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The Coca-Cola Company owns a roster of over 200 brands that includes its eponymous soft drink; Powerade; Fairlife; and Bodyarmor, a recent acquisition. 
<ul> 
 	<li>In 2022 the Coca-Cola Company had strong topline performance with $43 billion in revenues, an 11% increase compared to the prior year, but struggled to grow its profits; its $9.5 billion total represented a 2% decline. The company dropped seven spots on the Fortune 500.</li> 
 	<li>Coca-Cola expanded into the alcoholic beverage market in the U.S. with the launch of a canned Jack Daniels bourbon and Coke drink after a successful 2022 pilot in Mexico.</li> 
 	<li>In March 2023 Coca-Cola inked a deal for an undisclosed sum with OpenAI for use of its ChatGPT and DALL-E chatbots. Details are still vague, but the company has already announced an advertising campaign in which it invites people “to generate original artwork with iconic creative assets from the Coca-Cola archives.”</li> 
</ul>

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Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

<span data-sheets-value="{&quot;1&quot;:2,&quot;2&quot;:&quot;The pandemic battered Coca-Cola’s business, with revenue falling 11.4% to $33 billion in 2020. Consumer cravings for soft drinks and snacks at home failed to match the corresponding cratering of demand for Coke products in restaurants, movie theaters, and other public destinations, where the company traditionally makes about half its sales. Amid these societal changes, the Atlanta-based beverage company made some changes of its own; Coca-Cola in August 2020 announced plans to restructure its workforce to focus on its fastest-growing products (Tab and Odwalla drinks got the ax). That plan meant cutting more than 2,000 jobs through layoffs and buyouts out of an employee base of just over 80,000.&quot;}" data-sheets-userformat="{&quot;2&quot;:12673,&quot;3&quot;:{&quot;1&quot;:0},&quot;10&quot;:2,&quot;11&quot;:4,&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:11}">The pandemic battered Coca-Cola’s business, with revenue falling 11.4% to $33 billion in 2020. Consumer cravings for soft drinks and snacks at home failed to match the corresponding cratering of demand for Coke products in restaurants, movie theaters, and other public destinations, where the company traditionally makes about half its sales. Amid these societal changes, the Atlanta-based beverage company made some changes of its own; Coca-Cola in August 2020 announced plans to restructure its workforce to focus on its fastest-growing products (Tab and Odwalla drinks got the ax). That plan meant cutting more than 2,000 jobs through layoffs and buyouts out of an employee base of just over 80,000.

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G500-2020-335-Coca-Cola

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F500-2020-088-Coca-Cola

Coca-Cola’s $4.9 billion acquisition of the coffee chain Costa—the largest brand acquisition in its history, announced in 2018 and finalized in January 2019—had a major hand in shaping its performance last year. The buy helped the 134-year-old soft drink company rocket 12 spots up the Fortune 500, gain an expanded retail footprint, grow to 23,600 employees, and bring in $37.2 billion in revenue—a 17% rise over 2018. But more recent news has been less upbeat. Consumer stockpiling of water and sports drinks ahead of the coronavirus lockdown hasn't outweighed the effects of pandemic-related movie theater and restaurant closures on Coca-Cola's sales and profits. The company withdrew its 2020 outlook in March.

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Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Coca-Cola, the world’s largest beverage manufacturer and distributor, makes, sells, and distributes beverages, including soft drinks, energy drinks, coffee, tea, sports drinks, juices, and bottled and enhanced water. It also makes and distributes other beverage brands, including Dr Pepper and Monster Energy. The company was known as Coca-Cola Bottling Co. until it changed its name in January 2019. Coca-Cola dates back to 1886, when the Atlanta pharmacist who formulated the syrup poured the first glass, which was sold for five cents.

Q2 2025

Q1 2025

Q4 2024

Coca-Cola (KO): Company Profile, Stock Price, News, Rankings

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Coca-Cola

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At this time, I'd like to welcome everyone to The Coca Cola Company's First Quarter twenty twenty five 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 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 in the company's periodic SEC reports. 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 gross 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 foodservice 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 income. 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 influencers. 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 Wantafanta, Sprite Spicy Meals and Schweppes Born Social two point zero. 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 had 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 placements 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 CAGNY, and we're building capabilities to further our strategic edge. Starting with our portfolio of loved 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. 30% of our volume is from low or no calorie beverages and 68% 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 Coat campaign. The twenty twenty five iteration of this campaign offers digital experiences and increased shareability and customization. The return of Sharer Coke is the first chance for Gen Z to experience this much loved campaign. We're investing in multiyear innovations and prioritizing fewer but bolder launches to drive greater impact and improve our success rates. For example, we're continuing to invest in Fuze Tea, which contributed to value share gains in the category during the quarter.

