous value for Monster for us Coca-Cola and for the bottling partners. Clearly in the case of the U.S., there's been what happens in every category when people create a category, and there's one or two brands. People look for the white spaces and start to innovate, and start to bring new news to the category. I think that's what's happening in energy, particularly in the US. And so, I think working with Monster that will respond to the evolution of the way, the consumers looking at the category. I think it's also important to understand that the energy category, is one of the categories that responds to an overall consumer needs state, of being fueled for their lives. And so, from a company point of view, we see that as something where we bring multiple brands, to bear against that needs state. And each brand in each category needs to play its part in kind of delivering on that. Each one has to do their own work to do it. But I think there's more to be done across the board, including in the Monster energy portfolio. We're working with them on that. And then I think internationally, there's robust growth in the energy category and making good progress around the world in different ways and different forms. So I think, one has to kind of pull apart energy category and look at it kind of geographically, to see that overall it's still got some good growth, and there's different jobs to be done in different parts of the world.
Operator: Our next question comes from Charlie Higgs from Redburn. Please go ahead. Your line is open. |
3,958 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Charlie Higgs from Redburn. Please go ahead. Your line is open.
Charlie Higgs: Hi James, John. Hope you're both well. I've got a question on Asia Pacific. The performance in Q2, please. Where volumes are up 3% and price mixed is down 3%. Can you maybe just talk a bit more about the volumes up 3%, and specifically how China performed, and what you're seeing on the ground there in China in Q2. And then the price mix down 3%, is that purely just negative geographic mix from India and Philippines, also in Japan, or was there negative pricing within that? Thank you. |
3,959 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Yes, sure. I'll take it in reverse order, Charlie. Yes, the negative pricing is more than driven by the mix effect. So core pricing is positive if you went operating unit-by-operating unit, but overall Asia price mix is negative, because of the way the mathematics of the thing works. But the central answer there is it's more than just geography mix. Geography mix is consuming core pricing and taking it down to minus 3%. Then if I go back to the performance of the different operating units, clearly the big swing in Asia-Pacific is driven by the bounce back of India. You'll remember that in the first quarter, India had a soft first quarter. The second quarter was very strong. And so that produces obviously a big swing in the results. So India had a good double-digit growth of volume in the second quarter. Still very bullish on India. Still very realistic in terms of it won't be a straight line into the future, but they certainly had a good quarter in the second quarter. We also saw good volume growth across Southeast Asia, including also volume growth across Japan and South Korea. Volumes were negative in the China operating unit. There's two parts to this story. The first is, yes, there's a general macro softness as the overall economy works through some of the structural issues around real estate, pricing, et cetera, et cetera. But within the things that we control, we have essentially been prioritizing and restructuring where we invest across the category portfolio. And focusing more on sparkling and juice drinks and teas. And deprioritizing what is essentially case-packed water, where we - don't make money in China. So the overall volumes were negative in China, but that's entirely driven by the de-prioritization of the water. And actually, I think the sparkling volume was slightly positive in China for the quarter.
Operator: Our next question comes from Kevin Grundy from BNP Paribas. Please go ahead. Your line is open. |
3,960 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Kevin Grundy from BNP Paribas. Please go ahead. Your line is open.
Kevin Grundy: Great. Thanks. Good morning, everyone. Question for John, please, just kind of building on some of the questions earlier on cash flow. Can we get an update, please, on timing of potential bottler re-franchising? I think it's probably largely a question on CCBA, and understanding that market conditions may potentially dictate. But can you help us how you're currently thinking about potential timing there? And then as you're thinking about value creation for shareholders, how much does EPS solution come into that? We hear that from shareholders sometimes, if at all, as you're thinking about moving forward with that? Thanks. |
3,961 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | John Murphy: So regarding the timing, we're not giving out dates as to when we expect the refranchising process to finish, we're staying very thoughtful, disciplined in recruiting new partners in the areas that are still outstanding. And so, there's good work underway, but no imminent decisions and we'll advise as that work bear fruition. But I think the overall message is, we continue to be very clear internally on the path forward. And we'll expect over the couple of years to have the both of the refranchising, John, if not all of us. With regard to the impact on EPS dilution, it's a mechanical effect that comes from the broader strategic decisions that, we've - that we believe are right for the Coca-Cola Company, and over time for the Coca-Cola system. The refranchising work that started back in the mid-teens is demonstrating time and again that the overall system benefits, when there's a step change in overall performance. And with that step change, we benefit over the longer haul to - as you've seen this year, there is a mechanical impact on the EPS line. But longer term, we think that the broader value proposition of the Coca-Cola Company is staying very focused on what we do best, and having a balance sheet then that's designed to support what we do best, working in partnership with great partners around the world, is the recipe for us to ease and exceed our long-term growth model.
Operator: Our last question today will come from Robert Moskow from TD Cowen. Please go ahead. Your line is open.
Robert Moskow: Hi, thanks for the question Maybe I missed it, but did you make any commentary about your intentions on marketing investment for the year, whether anything has changed since the start of the year. I think you talked about maybe some surgical efforts in certain markets in certain categories. But can I assume that there's no signal here that, needs to be incremental investment to improve volume? |
3,962 | KO | 2 | 2,024 | 2024-07-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Let me attack the answer in a different way. Our bias is to lean in and invest where we see opportunities. And to the extent that we continue to see opportunities, we continue to invest. And if we see more opportunity, we'll invest more. And the contrary is also true. If we see softness that doesn't warrant certain level of investment, then we will look to pull back. Having said that, there's nothing particularly in the guidance that's trying to tell you, is changing radically in one direction or the other. Yes, we continue to see the need for marketing pressure. It's not a fixed sum that, is not subject to inflation. But there's nothing in the guidance that's trying to tell you something radically different. It's very much we continue to invest and drive the top line, and we see the two marching together. Okay. Thanks, Robert. That was the last question. So to summarize, we're building a culture that emphasizes improving every aspect of how we do business. We have lots of opportunities in front of us. We think we're well positioned to capture these opportunities, and we're confident that we will successfully execute our strategy and create value for - our stakeholders. Thank you for your interest. Your investment in our company and for joining us this morning. Thank you.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. |
3,963 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | Operator: At this time, I'd like to welcome everyone to the Coca-Cola Company's First Quarter 2024 Earnings Results Conference Call. Today's call is being recorded. If you have any objections, please disconnect at this time. [Operator Instructions]
I would like to remind everyone that the purpose of this conference is to talk with investors, and therefore, questions from the media will not be addressed. Media participants should contact Coca-Cola's Media Relations department if they have any questions.
I would now like to introduce Ms. Robin Halpern, Vice President and Head of Investor Relations. Ms. Halpern, you may now begin.
Robin Halpern: Good morning, and thank you for joining us. I'm here with James Quincey, our Chairman and Chief Executive Officer; and John Murphy, our President and Chief Financial Officer.
We've posted schedules under Financial Information in the Investors section of our company website. These reconcile certain non-GAAP financial measures that may be referred to this morning to results as reported under generally accepted accounting principles. You can also find schedules in the same section of our website that provide an analysis of our growth and operating margins.
This call may contain forward-looking statements, including statements concerning long-term earnings objectives, which should be considered in conjunction with cautionary statements contained in our earnings release and in the company's periodic SEC report. Following prepared remarks, we'll take your questions. [Operator Instructions]
Now I will turn the call over to James.
