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    Coca-Cola Co (KO)

    Board Change

    Business Description

    The Coca-Cola Company is a total beverage company with products sold in more than 200 countries and territories. It operates in two main lines of business: concentrate operations and finished product operations. The company sells beverage concentrates and syrups to authorized bottling partners, as well as sparkling soft drinks and other beverages directly to retailers, distributors, and wholesalers . Its product lines include sparkling soft drinks, juice, value-added dairy, plant-based beverages, water, sports drinks, coffee, tea, and emerging beverages .

    1. Concentrate Operations - Sells beverage concentrates and syrups to authorized bottling partners, who produce and package the finished beverages.
    2. Finished Product Operations - Sells sparkling soft drinks and other beverages directly to retailers, distributors, and wholesalers.
    3. Sparkling Soft Drinks - Offers popular brands such as Coca-Cola, Diet Coke, Coca-Cola Zero Sugar, Fanta, and Sprite.
    4. Juice, Value-Added Dairy, and Plant-Based Beverages - Includes brands like Minute Maid and Simply.
    5. Water, Sports, Coffee, and Tea Brands - Features products such as Dasani, Powerade, and Costa.
    6. Emerging Beverages - Includes new offerings like Topo Chico Hard Seltzer.
    7. Direct-to-Consumer Sales - Engages in retail through Costa-operated stores, part of its Global Ventures operating segment.

    Q3 2024 Summary

    Initial Price$64.03July 1, 2024
    Final Price$71.71October 1, 2024
    Price Change$7.68
    % Change+11.99%

    What went well

    • Coca-Cola's digital initiatives, including enhanced platforms for retailers and AI-driven order suggestions, are driving productivity and engagement in traditional trade channels, leading to confidence in delivering long-term sustainable value for stakeholders.
    • Strong performance in developed markets, particularly in North America where Trademark Coca-Cola and sparkling flavors both grew volume; Coke Zero experienced double-digit growth and Diet Coke grew, leading to robust top-line growth and value share gains. Additionally, Coca-Cola Trademark and fairlife were the leaders in the beverage industry in at-home retail sales growth.
    • Successful innovations like fairlife, which is expected to be a $1 billion brand, and Topo Chico, which grew volume nearly 20% globally, demonstrate Coca-Cola's ability to drive significant growth through both new and existing brands.

    What went wrong

    • Declining unit case volumes and pressure in emerging markets: Coca-Cola experienced a 1% decline in unit case volumes in Q3 2024, driven by challenging conditions in emerging markets like China, India, and Eurasia, with factors such as heavy monsoons, economic adjustments, and macroeconomic pressures impacting performance.
    • Significant financial obligations impacting cash flow and leverage: The company made a $6 billion deposit related to an ongoing IRS tax dispute and expects to make a $6.1 billion payment for the fairlife contingent consideration in the first half of 2025, leading to elevated net interest expense and increased net debt leverage.
    • Pressure on margins due to expected commodity price volatility and higher agricultural costs: Coca-Cola expects agricultural commodities to continue facing volatility and higher prices, which could pressure margins in 2025. Additionally, currency headwinds are anticipated to have a mid-single-digit impact on comparable earnings per share for full year 2025.

    Q&A Summary

    1. Volume Decline Analysis
      Q: Why did unit case volume decline by 1% in Q3?
      A: The decline was due to atypical volume makeup, with good performance in developed markets but pressure from emerging markets. Developed markets like North America, Europe, Japan, and Australia grew, while emerging markets faced factors like Mexico cycling a strong Q3 last year and India affected by heavy monsoons. Ongoing issues in China and Eurasia also contributed to the decline.

    2. Managing FX Headwinds and Strategy
      Q: How will you manage FX headwinds into 2025?
      A: We pursue an all-weather strategy to drive growth despite headwinds. In 2025, FX headwinds are expected to be less than this year. Emerging market devaluations allow quicker inflation pass-through, linking to pricing. We focus on investing behind brands, understanding profit drivers, and maintaining productivity efforts to offset challenges.

    3. Margin Expansion Levers
      Q: What are the levers for margin expansion next year?
      A: We expect underlying gross margin expansion to continue, aiming to offset FX headwinds through Revenue Growth Management and cost efficiency efforts. Despite challenges like inflation in agricultural commodities, we'll leverage levers on both revenue and cost lines, such as optimizing promotions, simplifying product specs, and leveraging our supplier base.