We expanded Fuzed Tea Saboroquinol to Spain and Fuzed Ice Tea to Canada. In The U. S, Coca Cola Orange Cream is off to a good start with approximately $50,000,000 in retail sales during the quarter. At the 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 6,000,000 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 Red Queen in The U. S, our ecosystem contributes approximately 860,000 jobs and approximately $58,000,000,000 to annual gross domestic product.

In Brazil, our ecosystem contributes approximately 575,000 jobs and over $15,000,000,000 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 $30,000,000,000 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.

Thank you, James, and good morning, everyone. During the quarter, we pivoted as needed to continue delivering on our objectives. We grew organic revenues 6%, which reflects performance at the high end of our long term growth algorithm. Unit case growth was 2%, in line with our multiyear trend. Concentrate sales were one point behind unit case sales as the impact of two fewer days in the quarter was partially offset by the timing of concentrate shipments.

Our pricemix growth of 5% was driven primarily by pricing actions across our markets, partially offset by approximately one point of unfavorable mix. Pricing from intense inflationary markets contributed to approximately one point of pricemix growth, down from approximately five points in full year 2024. Comparable gross margin increased approximately 30 basis points and comparable operating margin increased approximately 130 basis points. Both were driven by underlying expansion and a benefit from bottler refranchising, partially offset by currency headwinds. Putting it all together, first quarter comparable EPS of $0.73 increased 1% year over year despite 5% currency headwinds, dilution from bottler refranchising, elevated net interest expense and an approximate two point increase in our effective tax rate.

Free cash flow excluding the Fairlife contingent consideration payment was approximately $560,000,000 an increase versus prior year. During the quarter, we made our final $6,200,000,000 payment related to our acquisition of Fairlife, which continued to deliver strong performance. We're expecting Fairlife's growth to moderate during the remainder of 2025 in advance of bringing additional capacity online. Our balance sheet remains strong with our net debt leverage of 2.1 times EBITDA, which is at the low end of our targeted range of two to 2.5 times. We're confident in our long term free cash flow generation and continue to have balance sheet capacity to pursue our capital allocation agenda, which prioritizes an unwavering commitment to drive growth and support our dividend while staying flexible and opportunistic.

Before I discuss our guidance, I'd like to provide perspective on the current global trade environment and the actions we're taking to manage our business. While our system primarily executes locally, we're not immune to global trade dynamics. Based on what we know today, the dynamic tariff landscape could impact pockets of our systems cost structure as well as consumer sentiment in our markets. At this time, we believe we have numerous levers to help manage the impact, which is contributing to our current 2025 guidance. Enabled by our all weather strategy, we believe our business model has the flexibility needed to allow us to deliver on our near term commitments.

Our current 2025 guidance takes into consideration the underlying momentum of our business and what we know today about our external environment. We continue to expect organic revenue growth of 5% to 6%, but now expect comparable currency neutral earnings per share growth of 7% to 9%, both of which reflect delivery in line with our long term growth algorithm. Bottle refranchising is still expected to be a slight headwind to comparable net revenues and comparable earnings per share. Most of the impact of bottle refranchising occurred during the first quarter of this year as we cycled the impact of refranchising The Philippines, which closed during the first quarter of twenty twenty four. Based on current rates and our hedge positions, we now anticipate an approximate two point to three point currency headwind to comparable net revenues and an approximate five point to six point currency headwind to comparable earnings per share for full year 2025.

Our underlying effective tax rate for 2025 is still expected to be 20.8, which is over a two point increase versus prior year. All in, based on what we know today, we continue to expect 2025 comparable earnings per share growth of 2% to 3% versus $2.88 in 2024. There are some considerations to keep in mind for 2025. During the second quarter, we are cycling a tougher volume comparison from the prior year. While we're taking action to address consumer dynamics across some key markets and are seeing encouraging signs, we expect recovery to take some time.

We continue to expect the productivity benefits that I discussed in February to be weighted towards the latter half of 2025. Last, due to our reporting calendar, there will be one additional day in the fourth quarter. To sum it up, we remain focused on the execution of our all weather strategy and are well positioned despite macro complexity and uncertainty in the remainder of 2025. Thanks to the power of our portfolio and the partnership of our system, we're confident we will continue to create enduring value for our stakeholders. And with that, operator, we are ready to take questions.

