Gross Margin Outlook
Q: How will gross margins trend this year?
A: Management expects gross margins to expand, primarily driven by tailwinds from refranchising efforts and underlying expansion, despite currency headwinds. Input costs are normalizing, though there is some elevation in juice and sugar prices. Overall, they anticipate positive margin expansion going forward, though not as aggressive every quarter.

Volume Growth Outlook
Q: Is 2% volume growth still expected?
A: They reaffirm a target of 2% volume growth, with a balanced contribution from volume and price/mix. Despite anomalies in Q1 due to the Middle East conflict and timing differences, they expect to maintain this growth rate, aligning with their long-term algorithm.

North America Performance
Q: How is the U.S. consumer and price/mix?
A: The U.S. consumer remains in good shape, though lower-income consumers face pressure, leading to slight shifts towards value and at-home channels. Of the 7% price/mix growth in North America, approximately 2% was mix or timing related, with the rest from pricing. Pricing is expected to moderate throughout the year, returning to pre-COVID patterns and a more balanced growth equation.

Asia Performance
Q: How did Asia, especially China, perform?
A: In China, they had a solid quarter, focusing on sparkling beverages during Chinese New Year, despite cycling a strong prior year. Consumer confidence hasn't fully rebounded, but growth is expected, though not at historic levels. Other markets like Japan, South Korea, and the Philippines showed strong performance. India had a slower start but bounced back in March and April, with expectations for strong growth this year.

Latin America Performance
Q: Can volume growth continue in Latin America?
A: Management believes they can continue to grow volume and revenue in Latin America, building on recent momentum. Strong performance was seen in Mexico, Brazil, and Colombia, while Argentina was impacted by macroeconomic conditions. They remain focused on marketing, innovation, execution, and revenue growth management to unlock volume growth.

Fairlife Liability Impact
Q: How will the fairlife liability affect earnings?
A: The fairlife liability, linked to the business's strong performance, has increased in estimate as the earnout ending in early 2025 approaches. Management notes the business's momentum is very strong and may present more upside, updating projections as they evolve.

Currency Headwinds Management
Q: How do you manage FX headwinds?
A: In markets with local currency competition, they compete locally and use long-term hedging to anticipate dollar impacts. In high inflation and devaluation markets, they focus on winning locally using revenue growth management and investments, accepting that dollar values may fluctuate. Prioritizing investments ensures they deliver consistent U.S. dollar EPS growth, leveraging the portfolio effect of different markets.

EMEA Performance
Q: How is the consumer in EMEA?
A: EMEA had various moving parts; high inflation countries contributed to strong pricing, while Europe saw more normalized pricing and consumer behavior similar to the U.S., with lower-income consumers under pressure and slight shifts towards value and at-home channels. They focus on marketing, innovation, and revenue growth management to drive growth despite macro challenges.

Sports Drink Strategy
Q: What's the update on BODYARMOR and POWERADE?
A: While progress hasn't been as fast as desired, they see long-term value in the dual-brand strategy. New product innovations, like Zero Calorie versions, are gaining traction, with double-digit share for offerings like Flash I.V. New marketing partnerships, such as with the NHL, and improved execution are helping market share trends, expecting further progress throughout the year.

Innovation Strategy
Q: Are there guardrails around innovation?
A: They focus on different types of innovation, including core brand renovation, limited-time offerings, and new products. They track metrics like whether products are still growing in the fifth quarter after launch but do not set artificial targets for percentage of sales from innovation. The goal is to sell what consumers want, whether that's legacy products or new innovations.

Market Development Evolution
Q: How is market development evolving?
A: They focus on adding value to retailers by moving from shelf replenishment to account development roles. Utilizing AI for suggested orders enhances efficiency, allowing salespeople to expand accounts. Growth in capabilities is tailored to regional channel structures, aiming for mutual growth with bottling partners by delivering on shared high ambitions.

Digital B2B Impact
Q: How does digital B2B affect performance?
A: Digital B2B enhances efficiency and supports growth. In large modern retailers, digital tools aid inventory management, while in mom-and-pop stores, platforms enable 24/7 ordering and services. These tools strengthen relationships and support growth, though the impact on market share is harder to quantify as they're enabling tools rather than consumer-facing.