Coca-Cola Company (The)

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 provided 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 pleased with our 2024 results, which include volume growth, robust organic revenue growth, and comparable growth and operating margin expansion. This led to a 7% comparable earnings per share growth, despite nearly double-digit currency headwinds and the impact of bottler re-franchising. These results reflect the continuation of delivering on our long-term commitments Through our all-weather strategy, we've demonstrated we have agility to navigate what comes at us and continue to grow comparable earnings per share. Given the strong momentum of our business, we're confident we can deliver on our 2025 guidance and longer-term objectives. With that as context, I'll next provide perspective on our industry and review our business performance across our segments in the fourth quarter. Then I'll explain how we're executing our strategy by amplifying what is working and fine-tuning where needed. John will end by discussing our financial results in more detail and providing an overview of our 2025 guidance. One of our fundamental strengths is that we operate in a great industry with steady growth. No matter how you slice it by consumer, by customer, by beverage category, by geography, we have vast opportunities ahead of us. During the quarter, we leveraged the power of our portfolio and the local expertise of our franchise system to capitalize on these opportunities. We won overall share and had broad-based share gains across our global beverage categories. We're making progress across our total beverage portfolio, delivering ongoing growth in sparkling soft drinks as well as momentum in other categories like value-added dairy and tea. which are reaching global scale while remaining tailored to local consumer needs. And we're continuing to strengthen alignment across our system, and we believe our global franchise model, which operates locally, is an advantage to drive long-term balance growth. During the quarter, while our operating environment remained dynamic, consumer demand held up well, and our industry remained strong. Starting in Asia Pacific, In ASEAN and South Pacific, we grew volume during the quarter and benefited from successful integrated marketing campaigns like Food Marks, which was activated in over 7,000 outlets and led to trademark Coca-Cola volume growth. Our system also drove affordability by increasing refillable offerings and focusing on attractive price points. Refillable offerings contributed to approximately one-third of ASEAN and South Pacific volume growth in 2024. In China, despite continued macro headwinds, we grew volume during the quarter, and while early, we're seeing improved trends across our business. Trademark Coca-Cola continues to gain share, and Sprite, Fanta, and Minute Maid each improved volume performance. Our system is stepping up integrated execution in 2024 by accelerating placement of cold drink equipment and activating integrated marketing campaigns in key channels. In Japan and South Korea, we grew volume during the quarter. Innovation was a strong contributor to growth, led by resurgence of Ayataka and a number of other brands. We're continuing to benefit from steady performance from trademark Coca-Cola and stepped up integrated execution in key channels. In India, our business rebounded nicely during the quarter and we grew volume. We recruited consumers with innovative marketing campaigns that link Coca-Cola with music, Bright with travel and Thumbs Up with movies. And Mazza is now our 30th billion dollar brand. In 2024, our system added approximately 440,000 outlets to our digital customer platforms in India, which provides more opportunities to better tailor our product price and packaging offerings. Moving on to EMEA. In Europe, volume declined during the quarter with mixed performance across Western and Eastern markets. Despite volume pressure, we grew both revenue and profits. We're engaging consumers with experiential marketing campaigns like The World Needs More Santas for trademark Coca-Cola, and by linking our brands to new occasions like Sprite with spicy meals. Also, innovation velocities and multi-year innovation success rates both performed well in 2024. We're seeing good traction on Fuse T, Powerade Zero, Jack and Coke, and Absolute and Sprite. In Eurasia and Middle East, despite a confluence of continued macro headwinds, we returned to volume growth during the quarter. We're emphasizing the localness of our business and seeing positive responses. For example, the Made In, Made By campaign in Turkey led to strong volume growth for trademark Coca-Cola. Fused Tea also had good momentum across the region. Our system is driving affordability and stepping up integrated execution by increasing cooler placement and share of visible inventory during the year. In Africa, volume declined during the quarter, driven primarily by pressure in North Africa and Nigeria and partially offset by strong volume momentum in South Africa. We took action during the quarter by adjusting our pack price architecture to further drive affordability. Our system is investing for the long term, adding refillable offerings, placing more cold drink equipment, and increasing manufacturing capacity in 2024. In Latin America, despite some macroeconomic pressures, we grew volume, revenue, and profit during the quarter. We drove trial and recruited weekly plus drinkers for trademark Coca-Cola in 2024 by better linking the brand to the meal occasion. Also, to drive balanced top line growth, Our system focused on increasing single serve offerings. Over 90% of our fragmented trade customers are now on our system's digital customer platforms, allowing for greater opportunity to tailor offerings to customers' individual needs. Lastly, in North America, we grew both transactions and volume and had robust top line and profit growth during the quarter. Trademark Coca-Cola and Fairlife remain leaders in at-home retail sales growth. Sparkling flavors gained share during the quarter due to successful, limited-time innovations like Sprite, Winter Spice Cranberry, and Fanta Beetle Juice, and stepped-up integrated execution focused on increased point-of-sale messaging and increased