Coca-Cola Company (The)

At this time, I'd like to welcome everyone to the Coca-Cola Company's second quarter 2026 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 Todd Beiger, Vice President and Head of Investor Relations. Mr. Beiger, you may now begin.

Good morning, and thank you for joining us. I'm here with Henrique Braun, our Chief Executive Officer, and John Murphy, our President and Chief Financial Officer. We've posted schedules under financial information in the investor section of our company website. These reconcile certain non-GAAP financial measures that may be referred to this morning to results 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 gross 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 the company's periodic SEC reports. Following the prepared remarks, we will take your questions. Please zoom yourself to one question. Re-enter the queue to ask follow-ups. Now, I'll turn the call over to Henrique.

Thanks, Todd, and good morning, everyone. We've had a strong first half of the year. Our results reinforce our three beliefs. We operate in a great industry. Our beverages are well loved by consumers, and the strength of our system is unmatched. With the commitment and dedication of our Coca-Cola system partners around the world, I'm confident we are well positioned to deliver on our RAISED 2026 guidance. This morning, I'll touch on our business performance and share our perspective on the global operating environment. Then, I'll discuss how we are executing against our three priorities to enhance our staying power and extend our strength. John will end by discussing our financial results and provide further commentary on the outlook for the rest of the year. We delivered a strong quarter with broad-based momentum across our business. We grew volume 5% aided by cycling an easier prior year comparison, and we grew organic revenue at the high end of our long-term growth algorithm. Looking at the two-year average, we grew volume 2%, reflective of a more balanced contribution to the top-line growth. This led to organic revenue growth at the high end of our long-term algorithm. We also expanded margins while continuing to invest in our business, delivered double-digit earnings growth, and gained value share. Our results demonstrate Key advantages. Number one, the strength of our total beverage portfolio. Number two, the power of our global yet local system. And three, our ability to quickly adapt to changing consumer needs. Across much of the world, we see an uneven consumer environment. The economy is strong in many places, yet many consumers face inflationary pressures They are evaluating how they shop, what they value, and what they want to put in their basket. In markets like the U.S. and Europe, the consumer backdrop is stable in aggregate, but many remain under pressure. In China, sentiment remains cautious, and spending continues to be selective. Across Latin America, the consumer sentiment is mixed. With improvements in Brazil and Central America, while consumers in other key markets remain under pressure. Across our more than 200 countries and territories, our mission is simple, ensuring our brands are valued, relevant, and worth choosing. To get us there, we are staying close to the consumer, adapting quickly, and doing a little bit better every day to earn every transaction. In the second quarter, Our FIFA World Cup integrated marketing campaign and the world-class activation brought consumers closer to the action, showed the power of our system at scale, and drove momentum across our business. In North America, while we benefited from cycling an easier prior year comparison, we delivered strong performance. We gained both value and volume share and grew revenue and profit for the quarter. Our dual approach with FIFA World Cup and America 250 gave us a unique platform to be part of a once in a lifetime celebrations in locally relevant ways across the country. Harnessing our total beverage portfolio, we grew volume 3% by leveraging our growth flywheel. We had strong volume growth for many brands, including trademark Coca-Cola, Fairlife, Powerade, Fresca, Gold Peak, Smart Water, and Simply. During the quarter, newly relaunched Mr. Pibb grew volume more than 20%, demonstrating how we are using insights to innovate and stay relevant across need states and drinking occasions. In Latin America, we gained both value and volume share, realized balanced top-line growth, and grew profit. We continue to navigate a difficult environment in Mexico, but we see improving conditions in Brazil. Our system is taking targeted actions to strengthen the business and build momentum to capture growth opportunities. In EMEA, we gained value and volume share and grew unit case volume in each of the operating units. While we grew revenue, profit declined due to the phasing of investment. In Europe, favorable weather supported volume performance in many markets, while growth broadened across the region. In the region of the Middle East, geopolitical conflicts continue to disrupt the region. We are combining the power of our global scale with the flexibility to adapt to local needs. This led to value share gain and strong volume growth for trademark Coca-Cola, Fuse D, and Sprite for the quarter. In Africa, our system is highlighting localness and sharpening our revenue growth management capabilities to drive sustainable long-term growth. Lastly, in Asia Pacific, we grew volume across all operating units and nearly all beverage categories. Comparable operating income declined during the quarter, primarily due to our focus on expanding our consumer base in all socioeconomic segments. While we are encouraged by the progress we've made, we recognize this is a journey. We are investing to bring more consumers into the franchise and build our business for the long term. For example, in China, we are using the strength of our total beverage portfolio, and in India, we are taking our proven revenue growth management capabilities to meet consumer needs. Overall, Growth was broad-based across channels and consumption occasions, reflecting our ability to meet consumers with the right offerings at the right moment. To sum up our global view, we remain focused on our all-weather strategy, building balanced, quality, top-line growth while being locally agile and executing at pace in this dynamic economic environment. Earlier this year, I laid out our three priorities to deliver on our next chapter of growth. Becoming even more consumer-centric, remaining constructively discontented, and placing digital at the core of every connection. First, on becoming more consumer-centric, the 2026 FIFA World Cup is a great example of how we are leveraging the four I's, insights, innovation, We entered the tournament with a stronger foundation and greater system alignment, allowing us to bring the Activision to life with more speed, precision, and scale. We started with deep insights, understanding fans, occasions, and how consumers want to engage throughout the tournament. We used innovation with connected packaging to make our brands more interactive. Through our long-standing partnership with Panini, we distributed more than 1 billion player stickers across more than 40 markets, driving digital participation and engagement. We've applied intimacy by tailoring activations to local consumers market by market, team by team. We translated the tournament's momentum into powerful consumer experiences placing Coca-Cola and Powerade at the heart of national pride and fan celebrations. We've brought it all together to integrated execution across our system in over 180 markets and more than 20 million retail outlets. This execution delivered commercial impact, driving average incidence of over 80% at venues across 16 whole cities, which is a record for us for a FIFA World Cup. Throughout the tournament, we've collected more than 25 million first-party data points and generated more than 9 billion views through digital and social media activations. These insights give us stronger foundation to better understand consumers, tailor our decisions, and improve how we show up in the marketplace. Activating around the FIFA World Cup contributed to trademark Coca-Cola volume growth of 5% for the quarter, its strongest volume growth in 17 years, excluding COVID recovery. Powerade also grew volume 8% globally during the quarter. Moving to remaining constructively discontented, we are focused on driving more from our markets and more from our brands. This quarter's results show that we are making our brands more relevant to more consumers and making our $32 billion brands work harder for us. For example, evening occasions remain meaningful untapped opportunities. By redesigning Coca-Cola Zero-Zero, we are better positioning the brand for this moment. Following strong initial success in Europe, we continue expanding the product to more markets globally. Combined with disciplined revenue growth management, strong execution, and world-class bottling partners, we are strengthening our ability to deliver more growth for more markets. As we continue to think about preparing the organization for the next chapter, we are putting great leaders in place, sharpening accountability, inspiring a culture of doing a little bit better every day. Finally, we're focused on elevating the role of digital across everything we do. We are amplifying the things that we already do well with more agility and more scale. By focusing our resources on a selective set of consumer, customer, and enterprise priorities, we can strengthen our competitive advantages and create more value across the system.