James Quincey: Thanks, Robin, and good morning, everyone. We're off to a good start this year as our first quarter results continued the momentum we've been building by executing our all-weather strategy. The operating backdrop differed greatly across our markets once again, but our powerful portfolio, coupled with our systems capabilities, equip us with the agility we need to deliver on our 2024 guidance, which we are updating today. |
3,964 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | This morning, I'll discuss the drivers in the quarter and how we use our scale and growth mindset to deliver these strong results. Then I'll highlight how we continue to meet consumer needs and grow our total beverage portfolio. Finally, John will discuss our financial results and updated 2024 guidance.
In the first quarter, we grew volume and expanded comparable margins, and we continued to invest across the business. We're managing currency fluctuations to deliver earnings growth as shown by the 7% comparable earnings per share growth despite 9% currency headwinds, and we gained value share in both at-home and away-from-home channels.
Across the world, we're continuing to win in the market by leveraging our scale and relying on our local expertise of our bottling partners. In Asia Pacific, momentum continued across a large portion of our business, including Japan and South Korea, Philippines and Thailand. We gained traction in Indonesia with a return to volume growth. India's momentum was impacted by some temporary factors that recovered at the end of March.
In China, retail sales growth continues to improve, but consumer confidence is still below 2019 levels. We remain optimistic about the many opportunities ahead of us, and we're stepping up our execution in a number of ways. For example, greater focus on our core business for a more segmented market approach and more surgical horizontal market and execution.
In EMEA, we're seeing gradual improvement in macro trends in Europe, leading to improved consumer confidence. We paired Sprite with spicy new locations to drive momentum in away-from-home channels. Fuze Tea and POWERADE also generated strong performance, and Jack Daniels and Coca-Cola expanded to 6 more European markets during the quarter. |
3,965 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | Africa saw continued volume momentum from last quarter, while navigating a number of markets with significant currency devaluations. Geopolitical and economic challenges in Eurasia and the Middle East continue to affect our business in the region. We are working closely with local partners to manage these challenging dynamics, and we're committed to investing behind the strength of our brands for the long term.
North America volume had a slow start to the quarter before posting sequential improvement in each of the last 2 months of the quarter and elasticities remain favorable, leading to ongoing share gains. The launch of Coke Spiced featured compelling in-store displays. Across our sparkling softdrink brands, Zero Sugar sugar performance was strong, and we introduced 12-ounce slim cans to further drive premiumization. Value-added dairy continued across fairlife and Core Power in sports drinks, notwithstanding the noncash impairment charge that John will speak to in more detail.
We believe our 2-brand strategy with POWERADE and BODYARMOR is gaining traction, and we've seen improved share trends. While we still have work to do, the stepped up execution by our dedicated sales force in driving improved on-shelf execution and we're encouraged by the continued growth in sports water and the more recent BODYARMOR innovations, including Zero Sugar and Flash I.V.
While inflation has moderated and wages continue to trend upward in North America, we're closely monitoring consumer sentiment and traffic trends between at-home and away-from-home consumption. In Latin America, volume momentum continued. Performance was driven by strength in Mexico, Brazil and Colombia, while Argentina continued to experience high inflationary conditions. We have quality leadership across our portfolio in Latin America, with Coca-Cola Zero Sugar continuing its strong performance. Sparkling flavors, sports, juices and alcohol ready-to-drink also performed well during the quarter. |
3,966 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | Commercial initiatives are driving improved shelf space and basket incidence supported by ongoing outlet digitization. We have suggested order capabilities in digital platforms that reach more than 3 million customers in the region.
Across developed markets, the overall inflationary environment is normalizing. However, across developing emerging markets, there continues to be a handful of markets that are experiencing intense inflation, which is driving elevated pricing, offset by incremental currency headwinds. We're proactively managing these volatile environments, and we feel confident we have the playbook to navigate challenges locally, while continuing our momentum at a consolidated level.
We're continuing to spin our strategic flywheel faster across total beverage portfolio. And as discussed at CAGNY, we're building loved brands and innovating and delivering bigger, bolder bets. In the first quarter, we launched K-Wave as part of the Coke Creations platform in markets across 5 operating units. K-Wave celebrates Korean pop or K-pop fans, includes a global collaboration with 3 K-pop groups and an AI-based fan experience. Our growing number of Coke Creations are different with each iteration and, by design, are only available for a limited time. This generates buzz and excitement building relevance for the brand and reconsideration for Coke with Gen Z drinkers.
We also know that sometimes the most successful lasting innovation is simply improving the taste of existing drinks. Using our deep in-house flavor expertise and understanding of the science of taste, we have worked to refine the recipes for Fanta and Sprite to meet consumer preferences across many markets. These changes bring new consumers to our brands as well as remind current consumers what drew them to their favorite beverages in the first place. |
3,967 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | The strong Fanta performance in markets from Brazil to Germany to the U.S. this quarter is largely due to this type of innovation, which was supported by marketing messages focused on taste and on tying the brand to snacking occasions at local festivals, like Carnival in Brazil.
Elsewhere in our total beverage portfolio, Minute Maid Zero Sugar kicked off its global campaign in North America, leveraging influencers, social media and connected commerce activations with key customers. We're building on our innovations by driving awareness and excitement through an increasingly digital marketing media mix.
Our total beverage portfolio plays a lead role, as shown by the New Guy campaign in the U.S. this quarter, which featured multiple grounds across categories. Innovation is woven into the fabric of our culture, and we're encouraged by our innovation pipeline as we look forward to the rest of 2024.
Moving across the flywheel, we're leaning into integrated execution to drive basket incidence and create incremental value for customers. We work closely with our bottling partners and went bigger with in-store displays to inspire transactions around key events like NCAA March Madness in the U.S., and we'll do this again later this summer with the Olympic and Paralympic Games. As a system to improve quality availability, we increased outlets by 2%, added more than 600,000 cooler doors and increased our share of cold space and overall shelf space in stores.
We benefited from global scale, while maintaining local relevance by tying our brands to regional meals occasions. For example, in Japan, we've associated Coke with Wagyu and Yakiniku through the path to purchase, using end-to-end consumer messaging and partnering with key customers in the modern trade and convenience retail. We have seen strong Coca-Cola revenue growth in Japan. |
3,968 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | While we continue to grow our business, we also strive to positively impact the communities we serve. We do this by focusing on the issues that matter most to our system, and we share our status and learnings each year when we publish our business' sustainability report. Putting it all together, it's early in the year, but we're off to a good start. We have confidence we will achieve our guidance for the year.
With that, I'll turn the call over to John.
John Murphy: Thank you, James, and good morning, everyone. Our first quarter results marked a continuation of the underlying momentum in our business, driven by a strong and focused system. We delivered another quarter of volume growth, even as we cycled strong results. Additionally, we completed the refranchising of several bottlers during the quarter, leading to further comparable margin expansion.
We progressed on our refranchising agenda, while making sure we best position our system to deliver long-term growth, and we earn a fair return on our investments. We continue to invest behind our portfolio with discipline and flexibility, thanks to our enhanced resource allocation agenda.
During the quarter, we grew organic revenues 11%. We had 1% unit case growth. Concentrate sales were behind unit case volume by 3 points, driven by 1 less day in the quarter and the timing of concentrate shipments, primarily in Mexico and the Middle East.
Our price/mix growth of 13% in the quarter was driven by approximately 6 points of intense inflationary pricing across a handful of markets to offset significant currency devaluation, pricing actions across a number of markets and a couple of points of favorable mix.
