Global Unit Case Volume Grew 4%
Net Revenues Grew 10%; Organic Revenues
(Non-GAAP) Grew 16%
Operating Income Grew 7%; Comparable Currency
Neutral Operating Income (Non-GAAP) Grew 18%
Operating Margin Was 27.9% Versus 28.9% in the
Prior Year; Comparable Operating Margin (Non-GAAP) Was 29.5% Versus
30.0% in the Prior Year
EPS Grew 14% to $0.65; Comparable EPS
(Non-GAAP) Grew 7% to $0.69
The Coca-Cola Company today reported strong third quarter 2022
results as the company continued to build on the momentum from the
first half of the year. “Our strong capabilities and consumer
insights continue to help us win in the marketplace,” said James
Quincey, Chairman and CEO of The Coca-Cola Company. “Our business
is resilient amidst a dynamic operating and macroeconomic
environment. We are investing in our strong portfolio of brands,
which is a cornerstone of our ability to deliver long-term value
for our stakeholders.”
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20221025005338/en/
Highlights
Quarterly Performance
- Revenues: Net revenues grew 10% to $11.1 billion, and
organic revenues (non-GAAP) grew 16%. Organic revenue (non-GAAP)
performance was strong across operating segments and included 12%
growth in price/mix and 4% growth in concentrate sales.
- Margin: Operating margin, which included items impacting
comparability, was 27.9% versus 28.9% in the prior year, while
comparable operating margin (non-GAAP) was 29.5% versus 30.0% in
the prior year. Comparable operating margin (non-GAAP) compressed
as strong topline growth was more than offset by the impact of the
BODYARMOR acquisition, higher operating costs, an increase in
marketing investments versus the prior year, and currency
headwinds.
- Earnings per share: EPS grew 14% to $0.65, and
comparable EPS (non-GAAP) grew 7% to $0.69. Comparable EPS
(non-GAAP) performance included the impact of an 11-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 $8.1 billion
year-to-date, a decline of $1.2 billion versus the prior year, as
strong business performance was more than offset by the impact of
cycling the timing of working capital benefits in the prior year
and higher 2021 annual incentives in the current year. Free cash
flow (non-GAAP) was $7.3 billion, a decline of $1.2 billion versus
the prior year.
Company Updates
- Leveraging strong revenue growth management capabilities to
meet consumer needs: In an environment where consumer
preferences are rapidly evolving, the company is focused on
expanding its offerings to fit all consumers’ budgets. The
Coca-Cola Value Bundle, which was launched in North America during
the third quarter, is an example of how the company is offering
more choices to cost-conscious consumers. The bundle features an
assortment of core sparkling brands at relevant and competitive
price points. By utilizing end-to-end messaging across platforms,
these offerings are retaining and recruiting more consumers while
creating value for our customers. Additionally, the company is
balancing the mix between affordability and premiumization, while
driving pricing actions in the marketplace in response to ongoing
cost inflation. For example, in Australia the company achieved low
double-digit retail value growth in the sparkling category and
gained approximately 1.5 points of sparkling value share through
intelligent segmented pricing, increased premium mix through
multi-packs of mini cans, and optimized promotional initiatives for
at-home occasions.
- Turning insights into global brand experiences: The
company continues to engage and attract consumers through globally
scaled marketing campaigns driven by consumer insights. The “What
the Fanta” marketing and innovation platform is an example of how
the company is executing with its global networked marketing
partner to identify and scale what resonates with consumers, from
taste to brand experiences. Now launched in over 30 markets
globally, the experience-driven platform is designed to spark
adventure and intrigue through bold innovative flavors complemented
by social media campaigns and multi-channel activations. With a
uniform marketing platform and a streamlined offering of flavors
that resonate with local tastes, “What the Fanta” is driving
increased profitability in sparkling flavors and is recruiting more
consumers, as approximately 40% of consumers in Europe who
purchased “What the Fanta” beverages in 2022 were new to the Fanta®
brand.