In the interest of time, we ask that you please limit yourself to one question. If you have any additional questions, you may rejoin the queue. Our first question comes from Dara Mohsenian from Morgan Stanley. Please go ahead. Your line is open.

Hey, good morning. Another strong quarter clearly in Q1, but you did maintain the all in full year 2025 earnings guidance, which implies constant currency earnings growth is now lower by 100 basis points with FX improving. So is that just because it's early in the year and in a difficult environment, it doesn't make sense to raise overall earnings, particularly with volatile currency? Or are there discrete factors that are incremental as we think about full year currency neutral earnings? And maybe I can just extend that question also to unit cases, 2% great result in the quarter.

Comps do get tougher going forward. There's some geopolitical risk in theory. So just any thoughts around your ability to drive continued corporate unit case growth going forward in this more difficult environment that you referenced? Thanks.

Thanks, Dara. On the currency front, as we said in the script, currency guidance is based on current rates and hedge positions, and it's early in the year. We have most of our G10 pretty much hedged, but there's still a lot of volatility out there with emerging markets. So, we are being, I think, prudent to not get flow through. And I am sure there's more to come in the coming months on the currency front, particularly in the emerging world.

So and on unit case volume, not dissimilar. We have had an overall strong start when you look at the global portfolio, thanks to the strength of that portfolio. I highlighted in my script remarks, as you just alluded to, we're cycling a strong second quarter. We have had a number of actions to address some of the challenges we've seen in the first quarter, And we expect those actions to have an impact, but they will not be immediate. So we're I'd highlight the full year guidance we feel comfortable and confident with.

And like we've seen over the last, I'd say, 12 to 13 quarters, each quarter has its own personality nowadays. And so I'd look at the full year versus, let's say, the dynamics of any one quarter.

Next question comes from Brian Spillane from Bank of America. Please go ahead. Your line is open.

Hey. Thanks, operator. Good morning, everyone. And John, I'm still trying to figure out, it's the first time I've heard quarters described as having personality. So I'm trying to understand what personality this quarter might have been.

But just can we talk a little bit about Mexico? The quarter was, I think, was a little bit softer. Also, I think you talked about market share gain or market share losses. So maybe can we talk a little bit about the current conditions there? I know last year there was some noise with the consumer around the election.

So just what's happening with the consumer there? And I guess perhaps what actions you're going to take, what you're planning to take going forward to sort of restart volume growth?

Yes, sure. Firstly, stepping back a bit, I mean, America had a reasonable quarter. There was strong growth in Brazil and particularly Argentina. And yes, as you say, it was a bit softer in Mexico. There are a few things that went into that softness in Mexico.

It's cycling a stronger first half from last year and Eastern being an important holiday in Mexico. That shifted effectively from the first quarter to the April, effectively the second quarter. So that's one that's the first piece. Second piece, there was some macro uncertainty coming into the year post the election, the local Mexican elections and some geopolitical tension. We called out some of the pullback in Hispanic consumers in The U.

S. As part of underlying one of the factors in The U. S. Volume. That is also the same thing that's happening in Mexico, in Northern Mexico.

Some of the geopolitical tension and Hispanic pullback also affected Mexican, particularly the border region, which is very connected to The U. S. And so you've got that as well. And so there was a couple of impacts there coming. We had some pretty good bright spots on Coke Zero and De Valle and Santa Clara infused, but we're very focused going into Q2 on affordability with refillables and value, reinforcing Echio in Mexico, which is a campaign about the localness, the tens of thousands of jobs in Mexico that are about our Mexican system, and partnering closely with the fragmented trade.

So I think that it will come back. As John said, each quarter will have its own personality. I'm not sure what Q2 will end up with, but choppy would be a good start. We're confident in our guidance because we're confident in our strategy and the systems execution of that all weather strategy. And so I think we'll come back in Mexico and we'll pull it back.

Our next question comes from Lauren Lieberman from Barclays. Please go ahead. Your line is open.

Great. Thanks so much. So I want to talk a little bit more perhaps about the actions you're taking in The U. S. You called out consumer softness, particular demographics, but there was also some pretty pointed anti Coke, brand Coke sentiment out there.

So I was just curious, anything you could share or articulate on what the system is doing to kind of manage through that? So yes, that's the key question. Thanks.