Excluding impacts from intense inflationary pricing, organic revenue growth in the first quarter was at the high end of our long-term growth algorithm. Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and a benefit from bottler refranchising, partially offset by the impact of currency headwinds. |
3,969 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | Comparable operating margin expanded approximately 60 basis points for the quarter. This was primarily driven by strong top line growth and bottler refranchising, partially offset by currency headwinds and an increase in marketing investments. Markets experiencing intense inflation represent only a single-digit contribution to our volume, but continue to have an outsized impact on the shape of our P&L.
Putting it all together, first quarter comparable EPS of $0.72 was up 7% year-over-year, including 9% currency headwinds, which were driven by currency devaluation in markets experiencing intense inflation. Free cash flow was approximately $160 million, an increase from the prior year.
Before moving on, I want to discuss 2 items that are included in our first quarter reported results, a $765 million charge related to the remeasurement of our contingent consideration liability for our acquisition of fairlife. Our final payment related to the fairlife acquisition will take place in 2025. This payment has grown as fairlife has outperformed. We continue to be encouraged by our ability to scale fairlife organically.
Secondly, a noncash impairment charge of $760 million related to BODYARMOR. While we are taking a charge to reflect revised projections and a higher discount rate since the acquisition date of BODYARMOR, we believe in the power of our 2 sports brand strategy with POWERADE and BODYARMOR. We're taking actions to help create long-term value, and we're seeing signs that this strategy is working.
Our balance sheet remains strong and our net debt leverage of 1.6x EBITDA is below our targeted range of 2 to 2.5x. This gives us ample capacity for potential upcoming payments in 2024 related to the IRS tax case, which we continue to vigorously defend, and the upcoming fairlife payment in 2025.
We continue to remain consistent in our approach to prioritizing our capital allocation. We're committed to investing to drive growth and to support our dividend, which we have raised for 62 consecutive years. |
3,970 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | We're confident our business model has the flexibility to allow us to deliver on our overall objectives. Our updated 2024 guidance reflects the underlying momentum of our business, and we now expect organic revenue growth of 8% to 9%, and comparable currency-neutral earnings per share growth of 11% to 13%. Our revised top line guidance is solely driven by higher-than-expected inflationary pricing in a handful of markets, which we expect to moderate throughout the year.
Bottler refranchising is still expected to be a 4- to 5-point headwind to comparable net revenues and a 2-point headwind to comparable earnings per share, but will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 4- to 5-point currency headwind to comparable net revenues, and an approximate 7 to 8-point currency headwind to comparable earnings per share for full year 2024.
This increase in currency headwind is driven by intense inflationary markets, while the rest of the currency basket is relatively neutral to our results.
Our underlying effective tax rate for 2024 is now expected to be 19%. All in, we continue to expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. There are some considerations to keep in mind. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the first quarter of 2024. It's unclear how long this impact will last. The cadence of structural impact will be larger in the second and third quarters due to the timing of transaction closing during the first quarter and the seasonality of the businesses we refranchised. |
3,971 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | Finally, there will be 2 additional days in the fourth quarter. To sum it up, and as James said, the year has started off well. We remain focused on the execution of our all-weather strategy. And thanks to the partnership of our system and the ongoing dedication of our people, we're confident we can create value for our stakeholders and deliver on our guidance for the year. And as we said at CAGNY, we're primed for performance in 2024 and over the long term.
With that, operator, we are ready to take questions.
Operator: [Operator Instructions]
Our first question comes from Bryan Spillane from Bank of America.
Bryan Spillane: John, I wanted to ask a question about gross margins. In the quarter, there was about a 100 basis point tailwind from structural benefits and then also -- or structural change and then, I think, 60 basis points benefit underlying. If we kind of take that first quarter performance and kind of think about it over the balance of the year, can you just give us some context of how we should be thinking how much of that we should extrapolate going forward?
Maybe what some of the headwinds, tailwinds would be? But just given the gross margins were so much better, our gross profit dollars were so much better than we were all modeling. I just want to kind of get a sense of how much of that we should bank in our estimates going forward.
John Murphy: Thanks, Bryan. So as we think about the full year, we're going to continue to have a tailwind from the refranchising work that we have discussed. And so I think that's going to flow through throughout the year. We expect to continue to have some expansion as reflected in our ongoing and the growth model, driven by both positive impacts and some productivity fee. The input horizon is more normalized. We do have some elevation on juice and sugar, which we'll continue to have. But the net of it all is that we'll have some tailwinds in the underlying area. |
3,972 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | Currency will continue to be a headwind, and you can kind of extrapolate that out for the year. So the net of it all is it will be primarily driven by the refranchising efforts positively, some underlying expansion, offset by the currency headwind. And as we reflected in our guidance, the top line growth continues to be a primary driver and the quality therein will -- I think will ensure that on a sustained basis, that expansion. Albeit not as potentially aggressive every quarter, but that expansion will be in our favor going forward.
Operator: Our next question comes from Dara Mohsenian from Morgan Stanley.
Dara Mohsenian: So I was just hoping you could give a bit of a deeper dive into North America, a, just wanted to get an update on what you're seeing from the consumer? Any channel shifts in terms of away-from-home versus at-home and the sequential improvement you discussed within Q1, is that something that's expected to continue going forward? And then just b, price/mix was very strong at 7% in North America, can you unpack that between mix and pricing and just how you think about the balance between pricing mix and volume going forward in the balance of the year in North America?
James Quincey: Sure. Overall, in terms of the consumer and how that fed into the channels, the U.S. still remains in good shape. There is some purchasing power compression in the lower-income echelons. And I think it's quite clear that there's some behavioral shift there looking for value. I think that has led to a marginal channel weighting or shift, if you like, with slightly more at-home volume versus away-from-home.
I would emphasize this is at the periphery rather than a big shift. But the margin, slightly more value seeking, slightly more at-home, slightly less away-from-home. And so we've been stepping up our RGM efforts, our packaging efforts and executing against that, so that we have continued to gain share in the quarter. |
3,973 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | As it relates to pricing, of the 7 points in the first quarter, approximately 2 of those are mix or timing related, the rest is pricing, and we expect that to moderate as the year goes on. And we expect to see 2024 be in a much more normal year in terms of pricing, it's largely going to be as it was pre-COVID. So we're expecting to see 2024 end up with a much more balanced growth equation over the rest of the year.
Operator: Our next question comes from Lauren Lieberman from Barclays.
Lauren Lieberman: I wanted to talk a little bit about how the company manages when the dollar is strong. So outside of the markets with extreme inflation, we know from a strategic standpoint, of course, the ongoing RGM efforts and pack and channel and so on. But just sort of from a more tactical standpoint, when you're in a strengthening dollar environment, I was curious if you could share a bit more about how you manage that at a local level. Because the delivery of dollar-based EPS has become a key focus and hallmark, frankly, in the last couple of years, and I thought a bit more color on how you go about that in a more tactical sense could be helpful.
James Quincey: Sure. So markets outside the U.S. will roughly break down into 2 types. There'll be those perhaps typified by Europe, Japan, Australia, some of the obvious ones, where the competition and the economic dynamics of the marketplace are predominantly local currency. And so in these markets, our approach is to compete locally in the local currency given the cost structures in those areas. And we generally marry that with a long-term currency hedging or selling forward program, such that we can have a clear anticipation during the course of the year as to what that's likely to turn into.