    4. Price Mix Sustainability
      Q: Is the price/mix growth of 3% sustainable into 2025?
      A: The mix has enduring elements like managing affordability and premiumization to drive growth. Temporary factors, such as slower growth in emerging markets, boosted price/mix this quarter. We expect a return to normal growth patterns, with emerging markets growing faster, normalizing volume and price/mix.

    5. North America Pricing and Mix
      Q: Can you elaborate on North America's strong price/mix?
      A: In Q3, North America's price/mix was half price and half mix. Mix was driven by focus on premium brands like fairlife, Topo Chico, and Coca-Cola, with less emphasis on case pack water. We anticipate moving towards a more normalized level of pricing next year, tracking similar rates to CPI, while continuing to invest in both affordability and premiumization options.

    6. Volume Growth Expectations
      Q: Will lower price/mix next year boost volume?
      A: We expect emerging markets to resume growing faster than developed economies, contributing to volume growth but not to positive price/mix. This should stabilize the relationship between volume and price/mix, making next year resemble this year with normal volume growth and pricing levels.

    7. Fairlife Growth and Impact
      Q: How significant is fairlife's impact on mix and sales?
      A: fairlife is a $1 billion brand, contributing to mix due to our vertically integrated business model, boosting both revenue and the bottom line. Importantly, North America excluding fairlife is also growing in top line and profit, so all engines are firing. We're expanding capacity to support fairlife's continued growth.

    8. US CSD Growth Drivers
      Q: What is driving US carbonated soft drink growth?
      A: Growth is driven by making brands more relevant through marketing transformation and improved execution. In Q3, Coke Zero had double-digit growth, and even Diet Coke grew. Efforts in Revenue Growth Management and pack mix are strengthening the sparkling beverage business.

    9. North America Consumer Demand
      Q: Are you seeing softness in US consumer demand?
      A: There's some marginal softness, but the beverage industry remains robust with growth in total dollars. While some consumers exhibit value-seeking behavior, strong purchasing power in other segments offsets this. Overall, the US market has remained resilient.

    10. Alcohol Strategy and Learnings
      Q: What are the learnings from your alcohol strategy?
      A: It's early days, but we've learned that building scale takes time. We're taking a measured approach, focusing on a robust portfolio combining partnered ready-to-drink offerings like Jack and Coke, Bacardi and Coke, Absolut and Sprite, and our own brands like Simply Spiked. The goal is to make alcoholic ready-to-drink a meaningful category.

    11. Quick Adaptations and Macro Environment
      Q: What quick adaptations are you making amid macro challenges?
      A: We're expanding affordable options, investing in cold drink equipment to increase availability, adjusting marketing messaging, and working with local bottlers to fine-tune relevance with consumers and retailers. The macro environment shows resilience globally.

    12. Digital Capabilities and Bottler Investments
      Q: How are you enhancing digital capabilities with bottlers?
      A: We're expanding digital engagement with retailers, especially in traditional trade, allowing 24/7 ordering and service requests. With AI, we can suggest orders to retailers based on trends. This enhances human productivity, and bottlers are investing in these capabilities.

    13. Q4 Outlook and Mexico CSD Ban
      Q: How should we think about Q4 growth and potential Mexico CSD ban?
      A: We expect a strong outlook for Q4. Excluding high-inflation markets, Q3 price/mix was 6%, volume -1%, net 5%, aligning with our growth algorithm. Regarding Mexico, a potential CSD ban in schools is expected to have a very small impact, as we largely sell no-sugar portfolios to schools.

    14. McDonald's Food Safety Impact
      Q: Will McDonald's food contamination issue affect you?
      A: As a partner, we'll support McDonald's as needed. Based on current information, we don't expect a significant impact on our business.

    15. Growth Outlook
      Q: Can you return to positive growth in Q4?
      A: Despite a challenging Q3 volume, we believe it's within our control to return to growth by focusing on our marketing innovation, price pack strategies, and system execution. The macro environment shows resilience, supporting our expectations for Q4 and into 2025.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Europe, Middle East & Africa2,0242,1882,1761,698,0781,9732,3392,019
    - Europe--------
    Latin America1,3861,3781,5741,4925,8301,5271,6501,639
    North America3,9044,3674,4634,0416,7744,1744,8124,984
    Asia Pacific1,3711,5671,4021,1155,4551,4691,5121,349
    Global Ventures7077657798133,064730768781
    Bottling Investments1,9462,0421,8592,0137,8601,8171,5391,316
    Corporate25304031126273018
    Eliminations-383-365-340-345-1,433-417-287-252
    Concentrate Operations6,3337,0507,2125,94426,5396,6557,4947,058
    Finished Product Operations4,6474,9224,7414,90519,2154,6454,8694,796
    Total Revenue10,98011,97211,95310,84945,75411,30012,36311,854
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Europe, Middle East & Africa2,0242,1882,1761,698,0781,9732,3392,019
    Eurasia & Africa--------
    Europe--------
    Latin America1,3861,3781,5741,4925,8301,5271,6501,639
    North America3,9044,3674,4634,0416,7744,1744,8124,984
    Asia Pacific1,3711,5671,4021,1155,4551,4691,5121,349
    Global Ventures7077657798133,064730768781
    Bottling Investments1,9462,0421,8592,0137,8601,8171,5391,316
    Corporate25304031126273018
    Eliminations-383-365-340-345-1,433-417-287-252
    Total Revenue10,98011,97211,95310,84945,75411,30012,36311,854
    KPIs - Metric / QuarterFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    **Unit Case Volume Growth**3%0%2%2%-1%2%-1%
    **Concentrate Sales Volume Growth**1%1%3%3%--2%5%-1%

