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F500-2023-100-Coca-Cola

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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<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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Coca-Cola, one of the world’s largest beverage companies, sells products that includes soft drinks, coffee, tea, sports drinks, juices, and water. The Coca-Cola system includes more than 200 independent bottlers worldwide. Coca-Cola dates to 1886, when the Atlanta pharmacist who formulated the syrup poured the first glass, which was sold for five cents.

Q2 2026

Q1 2026

Q4 2025

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 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'd 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 the 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 prepared remarks, we will take your questions. Please limit yourself to one question. Reenter the queue to ask follow-ups. I will turn the call over to Henrique.

Thanks, Todd. Good morning, everyone. We're off to a good start this year. We delivered strong first quarter results despite a complex external environment. I'd like to thank our system associates for their continued commitment. We're focusing on becoming more consumer-centric, remaining constructively discontent, and leveraging our digital capabilities to create enduring value. I'm confident we are well-positioned to deliver on our updated 2026 guidance. This morning, I will provide perspective on the global operating landscape before diving into our business performance. I will share how we are getting closer to consumers by operating with both granularity and scale. Finally, John will discuss our financial results in 2026 guidance. During the quarter, the external environment differed greatly across our market. While many consumers remain resilient, others are under pressure due to persistent inflation, greater macroeconomic uncertainty, and volatility driven by the conflict in the Middle East.

Against this backdrop, we operate in an expanding industry. We harness the power of our brands and our unmatched system reach to deliver 3% volume growth, and we grew volume across all segments. We also extended our streak of gaining overall value share for the past 20 consecutive quarters. Excluding the impact from six extra days in the quarter and the timing of concentrate shipments, organic revenue growth is on track with our full-year guidance. We also expanded comparable operating margin, which contributed to double-digit comparable earnings per share growth. We're always pushing ourselves to do even better and focusing on getting more from our market and more from our brands to drive balanced growth. Starting with North America. While we benefited from cycling and easier comparison versus the prior year, we delivered solid performance. We gained both volume and value share and grew volume, revenue, and profit.

The softness in price/mix can be attributed to Easter timing, coupled with unfavorable category mix from packaged water and constrained production capacity for Topo Chico and fairlife. We had broad-based strength across our total beverage portfolio. Trademark Coca-Cola, Fanta, Fresca, BODYARMOR, Powerade, Dasani, smartwater, and Minute Maid each grew volume. Trademark Coca-Cola also led the industry in retail sales growth. Innovation contributed strongly to revenue growth. For example, we're tapping into the consumer insights favoring all things cherry with Coca-Cola Cherry Float, Diet Coke Cherry, and Mr. Pibb. Powerade Power Water and the expansion of mini cans into the convenience retail channel both had strong performance. In Latin America, we gained value share and grew volume, revenue, and profit by focusing on fewer but more impactful initiatives. Volume growth in Brazil and Central America more than offset declines in Mexico and Argentina.

Across the region, to drive resilience, we are balancing relevance with scale and more closely integrating our marketing and commercial plan. For example, we activated Coca-Cola with the FIFA World Cup Trophy Tour and offered fans interactive experiences, music, games, and product sampling. Consumers accessed ticket giveaways by scanning our connected packaging, which allows us to gather insights to customize future offerings and content. In EMEA, we gained value share and grew volume across all operating units. We also grew both revenue and profit. In Europe, despite a cautious consumer environment, we gained value share. We are better linking our brands to key drinking occasions, including the Coke and meals campaign and passion points like the FIFA World Cup Trophy Tour and the English Premier League. Also, we are more granularly focusing on value offerings at attractive absolute price points. In the region of the Middle East, we gained value share.

While we grew volume for the quarter, our volume declined in March after the onset of the conflict. Our top priority is supporting the safety and well-being of our system associates and partnering closely with customers across the region. Lastly, in Africa, we are highlighting the localness of our system and sharpening our revenue management capabilities. For example, in Egypt and Algeria, our Ramadan campaign linked our brands to the meals occasion and emphasized refillable packaging. In Asia Pacific, we grew volume across all operating units despite cycling a strong comparison versus the prior year. We also grew revenue, but profit declined driven by commodities, headwinds in tea and coffee, and phasing of inventory costs. In ASEAN and South Pacific, despite a continued challenging external environment, we leaned into impactful marketing campaigns like the FIFA World Cup Trophy Tour and innovations like the Fanta Pineapple.