So that's one set of markets. And we essentially have put ourselves in a position through the hedging program that we can compete locally and do what's necessary to continue to win in those marketplaces, which is generally what happens. |
3,974 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | The second bucket of countries, and that's much more apparent in recent quarters than even historically, where you have higher -- whether you want to say the chicken and the egg, a higher level of devaluation and a higher level of inflation. These tend to be more emerging market economies where there is less availability of economically attractive hedging programs. And so we tend to have hedged them.
But also given the elevated nature of the dynamic between the inflation and devaluation, we do -- we obviously are competing locally. So for example, in the Argentinas of the world, we're competing predominantly locally to win in that marketplace and set ourselves out for the long term. And the inflation -- it's very cyclical as these markets cycle through higher inflation and high devaluation.
Sometimes, the dollar value of those businesses shoots up. And sometimes it shoots down. At the moment, they're in as of shooting down in dollar terms. So they're declining in dollar terms, even though they're growing a lot in currency neutral. But we look at it on a long-term basis to win using the RGM and all the other investments we make in the business. And of course, they're not all in sync with each other. So it's a portfolio management question.
And then overlay that is, of course, a corporate approach in terms of prioritization, where and how to invest, whether it's a lean in and lean in with what sorts of investments, such that we are able to deliver on our corporate level commitment to make sure that the end of it, the sum of all the competing locally, is more than the sum of the parts, such that we can deliver a consistent level of U.S. dollar EPS growth.
Operator: Our next question comes from Steve Powers from Deutsche Bank. |
3,975 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Steve Powers from Deutsche Bank.
Stephen Robert Powers: James and John, you both mentioned incremental progress on the 2-brand strategy and sports drinks with BODYARMOR and POWERADE. I was hoping you could expand a bit more on what you're seeing there that gives you that encouragement and what you see as the key initiatives for that strategy as we go forward.
James Quincey: Sure. Clearly, we haven't progressed as fast as we would like with regard to BODYARMOR, notwithstanding the step-up in the discount rate, and that's reflected, as John talked earlier, in the charge. Notwithstanding that, we do see long-term value in the dual strategy, particularly in the U.S. between POWERADE and BODYARMOR. We're off to a good start with some of the plans the Zero Calorie version is ahead of expectations. The Flash I.V. has got some double-digit share. And the Sport Water version is one of the fastest-growing premium water brands.
So some product innovation is getting some traction, a new partnership with NHL on the marketing front. And on the execution front, a stepping up of the merchandising and sales force focused directed just at the sports drinks category, which is helping improve the share trend in the category. Although not at the rate we had hoped initially, but we think we are in good shape going forward. Obviously, we'll have an opportunity with the Olympics to really continue to step that up. So plans in place across the product innovation, the marketing and the execution, and we think this will come to fruition over the course of the year.
Operator: Our next question comes from Bonnie Herzog from Goldman Sachs. |
3,976 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Bonnie Herzog from Goldman Sachs.
Bonnie Herzog: I was hoping for a little more color on your performance in Asia in the quarter, and then whether it met your expectations or possibly fell short. Also, you mentioned that declines in China more than offset growth in some of your key markets in the region. So maybe just hoping for a little bit more color on your business in China, and how quickly you expect the market will recover, again, given the broader macro challenges in the region.
James Quincey: Sure. We'll let us go around Asia quickly. I mean China, we are cycling in the first quarter a very strong Chinese New Year first quarter from 2023. So I think we had a solid a solid quarter in China. We focus very well on having a good Chinese New with sparkling, which was good. We deprioritized some of the lower-value water in order to do so. And as we commented earlier, the Chinese confidence isn't as strongly rebounded as some of the other markets versus 2019. And so we see an overall environment where there'll be growth, perhaps not at the top historic levels, but there'll be growth.
And so we're there we're very much focused on what we can control and the things we need to do. There's still huge opportunities in the Chinese marketplace, notwithstanding the macros. And there's a lot we can execute against in the marketing, in the innovation, in the execution in the marketplace, in the stores and with RGM. So there's a lot for us to achieve that's within our control in China.
In the rest of Asia, we had a good quarter in Japan and South Korea. Good share gains, really starting to pick up the pace. Also, likewise, we had a strong performance in the Philippines, which is an important market for us, and so that was good in the quarter. The one that was atypical or at least compared to recent quarters was India had a slower start in January and February. As we've talked in previous calls, we're very bullish on the long-term prospects for the Indian business. |
3,977 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | And we're also very clear it's not going to be a straight line of metronomically consistent growth. And so it wasn't in the first quarter. It was a little softer January, February, but March and April have now bounced back. And so we expect to see India continue to have a strong year this year.
Operator: Our next question comes from Andrea Teixeira from JPMorgan.
Andrea Teixeira: So can you comment on EMEA? You called out Nigeria, Germany and South Africa growing unit case and driving the growth in volumes. But if my math is correct, ex-inflationary countries, your price/mix in the rest of EMEA was about 7%. So can you comment on the state of the consumer there similar to what you said about the U.S.? And if you feel the 7% price/mix is more stable countries, sustainable going forward?
James Quincey: Sure. EMEA, also this quarter had a whole series of moving pieces. As you started on price/mix, clearly, there's a number of countries in there with very high inflation. Not just Nigeria, but also Turkey and somewhat mathematically unlikely, some of the smaller African countries given the level of inflation can also make a difference to the pricing lever in the EMEA segment. So the EMEA segment has a substantive piece of pricing that is the inflationary marketplaces, including many markets you wouldn't normally suspect.
And so that's a roundabout way of saying, actually, the -- in Europe, our pricing is much more normalized. And a bit like the U.S., we both see improved macros. Actually, I think that, today, a number of the markets came out and said they've come out of recession from the previous quarters. Like the U.S., we see the lower income consumers remaining under pressure. And at the margin, slightly more shift towards value-orientated channels, at-home orientated channels and lesser from the away-from-home. And clearly, that's related to our focus, not just on the marketing and the innovation with the RGM and affordability and driving premiumization. |
3,978 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | So Europe, not too dissimilar a story compared to the U.S. But the EMEA segment mix is in both the Middle East conflict and quite a number of the high-inflation countries.
Operator: Our next question comes from Chris Carey from Wells Fargo Securities.
Christopher Carey: So I want to ask about brand Coca-Cola, Trademark Coca-Cola relative to the sparkling flavor businesses. I think unit case for sparkling flavors outperformed trademark Coca-Cola in 2021 and in 2022, but this normalized into the back half of 2023. That's continued into Q1 of this year. So can you just perhaps expand on whether there's anything distinct that's occurring here between brand or Trademark Coca-Cola and sparkling flavors, regional considerations, brand considerations? I just think it's noteworthy, given the relative outperformance, that has just turned the other way a little bit. So any context would be helpful.
James Quincey: Yes. Look, clearly, both Trademark Coke, original taste, Coke Zero, have been having a good run over the last number of years and really focused on performance. But also perhaps unlike in times more recently passed, Sprite and Fanta have also been doing well. This has been a intentional focus for the company and the bottling system, which historically, we have looked at and managed sparkling altogether.
And very deliberately a number of years ago, we separated to really focus in on Coke, Coke Trademark on its own with all the innovations, whether they be things like the K-Wave innovations, or continuing to focus on Coke Zero with updated -- the updated formulas or focusing on original case Coke with the Marvel activations that's just coming out. A real focus on Coke, and that has been part of what has driven success over the last number of years. And ultimately, for the company to do well, Coke has to do well. It's the kind of a mathematical certainty, and that has certainly been what's driving this. |
3,979 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | And then the separation of Sprite, Fanta and some of the regional brands particularly perhaps some of the Indian soft drink brands like Thums Up, have really got their own deserved focus. Actually, if you put all the flavored sparkling brands together, they would be one of their own big FMCG companies in their own right.