    Executive Team

    NamePositionStart DateShort Bio
    Manuel ArroyoExecutive Vice President, Global Chief Marketing OfficerJanuary 2024Manuel Arroyo has been serving as Executive Vice President since January 2024 and as Global Chief Marketing Officer since January 2020. He was previously President of the Asia Pacific Group and Mexico business unit .
    Henrique BraunExecutive Vice President, President, International DevelopmentJanuary 2023Henrique Braun has been serving as Executive Vice President since January 2024 and President, International Development since January 2023. He joined Coca-Cola in 1996 and has held various roles across multiple regions .
    Lisa ChangExecutive Vice President, Global Chief People OfficerJanuary 2024Lisa Chang has been serving as Executive Vice President since January 2024 and Global Chief People Officer since March 2019. She joined Coca-Cola in March 2019 after serving as SVP and CHRO for AMB Group LLC .
    Monica Howard DouglasExecutive Vice President, Global General CounselJanuary 2024Monica Howard Douglas has been serving as Executive Vice President since January 2024 and Global General Counsel since April 2021. She was previously Chief Compliance Officer and Associate General Counsel for North America .
    Nikolaos KoumettisPresident, Europe Operating UnitJanuary 2021Nikolaos Koumettis has been President of the Europe operating unit since January 2021. He previously served as President of the Europe, Middle East, and Africa Group and other regional business units .
    Jennifer K. MannExecutive Vice President, President, North America Operating UnitJanuary 2023Jennifer K. Mann has been Executive Vice President since January 2024 and President of the North America operating unit since January 2023. She has been with Coca-Cola for 27 years, holding various leadership roles .
    John MurphyPresident, Chief Financial OfficerOctober 2022John Murphy has been President since October 2022 and Chief Financial Officer since March 2019. He previously served as Executive Vice President and held other senior financial roles within the company .
    Beatriz PerezExecutive Vice President, Global Chief Communications, Sustainability and Strategic Partnerships OfficerJanuary 2024Beatriz Perez has been Executive Vice President since January 2024 and Global Chief Communications, Sustainability and Strategic Partnerships Officer since May 2017. She was the company's first Chief Sustainability Officer .
    Bruno PietracciPresident, Latin America Operating UnitFebruary 2023Bruno Pietracci has been President of the Latin America operating unit since February 2023. He previously served as President of the Africa operating unit and other regional business units .
    Nancy QuanExecutive Vice President, Global Chief Technical and Innovation OfficerJanuary 2024Nancy Quan has been Executive Vice President since January 2024 and Global Chief Technical and Innovation Officer since February 2021. She previously served as Chief Technical Officer for Coca-Cola North America .
    James QuinceyChairman of the Board of Directors, Chief Executive OfficerApril 2019James Quincey has been Chairman of the Board since April 2019 and Chief Executive Officer since May 2017. He joined Coca-Cola in 1996 and has held various leadership positions, including President of the Europe Group .
    Bela BajariaDirector, Member of the Talent and Compensation CommitteeOctober 17, 2024Bela Bajaria was elected as a Director on October 17, 2024. She is also a member of the Talent and Compensation Committee and serves as Chief Content Officer for Netflix Inc., overseeing global television and film content .

    Questions to Ask Management

    1. With fairlife surpassing $1 billion in sales and significantly impacting your North American mix, how do you plan to sustain its growth given capacity constraints and tough year-over-year comparisons, especially before the New York plant becomes operational?

    2. Given the recent food contamination issues at McDonald's, your largest customer, how are you preparing to mitigate potential impacts on your business, and do you foresee any long-term repercussions in affected markets?

