Global Unit Case Volume Was Even
Net Revenues Grew 6%; Organic Revenues
(Non-GAAP) Grew 11%
Operating Income Grew 3%; Comparable Currency
Neutral Operating Income (Non-GAAP) Grew 15%
Operating Margin Was 20.1% Versus 20.7% in the
Prior Year; Comparable Operating Margin (Non-GAAP) Was 31.6% Versus
30.7% in the Prior Year
EPS Grew 34% to $0.59; Comparable EPS
(Non-GAAP) Grew 11% to $0.78
The Coca-Cola Company today reported strong second quarter 2023
results, showing continued momentum in a dynamic operating
environment. “I am encouraged that our all-weather strategy,
working together with our bottling partners, has delivered strong
second quarter results,” said James Quincey, Chairman and CEO of
The Coca-Cola Company. “We are executing efficiently and
effectively on a local level, while maintaining flexibility on a
global level. The strength of our first half results and the
resiliency of our business give us the confidence to raise our 2023
guidance.”
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Highlights
Quarterly Performance
- Revenues: Net revenues grew 6% to $12.0 billion, and
organic revenues (non-GAAP) grew 11%. Revenue performance included
10% growth in price/mix and 1% growth in concentrate sales.
Concentrate sales were 1 point ahead of unit case volume, largely
due to the timing of concentrate shipments.
- Operating margin: Operating margin was 20.1% versus
20.7% in the prior year, while comparable operating margin
(non-GAAP) was 31.6% versus 30.7% in the prior year. Operating
margin decline was primarily driven by items impacting
comparability and currency headwinds. Comparable operating margin
(non-GAAP) expansion was primarily driven by strong topline growth
and the impact of refranchising bottling operations, partially
offset by an increase in marketing investments and higher operating
costs versus the prior year, as well as currency headwinds.
- Earnings per share: EPS grew 34% to $0.59, and
comparable EPS (non-GAAP) grew 11% to $0.78. Comparable EPS
(non-GAAP) performance included the impact of a 6-point currency
headwind.
- Market share: The company gained value share in total
nonalcoholic ready-to-drink (NARTD) beverages.
- Cash flow: Cash flow from operations was $4.6 billion
year-to-date, an increase of $83 million versus the prior year,
driven by strong business performance and working capital
initiatives, partially offset by the transition tax payment made
during the second quarter. Free cash flow (non-GAAP) was $4.0
billion year-to-date, a decline of $45 million versus the prior
year.
Company Updates
- Reinvigorating iconic brands through innovative products,
refreshed designs and consumer-centric marketing: Within a
vibrant industry, the company continued to grow its consumer base
and gain value share for the quarter. At the Cannes Lions festival
in June, Trademark Coca-Cola® garnered multiple awards as a result
of the company’s recent marketing and innovation transformation.
This same approach is being applied throughout the total beverage
portfolio. The Minute Maid® brand, which was acquired over 60 years
ago as a traditional orange juice, has grown to be the world’s
largest juice brand, including regional trademarks such as Cappy®
in Europe and Africa and Del Valle® in Latin America. Leveraging
the brand’s recognition, the company is delivering new and
innovative products that tap into the tastes of younger drinkers
such as Minute Maid® Sparkling in China and Minute Maid® Aguas
Frescas in North America. Recently, the company launched its first
Minute Maid global rebrand with a brighter, refreshed visual
identity. The “Filled with Life” campaign began rolling out across
markets through digitally led experiences that seek to intercept
life’s routine moments with a reminder to engage and live life
fully. For instance, in Türkiye during long daily commutes, the
brand enlivened consumers with unexpected surprises, such as
music-based activations. The revitalization further strengthens the
brand’s relevance and contributed to Minute Maid generating high
single-digit volume growth and overall volume and value share gains
for the juice, value-added dairy and plant-based beverages category
for the quarter.
- Leveraging revenue growth management capabilities, digital
platforms and integrated execution to create value for customers
and consumers: In an environment where consumer preferences are
rapidly evolving, customers are increasingly looking to add value
for their shoppers. In North America, the company has delivered on
these needs using various strategies such as tailored affordability
and premiumization propositions resulting in both volume and value
share gains for the quarter. In Vietnam, affordable entry packs led
to double-digit basket incidence growth year-to-date, and in Japan,
“Mini Pack, Mini Price” messaging across categories resulted in
double-digit household penetration growth and increased revenue
year-to-date. Additionally, the global system continues to invest
in digitizing its customer base with B2B platforms which allows for
better tailoring of product, price and packaging architecture and
ultimately leads to improved revenue growth management.
