The first quarter of 2016 was a busy one for Coca-Cola. Despite challenging macroeconomic conditions in many parts of the world, the company introduced a new global marketing strategy, acquired new brands and continued its global bottler refranchising and segmented revenue growth plans in the first three months of the year.
“We have defined a clear path to transform the company,” Chairman and CEO Muhtar Kent told analysts during a conference call to review the company’s Q1 results. “The Coca-Cola Company is becoming stronger, more efficient and more focused on our core strengths of marketing and brand building, customer value creation, and leading our franchise bottling system.”
Here are five key takeaways from Coke’s Q1 results:
Coca-Cola unveiled a new global ‘One Brand’ marketing strategy and supporting ‘Taste the Feeling’ campaign. Now live in 195 countries, the creative unites all four Trademark Coke brands. Kent said initial response among consumers, employees and bottlers, is “encouraging and positive.” Learn more about the strategy and campaign here.
The company added to its portfolio of fast-growing still beverages. Coke recently closed its acquisition of Culiangwang, a Chinese plant-based protein beverage maker, and invested in Chi, Nigeria’s leading juice and value-added dairy company. “Both transactions are further proof points of how we are strengthening our leading stills position, effectively responding to evolving consumer preferences,” Kent said.
Global refranchising efforts accelerated in Q1. In North America, Coke continued to progress against its goal of refranchising 100% of its bottling operations by the end of 2017. Including territories announced today, the company has transferred or signed agreements on almost two-thirds of the U.S. territories originally acquired from Coca-Cola Enterprises. In Western Europe, the Coca-Cola European Partners transaction is on track to close by the end of the second quarter. In Africa, the regulatory approval process continues for the Coca-Cola Beverages Africa merger. “We continue to evolve and strengthen our global bottling system as we accelerate refranchising and return to a predominantly concentrate-driven model with significantly higher margins and returns,” Kent said. “Our franchise bottling system is getting stronger, faster and more closely aligned.”
KO gained global value share in NARTD beverages, with increases in both Sparkling and Still Beverages worldwide. Global unit case volume and organic revenue were both up 2% in the first quarter. Strong marketing, disciplined revenue management and improved execution drove performance in key markets (North America, Latin America, Japan and India), partially offset by challenges in emerging and developing markets suffering the brunt of the macroeconomic slowdown (Russia, Brazil and China). Several European markets delivered solid volume growth in the quarter, including Spain (+3%), Germany (+1%) and Central and Southern Europe (+2%), while South Africa (+7%) and Nigeria (+13%) led the way in Africa.
The company remains on track to deliver $600+ million in productivity savings in 2016, which will fuel brand and growth investments while covering cost inflation and driving margin expansion. Structurally adjusted comparable currency neutral income before tax grew 9% in the first quarter, with underlying margin expansion reflecting Coke’s focus on productivity.
“With the challenges around the world, we will focus on what we can control in order to deliver solid revenue growth and strong underlying operating margin expansion through the effective management of our portfolio, price/mix and productivity efforts,” President and COO James Quincey said.
Note: This article includes certain "non-GAAP financial measures" as defined under U.S. federal securities laws. Refer to our first quarter 2016 earnings release issued on April 20, 2016, available at www.coca-colacompany.com (in the “Investors” section), for full financial results and a reconciliation of non-GAAP financial measures.
Forward-Looking Statements: This article contains statements, estimates or projections that constitute “forward-looking statements” as defined under U.S. federal securities laws. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from The Coca-Cola Company’s historical experience and our present expectations or projections. These risks are discussed in our Company’s filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2015, which filings are available from the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Coca-Cola Company undertakes no obligation to publicly update or revise any forward-looking statements.