Global Unit Case Volume Grew 3%
Net Revenues Grew 5%; Organic Revenues
(Non-GAAP) Grew 12%
Operating Income Declined 1%; Comparable
Currency Neutral Operating Income (Non-GAAP) Grew 15%
Operating Margin Was 30.7% Versus 32.5% in the
Prior Year; Comparable Operating Margin (Non-GAAP) Was 31.8% Versus
31.4% in the Prior Year
EPS Grew 12% to $0.72; Comparable EPS
(Non-GAAP) Grew 5% to $0.68
The Coca-Cola Company today reported first quarter 2023 results,
demonstrating resilience in the marketplace despite an operating
environment that remains dynamic. “We are encouraged by our first
quarter 2023 results,” said James Quincey, Chairman and CEO of The
Coca-Cola Company. “Our system alignment is stronger than ever, and
our networked organization is allowing us to adapt as needed. We
continue to invest for the long term, strengthening our
capabilities to drive sustainable value for our stakeholders. We
have the right portfolio, the right strategy and the right
execution to deliver in the marketplace. We are confident in our
ability to deliver on our 2023 objectives.”
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Highlights
Quarterly Performance
- Revenues: Net revenues grew 5% to $11.0 billion, and
organic revenues (non-GAAP) grew 12%. Revenue performance included
11% growth in price/mix and 1% growth in concentrate sales.
Concentrate sales were 2 points behind unit case volume, largely
due to the timing of concentrate shipments and the impact of one
less day in the quarter.
- Operating margin: Operating margin was 30.7% versus
32.5% in the prior year, while comparable operating margin
(non-GAAP) was 31.8% versus 31.4% 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 12% to $0.72, and
comparable EPS (non-GAAP) grew 5% to $0.68. Comparable EPS
(non-GAAP) performance included the impact of a 7-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 $160 million, a
decline of approximately $460 million versus the prior year,
largely due to the timing of working capital initiatives and
payments related to acquisitions and divestitures. Free cash flow
(non-GAAP) declined approximately $520 million versus the prior
year, resulting in negative free cash flow of approximately $120
million.
Company Updates
- Growing loved brands through consumer-centric innovation and
occasion-based marketing: smartwater®, a billion-dollar brand
that is available in 28 markets, grew volume 8% in the first
quarter. The company continues to innovate with the brand, recently
launching smartwater alkaline with antioxidant to offer premium
hydration for consumers with active lifestyles. The innovation
features a higher pH level, the antioxidant selenium and a unique
electrolyte blend for a crisp, pure taste. The launch was supported
by the “Elevate How You Hydrate” marketing campaign, which was
promoted through digital platforms such as Spotify, Meta and
TikTok, as well as through partnerships with comedian Pete
Davidson, Peloton instructor Alex Toussaint and others. The
campaign used geolocation apps to drive incremental occasions with
on-the-go consumers and segmented experiential sampling in gyms and
fitness centers in select U.S. cities.
- Driving value through continued excellence in integrated
execution in India: The company, in close alignment with its
bottling partners, continues to raise the bar in India in
integrated execution to deliver value for its customers and
consumers. The company grew its business in the first quarter in
India by adding retailers, investing in cold-drink equipment and
offering the right products at the right price points to recruit
consumers. During the first quarter, the company and its bottling
partners increased availability by more than 300,000 stores and
approximately 40,000 coolers ahead of the summer season and drove
approximately 3 billion transactions at affordable price points
through single-serve packages and at-home entry packs. The company
also increased household penetration via targeted promotions on
large packages for the at-home channel. This integrated execution
yielded strong results, as the company grew revenue ahead of
transactions and grew transactions ahead of volume, while also
growing value share in the sparkling soft drinks and juice
categories.
- Collaborating with cutting-edge technology platforms to
experiment, learn and drive results: The company is adopting
emerging technologies to drive new approaches, more experimentation
and improved speed to market. Coca-Cola is the first company to
collaborate with OpenAI and Bain & Company to harness the power
of ChatGPT and DALL-E to enhance marketing capabilities and
business operations and to build capabilities through cutting-edge
artificial intelligence (AI). Within one month of announcing this
collaboration, the company launched the “Create Real Magic”
platform, which allowed consumers to become digital marketeers by
leveraging AI to generate original artwork with iconic creative
assets from the Coca-Cola archives. The company is also exploring
ways to leverage AI to improve customer service and ordering as
well as point-of-sale material creation in collaboration with its
bottling partners.
