The Operator welcomes everyone to The Coca-Cola Company's First Quarter 2024 Earnings Results Conference Call. The purpose of the call is to talk with investors and questions from the media will not be addressed. Ms. Halpern, Vice President and Head of Investor Relations, introduces the CEO and CFO. Forward-looking statements may be made during the call. Following prepared remarks, questions will be taken. The CEO, James Quincey, notes that the company is off to a good start and continuing momentum with their all-weather strategy.

In the first quarter, the company saw strong results due to its powerful portfolio and systems capabilities. They also continued to invest in the business and managed currency fluctuations. The company gained value share in both at home and away from home channels. In Asia Pacific, they saw momentum in many markets, including Japan, South Korea, Philippines, and Thailand. In China, retail sales are improving but consumer confidence is still below 2019 levels. In EMEA, there is a gradual improvement in macro trends and consumer confidence in Europe. The company is focusing on its core business and implementing new strategies for growth, such as pairing Sprite with spicy meal occasions.

During the quarter, Fuze Tea and Powerade had strong performance, and Jack Daniel's & Coca-Cola expanded to six more European markets. Africa also saw volume momentum, while facing currency devaluations. Geopolitical and economic challenges in Eurasia and the Middle East affected business, but the company is committed to investing in their brands for the long term. North America had a slow start but saw improvement in the last two months, with favorable elasticities and share gains. The company launched Coke Space and saw strong performance in their Zero Sugar sparkling soft drinks and value-added dairy brands. In sports drinks, the company's two brand strategy with Powerade and BODYARMOR is gaining traction, with improved share trends. In Latin America, volume momentum continued, driven by strength in Mexico, Brazil, and Colombia, while Argentina faced inflationary conditions.

In Latin America, Coca-Cola Zero Sugar and other products such as Sparkling Flavors, sports drinks, juices, and alcohol ready to drink are performing well due to commercial initiatives and outlet digitization. Inflation is normalizing in developed markets but remains a challenge in some emerging markets. The company is confident in its ability to navigate these challenges and is focused on building loved brands, innovating, and delivering new products such as K-Wave, a limited edition drink for Gen Z consumers. Additionally, the company is continuously improving the taste of existing drinks, such as Fanta and Sprite, to meet consumer preferences.

The company's recent changes and innovations have attracted new consumers and reminded existing ones of the appeal of their beverages. This was evident in the success of Fanta in various markets and the launch of Minute Maid Zero Sugar's global campaign. The company is also utilizing digital marketing and integrated execution strategies to increase sales and create value for customers. They have also focused on improving product availability and have seen strong growth in Japan by associating their brands with local meals.

In the first quarter, the company continued to grow its business and make a positive impact on the communities it serves. They shared their statements and learnings in their business and sustainability report. Despite cycling strong results, they saw volume growth and completed the refranchising of several bottlers. They continue to invest in their portfolio with discipline and flexibility. Organic revenues grew 11%, with 1% unit case growth. Price mix growth was driven by intense inflationary pricing, currency devaluation, and favorable mix. Excluding inflationary pricing, organic revenue growth was in line with their long-term growth algorithm.

In the first quarter, comparable gross margin and operating margin increased, driven by strong top-line growth and bottler refranchising, but offset by currency headwinds and marketing investments. Inflation in certain markets had a significant impact on the company's profits. The first quarter comparable EPS was $0.72, up 7% from the previous year. Free cash flow also increased. The company reported two charges, one related to the acquisition of fairlife and the other related to BODYARMOR. Despite these charges, the company remains confident in their two sports brand strategy and their balance sheet is strong.

The company has enough funds to cover potential payments in 2024 and is committed to investing in growth and supporting their dividend. They expect organic revenue and earnings growth, but are facing inflationary pricing in some markets and currency headwinds. The bottler refranchising will have a positive impact on margins and returns. The effective tax rate for 2024 is expected to be 19%. The ongoing conflict in the Middle East may have a slight impact on volume growth in the first quarter of 2024.

The company expects a larger impact on its financials in the second and third quarters due to the timing of transaction closing and seasonality. There will also be two additional days in the fourth quarter. The company is confident in its strategy and partnership with its system to create value for stakeholders and meet their guidance for the year. The first quarter had a 100 basis point tailwind from structural benefits and a 60 basis point benefit underlying, and the company expects to continue to have a tailwind from refranchising. The questioner asks for more context on how much of this should be factored into future estimates.

The speaker discusses the expected growth and expansion of the company throughout the year, driven by positive RGM impacts and productivity. They also mention some challenges, such as currency headwinds, but overall the top line growth is expected to be a primary driver. The speaker also gives an update on the North American market, stating that the consumer remains in good shape but there is some purchasing power compression in lower income groups. They also mention strong price mix in North America and the balance between pricing, mix, and volume going forward.

Coca-Cola's CEO explains that there has been a slight shift towards more at-home consumption and less away from home due to the pandemic. The company has been focusing on revenue growth management and packaging to gain share in the market. Approximately two points of the seven-point growth in the first quarter were due to mix or timing, and the company expects pricing to moderate as the year goes on and return to pre-COVID levels in 2024. When the dollar is strong, the company manages it at a local level by focusing on markets with predominantly local currency and using strategies such as revenue growth management to maintain dollar-based EPS.