Yes. Sure. I mean, clearly, with the key is agility and reprioritization, refocusing on some of the issues within the context of a strategy that has been working for us in The US marketplace. I mean, we have been very focused on driving the portfolio, and upping the execution with our bottling partners, and that's been a multi quarter, multi year successful strategy. So within the context of continuing that, we're going to make some adjustments to what's happened in the first quarter.

Just standing back a second and saying, what happened? There were a whole set of things came together. There's a shift in Easter, which I mentioned, Remexico and weakness in some of the consumer traffic, particularly Hispanics in traffic. And there was some very unfortunate videos circulating around, false, completely false, but they impact the business. That kind of hit us, particularly Coke Original, in the Southern States.

That is abating. But there were other things like cold weather and some of the calendar shifts. So there were some known factors, there's some unfortunate factors, and there's some stuff that we've got to focus on so that we can build on what went well. Coke Zero was still growing. Fairlife was still the number one brand to add retail dollars in the first quarter.

Topo Chico is going well. So we have a lot to build on. We focused on coming back on Coke Original. We're focusing in on winning back some of the Hispanic consumers, both from a consumer and a channel point of view and reinforcing some of our affordability options. I think we're going to, again, come back.

It might be choppy again going into Q2, but we feel we have a handle on the controllables and can get ourselves back on track to our winning strategy.

Our next question comes from Steve Powers from Deutsche Bank. Please go ahead. Your line is open.

Hey, great. Thanks. So James, as emphasized in the prepared remarks, the company's portfolio is made up a broad mix of both global and local brands. Given some of the shifts you've seen in demand since we were all together at CAGNY in February, could you talk maybe about how you're leaning more into some of those local brands in the current environment to the extent that you are? Or perhaps how you're executing or positioning differently some of your global brands to emphasize their local relevance?

Sure. And let me start by emphasizing the nature of the Coke system, globally. Obviously, we're iconically known for Coca Cola, the world's most global brand and a set of other global brands. But along with that kind of headline globalness, actually it's a very profoundly local business. The beverages in each country are largely made in that country by local employees using local inputs.

So The US system, for example, between the people we employ directly and the kind of the economic jobs that come through the supply chain in total ecosystem it's like 860,000 people and 58,000,000,000 of GDP. You go to Brazil, same, 575,000 people, dollars 15,000,000,000 of GDP. So this is a very profoundly local business as much as it looks like a global business. And so the paradox that gets managed productively from our point of view is how do we make global brands locally relevant. So it's not that we, in this current context, are switching from supporting and investing behind the global brands into just local brands.

No. The trick, the imperative, is to make the global brands locally relevant. And in the moments of geopolitical tension, one of the key strategies is to drive and reinforce the made in or made by. The fact that it's a local business, the factories down the road from you, your neighbors make the product, And this underlining of the localness of the production and the distribution and the workforce, plus reinforcing affordability, tends to be the key thing to do, particularly with brand Coca Cola in these moments. So I would not expect to see any major shifts in the makeup from a global brand or from a brand portfolio sense as we go forward.

It's about how you engage locally to reinforce the global nature of the brand, but the local physical presence of the brand, and that's what works in these circumstances. And it's a best practice that we know from around the world. It's not the first time it's had to be used. I'm sure it won't be the last. And so we think our business model is set up for an environment that can take a degree of disturbance because it's a very resilient business model.

Our next question comes from Filippo Folorni from Citi. Please go ahead. Your line is open.

Hi, good morning, everyone. I wanted to ask you about your comment about the global trade dynamics. You mentioned that your operations are primarily local. But what are the portion of your business where you're actually seeing the tariff implication impacting your business? Any sense if you can give us a sense of quantifying the potential impact?

I know aluminum is a component, but just any broader comment on the implication from the global trade environment? And then a follow-up to that in the sense of the responses to just a general anti American brand sentiment around the world from the global trade disputes. Are there any countries other than Mexico, which you called out, where you're seeing a little bit more of, I guess, negative sentiment towards American brands? Thank you.

Yeah. I'll take the second piece first because it's very much linked to my previous answer, which is about reinforcing localness and really making sure we're on affordability and getting that really working focused on driving the execution of that strategy. I'm not sure I would call out many other places. Obviously, there have been countries that have cycled through this problem over the last number of years. I'm sure there'll be more.

