BOSTON – The Coca-Cola Company’s ongoing transformation is beginning to bear fruit thanks to the acceleration and evolution of strategic actions, including brand reinvestments and new marketing programs, President and Chief Operating Officer James Quincey told analysts this week at the Barclays Global Consumer Staples Conference.

Here are highlights from Quincey’s presentation, which he framed around the company's five strategic priorities announced in late-2014:

Company’s Brands and Assets Provide Strong Foundation

As the market share leader in sparkling, still and total nonalcoholic ready-to-drink (NARTD) beverages, Coca-Cola is well positioned for long-term growth. "We have an unparalleled set of assets from which to build," Quincey said.

The company's dynamic portfolio of 500-plus brands, anchored by 20 billion-dollar brands, comes to life in the marketplace through high-quality marketing and sharp commercial execution in collaboration with more than 250 bottling partners globally.

20 Billion-Dollar Brands

Refranchising Plan On Target

Coca-Cola is on track to refranchise all company-owned bottling operations in its flagship market by the end of 2017. Quincey noted that U.S. distribution territories that have been refranchised 12 months or longer are thriving. “The large majority of these partners have taken these territories to a higher growth level and been able to sustain it,” he said.

2015 Q4 Earnings: North America Refranchising

… and Setting Up the Coca-Cola System for Success

The company continues to invest in key international markets with bottling partners with the goal of returning to its core focus of building brands and leading a focused franchise system. “We believe that what's happening now in this transformation is refocusing each component on the system… on what it does best and how we best create value together,” Quincey said. “The focus on strengthening the system – whether it'd be through refranchising or through working together in new ways with bottlers – is leading to better results.”

Deals to establish Coca-Cola European Partners and Coca-Cola Beverages Africa have closed, Quincey noted, and recent investments made in Indonesia with Coca-Cola Amatil are fueling growth in the once-struggling market. 

'The focus on strengthening the system – whether it'd be through refranchising or through working together in new ways with bottlers – is leading to better results.'

“The company will be, in large measure, the concentrate company we have talked about,” Quincey explained. “As we return to a brand-focused, customer value-driving, franchise-leading company, we will have a more asset-light, higher-margin model.”

He added, “Refranchising is not an end in itself. The end is a stronger system. It's about a better aligned system that is positioned for growth, is organized and energized, and is more efficient.”

'As we return to a brand-focused, customer value-driving, franchise-leading company, we will have a more asset-light, higher-margin model.'

Beverage Industry Will Continue to Grow

Macro trends including globalization, urbanization and a booming middle class point to a promising runway for the NARTD business, Quincey said. And considering Coca-Cola today captures approximately only one-third of the industry’s total revenue, “there's still plenty of market share to continue to go for.”

Growth Strategies Vary by Market

A key pillar of the company’s evolving strategy is a segmented revenue growth approach. In developed markets like the U.S., for example, Coca-Cola is focused on driving value over volume through a strategic pricing architecture, smaller and premium packaging, and more. “These are good from a revenue point of view, but they're also good from the point of view of reducing the number of calories sold,” Quincey said. Mini cans and other smaller packs also help recruit new sparkling consumers, he added.

In emerging markets like India and Indonesia, meanwhile, the company continues to focus on volume. This strategy has led to sustained revenue growth since 2014, despite a slowdown in the global economy. “The pieces are coming together,” Quincey said.

Taste the Feeling

‘One-Brand’ Strategy Showing ‘Green Shoots’…

In the first quarter of 2016, Coke began to roll out a bold new “One Brand” marketing strategy and global “Taste the Feeling” campaign, uniting all four Trademark Coca-Cola brands. And while performance metrics and other measures of success are still rolling in, Quincey said early signs look “very encouraging” in terms of retail sales and brand metrics “especially in those places where we launched first and we launched the fastest and the hardest.”

… and Helping Consumers ‘Shape the Choices They Make’

“Taste the Feeling” is much more than a new ad campaign or visual identity, Quincey insisted. “It’s reshaping our sparkling strategy so we can sustain growth over time,” he explained. “It's about responding to the changes in the consumer landscape and the stakeholder landscape.”

And, if successful, the strategy will be a win-win.

“If we can get revenue to grow faster than transactions, to grow faster than volumes… things will work out well from the consumer point of view in all dimensions and also from an economic point of view for the company,” Quincey said.

Ades Soy Beverages

Innovation Powering Coke’s Stills Business

Despite being the global market share leader in juice and juice drinks and ready-to-drink coffee, and a strong No. 2 in energy drinks, water, sports drinks, ready-to-drink tea and more, Coke only accounts for roughly 15 percent of the fragmented still beverage category’s total value. The company is steadily gaining share, Quincey said, by launching and building successful local brands – such as Simply Orange and Gold Peak in the U.S. and Georgia Coffee in Japan – and making strategic bolt-on acquisitions, including the recent purchase of AdeS soy beverages in Latin America.

'If we build them steadily – the combination of local, bolt-on and the global expansions – we can build profitable positions in each of these stills categories and continue the ongoing share gains.'

The company also is keeping a close eye on global trends and, when appropriate, scaling local brands internationally, Quincey said, citing the recent launch of Honest Tea in the UK, expansion of Innocent across Western Europe, and expansion of Del Valle across Latin America.

In 2015, still beverages accounted for 36 percent of the company’s total volume in the U.S. – up from 16 percent in 2000.

“So we have added 20 percent of the mix of the North American business, a little over a point a year,” Quincey said. “That's also more or less true globally. Those small amounts each year over time add up to a great deal of value creation.”

He concluded, “If we build them steadily – the combination of local, bolt-on and the global expansions – we can build profitable positions in each of these stills categories and continue the ongoing share gains.”

Read a full transcript of Quincey’s remarks along with playback and slides.



This article includes certain "non-GAAP financial measures" as defined under U.S. federal securities laws. Click here for a Reconciliation of GAAP and Non-GAAP Financial Measures Schedule.

Forward-Looking Statements

This article 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 Coca-Cola 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; an inability to be successful in our innovation activities; 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 one or more 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 marketing or sale 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; failure to adequately protect, or disputes relating to, trademarks, formulae and other intellectual property rights; 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 relationship with 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 our refranchising activities; an inability to successfully manage the possible negative consequences of our productivity initiatives; an inability to attract or retain a highly skilled workforce; 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, 2015 and our subsequently filed Quarterly Report 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 Coca-Cola Company undertakes no obligation to publicly update or revise any forward-looking statements.

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