- Strategically expanding in emerging categories: Since
entering into the ready-to-drink (RTD) alcohol beverages category
in 2018 with Lemon-Dou in Japan, the company has continued its
test-and-learn approach with disciplined experiments around alcohol
occasions globally. The company is leveraging brands with strong
credentials, such as Topo Chico®, while adding to the existing
portfolio of Schweppes® premium adult cocktail mixers and tonics.
This year, Simply Spiked Lemonade™ and Fresca™ Mixed were
introduced in the United States through brand authorization
agreements with Molson Coors Beverage Company and Constellation
Brands, Inc., respectively, and both offerings are seeing
encouraging early results. These initiatives support the company’s
disciplined approach on its journey to become a total beverage
company with beverage options for all occasions and need
states.
- Increasing water security through collaboration and
collective action: The company continues to focus on
collaborating with businesses and nongovernmental organizations to
create a more sustainable and better shared future. During the
quarter, at World Water Week 2022, the company focused on how
corporate water stewardship can drive collective action to help
address water challenges. Over the past two years, the company has
stepped up investments in nature-based water solutions as an
important part of its 2030 Water Security Strategy. These
solutions, which include meadow and forest restorations, invasive
species removal and floodplain management, can provide a wide range
of benefits, including better water quality, carbon sequestration
and enhanced biodiversity.
Operating Review – Three
Months Ended September 30, 2022
Revenues
and Volume
Percent Change
Concentrate Sales1
Price/Mix
Currency Impact
Acquisitions, Divestitures and
Structural Changes, Net
Reported Net Revenues
Organic Revenues2
Unit Case Volume3
Consolidated
4
12
(8)
2
10
16
4
Europe, Middle East & Africa
1
19
(16)
0
4
20
(1)
Latin America
6
12
(6)
0
12
18
5
North America
(1)
15
0
6
21
14
1
Asia Pacific
9
4
(10)
0
4
14
9
Global Ventures4
17
(12)
(15)
0
(10)
5
8
Bottling Investments
16
3
(12)
0
7
19
16
Operating Income and EPS
Percent Change
Reported Operating Income
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral2
Consolidated
7
(2)
(10)
18
Europe, Middle East & Africa
2
1
(18)
19
Latin America
0
0
(7)
7
North America
25
5
0
20
Asia Pacific
(1)
(8)
(12)
19
Global Ventures
(41)
1
(5)
(37)
Bottling Investments
(43)
(20)
(7)
(16)
Percent Change
Reported EPS
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral2
Consolidated EPS
14
8
(11)
18
Note: Certain rows may not add due to
rounding.
1 For Bottling Investments, 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.
2 Organic revenues, comparable currency
neutral operating income and comparable currency neutral EPS are
non-GAAP financial measures. Refer to the Reconciliation of GAAP
and Non-GAAP Financial Measures section.
3 Unit case volume is computed based on
average daily sales.
4 Due to the combination of multiple
business models in the Global Ventures operating segment, the
composition of concentrate sales and price/mix may fluctuate
materially from period to period. Therefore, the company places
greater focus on revenue growth as the best indicator of underlying
performance of the Global Ventures operating segment.
In addition to the data in the preceding tables, operating
results included the following:
Consolidated
- Unit case volume grew 4%, with broad-based growth across most
operating segments. Volume performance was driven by strength in
away-from-home channels and ongoing investments in the marketplace.
Developed markets grew mid single digits, while developing and
emerging markets grew low single digits. Growth in developed
markets was led by Western Europe, Mexico and the United States,
while growth in developing and emerging markets was led by India,
China and Brazil.
Category performance was as follows:
- Sparkling soft drinks grew 3%, driven by growth across all
geographic operating segments, primarily led by India, Mexico and
China. Trademark Coca-Cola grew 3%, driven by growth across all
geographic operating segments. Coca-Cola® Zero Sugar grew 11%,
driven by low double-digit growth across developed markets and high
single-digit growth across developing and emerging markets.
