Coca-Cola Company (The)

At this time, I'd like to welcome everyone to the Coca-Cola Company's first quarter 2025 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. Our results in the first quarter reflect the continued execution of our all-weather strategy and demonstrate the resilience of our business as we navigate a dynamic external environment. We delivered 2% volume growth and organic revenue growth at the high end of our long-term growth algorithm. We also delivered comparable growth and operating margin expansion. With this as context, we're grounded in our starting point of human centricity. Our first quarter results would not have been possible without the actions of our people around the world. I'd like to express my gratitude to our system associates who are adapting quickly and creating enduring value. And as we look to the remainder of the year, we will continue to be consumer and customer centric. Based on what we know today, we believe we can achieve our 2025 guidance. This morning, I'll provide further detail on our first quarter business performance and we'll discuss the current operating environment. Then I'll explain how we're improving execution and investing to strengthen our system. John will also discuss our financial results and provide further commentary on the outlook for the rest of the year. During the quarter, some markets improved sequentially, while other markets faced macroeconomic uncertainty and geopolitical tensions that impacted consumer confidence and consumption behaviors. Despite this backdrop, We delivered robust organic revenue growth. Through our stepped up capabilities and better than ever system alignment, we're getting more granular and tailoring our execution to win locally in key geographies, categories, and channels. During the quarter, we grew volume across all global beverage categories. We won value share by three key metrics, overall share, at home, and away from home. However, as we look across our top country category combinations, we still have opportunities to further improve our performance. Across our markets, we leveraged our global scale and local expertise to respond to complex dynamics in the quarter. In North America, we grew revenue and profit and won value share, but we were not satisfied with our volume performance. In addition to challenges with severe weather and calendar shifts, volume was impacted by weakening consumer sentiment as the quarter progressed, particularly among Hispanic consumers. Bright spots include continued volume growth for Coca-Cola Zero Sugar, another good quarter for Fairlife and Topo Chico Saboris, and continued traction with food service customer renewals and new accounts. Our system has quickly pivoted to prioritize the most impactful investment opportunities and is emphasizing faster decision-making and greater agility to accelerate volume growth. In Latin America, while volume was flat, we grew both organic revenue and comparable currency-neutral operating income. Brazil and Argentina had strong volume performance, while momentum in Mexico was weaker due to cycling, strong volume growth in the prior year, calendar shifts, and diminished consumer sentiment, partly stemming from geopolitical tensions. Our system has taken swift action in Mexico. We've learned from best practices in other markets by messaging affordability with value packages in key channels, and by launching the Echo in Mexico campaign to further build trust with consumers. Across Latin America, our system is leveraging connected packaging and digital customer platforms to drive long-term growth. In EMEA, we grew volume, organic revenue, and comparable currency-neutral operating incomes. In Europe, volume declined with mixed performance in both Western and Eastern markets due to a range of factors. To drive demand for our brands, we're focused on affordability and launching impactful integrated marketing activations. For example, with trademark Coca-Cola, we launched the Everyday Tasty Celebrations campaign for the meal occasions in over 20 markets leveraging local influences. For Fanta, we launched a partnership with Xbox to recruit Gen Z drinkers. In Eurasia and Middle East, we drove strong volume growth and won value share. In Turkey, despite continued external challenges, our business performance improved. We're leveraging our learnings from the past year to better understand consumer motivations and pivot during shifts in demand. Our efforts across the region to emphasize the localness of our system while driving affordability and partnering closely with customers are taking hold. Lastly, in Africa, we grew volume despite cycling strong growth in the prior year and dealing with double-digit inflation. We're driving affordability with refillable offerings and value packages, and we're engaging consumers by scaling global integrated marketing campaigns at a local level, including Wanta Fanta, Sprite Spicy Meals, and Schweppes Born Social 2.0. Finally, in Asia Pacific, we delivered volume, organic revenue, and comparable currency-neutral operating income growth. In ASEAN and South Pacific, volume declined as strong performance in the Philippines was more than offset by weaker performance in Thailand and Indonesia. However, we won value share in the region. We're focused on driving affordability with refillable offerings and attractive absolute price points, increasing outlet coverage, and accelerating placement of cold drink equipment. In China, our system focus on improving execution