- Laying out a roadmap to 2030 Water Security Strategy and
driving collective action: Water is a priority for the company
because it is essential for beverages and the communities the
company serves. Sustainable access to water is critical for the
company’s success and the resilience of its agricultural supply
chain. During the UN 2023 Water Conference in March, the company
announced three goals to accelerate action by investing more in its
Leadership Locations, which are basins designated based on needs
for the company, its supply chain and impacted communities. In
addition, the company is working with other partners and
stakeholders to improve watershed health and communities’ access to
clean water and sanitation as part of the Business Leaders’ Open
Call to Accelerate Action on Water – a partnership to achieve
collective positive water impact in at least 100 vulnerable water
basins by 2030.
Operating Review – Three
Months Ended March 31, 2023
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
1
11
(6)
(1)
5
12
3
Europe, Middle East & Africa
2
22
(13)
0
10
23
(3)
Latin America
1
18
(5)
0
14
19
5
North America
(2)
11
0
0
9
9
0
Asia Pacific
(2)
5
(8)
2
(3)
3
10
Global Ventures4
8
(3)
(8)
0
(3)
5
7
Bottling Investments
3
8
(9)
(7)
(5)
11
(1)
Operating Income and
EPS
Percent Change
Reported Operating Income
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral
Operating Income2
Consolidated
(1)
(7)
(9)
15
Europe, Middle East & Africa
13
1
(17)
28
Latin America
12
2
(8)
18
North America
(2)
(23)
0
21
Asia Pacific
(15)
1
(9)
(7)
Global Ventures
1
(5)
(1)
8
Bottling Investments
(28)
1
(7)
(23)
Percent Change
Reported EPS
Items Impacting Comparability
Currency Impact
Comparable Currency Neutral
EPS2
Consolidated
12
7
(7)
13
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 3%. Volume performance was driven by
strength in away-from-home channels and continued 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 Mexico, Western Europe and Australia,
while growth in developing and emerging markets was led by China,
India and Brazil. Developing and emerging markets growth was
impacted by the suspension of business in Russia.
Unit case volume performance included the following:
- Sparkling soft drinks grew 3%, led by strong performance in
Asia Pacific and Latin America, partially offset by the suspension
of business in Russia. Trademark Coca-Cola grew 3%, driven by
growth across all geographic operating segments. Coca-Cola® Zero
Sugar grew 8%, reflecting strong growth across all geographic
operating segments. Sparkling flavors grew 3%, driven by Asia
Pacific, Latin America and North America, partially offset by
Europe, Middle East & Africa.
- Juice, value-added dairy and plant-based beverages were even,
as strong growth in fairlife® in the United States, Minute Maid®
Pulpy in China and Maaza® in India was offset by the suspension of
business in Russia.
- Water, sports, coffee and tea grew 4%. Water grew 5%, led by
strong growth in Asia Pacific and Latin America. Sports drinks
declined 1%, primarily driven by BODYARMOR® and Powerade® in the
United States. Tea declined 3%, primarily due to doğadan® which was
impacted by an earthquake in Türkiye in February. Coffee grew 9%,
primarily driven by the strong performance of Costa® coffee in the
United Kingdom and China.
- Price/mix grew 11%, driven by pricing actions in the
marketplace and favorable channel and package mix. Concentrate
sales were 2 points behind unit case volume, largely due to the
timing of concentrate shipments as well as the impact of one less
day in the quarter.
- Operating income declined 1%, which included items impacting
comparability and an 8-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 versus the prior year.
Europe, Middle East &
Africa
- Unit case volume declined 3%, as strong growth in Western
Europe, Pakistan and South Africa was more than offset by the
suspension of business in Russia and the impact of the earthquake
in Türkiye in February.
- Price/mix grew 22%, driven by pricing actions across operating
units along with inflationary pricing in Türkiye. Concentrate sales
were 5 points ahead of unit case volume, largely due to the timing
of concentrate shipments.