Sparkling flavors grew 3%, led by Asia Pacific and Latin
America.
- Nutrition, juice, dairy and plant-based beverages were even, as
growth led by Minute Maid Pulpy in China, Maaza® in India and
fairlife® in the United States was offset by declines primarily in
local brands in Eastern Europe.
- Hydration, sports, coffee and tea grew 5%. Hydration grew 6%,
led by strong growth in Asia Pacific and Latin America. Sports
drinks grew 6%, primarily driven by growth of Aquarius®, BODYARMOR®
and Powerade®. Coffee grew 5%, primarily driven by cycling the
impact of pandemic-related Costa® retail store closures in the
United Kingdom in the prior year and continued expansion of Costa®
coffee across markets. Tea was even, as strong growth in Brazil and
Mexico was offset by a decline due to the suspension of business in
Russia.
- Price/mix grew 12%, driven by pricing actions in the
marketplace across operating segments along with favorable channel
and package mix primarily due to cycling the impact of the pandemic
in the prior year. Price/mix also benefited from positive segment
mix.
- Operating income grew 7%, which included items impacting
comparability and a 10-point currency headwind. Comparable currency
neutral operating income (non-GAAP) grew 18%, driven by strong
organic revenue (non-GAAP) growth across all operating segments,
partially offset by higher operating costs and an increase in
marketing investments versus the prior year.
Europe, Middle East &
Africa
- Unit case volume declined 1%, as strong growth in Spain,
Germany and France was more than offset by a decline due to the
suspension of business in Russia.
- Price/mix grew 19%, driven by pricing actions across operating
units along with favorable channel and package mix due to cycling
the impact of the pandemic in the prior year, in addition to
inflationary pricing in Turkey. Concentrate sales were 2 points
ahead of unit case volume, largely due to the timing of concentrate
shipments.
- Operating income grew 2%, which included items impacting
comparability and an 18-point currency headwind. Comparable
currency neutral operating income (non-GAAP) grew 19%, primarily
driven by strong organic revenue (non-GAAP) growth across all
operating units, partially offset by higher operating costs and an
increase in marketing investments versus the prior year.
- The company gained value share in total NARTD beverages with
share gains across all categories.
Latin America
- Unit case volume grew 5%, with strong growth across nearly all
categories. Growth was led by Mexico, Brazil and Argentina.
- Price/mix grew 12%, driven by pricing actions in the
marketplace and favorable channel and package mix, in addition to
inflationary pricing in Argentina. Concentrate sales were 1 point
ahead of unit case volume due to the timing of concentrate
shipments. Year-to-date concentrate sales were 1 point behind unit
case volume, primarily driven by the impact of one less day in the
first quarter of this year.
- Operating income was even, which included a 7-point currency
headwind. Comparable currency neutral operating income (non-GAAP)
grew 7%, primarily driven by strong organic revenue (non-GAAP)
growth, partially offset by higher operating costs and an increase
in marketing investments versus the prior year.
- The company lost value share in total NARTD beverages, as share
gains in juice and juice drinks as well as tea were more than
offset by pressure in sparkling soft drinks and other
categories.
North America
- Unit case volume grew 1%, driven by continued recovery in
away-from-home channels. Sparkling soft drinks and dairy beverages
led growth during the quarter.
- Price/mix grew 15%, primarily driven by pricing actions in the
marketplace and continued recovery in the fountain business.
Concentrate sales were 2 points behind unit case volume, primarily
due to the timing of concentrate shipments.
- Operating income grew 25%, which included items impacting
comparability. Comparable currency neutral operating income
(non-GAAP) grew 20%, driven by strong organic revenue (non-GAAP)
growth, partially offset by higher operating costs and an increase
in marketing investments versus the prior year.
- The company gained value share in total NARTD beverages, driven
by strong performance in away-from-home channels.
Asia Pacific
- Unit case volume grew 9%, driven by strong growth in India and
China. Growth was led by sparkling soft drinks and hydration.