In certain markets, the company competes locally in local currency and uses a hedging program to anticipate and manage currency fluctuations. In other markets with higher levels of inflation and devaluation, the company competes locally and focuses on long-term growth, despite short-term fluctuations in dollar value. This approach is seen as a portfolio management strategy.

The company is taking a corporate approach to prioritize investments and deliver consistent growth. They are seeing incremental progress in their two brand strategy for sports drinks, with the zero calorie version, Flash I.V., and sport water showing positive results. They have also formed a new partnership with the NHL and are increasing focus on the sports drinks category. The upcoming Olympics will provide more opportunities for growth.

The speaker discusses the company's plans for product innovation, marketing, and execution, and mentions that they expect to see positive results throughout the year. They also provide some insight into their performance in Asia, highlighting solid growth in China during the Chinese New Year but acknowledging challenges in the overall macro environment. The company remains focused on executing their strategies in China and sees opportunities for growth in the rest of Asia, particularly in markets like Japan, South Korea, and the Philippines.

In the first quarter, Coca-Cola saw strong growth in India despite a slower start in January and February. The company remains optimistic about the long-term prospects for the Indian market. In EMEA, countries like Nigeria, Germany, and South Africa drove unit case growth, but there were also significant pricing factors due to high inflation in certain markets. In Europe, pricing was more normalized and the macroeconomic situation improved, with some markets coming out of recession.

The company has seen a shift towards value-oriented channels and home-oriented channels, with a focus on marketing, innovation, RGM, and affordability. This trend is similar in both the US and Europe, but the EMEA segment also faces challenges due to conflicts and high inflation in some countries. In terms of brand performance, trademark Coca-Cola has been outperformed by sparkling flavors in recent years, but both are doing well. This has been a deliberate focus for the company and its bottling system.

The company has recently focused on the Coke trademark, resulting in success over the years. Other brands such as Sprite, Fanta, and regional brands have also received more attention, with a focus on their formulas and marketing. The only area where they have not seen success is in China with Sprite, but overall, the Indian flavor brands have performed well. The Latin American business was also mentioned, but no specific question was asked about it.

James Quincey, CEO of a company, is asked about the impact of hyperinflation on their business in Latin America and their ability to continue seeing growth in the region. Quincey responds that they believe the business can continue to grow in both volume and revenue terms, citing strong performance in Mexico, Brazil, and Colombia. He also mentions that they are investing in capacity to unlock further growth. In a separate question, John Murphy, a representative from the company, is asked about the liability associated with their Fairlife brand. Murphy responds that the liability is linked to the performance of the brand and will be reflected in their latest estimates.

The company's momentum has been strong and is expected to continue, with potential for even more growth. The liability for the company will be updated as projections evolve throughout the year. There are different types of innovation at play, including renovation of core brands. It is difficult to track the success of new products, but there are measures in place to ensure accountability for innovation.

The launch of new Coke creations is intended to reengage with consumers and drive relevance of core brands. There are also new innovations being introduced, such as Minute Maid Zero Sugar and Absolute Sprite. The company tracks various metrics to measure the success of these innovations, but does not set a specific percentage goal for growth from innovation. The focus is on selling what consumers want to buy, whether it be a new innovation or a classic Coke. The market development strategy is aimed at improving shelf replenishment and driving faster growth.

The transformation towards richer market development and less shelf replenishment order taking is a global trend, with each region and country at different stages. The goal is to add value to retailers by growing the beverage category and portfolio brands faster than the average of their business. This involves moving from order taking to account development, utilizing AI for more efficient ordering, and constantly improving system capabilities. The ambition of Coca-Cola and its bottling partners has also increased in recent years.

The speaker discusses the company's ambition to see revenue growth at the top end of the algorithm and how it is driving progress each quarter. They also clarify that timing differences between concentrate units and unit cases naturally reverse and that the company is still aiming for a 2% unit volume growth despite these discrepancies.

The company is aiming for 5-6% growth with a balanced contribution from volume and price mix. Volume growth is expected to be around 2%, with a focus on prices as inflation normalizes. The first quarter had some abnormal factors, but the company's main business is performing well and is on track with their goals. In North America, volume growth will depend on factors such as the economy, comps, and sectors, and tea, coffee, and water have been weak.

The speaker discusses the company's expectations for flat to modest growth in volume and good pricing in North America. They mention a strong quarter in sparkling, dairy, and juice categories, but softer performance in water and tea. They also mention a question about focusing on FUZE Tea rather than Gold Peak, and a question from a Bernstein analyst about the company's gross margins, which were expected to reach 68% after re-franchising in 2016 but are currently around 60%.

The speaker responds to a question about the company's performance, attributing it to factors such as mergers and acquisitions, currency impact, and re-franchising. They also mention the impact of B2B digital experiences on category share.

The digital version of B2B is not a singular thing and has been used for many years in various forms to support physical retail. This includes direct order transfers to large retailers and the use of ordering and relationship platforms for mom and pop stores. These relationships are supportive of growth and enable the company to continue to do well. The first quarter of the year has been strong and the company is confident in delivering on its 2024 guidance. They will continue to leverage their capabilities to drive growth and manage through different environments. The call concludes with a thank you to stakeholders and investors.

The paragraph thanks the reader for their participation and informs them that they can now disconnect.

This summary was generated with AI and may contain some inaccuracies.