    3. With higher net interest expenses due to deposits related to the ongoing IRS tax dispute and the upcoming fairlife contingent consideration payment, how are these factors impacting your financial outlook, and what steps are you taking to resolve the IRS dispute promptly?

    4. Observing softness in discretionary spending in North America, especially in small-format stores and foodservice, how are you adjusting your strategies to address potential declines in impulse purchases and revitalize consumer spending in these channels?

    5. While your U.S. carbonated soft drink business is currently outperforming, how sustainable is this growth given the market shifts towards healthier options, and what strategies are you implementing to maintain relevance among younger consumers who may prefer non-carbonated beverages?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateFebruary 2019
    End Date/DurationN/A
    Total additional amount150 million shares
    Remaining authorization84,844,097 shares
    DetailsOffset dilution from employee stock-based compensation plans

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Organic Revenue Growth: Approximately 10% .
      2. Comparable Currency-Neutral Earnings Per Share Growth: 14% to 15% .
      3. Comparable Earnings Per Share Growth: 5% to 6% versus $2.69 in 2023 .
      4. Currency Headwinds: Approximate 5-point headwind to comparable net revenues and 9-point headwind to comparable earnings per share .
      5. Net Interest Expense: Expected to be elevated due to IRS tax dispute and fairlife contingent consideration payment .
      6. 2025 Considerations: Pricing from inflationary markets expected to moderate, cycling impact of currency devaluations .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Organic Revenue Growth: 9% to 10% .
      2. Comparable Currency-Neutral Earnings Per Share Growth: 13% to 15% .
      3. Bottler Refranchising Impact: 4- to 5-point headwind to net revenues, 1- to 2-point headwind to earnings per share .
      4. Currency Headwind: 5- to 6-point headwind to net revenues, 8- to 9-point headwind to earnings per share .
      5. Comparable Earnings Per Share Growth: 5% to 6% versus $2.69 in 2023 .
      6. Unit Cases and Concentrate Shipments: Expected to align .
      7. Earnings Growth: Weighted towards Q4 2024 .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Organic Revenue Growth: 8% to 9% .
      2. Comparable Currency-Neutral Earnings Per Share Growth: 11% to 13% .
      3. Bottler Refranchising Impact: 4- to 5-point headwind to net revenues, 2-point headwind to earnings per share .
      4. Currency Headwind: 4- to 5-point headwind to net revenues, 7 to 8-point headwind to earnings per share .
      5. Underlying Effective Tax Rate: 19% .
      6. Comparable Earnings Per Share Growth: 4% to 5% versus $2.69 in 2023 .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. Organic Revenue Growth: 6% to 7% .
      2. Comparable Currency-Neutral Earnings Per Share Growth: 8% to 10% .
      3. Currency Headwinds: 2- to 3-point headwind to net revenues, 4- to 5-point headwind to earnings per share .
      4. Underlying Effective Tax Rate: 19.2% .
      5. Comparable Earnings Per Share Growth: 4% to 5% versus $2.69 in 2023 .
      6. Free Cash Flow: Approximately $9.2 billion through $11.4 billion in cash from operations, less $2.2 billion in capital investments .
      7. Impact of Hyperinflationary Pricing: Expected to moderate .
      8. Bottler Refranchising: 4- to 5-point headwind to net revenues, 2-point headwind to earnings per share, positive impact on margins and return profile .
      9. Capital Investments: Significant portion for fairlife and India business .

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • PepsiCo, Inc. - A primary competitor in many of the countries where the company does business .
    • Nestlé S.A. - Significant competitor .
    • Keurig Dr Pepper Inc. - Significant competitor .
    • Danone S.A. - Significant competitor .
    • Suntory Beverage & Food Limited - Significant competitor .
    • AB InBev - Significant competitor .
    • Kirin Holdings - Significant competitor .
    • Heineken N.V. - Significant competitor .
    • Diageo - Significant competitor .
    • Red Bull GmbH - Significant competitor .

    Latest news

    Recent developments and announcements about KO.

    Corporate Leadership

      Leadership Change

      ·
      Dec 16, 2024, 8:02 PM

      Helene Gayle is leaving her position as a director at The Coca-Cola Company. She retired effective December 13, 2024, after serving since 2013. Reason for leaving: Retirement. No successor has been announced yet .

      Board Change

      ·
      Dec 16, 2024, 8:02 PM

      Helene D. Gayle has retired from the Board of Directors of The Coca-Cola Company, effective December 13, 2024. She had been a director since 2013 and served as a member and former chair of the talent and compensation committee, as well as a member of the corporate governance and sustainability committee .