is paying off and led to volume growth. We delivered impactful integrated marketing activations around the Lunar New Year and invested to drive growth in away from home channels. Trademark Coca-Cola has strong volume performance while Sprite is getting back on track. In India, we had strong volume growth across our portfolio of global and local brands. Our system added nearly 350,000 outlets and increased household penetration. Also, our system increased cooler placement and added approximately 100,000 customers to its digital customer platforms. In Japan and South Korea, we drove volume growth and won value share with strong performance from Ayataka Tea. Our system is benefiting from stepped-up execution across key channels. Putting it all together, our business proved to be resilient during the quarter, And we're prepared to respond to changing consumer dynamics as our external environment continues to evolve. While we're navigating near-term market dynamics, we're focused on capturing the boundless opportunities we discussed at Cagney, and we're building capabilities to further our strategic edge. Starting with our portfolio of love brands. Our total beverage portfolio offers consumers choice, whether it be by brand, package size, or package type. We have 30 global and local billion-dollar brands that address a broad range of consumer need states and drinking occasions. Thirty percent of our volume is from low or no-calorie beverages, and 68 percent of our products in our portfolio have less than 100 calories per 12-ounce serving. We also have a diversified mix of affordable and premium offerings. By staying consumer-centric and offering choice, we're seeing growth across multiple elements of our portfolio. Moving on to our marketing and innovation agenda. Our ongoing transformation continues to fuel our top-line growth. With Studio X, we're producing tailored digital marketing at scale and with speed, and we're measuring the impact in real time. For example, during Lunar New Year, we scaled an integrated campaign with trademark Coca-Cola across China, Japan, Vietnam, and other Asia-Pacific markets. Consumers access personalized digital experiences through our systems-connected packaging. The campaign leveraged social media, live events, and increased displays in customer outlets, contributing to trademark Coca-Cola volume growth in Asia Pacific during the quarter. We're also excited about the global return of our iconic Share a Coke campaign. The 2025 iteration of this campaign offers digital experiences and increased shareability and customization. The return of Share a Coke is the first chance for Gen Z to experience this much-loved campaign. We're investing in multi-year innovations and prioritizing fewer for bolder launches to drive greater impact and improve our success rates. For example, we're continuing to invest in fused tea, which contributed to value share gains in the category during the quarter. We expanded fused tea Sabor original to Spain and fused iced tea to Canada. In the U.S., Coca-Cola orange cream is off to a good start with approximately $50 million in retail sales during the quarter. At the end of February, we launched Simply Pop, our first prebiotic soda in select locations and channels across the country. We're excited about our ability to test and learn and scale successes over time. Lastly, we're striving to optimize our broader ecosystem. This extends far beyond the company and our bottling partners. If you include our suppliers, approximately 6 million people service our ecosystem. Coca-Cola is for everyone. and we strive to contribute to each of the communities we serve. We believe our franchise model, which leverages global scale but prioritizes localness, is an advantage in today's environment. Our system primarily produces and distributes our brands locally. We also aim to procure locally where possible. Much of the value we create in terms of jobs and retail sales stays in the local markets. For example, According to a recent economic impact study by Stuart Redqueen in the U.S., our ecosystem contributes approximately 860,000 jobs and approximately $58 billion to annual gross domestic product. In Brazil, our ecosystem contributes approximately 575,000 jobs and over $15 billion annually to the gross domestic product. While it is reasonable to assume global trade tensions and broader macro uncertainty may persist in the near term, and could impact consumer sentiment, the building blocks behind our long-term growth opportunities are unchanged. We continue to benefit from three primary factors. Firstly, we operate in a resilient industry with predictable growth. Second, while barriers to entry in our industry are low, barriers to scale in our industry are high. Lastly, we have significant headroom to develop our industry and gain share, and we believe we're primed to capture these opportunities. Our portfolio power, as demonstrated by our $30 billion brands and pervasive yet local distribution, are key differentiators. Our system continues to prioritize agility, consumer centricity, and close partnership across our ecosystem to drive long-term growth. In summary, it's early in the year, and we know that the external environment is dynamic. Enabled by our all-weather strategy, We'll continue to expand our toolkit to respond to the opportunities and challenges ahead. Thanks to the unwavering dedication of our system employees, we are confident we can achieve our objectives. With that, I'll turn the call over to John.