Year-to-date, the system has connected 6.5 million fragmented trade
customers to B2B platforms, an increase of 210% versus the prior
year.
- Investing and working as a networked system to pursue
sustainability goals: To support the company’s goal to reduce
carbon emissions by 25% by 2030, against a 2015 baseline, The
Coca-Cola Company and eight leading global bottling partners
created a first-of-its-kind sustainability-focused $137.7 million
venture capital fund in partnership with Greycroft, a
seed-to-growth venture capital firm. The fund aligns with the
company’s networked approach to sustainability and has the
potential to help advance solutions across its global value chain
by investing in sustainability-focused companies at the point of
commercialization. Reducing the Coca-Cola system’s carbon footprint
is a top priority for the fund, so it will initially prioritize
five key areas with the most potential impact: packaging, heating
and cooling, facility decarbonization, distribution and supply
chain.
Operating Review – Three
Months Ended June 30, 2023
Revenues and
Volume
Percent Change
Concentrate Sales1
Price/Mix
Currency Impact
Acquisitions, Divestitures and
Structural Changes, Net
Reported Net Revenues
Organic Revenues2
Unit Case Volume3
Consolidated
1
10
(4)
(1)
6
11
0
Europe, Middle East & Africa
(5)
14
(9)
0
0
9
(5)
Latin America
8
17
(4)
0
21
25
4
North America
0
9
0
0
8
9
(1)
Asia Pacific
(1)
5
(5)
1
0
4
2
Global Ventures4
8
3
0
0
10
10
4
Bottling Investments
5
10
(10)
(7)
(2)
15
(1)
Operating Income and
EPS
Percent Change
Reported Operating Income
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral
Operating Income2
Consolidated
3
(7)
(6)
15
Europe, Middle East & Africa
(12)
0
(11)
(2)
Latin America
18
(5)
(3)
26
North America
45
21
0
25
Asia Pacific
(11)
(3)
(6)
(2)
Global Ventures
75
(40)
(2)
118
Bottling Investments
9
10
(1)
1
Percent Change
Reported EPS
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral
EPS2
Consolidated
34
23
(6)
17
Note: Certain rows may not add due to rounding.
1
For Bottling Investments, this represents
the percent change in net revenues attributable to the increase
(decrease) in unit case volume computed based on total sales
(rather than average daily sales) in each of the corresponding
periods after considering the impact of structural changes, if
any.
2
Organic revenues, comparable currency
neutral operating income and comparable currency neutral EPS are
non-GAAP financial measures. Refer to the Reconciliation of GAAP
and Non-GAAP Financial Measures section.
3
Unit case volume is computed based on
average daily sales.
4
Due to the combination of multiple
business models in the Global Ventures operating segment, the
composition of concentrate sales and price/mix may fluctuate
materially from period to period. Therefore, the company places
greater focus on revenue growth as the best indicator of underlying
performance of the Global Ventures operating segment
In addition to the data in the preceding tables, operating
results included the following:
Consolidated
- Unit case volume was even for the quarter. Developed markets
were even, as growth in Mexico was offset by declines in the United
States and Spain. Developing and emerging markets were also even,
as growth in India and Brazil was offset by the suspension of
business in Russia in 2022 and a decline in Pakistan.
Unit case volume performance included the following:
- Sparkling soft drinks were even, as strong performance in Asia
Pacific and Latin America was offset by a decline in Europe, Middle
East & Africa, primarily due to the suspension of business in
Russia. Trademark Coca-Cola® was even, as strong performance in
Latin America and Asia Pacific was offset by a decline in Europe,
Middle East & Africa. Coca-Cola Zero Sugar® grew 5%, reflecting
strong growth in Latin America and North America. Sparkling flavors
declined 1%, driven by a decline in Europe, Middle East &
Africa, partially offset by growth in Asia Pacific and Latin
America.
- Juice, value-added dairy and plant-based beverages were even,
as strong growth in fairlife® in the United States and Minute Maid®
Pulpy in China was offset by the suspension of business in
Russia.
