Coca-Cola took steps in 2015 to become a “leaner, higher-margin, higher-return and more focused company,” Chairman and CEO Muhtar Kent told analysts today.
Earlier this morning, the company reported fourth quarter and full-year 2015 financial results for 2015, described by leaders as a transition year. Full-year global highlights included 4% organic revenue growth, 2% unit case volume growth, and value share gains in sparkling, still and total nonalcoholic ready-to-drink (NARTD) beverages. Segmented revenue growth management strategies and increased investments in media also drove 2% global price/mix. Full press release.
Here are seven highlights from today’s conference call (click here for full audio and transcript):
Coca-Cola North America delivered its highest revenue growth in three years.
The company posted 4% organic revenue growth in its largest market in 2015, driven by increased marketing and a disciplined approach to volume, price and mix management.
Transactions were up 3%, outpacing 1% unit case volume growth, thanks to strong sales of profitable mini cans (highlighted in Coke’s 2016 Big Game ad), smaller PET and 8-oz. glass bottles, and premium aluminum bottles.
Bottler refranchising in North America will accelerate.
The company has signed agreements or transferred territories representing more than 40% of its U.S. bottle/can volume, to date. “Based on our success and knowledge we gained through the transitions, we are now ready to accelerate the pace,” Kent said. “Today, we announced we are committed to refranchising 100% of our remaining company-owned bottling territories in North America, including all cold-fill production facilities, by the end of 2017. This is a critical next step for our entire system in North America.”
Coke will also refranchise company-owned bottling operations in China.
Refranchising is the next logical step in this key market, Kent said, where the company currently controls approximately one-third of the bottling volume. Coke plans to refranchise its owned bottling operations to its existing bottling partners in China: COFCO and Swire.
These announcements, combined with the pending creation of
“When we complete these refranchising efforts by the end of 2017, we will look very different than we do today, as we return to a company that is focused on our core strengths of building strong, sustainable and valuable brands, creating value for our customers and partners and continuing to drive system capabilities,” Kent said. “As a result, we will become less capital intensive, with significantly higher margins and returns, which will enable our core strengths even further.”
The new ‘One Brand’ strategy will drive both the quality and efficiency of Coke’s global marketing.
Last month, Coke unveiled a new "One Brand" marketing strategy and supporting creative. “This is not just new not just a new global campaign,” Kent said, “but a new business approach.”
“Taste the Feeling” is the first Coke campaign to unite all
The global campaign was built end-to-end – from consumer through to shopper, digital and music – enabling the company to reduce agency and production costs.
The company continues to build – and invest in – innovative, high-potential brands.
Coke’s portfolio of strong, valuable brands across multiple categories is growing, with 20 billion-dollar brands and a strong pipeline of thriving regional brands. In 2015, the company gained global value share across the core sparkling, packaged water, juice and juice/drinks, energy drinks, and RTD tea categories. And, just last week, Coke announced an investment in Chi Limited, Nigeria’s leading value-added dairy and juice company, adding to other recent investments including Monster, Suja and fairlife.
Globally, the company captured more than $600 million in productivity savings in 2015.
These savings, which exceeded targets set in early-2015, combined with favorable commodities to help to drive 6% growth in structurally adjusted comparable currency neutral income before tax.
KO expects to 'be back on long-term growth algorithm' in 2016.
President and COO James Quincey said the company’s 2015 performance proves that its strategies are working. And while ongoing global macroeconomic volatility presents challenges, particularly in Brazil, Russia and China, the company’s focus on revenue and disciplined brand investments should continue to drive topline growth.
“Given the erratic nature of the global economy, we will continue to focus on what we can control – investing behind our brands, improving our market execution and delivering on our productivity efforts – in order to deliver our plan,” Quincey said. Watch his interview with CNBC.
Chief Financial Officer Kathy Waller said the company expects organic revenue to grow 4% to 5% in 2016, as marketing investments continue to pay off. Comparable currency neutral income before tax, structurally adjusted, is expect to grow 6 to 8%, and comparable currency neutral earnings per share growth is projected to be 4% to 6%.
“In 2016, we expect to be back on our long-term growth algorithm,” Waller said.
Note: This article includes certain "non-GAAP financial measures" as defined under U.S. federal securities laws. Refer to our fourth quarter and full year 2015 earnings release issued on February 9, 2016, available on the Company's website at www.coca-colacompany.com (in the “Investors” section), for full financial results and a reconciliation of non-GAAP financial measures.
This Q&A may contain statements, estimates or projections that constitute “forward-looking statements” as defined under U.S. federal securities laws. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from The Company’s historical experience and our present expectations or projections. These risks include, but are not limited to, obesity concerns; water scarcity and poor quality; evolving consumer preferences; increased competition and capabilities in the marketplace; product safety and quality concerns; perceived negative health consequences of certain ingredients, such as non-nutritive sweeteners and biotechnology-derived substances, and of other substances present in our beverage products or packaging materials; increased demand for food products and decreased agricultural productivity; changes in the retail landscape or the loss of key retail or foodservice customers; an inability to expand operations in emerging and developing markets; fluctuations in foreign currency exchange rates; interest rate increases; an inability to maintain good relationships with our bottling partners; a deterioration in our bottling partners' financial condition; increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters; increased or new indirect taxes in the United States or in other major markets; increased cost, disruption of supply or shortage of energy or fuels; increased cost, disruption of supply or shortage of ingredients, other raw materials or packaging materials; changes in laws and regulations relating to beverage containers and packaging; significant additional labeling or warning requirements or limitations on the availability of our products; an inability to protect our information systems against service interruption, misappropriation of data or breaches of security; unfavorable general economic conditions in the United States; unfavorable economic and political conditions in international markets; litigation or legal proceedings; adverse weather conditions; climate change; damage to our brand image and corporate reputation from negative publicity, even if unwarranted, related to product safety or quality, human and workplace rights, obesity or other issues; changes in, or failure to comply with, the laws and regulations applicable to our products or our business operations; changes in accounting standards; an inability to achieve our overall long-term growth objectives; deterioration of global credit market conditions; default by or failure of one or more of our counterparty financial institutions; an inability to timely implement our previously announced actions to reinvigorate growth, or to realize the economic benefits we anticipate from these actions; failure to realize a significant portion of the anticipated benefits of our strategic relationships with Keurig Green Mountain, Inc. and Monster Beverage Corporation; an inability to renew collective bargaining agreements on satisfactory terms, or we or our bottling partners experience strikes, work stoppages or labor unrest; future impairment charges; multi-employer plan withdrawal liabilities in the future; an inability to successfully integrate and manage our Company-owned or -controlled bottling operations; an inability to successfully manage the possible negative consequences of our productivity initiatives; global or regional catastrophic events; and other risks 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, 2014 and our subsequently filed Quarterly Reports on Form 10-Q, 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 Company undertakes no obligation to publicly update or revise any forward-looking statements.
More on Journey
- View our 2016 Sustainability Report
- Download our 2016 Sustainability Report (PDF)
- Subscribe to The Circular sustainability newsletter
- Video: 2016 Sustainability Highlights
- Ground Zero for What’s New and What’s Next: Why Coke’s Venturing & Emerging Brands Team Keeps Coming Back to Natural Products ExpoWest