I think the predominant issues have been, as we've seen this quarter so far in The U. S. And in Mexico, a little bit perhaps in Europe, and some of the other countries, but one has to pass apart sentiment from behavior. And therefore, it's very important that we're not responding to sentiment, we're responding to behavior. Turning back to the tariff dynamic, as we called out in our release, we see it as manageable.

Obviously, we're not immune to global trade dynamics, and we're talking now, knowing what we know today, and we're mindful the environment can change around us. Again, as I said before, I think our local franchise structure is an advantage. Our exposure to trade, importexport, is not massive in the major countries, relative to our cost structure. So if we were to take, The US, for example, we are exposed on a couple of inputs like orange juice or some of the dispensing equipment we buy. Our bottling system is a bit exposed to some of the resin and aluminum.

But these are small pieces, relative to the total size. And even if you focus just in on those elements exclusively and think about what impact they may have on marketplace pricing, you don't just have to take into account the tariff. You've to take into account, well, what's happened to the price of the underlying commodity? What's happened to the exchange rate from where you're buying it? What's happened, to our hedging positions?

Because we have long term hedging positions. See, when you put all those things together and all the other levers across the cost elements of the business, that's how we and the bottling partners locally make the decisions on pricing. As it comes to The U. S, given all the things I talked about, both we in the bits where we operate directly and the bottlers locally, we're sticking to our current pricing plans for the year, knowing what we know today.

Our next question comes from Chris Carey from Wells Fargo. Please go ahead. Your line is open.

Hi, everybody. I wanted to ask a question about margins and specifically operating margins. I think this is the best operating margin delivery going back in our model, I suppose, the modern era. I don't know if they were a hundred years ago, but let's say these are very, very strong operating margins. To what level are such margins, sustainable?

And do you envision any caveats in the quarter? I know you talked about marketing timing. And then just, you know, connected to that, as you think about reigniting trends in some of your developed markets, North America, Europe, is there a scenario whereby you would need to use some of this margin strength to drive that? Or is the price pack and RGM strategy strong enough that you can still offer affordability without sacrificing the margin strength? Thank you.

Thanks, Chris. Yes, pleased with the way we came out of the first quarter on the operating margin front. There is an element of timing in there that has benefited us. I would kind of step out of the quarter point to our longer term algorithm and the embedded in that are our belief in our ability to expand margins over time. We have as you know, we have made a lot of progress over the last five or six years to get to where we are north of 30%, thirty one % as we go into the rest of this year.

And we expect to be able to do that with the levers we have. And those levers are not just on the cost containment and management front. As you mentioned in your second question, they also flow through to being able to manage a quality top line over time. And with regard to the investment thesis we have to enable both the top and the margin line to expand in line with our algorithm, a combination of the buildup over the last few years of a substantial spend behind our portfolio and the opportunity to leverage further productivity that we know we have over the next few years, we feel good about our ability to lean into growth, to invest behind the brands and to adapt as we need to. This quarter is a good example of a quarter where there's been a lot of adaptation required to deliver the numbers we have delivered for the here and now.

We're confident that we have sufficient ammunition to be able to do that for the next number of quarters and embedded in that an assumption that we'll probably have to pivot again in some parts of the world or other.

Our next question comes from Rob Ottenstein from Evercore. Please go ahead. Your line is open.

Great. Thank you very much. You mentioned in the opening comments that, Fairlife growth may moderate and Fairlife and Core Power have been a phenomenal success. So wondering if you can, one, about the trajectory of that business starting now with kind of service levels you have, when the capacity will come on, a sense of how much capacity is coming on and where you see that brand going forward, in terms of how big it could get? And then also how you're going to protect that brand, from an intellectual property perspective?

Sure. Thanks, Rob. Firstly, when we talk about the kind of the growth moderating of Fairlife, we're very much focusing on the percent growth. And I think there, you're starting to see the lore of big numbers. It's starting to get to be a very big business as it compounded very, very high double digit percent growth rates over the last number of years.

So it's a comment relative to percentages rather than total business size. If you look at, as I commented earlier, in the first quarter of this year, Fairlife again was the brand that added most retail dollars to the beverage industry on top of doing so last year. So the dollars, robustness and the size of the business continues to grow substantially. It's just a percentage compounding question as it moderates a little. The capacity will come on towards the, we've been increasing capacity in a number of different places, in some of the existing locations, and the major capacity uplift will happen at the end of the year, And it will be more than enough to see us through a good number of years and certainly we'll make it unconstrained to the extent we get into that towards the end of the year.

