Coca‑Cola Reports Second Quarter 2023 Results and Raises Full-Year Guidance

07-25-2023

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

ATLANTA, July 26, 2023 – 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.”       

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

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

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

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.

Forward-Looking Statements

This press release 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 The Coca‑Cola Company’s actual results to differ materially from its historical experience and our present expectations or projections. These risks include, but are not limited to, unfavorable economic and geopolitical conditions, including the direct or indirect negative impacts of the conflict between Russia and Ukraine; increased competition; an inability to be successful in our innovation activities; changes in the retail landscape or the loss of key retail or foodservice customers; an inability to expand our business in emerging and developing markets; an inability to successfully manage the potential negative consequences of our productivity initiatives; an inability to attract or retain a highly skilled and diverse workforce; disruption of our supply chain, including increased commodity, raw material, packaging, energy, transportation and other input costs; the negative impacts of, and continuing uncertainties associated with the scope, severity and duration of the global COVID-19 pandemic and the substance and pace of the post-pandemic economic recovery; an inability to successfully integrate and manage our acquired businesses, brands or bottling operations or an inability to realize a significant portion of the anticipated benefits of our joint ventures or strategic relationships; failure by our third-party service providers and business partners to satisfactorily fulfill their commitments and responsibilities; an inability to renew collective bargaining agreements on satisfactory terms, or we or our bottling partners experience strikes, work stoppages, labor shortages or labor unrest; obesity and other health-related concerns; evolving consumer product and shopping preferences; 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; failure to digitalize the Coca‑Cola system; damage to our brand image, corporate reputation and social license to operate from negative publicity, whether or not warranted, concerning product safety or quality, workplace and human rights, obesity or other issues; an inability to successfully manage new product launches; an inability to maintain good relationships with our bottling partners; deterioration in our bottling partners’ financial condition; an inability to successfully manage our refranchising activities; increases in income tax rates, changes in income tax laws or the unfavorable resolution of tax matters, including the outcome of our ongoing tax dispute or any related disputes with the U.S. Internal Revenue Service (“IRS”); the possibility that the assumptions used to calculate our estimated aggregate incremental tax and interest liability related to the potential unfavorable outcome of the ongoing tax dispute with the IRS could significantly change; increased or new indirect taxes; changes in laws and regulations relating to beverage containers and packaging; significant additional labeling or warning requirements or limitations on the marketing or sale of our products; litigation or legal proceedings; conducting business in markets with high-risk legal compliance environments; failure to adequately protect, or disputes relating to, trademarks, formulas and other intellectual property rights; changes in, or failure to comply with, the laws and regulations applicable to our products or our business operations; fluctuations in foreign currency exchange rates; interest rate increases; an inability to achieve our overall long-term growth objectives; default by or failure of one or more of our counterparty financial institutions; impairment charges; an inability to protect our information systems against service interruption, misappropriation of data or cybersecurity incidents; failure to comply with privacy and data protection laws; failure to achieve our sustainability goals and targets or accurately report our progress due to operational, financial, legal and other risks, many of which are outside our control and are dependent on the actions of our bottling partners and other third parties; increasing concerns about the environmental impact of plastic bottles and other packaging materials; water scarcity and poor quality; increased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence; climate change and legal or regulatory responses thereto; adverse weather conditions; and other risks discussed in our filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the year ended December 31, 2022, 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. We undertake no obligation to publicly update or revise any forward-looking statements.

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