Coca-Cola leaders recently took center stage to talk about growth – where it is and where it will be – at the annual Consumer Analyst Group of New York (CAGNY) conference. Last week’s investor forum was held in Boca Raton, Fla. Gary Fayard, Chief Financial Officer, Ahmet Bozer, President Coca-Cola International and Steve Cahillane, President Coca-Cola Americas were on hand to provide an overview of our business and how our Company is investing for the future.
Fayard opened the presentation with a progress report on our 2020 Vision, telling analysts that three years into our journey we’ve exceeded growth targets for global volume, operating income and earnings per share. He pointed out these gains have come despite one of “the most difficult macro-environments in recent history.”
Fayard also noted the strength of the Company’s cash flow, saying the Company has generated over $30B in cash from operations in the past three years.
“That capital is continually re-invested in the business, because reinvesting in our system is what drives sustainable, long-term value creation.”
Fayard called NARTD beverages a “vibrant, high growth industry”, fueled by an emerging global middle class with increasing spending power and an increasing appetite for convenience and packaged goods. He acknowledged continuing economic headwinds in different markets, but said the opportunities for growth at all levels, whether incremental or exponential, remain abundant.
Acknowledging there’s no one-size-fits-all solution to capturing volume, Fayard walked analysts through several recent and pending transactions – our partnership with Coca-Cola FEMSA in the Philippines and the mergers of bottlers in Brazil, Iberia (Spain and Portugal) and Japan – to illustrate how our system steadily evolves to improve our capabilities and create long-term value.
Fayard was followed by Bozer and Cahillane, who provided detailed analysis of their respective groups.
Investing Together for a Better Tomorrow – Coca-Cola International
Bozer reviewed operating highlights in the Europe, Eurasia and Africa, and Pacific groups. He said Europe is positioned to capture profitable growth despite near-term economic headwinds. He described it as the “largest NARTD retail value pool in the world”, a market where we’ve gained share in the last three years, have the top three sparkling brands (Coca-Cola, Coke Light and Fanta), and where we’re still just beginning to build our still beverage portfolio. He said the Company is also well-positioned to see new growth once the region’s economic conditions improve.
Japan, China and India were among the highlights in the Pacific. Bozer spotlighted three years of record sales in Japan for example, where we have the number one share in sparkling, coffee and sports drinks. In China, Sprite is the number one sparkling brand and Coke was recently rated most favorite brand as well. Fanta is also a strong performer, having passed 100 million unit cases.
Bozer said the opening of two new bottling plants in China also “shows the continued belief of our franchise system in the Chinese opportunity.”
For all the strength of Japan and China, India may hold even greater promise.
“The opportunity in India is actually multiplied when compared to China,” Bozer explained, “because existing India per capita consumption is more or less one-third of the existing per capita consumption of China, so we have a much bigger runway to grow there.”
Bozer rounded out his comments with a discussion of Eurasia & Africa, saying the region has seen nine percent volume growth since the beginning of our 2020 Vision and continues to present opportunities over the next eight years as it evolves and urbanizes. He singled out Russia as a particularly bright spot. Brand Coca-Cola grew 20% there last year and is now seeing its highest market share in history. Our Company will further strengthen our position with numerous activations during next year’s Winter Olympic Games in Sochi, Russia.
Investing Together for a Better Tomorrow – Coca-Cola Americas
Steve Cahillane took the podium after Bozer to discuss Coca-Cola Americas. The group, consisting of North America and Latin America, includes 950 million people, representing approximately half of our Company’s volume.
For North America, Cahillane said a “clear and consistent focus” has led to 11 consecutive quarters of growth. He said although North America is a developed market, opportunity still exists thanks to a projected population increase of 30 million people in the U.S. between 2010 and 2020. Their demographics – young and diverse – also favor our business.
He said our Company is confident we can leverage that opportunity thanks to the strength of our brands, particularly Coca-Cola. It’s preferred two times over our primary competitor’s brand, and that preference continues to grow. Beyond Coca-Cola, Cahillane also highlighted the strong performance of our Juice and Juice Drinks and Sports Drinks in North America.
Cahillane told investors our North America business gained both volume and value share in both sparkling and still beverages, as well as across all major still beverage categories in 2012.
“This,” he emphasized, “is what a winning portfolio looks like.”
Cahillane also touched on efforts to accelerate system investments and reiterated our commitment to raising consumer awareness around calorie balance and active, healthy lifestyles.
He rounded out his presentation with a discussion of Latin America, which he said is a source of sustainable growth that continues to offer tremendous opportunities.
“While we have seen strong growth in our two largest markets, Mexico and Brazil, the reality is that every one of our Latin America business units has delivered sustainable and balanced growth over the last three years”.
Cahillane pointed to the success of Del Valle as just one example. It’s become the number one Juice brand in Latin America, while also rising to the number one position in the category in Mexico as well. He also said Powerade continues to see accelerated growth in the market, and is on track to become the Sports Drink category leader in Latin America by 2020.
In closing out the Coca-Cola presentation, Fayard reiterated to the analysts the Company’s faith in its ability to meet its 2020 goals, noting our results tell a story that goes beyond volume gains.
“We continue to take share, and it is not just volume. It is value share. So our focus is on creating long-term value for our shareowners. We think we have been delivering, and we expect to continue delivering that throughout the remainder of our 2020 Vision.”
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