The long term opportunity, I think, is still very substantial. There's a lot I mean, it's it's got a lot of reasons behind its underlying growth in terms of the quality of product, the quality of the taste, the quality of the shelf life, the low the low or no lactose, the higher pro I mean, it's just a great product on many dimensions, which is part of what gives it a competitive advantage. It doesn't just depend on any one piece, the IP and the technology that comes with it for the filtration. So it is a very strong business. Obviously, as we get into lots of extra headroom in terms of capacity, we can redouble down on marketing, innovation and really continue to drive and expand that business.

So we've kept in the swim lanes of the core products at the moment because that's the most effective thing to do when you're running such growth rates and risk running out of capacity. Obviously, we haven't because we're continuing to grow in the first quarter, but we will get soon into unconstrained opportunity to continue to really drive this master brand forward.

Our next question comes from Andrea Teixeira from JPMorgan. Please go ahead. Your line is open.

Thank you, operator, and good morning, everyone. So I will start with James and then a clarification for John. First, James, can you comment on Europe, Middle East and Africa? You had the three percent growth in unit volume. And I'm assuming, of course, there's a lot of different dynamics given how large the region is.

But can you comment on the performance of Western Europe, which is a very large component of your profit pool as you exit the quarter? As some CPG as you probably have been following have been calling a deceleration in the consumer dynamics there as well. And then a clarification for John on the underlying results. I mean, it seems that the FX came in or the outlook is 100 basis points better, but seems that the underlying profit is assumed to be 100 basis points worse to make for the all in comparable EPS to be the same. Can you comment on what got sequentially worse?

So is that some and you're embedding some of the risk of more putative trading news or just conservatism despite the strong start of the year? Thank you.

Yes. Let me get the clarification out of the way, Andrea. Thanks for the question. It's early in the year. Currency is a function of what we know today and our hedge positions, and there's still a long way to go.

And so we feel it's prudent at this juncture to guide as we have done so. And we'll continue to update on the currency front as we go through the year.

Yes. And then on in the EMEA segment, yes, the volume growth was principally driven by the Eurasia markets, actually including some of the North African ones, but it was a strong performance particularly by the Eurasian market. The European business specifically, as is, say, calling out, it's a good profit pool. The volume performance was actually in line with previous quarters. There were mixed performances between the East and the West, maybe the West a little softer.

Again, Europe has some of the factors that we talked about in the case of The U. S. And Mexico, the shift of Easter, some of the macro uncertainties and the political tensions. But again, just more online, it was very similar to what they were tracking from last year in terms of volume performance. And there were some really strong bright spots in things like Coke Zero, Sprite Zero, Fuze Tea, Powerade, and some really good marketing, across not just Coke with sort of everyday tasty celebrations and things, but partnerships with Xbox and Fanta.

And as we look forward, we're really going to continue to focus on some of the RGM and affordability and the availability of cold drink equipment, going into what is for Europe the most important season, which is, the summer season.

Thank you. Our next question comes from Bonnie Herzog from Goldman Sachs. Please go ahead. Your line is open.

All right. Thank you. Good morning, everyone. I just had a quick question on the away from home channel and consumer. Curious to hear how your away from home business trended in the quarter, I guess, versus even Q4?

And then what's your outlook for the channel this year given the consumer, I guess? And with that in mind, how should we think about the impact on your top line and margins if the away from home channel slows? And I guess is that factored in your guidance? Thanks.

Okay. Are you talking just U. S. Or globally?

Honestly, globally. But if you want to give some color on The U. S. As well, that would be helpful. Thank you.

Yeah. Sure. Look, I I think let's let's start with The US. I mean, The US, actually, immediate consumption actually held up better than than than future consumption. Some of the issues, particularly some of the pullbacks in consumers, were more concentrated in the take home channel.

So if we were to look at the North American business, IC business actually did reasonably well, and the future consumption business is where the impact was most felt. Similarly, in Europe, the impact was more on the future consumption. The IC was actually growing, in Europe. I think that calls out the importance of affordability in the retail channels, and I think that's what it's kind of reflecting and that's notwithstanding some of the geopolitics, that's what it's reflecting and that's what it's calling for in the months going forward. And then if you kind of extract that to a global basis, both at home and away from home were both growing, globally speaking, with away from home growing slightly faster than at home.

Coca-Cola (KO) Q1 2025 Earnings Call Transcript

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