- Price/mix grew 4%, primarily driven by pricing actions in the
marketplace and favorable channel and package mix, partially offset
by negative geographic mix within the segment.
- Operating income declined 1%, which included items impacting
comparability and a 9-point currency headwind. Comparable currency
neutral operating income (non-GAAP) grew 19%, primarily driven by
organic revenue (non-GAAP) growth across all operating units,
partially offset by higher operating costs and an increase in
marketing investments versus the prior year.
- The company gained value share in total NARTD beverages led by
share gains in Australia, Japan and South Korea.
Global Ventures
- Net revenues declined 10%, and organic revenues (non-GAAP) grew
5%. Net revenues included a 15-point currency headwind. Revenue
performance benefited from cycling the impact of pandemic-related
Costa retail store closures in the United Kingdom in the prior
year.
- Operating income and comparable currency neutral operating
income (non-GAAP) both declined, as solid organic revenue
(non-GAAP) growth was more than offset by higher operating
costs.
Bottling Investments
- Unit case volume grew 16%, driven by strength in India and
Vietnam.
- Price/mix grew 3%, driven by pricing actions across most
markets.
- Operating income declined 43%, which included items impacting
comparability and a 5-point headwind from currency. Comparable
currency neutral operating income (non-GAAP) declined 16%, as
strong organic revenue (non-GAAP) growth was more than offset by
higher operating costs.
Operating Review – Nine Months
Ended September 30, 2022
Revenues
and Volume
Percent Change
Concentrate Sales1
Price/Mix
Currency Impact
Acquisitions, Divestitures and
Structural Changes, Net
Reported Net Revenues
Organic Revenues2
Unit Case Volume3
Consolidated
6
10
(6)
2
13
16
6
Europe, Middle East & Africa
5
16
(13)
0
8
21
5
Latin America
7
14
(4)
0
16
21
8
North America
2
12
0
7
21
14
2
Asia Pacific
8
3
(8)
0
3
11
8
Global Ventures4
16
(2)
(11)
0
4
15
15
Bottling Investments
16
4
(8)
0
12
20
16
Operating Income and EPS
Percent Change
Reported Operating Income
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral2
Consolidated
2
(9)
(8)
19
Europe, Middle East & Africa
12
3
(15)
24
Latin America
10
1
(5)
15
North America
14
(5)
0
19
Asia Pacific
(2)
(2)
(8)
8
Global Ventures
(25)
4
(3)
(26)
Bottling Investments
12
(19)
(10)
41
Percent Change
Reported EPS
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral2
Consolidated EPS
2
(7)
(9)
18
Note: Certain rows may not add due to
rounding.
1 For Bottling Investments, 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.
2 Organic revenues, comparable currency
neutral operating income and comparable currency neutral EPS are
non-GAAP financial measures. Refer to the Reconciliation of GAAP
and Non-GAAP Financial Measures section.
3 Unit case volume is computed based on
average daily sales.
4 Due to the combination of multiple
business models in the Global Ventures operating segment, the
composition of concentrate sales and price/mix may fluctuate
materially from period to period. Therefore, the company places
greater focus on revenue growth as the best indicator of underlying
performance of the Global Ventures operating segment.
Outlook
The 2022 and 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 2022 projected organic revenues (non-GAAP) to full-year
2022 projected reported net revenues, full-year 2022 projected
comparable net revenues (non-GAAP) to full-year 2022 projected
reported net revenues, full-year 2022 projected comparable cost of
goods sold (non-GAAP) to full-year 2022 projected reported cost of
goods sold, full-year 2022 projected underlying effective tax rate
(non-GAAP) to full-year 2022 projected reported effective tax rate,
full-year 2022 projected comparable EPS (non-GAAP) to full-year
2022 projected reported EPS, full-year 2022 projected comparable
currency neutral EPS (non-GAAP) to full-year 2022 projected
reported EPS, full-year 2023 projected comparable net revenues
(non-GAAP) to full-year 2023 projected reported net revenues,
full-year 2023 projected underlying effective tax rate (non-GAAP)
to full-year 2023 projected reported effective tax rate, 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 amount of acquisitions, divestitures and/or
structural changes throughout 2022; the actual impact of changes in
commodity costs throughout 2022; the exact timing and amount of
items impacting comparability throughout 2022 and 2023; and the
actual impact of fluctuations in foreign currency exchange rates
throughout 2022 and 2023. The unavailable information could have a
significant impact on the company’s full-year 2022 and full-year
2023 reported financial results.