- Operating income grew 13%, which included items impacting
comparability and a 16-point currency headwind. Comparable currency
neutral operating income (non-GAAP) grew 28%, as strong organic
revenue (non-GAAP) growth across all operating units was partially
offset by an increase in marketing investments and higher operating
costs versus the prior year.
- The company gained value share in total NARTD beverages, led by
share gains in France, Italy and Poland.
Latin America
- Unit case volume grew 5%, with strong growth across all
categories. Growth was led by Mexico and Brazil.
- Price/mix grew 18%, 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
behind unit case volume, primarily due to the timing of concentrate
shipments as well as the impact of one less day in the
quarter.
- Operating income grew 12%, which included a 6-point currency
headwind and items impacting comparability. Comparable currency
neutral operating income (non-GAAP) grew 18%, primarily driven by
strong organic revenue (non-GAAP) growth, partially offset by an
increase in marketing investments and higher operating costs versus
the prior year.
- The company lost value share in total NARTD beverages, as share
gains in Brazil, Argentina and Colombia were more than offset by
pressure in Mexico.
North America
- Unit case volume was even, as growth in sparkling soft drinks
and juice, value-added dairy and plant-based beverages was offset
by a decline in water, sports, coffee and tea.
- Price/mix grew 11%, 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 as well as the impact of
one less day in the quarter.
- Operating income declined 2%, which included items impacting
comparability. Comparable currency neutral operating income
(non-GAAP) grew 21%, driven by strong organic revenue (non-GAAP)
growth, partially offset by an increase in marketing investments
and higher operating costs versus the prior year.
- 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 10%, driven by strong growth across most
categories. Growth was led by China, India and Australia.
- Price/mix grew 5%, primarily driven by pricing actions in the
marketplace, partially offset by negative geographic mix.
Concentrate sales were 12 points behind unit case volume, primarily
due to cycling the timing of concentrate shipments in the prior
year.
- Operating income declined 15%, which included items impacting
comparability and an 8-point currency headwind. Comparable currency
neutral operating income (non-GAAP) declined 7%, primarily driven
by higher operating costs versus the prior year.
- The company gained value share in total NARTD beverages, led by
share gains in Japan, India, Australia and Vietnam.
Global Ventures
- Net revenues declined 3%, and organic revenues (non-GAAP) grew
5%. Net revenues included an 8-point currency headwind. Revenue
performance benefited from the strong performance of Costa coffee
in the United Kingdom and China.
- Operating income grew 1%, which included items impacting
comparability and a 1-point currency headwind. Comparable currency
neutral operating income (non-GAAP) grew 8%, driven by solid
organic revenue (non-GAAP) growth as well as a decrease in
marketing investments and lower operating costs versus the prior
year.
Bottling Investments
- Unit case volume declined 1%, primarily driven by the impact of
refranchising bottling operations, partially offset by strong
growth in India.
- Price/mix grew 8%, driven by pricing actions across most
markets.
- Operating income declined 28%, which included items impacting
comparability and a 7-point currency headwind. Comparable currency
neutral operating income (non-GAAP) declined 23%, as organic
revenue (non-GAAP) growth was more than offset by higher operating
costs.
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 7% to 8%. – No Change
For comparable net revenues (non-GAAP), the company expects a 2%
to 3% 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. –
No Change
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 19.5%. This does not include the impact of ongoing
tax litigation with the IRS, if the company were not to prevail. –
No Change
Given the above considerations, the company expects to deliver
comparable currency neutral EPS (non-GAAP) growth of 7% to 9% and
comparable EPS (non-GAAP) growth of 4% to 5%, versus $2.48 in 2022.
– No Change
Comparable EPS (non-GAAP) percentage growth is expected to
include a 3% to 4% 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. –
No Change
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
Second Quarter 2023
Considerations – New
Comparable net revenues (non-GAAP) are expected to include 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.
Comparable EPS (non-GAAP) percentage growth is expected to
include a 2% to 3% currency headwind based on the current rates and
including the impact of hedged positions.
Notes
- All references to growth rate percentages, share and stores
added 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 first quarter 2023 operating results today,
April 24, 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230424005250/en/
Investors and Analysts: Robin
Halpern, koinvestorrelations@coca-cola.com Media: Scott Leith, sleith@coca-cola.com
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