And so really, what you're seeing is this focus on the formulas of Fanta and Sprite, really doing much better and being teamed up each time we've brought it to marketplace with a full marketing package. For example, Fanta in the U.S. had a good run as we updated the formula and relaunched the marketing.
And so I think the -- it's been doing really well. I think the only a place where we've not succeeded, particularly with some of the flavors are in the Chinese marketplace, for example, given -- and that's really a Sprite question there. That we need to continue to focus on to do better with Sprite in China. But otherwise, Fanta, Sprite and particularly the Indian flavor brands have done very well, and of course, Coke is a pretty broad-based success story.
Operator: Our next question comes from Filippo Falorni from Citi.
Filippo Falorni: I wanted to ask on the Latin America business. Clearly, there's a lot of impact from hyperinflation in the market, but the volume trends continue to remain very solid in the region from a unit case standpoint. So maybe can you talk about the consumer environment there. And do you think that you can continue to see volume good in Latin America going forward in some of your key initiatives in the region?
James Quincey: Yes. So the simple answer is yes. We believe the businesses can continue to grow in Latin America, both in volume and revenue terms. It's been a long-term success part of the business with a very strong system between ourselves and the bottlers focused on the marketing, the innovation, the execution on the RGM. |
3,980 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | We'll continue to build on the recent year's momentum. Performance this quarter was strong in -- particularly in Mexico, Brazil and Colombia. Obviously, Argentina was impacted by the macroeconomic conditions. But we have a very tight system. We're very focused on what needs to be done and continuing to invest in capacity in order to continue to unlock the volume growth.
Operator: Our next question comes from Peter Grom from UBS.
Peter Grom: I had a question as it pertains to the fairlife liability. Clearly, this is a sign that the underlying business is doing extremely well, but we've also seen kind of the value of this liability increased quite a bit over the last year or so. As we look ahead, is there anything you can share any guardrails you can provide in terms of how we should think about the liability changing as we move through the balance of the year and into '25?
John Murphy: So the liability is very much linked to the ultimate performance. And as we close out this quarter, we're reflecting our latest and best estimates as to what that will be. The momentum of the business has been very strong. And actually, I think it's going to continue. And if anything, there may be some more upside. But for now, we're reflecting our best estimates for what that liability ultimately would be. Just to keep in mind that the liability will be -- it's an early 2025 ending to it. And we'll update as we go through this year in the event that the projections evolve.
Operator: Our next question comes from Bill Chappell from Truist Securities. |
3,981 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Bill Chappell from Truist Securities.
William Chappell: Just a little bit more question on the innovation side. Certainly, it's been an innovative company over the past 4 or 5 years and more new products out there. But it's tough to kind of track some of these products that have been launched that are still on the shelf a year or 2 years later. So I guess the question is, are there things in place in terms of percentage of sales should come from new products in a certain region in a year or a number of new products that need to be launched per year? I understand you wanting to be more innovative, but just trying to -- what kind of guardrails or what kind of accountability there is around that kind of innovation.
James Quincey: Sure. I think the first thing is to bear in mind a certain segmentation of the innovation. And what I mean by that is you've got a strong focus on a part of the innovation that's around renovation of the core. So you get into kind of a question, okay, well, is the new Coke Zero formula or the updated Fanta formula backed with the new marketing campaign, is that -- you're going to count that as innovation or not. So the first thing is to understand that there's different types of innovation at play here all driving the business. One being. In a sense, the renovation of core brands.
Secondly, our launch is intended to be ins and outs. So some of the Coke Creations, where really the focus is on reengaging with consumers in a novel way to drive relevance of the core brand. So you're not expecting it into the last. And then, of course, there are things we're putting into the marketplace that are new innovations, whether it would be something like a Minute Maid Zero Sugar or something like the Absolut SPRITE or the Jack Daniels and Coke. So these things -- and then, of course, you've got nonproduct-based innovation, like it's a new bottle size or a new can size. So we track across all these things. |
3,982 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | As it relates to product innovation, we have a very clear set of metrics on whether it's still growing on the fifth quarter after its launch. So is it cycling itself and continuing to accelerate. So there's a lot of cliometrics. But we do not set ourselves an artificial strategy objective of it has to be X percent from innovation. As it happens, about 25% of the growth comes from innovation, but it is not set that way.
In the end, we are not setting ourselves up to sell what we make. We've got to sell what the consumers want to buy. So it's about doing justice to every brand and every idea and every package and every channel, and then service that resulting demand. If that is led by a great new innovation or by 138th year of classic Coke, then that's the answer.
Operator: Our next question comes from Carlos Laboy from HSBC.
Carlos Alberto Laboy: James, market development is a culture, right, it's a philosophy. And it seems to me that so much of what you're doing and what you talked about today is intended to get shelf replenishers to become better market developers for faster growth. Can you speak to how this evolution is going in the system? Are there any regions or countries that stand out for momentum in this system transformation of moving towards richer market development and to less shelf replenishment order taking?
James Quincey: Yes, sure. Look, I think each part of the world is in its journey to continue to add value to the retail. Because in the end, this is about, together with the bottlers, making sure that we are adding value to the retailers business. Our objective at the retail level is to grow the beverage category faster than the average of their business, and for us to grow our portfolio of brands faster than the beverage category. |
3,983 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | And to do that, we've got to add more value, and that takes different forms in different places. And so as that happens, for example, the pre-sellers, they move from just order taking to account development. As AI comes in, it generates a suggested order for the retail outlet that is demonstrably more efficient in helping the retailer drive sales and then allows the salesperson to do more account development and to expand on different ideas.
So at each stage, it's about taking the system capabilities to the next level so that we can continue to add value for the retailer. Everything that was done in the past starts to become the price of entry in the future, and so we need to keep adding value. And so I think there's a strong growth in capabilities all around the world specifically focused on the channel structure that the bottlers have in any given market.
John Murphy: And if I may just add, James, I think one of the big changes in the last 3 to 5 years is that the ambition that we share, respectively, with all of our bottling partners is much more at the high end of what it should be than scattered. So I think that's -- and then it's working backwards from there as to what does it take to deliver that ambition. And yes, some are further along than others, but it's the ambition is that starting point that I think is helping to drive the progress that we're seeing each quarter.
Operator: Our next question comes from Robert Moskow from TD Cowen.
Robert Moskow: Just a couple of clarifying questions. James, I think on the last earnings call, you were very clear that you view the business...
James Quincey: You have to speak up. We can't hear you.
Robert Moskow: My apologies. Can you hear me now?
James Quincey: Yes. |
3,984 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | Robert Moskow: My apologies. Can you hear me now?
James Quincey: Yes.
Robert Moskow: I think last quarter, you spoke very specifically about the business being a 2% unit volume grower. Given the timing impact, is that still how you would view this year? And then secondly, can you be more specific about those timing differences in Mexico and I think the Middle East between units and concentrate? What causes those discrepancies? And do they naturally reverse in the coming quarter?
James Quincey: Sure. Yes, timing differences naturally reverse between concentrate units and unit cases. Partly, it happens when there is a different number of days in the quarter, then we have the -- we use the 445 system for all sorts of reasons. And what that causes sometimes is different numbers of shipping days in quarters. And so you undersell when you got less days, like the first quarter. And of course, in the fourth quarter this year when there's 2 extra days, there'll be way more concentrate units than there were cases, relatively speaking. So over the course of time, these anomalies or differences reverse themselves or average themselves out.