Full Year 2022
On March 8, 2022, the company announced the suspension of its
business in Russia as a result of the conflict in Ukraine. The
approximate direct impacts of this are estimated to be as
follows:
- 1% impact to unit case volume – No Change
- 1% impact to net revenues and operating income – Updated
- $0.03 impact to comparable EPS (non-GAAP) – No Change
These estimated impacts are reflected in the outlook commentary
below.
The company expects to deliver organic revenue (non-GAAP) growth
of 14% to 15%. – Updated
For comparable net revenues (non-GAAP), the company expects a 7%
currency headwind based on the current rates and including the
impact of hedged positions, in addition to a 2% tailwind from
acquisitions and divestitures. – Updated
The company expects commodity price inflation to be a high
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 19.0%. This does not include the impact of ongoing
tax litigation with the U.S. Internal Revenue Service, 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 15% to 16% and
comparable EPS (non-GAAP) growth of 6% to 7%, versus $2.32 in 2021.
– Updated
Comparable EPS (non-GAAP) percentage growth is expected to
include a 9% currency headwind based on the current rates and
including the impact of hedged positions, in addition to a 1%
headwind from acquisitions and divestitures. – No Change
The company expects to generate free cash flow (non-GAAP) of
approximately $10.5 billion through cash flow from operations of
approximately $12.0 billion, less capital expenditures of
approximately $1.5 billion. This does not include any potential
payments related to ongoing tax litigation with the U.S. Internal
Revenue Service. – No Change
Fourth Quarter 2022
Considerations – New
Comparable net revenues (non-GAAP) are expected to include an 8%
currency headwind based on the current rates and including the
impact of hedged positions, in addition to a 1% tailwind from
acquisitions.
Comparable EPS (non-GAAP) percentage growth is expected to
include a 9% currency headwind based on the current rates and
including the impact of hedged positions.
Full Year 2023
Considerations – New
The company is providing the following considerations for
2023:
- The company is encouraged by the underlying topline momentum,
and will leverage its capabilities to sustain topline growth amidst
the ongoing inflationary backdrop.
- The company expects global inflation to continue to impact its
expenses across the board, and also expects commodity prices to
remain volatile. The company has benefited from its hedges in 2022
and expects elevated inflation on a per case basis in 2023.
- The company’s underlying effective tax rate (non-GAAP) is
estimated to be 19.5%. This does not include the impact of ongoing
tax litigation with the U.S. Internal Revenue Service, if the
company were not to prevail.
- The company’s initial currency outlook for full-year 2023 is as
follows:
- Comparable net revenues (non-GAAP) are expected to include an
approximate 5% to 6% currency headwind based on the current rates
and including the impact of hedged positions.
- Comparable EPS (non-GAAP) is expected to include an approximate
7% to 8% currency headwind based on the current rates and including
the impact of hedged positions.
- The company will provide full-year 2023 guidance when it
reports fourth quarter earnings.
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 2022 financial results were impacted by one less
day as compared to first quarter 2021, and fourth quarter 2022
financial results will be impacted by one additional day as
compared to fourth quarter 2021. 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 third quarter 2022 operating results today,
Oct. 25, 2022, 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221025005338/en/
Investors and Analysts: Tim
Leveridge, koinvestorrelations@coca-cola.com Media: Scott Leith, sleith@coca-cola.com
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