- Water, sports, coffee and tea were even. Water was even, as
growth in Latin America was offset by Europe, Middle East &
Africa and North America. Sports drinks declined 3%, primarily
driven by BODYARMOR® and Powerade® in the United States. Coffee
grew 5%, primarily driven by the strong performance of Costa®
coffee in the United Kingdom and China. Tea grew 1%, primarily
driven by growth in Latin America, partially offset by a decline in
doğadan® in Türkiye.
- Price/mix grew 10%, primarily driven by pricing actions in the
marketplace. Concentrate sales were 1 point ahead of unit case
volume, largely due to the timing of concentrate shipments.
- Operating income grew 3%, which included items impacting
comparability and a 10-point currency headwind. Comparable currency
neutral operating income (non-GAAP) grew 15%, driven by strong
organic revenue (non-GAAP) growth across all operating segments,
partially offset by an increase in marketing investments and higher
operating costs.
Europe, Middle East &
Africa
- Unit case volume declined 5%, as strong growth in Ukraine,
South Africa and France was more than offset by the suspension of
business in Russia and a decline in Pakistan.
- Price/mix grew 14%, driven by pricing actions across operating
units along with inflationary pricing in Türkiye. Concentrate sales
were in line with unit case volume.
- Operating income declined 12%, which included an 11-point
currency headwind. Comparable currency neutral operating income
(non-GAAP) declined 2%, as strong organic revenue (non-GAAP) growth
across all operating units was more than offset by an increase in
marketing investments and higher operating costs.
- The company gained value share in total NARTD beverages, led by
share gains in Türkiye, France and Germany.
Latin America
- Unit case volume grew 4%, with strong growth across all
categories. Growth was led by Mexico and Brazil.
- Price/mix grew 17%, driven by pricing actions in the
marketplace and favorable channel and package mix, in addition to
inflationary pricing in Argentina. Concentrate sales were 4 points
ahead of unit case volume, primarily due to cycling the timing of
concentrate shipments in the prior year.
- Operating income grew 18%, which included a 7-point currency
headwind and items impacting comparability. Comparable currency
neutral operating income (non-GAAP) grew 26%, primarily driven by
strong organic revenue (non-GAAP) growth, partially offset by an
increase in marketing investments and higher operating costs.
- The company lost value share in total NARTD beverages, as share
gains in Brazil, Argentina, Chile and Colombia were more than
offset by losses in Peru and industry pressure in Mexico.
North America
- Unit case volume declined 1%, as growth in sparkling flavors
and juice, value-added dairy and plant-based beverages was more
than offset by declines in water, sports, coffee and tea as well as
Trademark Coca-Cola®.
- Price/mix grew 9%, primarily driven by pricing actions in the
marketplace and favorable channel and package mix. Concentrate
sales were 1 point ahead of unit case volume, primarily due to the
timing of concentrate shipments.
- Operating income grew 45%, which included items impacting
comparability. Comparable currency neutral operating income
(non-GAAP) grew 25%, driven by strong organic revenue (non-GAAP)
growth, partially offset by an increase in marketing investments
and higher operating costs.
- The company gained value share in total NARTD beverages, driven
by sparkling soft drinks and juice, value-added dairy and
plant-based beverages.
Asia Pacific
- Unit case volume grew 2%, driven by growth across most
categories. Growth was led by India, China, Thailand and
Vietnam.
- Price/mix grew 5%, primarily driven by pricing actions in the
marketplace and favorable category mix, partially offset by
unfavorable geographic mix. Concentrate sales were 3 points behind
unit case volume, primarily due to cycling the timing of
concentrate shipments in the prior year.
- Operating income declined 11%, which included items impacting
comparability and a 4-point currency headwind. Comparable currency
neutral operating income (non-GAAP) declined 2%, as organic revenue
(non-GAAP) growth across all operating units was more than offset
by higher operating costs.
- The company gained value share in total NARTD beverages, led by
share gains in South Korea, India, Australia and Thailand.
Global Ventures
- Net revenues grew 10%, and organic revenues (non-GAAP) grew
10%. Revenue performance benefited from the strong performance of
Costa coffee in the United Kingdom and China.
- Operating income grew 75%, which included items impacting
comparability and a 1-point currency headwind. Comparable currency
neutral operating income (non-GAAP) grew 118%, driven by solid
organic revenue (non-GAAP) growth, partially offset by an increase
in marketing investments and higher operating costs.