And then as regards to the 2% volume, yes, look, I have a very strong view that the -- our overall ambition to see our revenue grow at the top end of the algorithm, I'm leaving aside the intense inflation countries for the sake of the argument at the moment, we want to grow at that 5% to 6% range. And we want that to have a balanced contribution from volume and price/mix. So implicitly, looking for 2% to 3% on volume. And I think we talked last quarter that in the current circumstances, that's likely to be slightly less volume and slightly more prices, as price inflation normalizes. And so I think that 2% is still pretty good number. |
3,985 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | It's certainly been the average growth rate in volume. If you take a compound number over the last number of years, you're going to get something like a 2%. So that seems to be the momentum we're driving. And that -- if you strip away the inflation and the weirdness in the first quarter, what you see is, you got that 1% volume, which given the Middle East headwind of 1% and actually recycling the strongest quarter last year, you can say it's a good volume number. It has good underlying price/mix in the normal countries. So the kind of the normal performance is right at the top end of the algorithm there, and then that feeds its way through to 7% EPS growth. So I think right in there, the main business, notwithstanding the kind of peripheral noise, is humming away right in line with where we said we wanted to be.
Operator: Our next question comes from Rob Ottenstein from Evercore ISI.
Robert Ottenstein: I'd just like to drill down both on the U.S. and the volume question. Can you talk about your expectations for volume growth in North America this year? What it will take to get volume growth, is a function of more the economy, more the comps, more of the sectors? And tied to the sectors or categories, I think you mentioned that tea, coffee and water were very weak. Any color around that?
James Quincey: Sure. I mean, clearly, in the case of the U.S., we've commented in previous calls, that our expectation would be modest, flat to modest growth in volume on a long-term basis in North America with good pricing. Clearly, that remains our overall ambition. Whether we get from the flat to something more positive in the rest of the year will obviously be a combination of what we execute against and the trajectory of the purchasing power of the economy in the balance of the year. But we're very focused on continuing to build the business, drive the revenue and continue to win in the marketplace. And we'll see where that nets out, too. |
3,986 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | And then in the case of where we were doing well and where not clearly, we had a strong quarter in terms of sparkling, in terms of some of the other categories in North America. Dairy, obviously, the fairlife additional charge, as John talked about, as the earnout is in its last year, very strong quarter on dairy, very strong on sparkling, actually good on juice.
The water and the tea, and obviously, to some extent, obviously, the sports categories, were a little softer. Some of it on the water was selling less of the kind of the case pack water. And tea, I think it was very much a question, we just need to focus a little more on some of what needs to be done there. But it was more on the kind of the Fuze Tea end of the spectrum rather than the Gold Peak end of the spectrum, which tends to do better.
Operator: Our next question comes from Callum Elliott from Bernstein.
Callum Elliott: Great. So I have a slightly longer-term question on gross margins. In 2015, your gross margin was 61%, I think. And you had published a slide at CAGNY in 2016, showing that you expected gross margins to get to 68%, post the refranchising that had been announced at the time. Today, we're still around 60% over the past 12 months. Recognizing you guys weren't in your current seats in 2016 when that slide was published, but my question is what's happened?
I'm sure you'll point to M&A cost per BODYARMOR CCBA, et cetera, but I don't think they come close to explaining the 800 basis points of delta and I don't think that FX explains the gap either. But so what else is it? And has refranchising maybe just has not been as margin accretive as you expected? Or is there some kind of other structural drag that haven't been anticipated back in 2016? |
3,987 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | John Murphy: Yes. Actually, I think it does explain what's happened. I don't have the breakdown in front of me. But at the gross margin level, when you take into account the impact of currency, of some of the bottlers acquisitions that came back into our portfolio, that we're now in the process of refranchising and some of the other acquisitions, I think they have had a mechanical impact. And we can come back with a little bit more color on that. And then I think when you look at the operating income and how it flows down into operating income line, the primary driver are these items. So yes, I don't have it in front of me. We can follow up in a bit more detail. But yes, that's the story.
Operator: Our last question will come from Brett Cooper from Consumer Edge Research.
Brett Cooper: Just wanted to ask on your digital experience in B2B. And if you do any quantification as to when you win B2B or you get B2B into more particular retailers? What happens to your space, your share of the category performance and its relative to a base? I think it's not so much a question of the 8% increase in the quarter, but looking back over time.
James Quincey: I don't know if something was up with the line today that was very kind of broken up. But I think, Brett, you were asking about the digital experiences in B2B and what happens in shares in the category. There are multiple -- B2B is not a singular thing and the digital version of B2B is not a singular thing. There is a vast amount of B2B business that has been done for many years with direct order transfers, largely to large store modern retailers where order replenishment has a long-standing track record. And this is really focused on the efficiency of making sure the shelf is not out of stock from products. And it's more a process of support to what already goes on. And so actually, you see it's enabling the physical presence in the kind of the analog world, if you like. |
3,988 | KO | 1 | 2,024 | 2024-04-30 08:30:00 | The Coca-Cola Company | 26,642 | Of course, there's other types of B2B, for example, in the mom-and-pop stores, where we have moved heavily from a you have to wait for the pre-seller to appear type of relationship with the mom-and-pop stores to where that is complemented by some sort of ordering and relationship platform. They come in multiple guises, depending on where you are in the world, and the relative need and cost efficiency of doing so. But those platforms allow retailers effectively to be able to order, make additional orders 24/7, maybe even book servicing for their cold drink equipment, follow loyalty programs, et cetera, et cetera. So there's a lot of different types of B2B relationships.
Generally speaking, they are supportive of us continuing to grow the relationship and to continue to do well. And -- but they are enabling rather than consumer facing, so the kind of the share is a little trickier to determine.
Okay. I think that was the last one. To summarize, first quarter of the year, strong start, and we're confident we can continue to create value for the stakeholders and shareowners and deliver on our 2024 guidance. We'll continue to manage through the many different types of environments out there, but focus on leveraging our capabilities to drive what we can control to make sure we get growth.
So thank you for your interest, your investment in the company and joining us this morning.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. |
3,989 | KO | 1 | 2,025 | 2025-04-29 20:30:00 | The Coca-Cola Company | 26,642 | Operator: At this time, I would like to welcome everyone to The Coca-Cola Company's First Quarter 2025 Earnings Results Conference Call. Today's call is being recorded. If you have any objections, please disconnect at this time. All participants will be on listen-only mode until the formal question-and-answer portion of the call. I would like to remind everyone that the purpose of this conference is to talk with investors; and therefore, questions from the media will not be addressed. Media participants should contact Coca Cola's Media Relations Department if they have any questions. I would now like to introduce Ms. Robin Halpern, Vice President and Head of Investor Relations. Ms. Halpern, you may now begin.