We also focused on refillable packaging and driving availability. In China, we activated our broad portfolio and stepped up execution in targeted channels during the Chinese New Year. In India, we drove affordability and linked our brands to consumer passion points, for instance, by connecting Thums Up with the T20 Cricket World Cup. We also expanded Sprite into more rural regions with content tailored to local languages. Lastly, in Japan, we gained value share by doubling down on consumer needs. We grew volume across our tea brands. With Georgia Coffee, we refined our package options to address different drinking occasions. In summary, we are adapting our execution as needed and focusing on improving performance across all dimensions of our strategic growth flywheel to recruit consumers and drive balanced long-term growth.

At CAGNY, I discussed how we are becoming even more consumer and customer-centric by applying the four I's, Insights, Innovation, Intimacy, and Integrated execution. Leveraging data and our digital capabilities are an unlock to be much more precise in how we serve consumers and customers. Here are a few examples of the four I's in action this quarter. In Europe, in select markets, approximately 60% of adult drinkers monitor caffeine intake in the evening. To capture incremental drinking occasions, we relaunched Coca-Cola Zero Zero, which offers zero sugar, zero caffeine, and zero calories with a new visual identity, expanding availability and activations tied to the evening meals occasion. Coca-Cola Zero Zero had a strong trial, positive repeat rates, and contributed to the trademark Coca-Cola growing volume in Europe. For Sprite, we recently launched our global campaign, It's That Fresh, which includes partnerships across music, basketball, fast food, and fashion.

We're also scaling and launching products tailored to local needs. In China, we launched Sprite Prebiotic and lifted and shifted Sprite + Tea from North America. In the region of the Middle East, to refresh consumers during Ramadan, we are linking Sprite Lemon Mint to local festivities and key drinking occasions. Globally, Sprite had strong volume growth. Finally, Fuze Tea, which is available in more than 80 markets, appeals to consumers who are looking for greater balance. While we execute Fuze Tea's Made of Fusion campaign globally to scale the brand, we deliver intimacy with a highly localized product portfolio tailored to taste profiles, tea types, and zero sugar options. In Turkey, for example, we accelerated growth by emphasizing peach, lemon, watermelon, and dragon fruit flavors, along with strong activation during Ramadan. Globally, Fuze Tea grew volume double digits.

It goes without saying that marketing and innovation do not come to life without commercial excellence, and our system is working towards mastering the fundamentals of integrated execution to drive customer value creation. In the past year, our system added more than 600,000 outlets, which increased outlet cover. To drive basket incidence, we increased our share of visible inventory and grew off-the-shelf points of interruption by double digits to capture impulse purchase. To drive transactions, our system also placed over 340,000 units of cold drink equipment. For the past eight years, we have been the leaders in customer value creation for our industry. Overall, greater focus across each element of the four I's resulted in both volume and value share gains, volume growth, and more weekly plus drinkers during the quarter.

In summary, it's early in the year, and we know the external environment remains complex, and it's quickly evolving. However, we continue to benefit from three unwavering beliefs. One, we are in great resilient industry. Two, we have a powerful portfolio, as demonstrated by our $32 billion-dollar brand. Three, our pervasive yet local system is a clear advantage. Moving forward, we'll continue to invest in these beliefs and leverage our all-weather strategies to achieve our objectives. With that, I'll turn the call over to John.

Thank you, Henrique. Good morning, everyone. During the quarter, we navigated market dynamics locally to deliver on our global objectives. We grew organic revenues 10%. Unit case growth was 3%. Concentrate sales were 5 points ahead of unit case sales as the impact of six additional days in the quarter was partially offset by the timing of concentrate shipments. Our price/mix growth of 2% was primarily driven by approximately 4 points of pricing actions, partially offset by 2 points of unfavorable mix, which was primarily driven by three items. One, Easter timing and category mix in North America. Two, stronger growth of value offerings from revenue growth management initiatives across Asia-Pacific. Three, geographic mix in Latin America.