Bottling Investments
- Unit case volume declined 1%, primarily driven by the impact of
refranchising bottling operations and a decline in the Philippines,
partially offset by growth in India and South Africa.
- Price/mix grew 10%, driven by pricing actions across most
markets, partially offset by unfavorable geographic mix.
- Operating income grew 9%, which included items impacting
comparability and a 1-point currency headwind. Comparable currency
neutral operating income (non-GAAP) grew 1%, driven by organic
revenue (non-GAAP) growth, partially offset by higher operating
costs.
Operating Review – Six Months
Ended June 30, 2023
Revenues and
Volume
Percent Change
Concentrate Sales1
Price/Mix
Currency Impact
Acquisitions, Divestitures and
Structural Changes, Net
Reported Net Revenues
Organic Revenues2
Unit Case Volume3
Consolidated
1
10
(5)
(1)
5
11
2
Europe, Middle East & Africa
(2)
18
(11)
0
5
16
(4)
Latin America
4
18
(4)
0
17
22
5
North America
(1)
10
0
0
9
9
0
Asia Pacific
(1)
5
(6)
1
(1)
4
6
Global Ventures4
8
0
(4)
0
3
8
5
Bottling Investments
4
9
(9)
(7)
(3)
13
(1)
Operating Income and
EPS
Percent Change
Reported Operating Income
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral
Operating Income2
Consolidated
0
(7)
(8)
15
Europe, Middle East & Africa
(1)
0
(13)
12
Latin America
15
(1)
(5)
21
North America
19
(4)
0
23
Asia Pacific
(13)
(1)
(7)
(4)
Global Ventures
36
(16)
(2)
53
Bottling Investments
(15)
3
(5)
(13)
Percent Change
Reported EPS
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral
EPS2
Consolidated
21
13
(7)
15
Note: Certain rows may not add due to rounding.
1
For Bottling Investments, this represents
the percent change in net revenues attributable to the increase
(decrease) in unit case volume computed based on total sales
(rather than average daily sales) in each of the corresponding
periods after considering the impact of structural changes, if
any.
2
Organic revenues, comparable currency
neutral operating income and comparable currency neutral EPS are
non-GAAP financial measures. Refer to the Reconciliation of GAAP
and Non-GAAP Financial Measures section.
3
Unit case volume is computed based on
average daily sales.
4
Due to the combination of multiple
business models in the Global Ventures operating segment, the
composition of concentrate sales and price/mix may fluctuate
materially from period to period. Therefore, the company places
greater focus on revenue growth as the best indicator of underlying
performance of the Global Ventures operating segment
Outlook
The 2023 outlook information provided below includes
forward-looking non-GAAP financial measures, which management uses
in measuring performance. The company is not able to reconcile
full-year 2023 projected organic revenues (non-GAAP) to full-year
2023 projected reported net revenues, full-year 2023 projected
comparable net revenues (non-GAAP) to full-year 2023 projected
reported net revenues, full-year 2023 projected comparable cost of
goods sold (non-GAAP) to full-year 2023 projected reported cost of
goods sold, full-year 2023 projected underlying effective tax rate
(non-GAAP) to full-year 2023 projected reported effective tax rate,
full-year 2023 projected comparable currency neutral EPS (non-GAAP)
to full-year 2023 projected reported EPS, or full-year 2023
projected comparable EPS (non-GAAP) to full-year 2023 projected
reported EPS without unreasonable efforts because it is not
possible to predict with a reasonable degree of certainty the exact
timing and exact impact of acquisitions, divestitures and
structural changes throughout 2023; the exact impact of changes in
commodity costs throughout 2023; the exact timing and exact amount
of items impacting comparability throughout 2023; and the exact
impact of fluctuations in foreign currency exchange rates
throughout 2023. The unavailable information could have a
significant impact on the company’s full-year 2023 reported
financial results.
