Coca-Cola Company (The)

At this time, I'd like to welcome everyone to the Coca-Cola Company's first quarter 2024 earnings results conference call. Today's call is being recorded. If you have any objections, please disconnect at this time. All participants will be on listen only mode until the formal question and answer portion of the call. I would like to remind everyone that the purpose of this conference is to talk with investors and therefore questions from the media will not be addressed. Media participants should contact Coca-Cola's Media Relations Department if they have any questions. I would now like to introduce Ms. Robin Halpern, Vice President and Head of Investor Relations. Ms. Halpern, you may now begin.

Good morning, and thank you for joining us. I'm here with James Quincy, our Chairman and Chief Executive Officer, and John Murphy, our President and Chief Financial Officer. We've posted schedules under financial information in the investors section of our company website. These reconcile certain non-GAAP financial measures that may be referred to this morning to result as reported under generally accepted accounting principles. You can also find schedules in the same section of our website that provide an analysis of our growth and operating margins. This call may contain forward-looking statements, including statements concerning long-term earnings objectives, which should be considered in conjunction with cautionary statements contained in our earnings release and in the company's periodic SEC report. Following prepared remarks, we will take your questions. Please limit yourself to one question. Re-enter the queue to ask any follow-ups. Now I will turn the call over to James.

Thanks, Robin, and good morning, everyone. We're off to a good start this year as our first quarter results continue the momentum we've been building by executing our all-weather strategy. The operating backdrop differed greatly across our markets once again, but our powerful portfolio, coupled with our system's capabilities, equip us with the agility we need to deliver on our 2024 guidance, which we are updating today. This morning, I'll discuss the drivers in the quarter and how we used our scale and growth mindset to deliver these strong results. Then I'll highlight how we continue to meet consumer needs and grow our total beverage portfolio. Finally, John will discuss our financial results and updated 2024 guidance. In the first quarter, we grew volume and expanded comparable margins, and we continued to invest across the business. We're managing currency fluctuations to deliver earnings growth, as shown by the 7% comparable earnings per share growth despite 9% currency headwinds. And we gained value share in both at-home and away-from-home channels. Across the world, we're continuing to win in the market by leveraging our scale and relying on our local expertise of our bottling partners. In Asia Pacific, momentum continued across a large portion of our business, including Japan and South Korea, Philippines, and Thailand. We gained traction in Indonesia with a return to volume growth. India's momentum was impacted by some temporary factors but recovered at the end of March. In China, retail sales growth continues to improve, but consumer confidence is still below 2019 levels. We remain optimistic about the many opportunities ahead of us, and we're stepping up our execution in a number of ways. For example, greater focus on our core business through a more segmented market approach and more surgical horizontal market execution. In EMEA, we're seeing gradual improvement in macro trends in Europe, leading to improved consumer confidence. We paired Sprite with spicy meal occasions to drive momentum in away-from-home channels. Fused tea and Powerade also generated strong performance, and Jack Daniels and Coca-Cola expanded to six more European markets during the quarter. Africa saw continued volume momentum from last quarter while navigating a number of markets with significant currency devaluations. Geopolitical and economic challenges in Eurasia and the Middle East continue to affect our business in the region. We're working closely with local partners to manage these challenging dynamics, and we're committed to investing behind the strength of our brands for the long term. North America volume had a slow start to the quarter before posting sequential improvement in each of the last two months of the quarter, and elasticities remained favorable, leading to ongoing share gains. The launch of Coke Spiced featured compelling in-store displays, Across our sparkling soft drink brands, zero sugar performance was strong, and we introduced 12-ounce slim cans to further drive premiumization. Value-added dairy growth continued across Fairlife and Core Power. In sports drinks, notwithstanding the non-cash impairment charge that John will speak to in more detail, we believe our two-brand strategy with Powerade and Body Armor is gaining traction, and we've seen improved share trends. While we still have work to do, stepped up execution by our dedicated sales force, driving improved on-shelf execution, and we're encouraged by the continued growth in sports water and the more recent body armor innovations, including zero sugar and flash IV. While inflation has moderated and wages continue to trend upward in North America, we're closely monitoring consumer sentiment and traffic trends between at-home and away-from-home consumptions. In Latin America, volume momentum continued. Performance was driven by strength in Mexico, Brazil, and Colombia, while Argentina continued to experience highly inflationary conditions. We have quality leadership across our portfolio in Latin America, with Coca-Cola Zero Sugar continuing its strong performance. Sparkling flavors, sports, juices, and alcohol ready to drink also performed well during the quarter. Commercial initiatives are driving improved shelf space and basket incidents, supported by ongoing outlet digitization. We have suggested order capabilities in digital platforms that reach more than 3 million customers in the region. Across developed markets, the overall inflationary environment is normalizing. However, across developing emerging markets, there continues to be a handful of markets that are experiencing intense inflation, which is driving elevated pricing offset by incremental currency headwinds. We're proactively managing these volatile environments, and we feel confident we have the playbook to navigate challenges locally while continuing our momentum at a consolidated level. We're continuing to spin our strategic flywheel faster across total beverage portfolio. As discussed at Cagney, we're building love brands and innovating and delivering bigger, bolder bets. In the first quarter, we launched K-Wave as part of the Coke Creations platform in markets across five operating units. K-Wave celebrates Korean pop or K-pop fans. It includes a global collaboration with three K-pop groups and an AI-based fan experience. Our growing number of Coke Creations are different with each iteration and by design are only available for a limited time. This generates buzz and excitement, building relevance for the brand and reconsideration for Coke with Gen Z drinkers. We also know that sometimes the most successful, lasting innovation is simply improving the taste of existing drinks. Using our deep in-house flavor expertise and understanding of the science of taste, we have worked to refine the recipes for Fanta and Sprite to meet consumer preferences across many markets. These changes bring new consumers to our brands. as well as remind current consumers what drew them to their favorite beverages in the first place. The strong phantom performance in markets from Brazil to Germany to the U.S. this quarter is largely due to this type of innovation, which was supported by marketing messages focused on taste and on tying the brand to snacking occasions and local festivals like Carnival in Brazil. Elsewhere in our total beverage portfolio, Minute Maid Zero Sugar kicked off its global campaign in North America, leveraging influencers, social media, and connected commerce activations with key customers. We're building on our innovations by driving awareness and excitement through an increasingly digital marketing media mix. Our total beverage portfolio plays a lead role, as shown by the New Guy campaign in the U.S. this quarter, which featured multiple brands across categories. Innovation is woven into the fabric of our culture, and we're encouraged by our innovation pipeline as we look forward to the rest of 2024. Moving across the flywheel, we're leaning into integrated execution to drive basket incidents and create incremental value for customers. We work closely with our bottling partners and went bigger with in-store displays to inspire transactions around key events like NCAA March Madness in the US, and we'll do this again later this summer with the Olympic and Paralympic Games. As a system, to improve quality availability, we increased outlets by 2%, added more than 600,000 cooler doors, and increased our share of cold space and overall shelf space in stores. We've benefited from global scale while maintaining local relevance by tying our brands to regional meals occasions. For example, in Japan, we've associated Coke with Wagyu and Yakiniku through the path to purchase, using end-to-end consumer messaging and partnering with key customers in the modern trade and convenience retail. We have seen strong Coca-Cola revenue growth in Japan. While we continue to grow our business, we also strive to positively impact the communities we serve. We do this by focusing on the issues that matter most to our system, and we share our status and learnings each year when we publish our business and sustainability report. Putting it all together, it's early in the year, but we're off to a good start. We have confidence we will achieve our guidance for the year. With that, I'll turn the call over to John.