Robin Halpern: Good morning, and thank you for joining us. I'm here with James Quincey, our Chairman and Chief Executive Officer; and John Murphy, our President and Chief Financial Officer. We've posted schedules under Financial Information in the Investors section of our company website. These reconcile certain non-GAAP financial measures that may be referred to this morning to results as reported under generally accepted accounting principles. You can also find schedules in the same section of our website that provide an analysis of our gross and operating margins. This call may contain forward-looking statements including statements concerning long-term earnings objectives, which should be considered in conjunction with cautionary statements contained in our earnings release and in the company's periodic SEC report. Following prepared remarks, we will take your questions. Please limit yourself to one question. Reenter the queue to ask any follow-ups. Now, I will turn the call over to James. |
3,990 | KO | 1 | 2,025 | 2025-04-29 20:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Thanks, Robin, and good morning, everyone. Our results in this first quarter reflect the continued execution of our all-weather strategy and demonstrate the resilience of our business as we navigate a dynamic external environment. We delivered 2% volume growth and organic revenue growth at the high end of our long-term growth algorithm. We also delivered comparable gross and operating margin expansion. With this as context, we're grounded in our starting point of human centricity. Our first quarter results would not have been possible without the actions of our people around the world. I'd like to express my gratitude to our system associates, who are adapting quickly and creating enduring value. And as we look to the remainder of the year, we will continue to be consumer and customer centric. Based on what we know today, we believe we can achieve our 2025 guidance. This morning, I'll provide further detail on our first quarter business performance, and we'll discuss the current operating environment. Then, I'll explain how we're improving execution and investing to strengthen our system. John will also discuss our financial results and provide further commentary on the outlook for the rest of the year. During the quarter, some markets improved sequentially while other markets faced macroeconomic uncertainty and geopolitical tensions that impacted consumer confidence and consumption behaviors. Despite this backdrop, we delivered robust organic revenue growth through our stepped-up capabilities and better than ever system alignment. We're getting more granular and tailoring our execution to win locally in key geographies, categories, and channels. During the quarter, we grew volume across all global beverage categories. We won value share by three key metrics, overall share, at home and away from home. However, as we look across our top country category combinations, we still have opportunities to further improve our performance. Across our markets, we leveraged our global scale and local expertise |
3,991 | KO | 1 | 2,025 | 2025-04-29 20:30:00 | The Coca-Cola Company | 26,642 | have opportunities to further improve our performance. Across our markets, we leveraged our global scale and local expertise to respond to complex dynamics in the quarter. In North America, we grew revenue and profit and won value share, but we were not satisfied with our volume performance. In addition to challenges with severe weather and calendar shift, volume was impacted by weakening consumer sentiment as the quarter progressed, particularly among Hispanic consumers. Bright spots include continued volume growth for Coca-Cola Zero Sugar, another good quarter for fairlife and Topo Chico Sabores, and continued traction with food service customer renewals and new accounts. Our system has quickly pivoted to prioritize the most impactful investment opportunities and is emphasizing faster decision making and greater agility to accelerate volume growth. In Latin America, while volume was flat, we grew both organic revenue and comparable currency neutral operating income. Brazil and Argentina had strong volume performance, while momentum in Mexico was weaker due to cycling strong volume growth in the prior year, calendar shifts, and diminished consumer sentiment, partly stemming from geopolitical tensions. Our system has taken swift action in Mexico. We've learned from best practices in other markets by messaging affordability with value packages in key channels and by launching the Hecho en Mexico campaign to further build trust with consumers. Across Latin America, our system is leveraging connected packaging and digital customer platforms to drive long-term growth. In EMEA, we grew volume, organic revenue, and comparable currency neutral operating income. In Europe, volume declined with mixed performance in both Western and Eastern markets due to a range of factors. To drive demand for our brands, we're focused on affordability and launching impactful integrated marketing activations. For example, with Trademark Coca-Cola, we launched the Everyday Tasty Celebrations campaign for the meal occasions in over 20 |
3,992 | KO | 1 | 2,025 | 2025-04-29 20:30:00 | The Coca-Cola Company | 26,642 | For example, with Trademark Coca-Cola, we launched the Everyday Tasty Celebrations campaign for the meal occasions in over 20 markets leveraging local influencers. For Fanta, we launched a partnership with Xbox to recruit Gen-Z drinkers. In Eurasia and Middle East, we drove strong volume growth and won value share. In Turkey, despite continued external challenges, our business performance improved. We're leveraging our learnings from the past year to better understand consumer motivations and pivot during shifts in demand. Our efforts across the region to emphasize the localness of our system while driving affordability and partnering closely with customers are taking hold. Lastly, in Africa, we grew volume despite cycling strong growth in the prior year and dealing with double-digit inflation. We're driving affordability with refillable offerings and value packages, and we're engaging consumers by scaling global integrated marketing campaigns at a local level, including Wanta Fanta, Sprite Spicy Meals, and Schweppes Born Social 2.0. Finally, in Asia-Pacific, we delivered volume, organic revenue, and comparable currency neutral operating income growth. In ASEAN and South Pacific, volume declined as strong performance in the Philippines was more than offset by weaker performance in Thailand and Indonesia. However, we won value share in the region. We're focused on driving affordability with refillable offerings and attractive absolute price points, increasing outlet coverage, and accelerating placement of cold drink equipment. In China, our system focus on improving execution is paying off and led to volume growth. We delivered impactful integrated marketing activations around the Lunar New Year and invested to drive growth in away from home channels. Trademark Coca-Cola had strong volume performance, while Sprite is getting back on track. In India, we had strong volume growth across our portfolio of global and local brands. Our system added nearly 350,000 outlets and increased household penetration. Also, our |
3,993 | KO | 1 | 2,025 | 2025-04-29 20:30:00 | The Coca-Cola Company | 26,642 | portfolio of global and local brands. Our system added nearly 350,000 outlets and increased household penetration. Also, our system increased cooler placement and added approximately 100,000 customers to its digital customer platforms. In Japan and South Korea, we drove volume growth and won value share with strong performance from Ayataka Tea. Our system is benefiting from stepped-up execution across key channels. Putting it all together, our business proved to be resilient during the quarter and we are prepared to respond to changing consumer dynamics as our external environment continues to evolve. While we're navigating near-term market dynamics, we're focused on capturing the boundless opportunities we discussed at CAGNY and we're building capabilities to further our strategic edge. Starting with our portfolio of love brands. Our total beverage portfolio offers consumers choice, whether it be by brand, package size, or package type. We have 30 global and local billion dollar brands that address a broad range of consumer need states and drinking occasions. A 30% of our volume is from low calorie or no calorie beverages, and 68% of our products in our portfolio have less than 100 calories per 12 ounce serving. We also have a diversified mix of affordable and premium offerings. By staying consumer centric and offering choice, we're seeing growth across multiple elements of our portfolio. Moving on to our marketing and innovation agenda. Our ongoing transformation continues to fuel our top line growth. With Studio X, we're producing tailored digital marketing at scale and with speed, and we're measuring the impact in real time. For example, during Lunar New Year, we scaled an integrated campaign with Trademark Coca-Cola across China, Japan, Vietnam, and other Asia-Pacific markets. Consumers access personalized digital experiences through our system's connected packaging. The campaign leveraged social media, live events, and increased displays in customer outlets, contributing to Trademark Coca-Cola volume |