share of visual inventory. Consumers responded well to value messaging in away-from-home channels, and we increased distribution of key affordable and premium offerings and benefited from product package and channel mix in the quarter to sum everything up we have good momentum in our business we're responding to the market dynamics locally to execute on our global While we're delivering on our near-term commitments, we're also investing to improve execution, build capabilities, and get more granular across our strategic growth flywheel. Our networked marketing model is integrating product, digital, live, and retail experiences, and we're harnessing passion points to connect with consumers in more personalized ways. One great example, Fanta Halloween was our first ever global Halloween activation and was scaled to nearly 50 markets. Partnering with Warner Brothers Pictures, we created a limited time Fanta Beetlejuice haunted apple flavor. Consumers scanned packages to access personalized experiences, and we replicated the Beetlejuice afterlife train taking over train stations, trams, and metros. The campaign was activated in-store with our largest customers, and contributed to sparkling flavors to share gain during the quarter. Our culture increasingly emphasizes acting boldly, learning, and scaling successes. This year, for the first time, our Coca-Cola Christmas ad was created with generative AI, combining emerging technology with human creativity, which allowed us to produce the ad faster and at a lower cost. The power of emerging technologies like genitive AI are still at early stages, and we will continue to lead and iterate our approach. We're seeing tangible results from our marketing transformation. Over the past three years, trademark Coca-Cola's retail sales have increased approximately $40 billion. According to Time Magazine, Coca-Cola, Minute Maid, and Fairlife were named world's best brands in their respective beverage categories in 2024. While we're building capabilities in marketing, we're also focusing on innovation that prioritizes bigger and bolder bets. Each of our innovations has a clear objective. Sometimes we innovate to create short-term buzz like Coke and Oreo or Sprite Winter Spice Cranberry. In other instances, we innovate for lasting impact. This year, we focused on sustaining investments behind key innovations to improve multi-year success rates and drive greater impact. This is paying off. as fused tea grew retail value three times faster than the tea category. Topo Chico's supporters continued its momentum, and Minute Maid Zero Sugar realized strong growth. In 2024, innovation contributed strongly to revenue growth, and our innovation success rates improved versus prior year. We're excited about our innovation pipeline for 2025. Moving across our top-line flywheel, our system is investing heavily in digital capabilities and sticking to the fundamentals of commercial excellence to accelerate consumer recruitment, increase consumption, and win in the market. Ensuring product availability is one of our system's greatest strengths, yet we still have tremendous opportunity. While our system improves share of visible inventory in 2024, and our brands are founded in 33 million outlets, there remains ample headroom to increase outlet coverage, reduce out-of-stocks, and better tailor our offerings with the right placements. Basket incidence is another opportunity. Winning just one point of global beverage incidence translates into over $40 billion in additional retail service. To drive basket incidents, our system is focused on better activating integrated marketing campaigns in key channels. Strong commercial execution is enabled by our revenue growth management capabilities, which fuel both top-line growth and margin expansion. We're driving affordability and premiumization across our total beverage portfolio. The strong elasticities we're realizing today are a testament to the progress we're making in this area. By focusing on availability, basket incidents and cold drink equipment, coupled with great marketing, innovation and revenue growth management, Our system recruited weekly-class drinkers, grew volume, and won one share in 2024. While we've made steady progress executing our all-weather strategy in 2024, we're operating with a mindset that we're only just getting started. As we turn the page to 2025, we anticipate the year will bring both opportunities and challenges. While we expect the external environment will be dynamic, several underpinnings remain constant. One, we operate in a great industry. Two, we have many opportunities available to us, and we're primed to capture these and deliver sustained performance. Three, our power Our full portfolio of brands, pervasive distribution systems, and the unwavering dedication of our system employees are clear advantages. Next Tuesday at Cagney, I look forward to sharing more about how we're leading to deliver results in all types of backdrops, and I encourage everyone to listen. With that, I'll turn the call over to John. Thank you, James, and good morning, everyone. We close the year with strong fourth quarter results, And as James said earlier, we delivered 7% comparable earnings per share growth in 2024, on top of 6% average comparable earnings per share growth over the prior five years. During the fourth quarter, we grew organic revenues 14%. Unit case growth was 2%, which is in line with our multi-year trend. Concentrate sales grew three points ahead of unit cases, driven primarily by two additional days in the quarter and the timing of concentrated shipments. Our price mixed growth of 9% was driven by two items. Approximately eight points of pricing split somewhat evenly between normal pricing actions across our markets and intense inflationary pricing in a handful of markets experiencing currency devaluations. and approximately one point of favorable mix. Excluding the impact of intense inflationary pricing, organic revenue growth was above our long-term growth algorithm. Comparable growth margin was up approximately 160 basis points, and comparable operating margin was up approximately 80 basis points. Butler Refranchising had a greater benefit to comparable growth margin and currency headwinds had a larger impact to comparable operating margin.