Full Year 2023
The company expects to deliver organic revenue (non-GAAP) growth
of 8% to 9%. – Updated
For comparable net revenues (non-GAAP), the company expects a 3%
to 4% currency headwind based on the current rates and including
the impact of hedged positions, in addition to an approximate 1%
headwind from acquisitions, divestitures and structural changes. –
Updated
The company expects commodity price inflation to be a mid
single-digit percentage headwind on comparable cost of goods sold
(non-GAAP) based on the current rates and including the impact of
hedged positions. – No Change
The company’s underlying effective tax rate (non-GAAP) is
estimated to be 19.3%. This does not include the impact of ongoing
tax litigation with the IRS, if the company were not to prevail. –
Updated
Given the above considerations, the company expects to deliver
comparable currency neutral EPS (non-GAAP) growth of 9% to 11% and
comparable EPS (non-GAAP) growth of 5% to 6%, versus $2.48 in 2022.
– Updated
Comparable EPS (non-GAAP) percentage growth is expected to
include a 4% to 5% currency headwind based on the current rates and
including the impact of hedged positions, in addition to a slight
headwind from acquisitions, divestitures and structural changes. –
Updated
The company expects to generate free cash flow (non-GAAP) of
approximately $9.5 billion through cash flow from operations of
approximately $11.4 billion, less capital expenditures of
approximately $1.9 billion. This does not include any potential
payments related to ongoing tax litigation with the IRS. – No
Change
Third Quarter 2023
Considerations – New
Comparable net revenues (non-GAAP) are expected to include an
approximate 2% currency headwind based on the current rates and
including the impact of hedged positions, in addition to an
approximate 1% headwind from acquisitions, divestitures and
structural changes.
Comparable EPS (non-GAAP) percentage growth is expected to
include an approximate 3% currency headwind based on the current
rates and including the impact of hedged positions.
Notes
- All references to growth rate percentages and share compare the
results of the period to those of the prior year comparable period,
unless otherwise noted.
- All references to volume and volume percentage changes indicate
unit case volume, unless otherwise noted. All volume percentage
changes are computed based on average daily sales, unless otherwise
noted. “Unit case” means a unit of measurement equal to 192 U.S.
fluid ounces of finished beverage (24 eight-ounce servings), with
the exception of unit case equivalents for Costa non-ready-to-drink
beverage products which are primarily measured in number of
transactions. “Unit case volume” means the number of unit cases (or
unit case equivalents) of company beverages directly or indirectly
sold by the company and its bottling partners to customers or
consumers.
- “Concentrate sales” represents the amount of concentrates,
syrups, beverage bases, source waters and powders/minerals (in all
instances expressed in unit case equivalents) sold by, or used in
finished beverages sold by, the company to its bottling partners or
other customers. For Costa non-ready-to-drink beverage products,
“concentrate sales” represents the amount of beverages, primarily
measured in number of transactions (in all instances expressed in
unit case equivalents) sold by the company to customers or
consumers. In the reconciliation of reported net revenues,
“concentrate sales” represents the percent change in net revenues
attributable to the increase (decrease) in concentrate sales volume
for the geographic operating segments and the Global Ventures
operating segment after considering the impact of structural
changes, if any. For the Bottling Investments operating segment,
this represents the percent change in net revenues attributable to
the increase (decrease) in unit case volume computed based on total
sales (rather than average daily sales) in each of the
corresponding periods after considering the impact of structural
changes, if any. The Bottling Investments operating segment
reflects unit case volume growth for consolidated bottlers
only.
- “Price/mix” represents the change in net operating revenues
caused by factors such as price changes, the mix of products and
packages sold, and the mix of channels and geographic territories
where the sales occurred.
- First quarter 2023 financial results were impacted by one less
day as compared to first quarter 2022, and fourth quarter 2023
financial results will be impacted by one additional day as
compared to fourth quarter 2022. Unit case volume results for the
quarters are not impacted by the variances in days due to the
average daily sales computation referenced above.
Conference Call
The company is hosting a conference call with investors and
analysts to discuss second quarter 2023 operating results today,
July 26, 2023, at 8:30 a.m. ET. The company invites participants to
listen to a live webcast of the conference call on the company’s
website, http://www.coca-colacompany.com, in the “Investors”
section. An audio replay in downloadable digital format and a
transcript of the call will be available on the website within 24
hours following the call. Further, the “Investors” section of the
website includes certain supplemental information and a
reconciliation of non-GAAP financial measures to the company’s
results as reported under GAAP, which may be used during the call
when discussing financial results.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230726744975/en/
Investors and Analysts: Robin
Halpern, koinvestorrelations@coca-cola.com Media: Scott Leith, sleith@coca-cola.com
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