3,994 | KO | 1 | 2,025 | 2025-04-29 20:30:00 | The Coca-Cola Company | 26,642 | leveraged social media, live events, and increased displays in customer outlets, contributing to Trademark Coca-Cola volume growth in Asia-Pacific during the quarter. We're also excited about the global return of our iconic Share a Coke campaign. The 2025 iteration of this campaign offers digital experiences and increased shareability and customization. The return of Share a Coke is the first chance for Gen-Z to experience this much loved campaign. We're investing in multi-year innovations and prioritizing fewer for bolder launches to drive greater impact and improve our success rates. For example, we're continuing to invest in Fuze Tea, which contributed to value share gains in the category during the quarter. We expanded Fuze Tea, Sabor Original to Spain and Fuze iced tea to Canada. In the U.S., Coca-Cola Orange Cream is off to a good start with approximately $50 million in retail sales during the quarter. At the end of February, we launched Simply Pop, our first prebiotic soda in select locations and channels across the country. We're excited about our ability to test and learn and scale successes over time. Lastly, we're striving to optimize our broader ecosystem. This extends far beyond the company and our bottling partners. If you include our suppliers, approximately 6 million people service our ecosystem. Coca-Cola is for everyone and we strive to contribute to each of the communities we serve. We believe our franchise model, which leverages global scale but prioritizes localness is an advantage in today's environment. Our system primarily produces and distributes our brands locally. We also aim to procure locally where possible. Much of the value we create in terms of jobs and retail sales stays in the local markets. For example, according to a recent economic impact study by Steward Redqueen in the U.S., our ecosystem contributes approximately 860,000 jobs and approximately $58 billion to annual gross domestic product. In Brazil, our ecosystem contributes approximately 575,000 jobs and over $15 billion |
3,995 | KO | 1 | 2,025 | 2025-04-29 20:30:00 | The Coca-Cola Company | 26,642 | billion to annual gross domestic product. In Brazil, our ecosystem contributes approximately 575,000 jobs and over $15 billion annually to the gross domestic product. While it is reasonable to assume global trade tensions and broader macro uncertainty may persist in the near term and could impact consumer sentiment, the building blocks behind our long-term growth opportunities are unchanged. We continue to benefit from three primary factors. Firstly, we operate in a resilient industry with predictable growth. Second, while barriers to entry in our industry are low, barriers to scale in our industry are high. Lastly, we have significant headroom to develop our industry and gain share, and we believe we're primed to capture these opportunities. Our portfolio power as demonstrated by our $30 billion brands and pervasive yet local distribution are key differentiators. Our system continues to prioritize agility, consumer centricity, and close partnership across our ecosystem to drive long-term growth. In summary, it's early in the year, and we know that the external environment is dynamic. Enabled by our all-weather strategy, we'll continue to expand our toolkit to respond to the opportunities and challenges ahead. Thanks to the unwavering dedication of our system employees, we are confident we can achieve our objectives. With that, I'll turn the call over to John. |
3,996 | KO | 1 | 2,025 | 2025-04-29 20:30:00 | The Coca-Cola Company | 26,642 | John Murphy: Thank you, James, and good morning, everyone. During the quarter, we pivoted as needed to continue delivering on our objectives. We grew organic revenues 6%, which reflects performance at the high end of our long-term growth algorithm. Unit case growth was 2%, in line with our multiyear trend. Concentrate sales were 1 points behind unit case sales as the impact of two fewer days in the quarter was partially offset by the timing of concentrate shipments. Our price mix growth of 5% was driven primarily by pricing actions across our markets, partially offset by approximately 1 point of unfavorable mix. Pricing from intense inflationary markets contributed to approximately 1 point of price mix growth, down from approximately 5 points in full year 2024. Comparable gross margin increased approximately 30 basis points, and comparable operating margin increased approximately 130 basis points. Both were driven by underlying expansion and a benefit from bottler refranchising, partially offset by currency headwinds. Putting it all together, first quarter comparable EPS of $0.73 increased 1% year-over-year despite 5% currency headwinds, dilution from bottle refranchising, elevated net interest expense, and an approximate 2 point increase in our effective tax rate. Free cash flow, excluding the fairlife contingent consideration payment was approximately $560 million, an increase versus prior year. During the quarter, we made our final $6.2 billion payment related to our acquisition of fairlife, which continued to deliver strong performance. We're expecting fairlife's growth to moderate during the remainder of 2025 in advance of bringing additional capacity online. Our balance sheet remains strong with our net debt leverage of 2.1 times EBITDA, which is at the low end of our targeted range of 2 times to 2.5 times. We're confident in our long-term free cash flow generation and continue to have balance sheet capacity to pursue our capital allocation agenda, which prioritizes an unwavering commitment to drive growth |
3,997 | KO | 1 | 2,025 | 2025-04-29 20:30:00 | The Coca-Cola Company | 26,642 | have balance sheet capacity to pursue our capital allocation agenda, which prioritizes an unwavering commitment to drive growth and support our dividend while staying flexible and opportunistic. Before I discuss our guidance, I'd like to provide perspective on the current global trade environment and the actions we're taking to manage our business. While our system primarily executes locally, we're not immune to global trade dynamics. Based on what we know today, the dynamic tariff landscape could impact pockets of our systems' cost structure as well as consumer sentiment in our markets. At this time, we believe we have numerous levers to help manage the impact, which is contributing to our current 2025 guidance. Enabled by our all-weather strategy, we believe our business model has the flexibility needed to allow us to deliver on our near-term commitments. Our current 2025 guidance takes into consideration the underlying momentum of our business and what we know today about our external environment. We continue to expect organic revenue growth of 5% to 6%, but now expect comparable currency neutral earnings per share growth of 7% to 9%, both of which reflect delivery in line with our long-term growth algorithm. Bottle refranchising is still expected to be a slight headwind to comparable net revenues and comparable earnings per share. Most of the impact of bottle refranchising occurred during the first quarter of this year, as we cycled the impact of refranchising the Philippines, which closed during the first quarter of 2024. Based on current rates and our hedge positions, we now anticipate an approximate 2 point to 3 point currency headwind to comparable net revenues and an approximate 5 point to 6 point currency headwind to comparable earnings per share for full year 2025. Our underlying effective tax rate for 2025 is still expected to be 20.8%, which is over a 2 point increase versus prior year. All-in, based on what we know today, we continue to expect 2025 comparable earnings per share growth of 2% to 3% |
3,998 | KO | 1 | 2,025 | 2025-04-29 20:30:00 | The Coca-Cola Company | 26,642 | prior year. All-in, based on what we know today, we continue to expect 2025 comparable earnings per share growth of 2% to 3% versus $2.88 in 2024. There are some considerations to keep in mind for 2025. During the second quarter, we are cycling a tougher volume comparison from the prior year, while we're taking action to address consumer dynamics across some key markets and are seeing encouraging signs, we expect recovery to take some time. We continue to expect the productivity benefits that I discussed in February to be weighted towards the latter half of 2025. Last, due to our reporting calendar, there will be one additional day in the fourth quarter. To sum it up, we remain focused on the execution of our all-weather strategy and are well positioned despite macro complexity and uncertainty in the remainder of 2025. Thanks to the power of our portfolio and the partnership of our system, we're confident we will continue to create enduring value for our stakeholders. And with that, operator, we are ready to take questions. |
3,999 | KO | 1 | 2,025 | 2025-04-29 20:30:00 | The Coca-Cola Company | 26,642 | Operator: [Operator Instructions] Our first question comes from Dara Mohsenian from Morgan Stanley. Please go ahead. Your line is open.
Dara Mohsenian: Hey, good morning. Another strong quarter clearly in Q1, but you did maintain the all-in full year 2025 earnings guidance, which implies constant currency earnings growth is now lower by 100 basis points with FX improving. So, is that just because it's early in the year and in a difficult environment, it doesn't make sense to raise overall earnings, particularly with volatile currency or are there discrete factors that are incremental as we think about full year currency neutral earnings? And maybe I can just extend that question also to unit cases, 2%, great result in the quarter. Comps do get tougher going forward. There's some geopolitical risk in theory. So, just any thoughts around your ability to drive continued corporate unit case growth going forward in this more difficult environment that you referenced. Thanks. |
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