Pricing Strategy and Margin Outlook
Q: How will pricing and margins evolve given inflation trends?
A: Management noted that only half of the 11% price/mix growth in North America was due to actual price increases; the other half was mix effects from higher-priced products like fairlife and juices growing faster. They expect the mix effect to subside in the back half of the year, leading to more normalized pricing. With inflation approaching the "landing zone," they anticipate future pricing to be earned through marketing, innovation, and execution rather than inflation-driven increases. Gross margins benefited slightly from stocking, adding tens of basis points, but overall margin trends are expected to remain similar in the second half of the year.

Volume Growth Expectations
Q: What is the outlook for volume growth versus pricing?
A: The company aims for balanced growth with revenue growth of 4–6%, targeting the 5–6% range through a mix of 2–3% volume growth and 2–3% price/mix. In the short term, they expect slightly more price and slightly less volume due to inflation trends. Positive volume growth is driven by developing economies like Latin America, India, and Africa, while North America and Europe face some softness.

Cash Flow and Capital Allocation
Q: How will fairlife and tax payments impact cash flow?
A: The company is managing upcoming outflows, including the fairlife acquisition and an IRS tax payment, through a combination of cash from operations, proceeds from refranchising, and the issuance of long-term debt. The balance sheet remains strong with a clear line of sight into needs for the next 12–18 months. They continue to invest in the business and support the dividend while addressing these obligations.

North America Performance
Q: What are the trends in North America consumer spending and price/mix?
A: Consumer sentiment is strong and resilient, with some softness in away-from-home channels due to lower traffic and value-seeking behavior among lower-income consumers. The company saw strong growth across the portfolio, including Coca-Cola Trademark, fairlife, Topo Chico, and juices, winning value share in the quarter. Only half of the 11% price/mix growth was due to actual pricing; the rest was mix from higher-priced products.

Latin America Performance
Q: What drove strong results in Latin America?
A: Latin America had strong volume momentum, driven by Mexico and Brazil, with broad-based category success including Coca-Cola Trademark and 20% volume growth in Coke Zero. The price/mix was heavily affected by Argentina's high inflation, which accounted for two-thirds of the price/mix growth. Excluding Argentina, price/mix was around 6% in other countries.

Away-from-Home Channel Trends
Q: How is the away-from-home business performing and what's the outlook?
A: The softness in away-from-home channels is a slow softening rather than a big deceleration. Lower-income consumers are making fewer trips and seeking value deals. The company is focusing on affordability and price-pack architecture to provide value offerings and retain consumers in this channel.

Energy and Sports Drinks Performance
Q: How are energy and sports drink categories performing?
A: In North America, Coca-Cola and fairlife were the top trademarks providing the most dollar retail growth in Q2. The sports drink category is improving, with positive volume growth in BODYARMOR and Powerade, and new innovations like Zero Sugar and Flash I.V.. In energy drinks, category growth has slowed in the U.S. due to new entrants and innovations, but internationally, energy drinks continue to show robust growth.

Concentrate Shipments and Margins
Q: How did concentrate shipments impact margins, and will this continue?
A: Concentrate shipments were affected by events like the ingestion in the Red Sea, restocking after floods in Brazil, and stocking up in India. This led to a slight benefit to gross and operating margins in the tens of basis points. The company expects a more normal relationship between unit cases and concentrate shipments in the second half of the year.

Refranchising and EPS Impact
Q: What's the timing and EPS impact of bottler refranchising?
A: The company is not providing specific dates but expects to complete most refranchising efforts over the next couple of years. While refranchising can have a mechanical impact on EPS due to dilution, management believes it benefits the overall system and aligns with their focus on core competencies.

Marketing Investment Intentions
Q: Has there been a change in marketing investment plans?
A: The company's bias is to invest where they see opportunities. There's no radical change in marketing investment intentions, and they continue to see the need for marketing support to drive the top line.

Europe and EMEA Performance
Q: What are the trends in Western Europe and EMEA?
A: Europe is not performing as well as desired, with more pressure on away-from-home channels in the West. Sporting events have helped, but weather challenges and lower-income consumers seeking value have impacted performance. Africa had a strong quarter with good volume growth and value share gains. The Middle East faces headwinds due to ongoing conflict.

Asia Pacific Performance and China
Q: How did Asia Pacific perform, and what's happening in China?
A: Asia Pacific volumes were up 3%, with price/mix down 3% due to mix effects. India had a strong double-digit volume growth after a soft first quarter. In China, overall volumes were negative due to the deprioritization of unprofitable case-pack water. Sparkling volumes in China were slightly positive.

Category Dynamics in North America
Q: Any notable category trends in North America?
A: Sparkling beverages are performing better than energy drinks as a sector. The company is focusing on multiple brands to meet consumer needs and responding to category evolution with partners like Monster. The sports drink category is showing improvement with product innovations and marketing efforts.

Energy Drinks Weakness in the U.S.
Q: What is causing weakness in the U.S. energy drink market?
A: New entrants and innovations are changing the category dynamics, leading to slowed growth for established brands. The company is working with Monster to respond to consumer evolution and is seeing robust growth in energy drinks internationally.