Following the release of The Coca-Cola Company’s second quarter 2015 earnings this morning, Chairman and CEO Muhtar Kent conducted a call with financial analysts.
Here are five key takeaways from his remarks:
1. Improved Top-line Results
While many markets around the world face macroeconomic challenges, Coke's focus on improving execution helped deliver improved top-line results in the second quarter. Net revenues grew 4% on an organic basis, driven by positive price/mix and 3% growth in concentrate shipments.
"Our top-line performance was broad based, with each operating segment delivering positive organic revenue growth, demonstrating the strength of our global brand portfolio and the robust distribution capabilities of our bottling partners," Kent said. "As a result, we once again gained global value share in NARTD beverages in the quarter, with gains in both sparkling and still beverages. This represents the 32nd quarter in a row that we have gained NARTD value share, an important metric for us, particularly in a tough macroeconomic environment. Notably, the levels of our volume and value share gains are accelerating versus the second quarter of last year.”
2. Continued Progress in Transition Year
In 2014, the company took decisive action to reinvigorate growth and increase profitability. "Halfway through our transition year, we are pleased with the progress we are making, but recognize that we still have much to do. We are acting with speed and urgency against each of our five strategic initiatives," Kent said. "First and foremost, our enhanced focus on revenue growth across markets is delivering value share gains ahead of volume share gains on a consolidated basis as well as in our international and North America businesses.”
3. North America Business Delivered
Coke's North America business delivered a very strong quarter, with 5% growth in organic revenues and 8% growth in comparable income before tax. This performance reflects increased marketing, a disciplined approach to managing volume, price and mix as well as a shift in the July 4th holiday and the "Share a Coke" campaign into the second quarter this year versus the third quarter last year, Kent noted.
"Importantly, in North America, we delivered revenue growth in our sparkling portfolio in the quarter, through the further expansion of our pricing strategy resulting in 4% sparkling price/mix," he added. "Our disciplined price/pack strategy has seen wide adoption across all retail channels, as we emphasize smaller proprietary packages while also raising prices on traditional packages including 12-ounce cans and 2-liter bottles. And while sparkling unit case volume grew 1%, transactions increased 2% due to strong growth in our smaller package sizes which are on-trend with consumer preferences, such as our mini-cans which grew volume double digits during the quarter.”
4. Increase in Marketing Showing Results
“The second action to reinvigorate growth is to increase our media investments globally to fully fund our brand plans across our markets around the world while enhancing the quality of our advertising at the same time," Kent said. "In the markets where we are investing more with better quality, we are seeing better performance. Marketing, along with solid execution by our bottling partners, is driving top-line growth across our emerging, developing and developed markets."
Despite a soft macro environment in China, for example, brand Coca-Cola volume grew double digits in the second quarter. A record 20 million consumers participated in China’s “Coca-Cola Break” consumer promotion, which along with the third edition of the “Share a Coke” campaign, fueled growth in China.
In Argentina, the company gained both volume and value share and, importantly, gained value share ahead of volume share for the second quarter in a row due in part to integrated marketing campaigns around Copa America, the main international football tournament for national teams in South America. Finally, the quantity and quality of Coke's marketing in North America helped the company realize four points of sparkling price/mix, resulting in solid revenue performance.
“The trends we are seeing in these markets as well as initial results in other markets give us confidence that our stepped up investments are working,” Kent said.
5. Encouraged by Progress, Still Work Ahead
“I remain encouraged by our progress to date, but acknowledge that there is still much work ahead of us," Kent concluded. "We are confident in our strategies and execution and remain on track to deliver against our full year comparable currency neutral growth expectations.”