Comparable gross margin declined approximately 30 basis points, stemming primarily from commodity pressures on our tea and coffee businesses, phasing of inventory costs, and timing of trade spend. Comparable operating margin increased approximately 70 basis points, as we've realized operating expense efficiencies while investing further behind our brands. Below the line, we benefited from a combination of higher equity income, lower net interest expense, and realized security gains in our captive insurance companies, which benefited comparable other income. Putting it all together, first quarter comparable EPS of $0.86 increased 18% year-over-year, helped by 3% currency tailwinds. Free cash flow is approximately $1.8 billion, an increase versus prior year. Our balance sheet remains strong with our net debt leverage of 1.6x EBITDA, which is below our targeted range of 2x-2.5x.

We're continuing to judiciously manage our balance sheet as we await a court decision related to our ongoing dispute with the IRS. We're confident in our long-term free cash flow generation and are prioritizing a capital allocation agenda that creates optionality to both reinvest in our business and return capital to share owners. Enabled by our all-weather strategy, we're on track to deliver on our updated 2026 guidance. We continue to expect organic revenue growth of 4%-5%. We now expect growth in comparable currency neutral earnings per share, excluding acquisitions and divestitures, of 6%-7%. Notwithstanding volatility in certain commodities like tea and coffee, we believe the overall impact on our cost basket is manageable at this time. However, uncertainty stemming from geopolitical tensions may cause this outlook to change.

Divestitures are expected to continue to be an approximate 4-point headwind to comparable net revenues and an approximate 1-point headwind to comparable earnings per share. This assumes the pending sale of Coca-Cola Beverages Africa, which is subject to regulatory approvals, closes during the second half of 2026. Based on current rates and our hedge positions, we now anticipate an approximate 1-point to 2-point currency tailwind to comparable net revenues, up from an approximate 1-point currency tailwind in our previous estimate. We continue to expect an approximate 3-point currency tailwind to comparable earnings per share for full year 2026. Based on the latest analysis of our global operations, our underlying effective tax rate for 2026 is now expected to be 19.9%, which is a 1-point reduction versus our previous estimate.

All in, we now expect comparable earnings per share growth of 8%-9% versus $3 in 2025, which is an increase from our prior estimate of 7%-8% due to the lower effective tax rate.

Finally, there are some considerations to keep in mind for 2026. As a reminder, due to a calendar shift, the fourth quarter will have six fewer days compared to the fourth quarter of 2025. We estimate the shift of Easter into the first quarter with a half a point benefit to first quarter volume. We also expect concentrate shipments to lag unit cases by a couple of points during the second quarter. Lastly, assuming the pending sale of Coca-Cola Beverages Africa closes during the second half of 2026, we see opportunity for more margin expansion in the latter half of this year. To sum it up, we remain focused on improving execution of our strategy and are well-positioned despite macro complexity and uncertainty.

We look to drive balanced top-line growth, margin expansion, cash generation, and returns over the long term, and we'll do so with continued strong partnership with our bottlers across the world. With that, operator, we are ready to take questions.

Ladies and gentlemen, to ask a question, you'll need to press star one on your telephone. To withdraw your question, press star one again. 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. Given the strength we saw in Q1 unit cases at the corporate level, but also price/mix that was more subdued than recent trends for the second straight quarter, I was hoping to get your view on the balance between volume versus price/mix in the remainder of the year, particularly in North America and Asia, where we saw some large variances in the quarter. On the volume front, just wondering, is consistent unit case growth reasonable in the balance of the year with the Easter help in Q1, some potential Ramadan impact? Just on pricing, how much of the lower growth in the last couple quarters is due to that affordability focus that you mentioned, John, which would seem more ongoing versus just some quarterly mix variances that are less ongoing? Thanks.

Thank you, Dara. It's great hearing from you. Look, first of all, we are really pleased with the results of the quarter. We believe it's a statement to everything that we continue to say that would be a year where we would have a top-line balanced algorithm, not only the quarter, but, you know, for the full year. More importantly, growing volume across our operating units, gaining share, and also topping, you know, the EPS growth as well, gives us the confidence that we are on the right track. What we will continue to see is a algo that will be balanced, as we have said in the past, it's not a coincidence that we actually got these in the quarter. We planned ahead of the curve. We invested accordingly. We started the year with a fast start as well.

What we're gonna see probably in the next two quarters, it variance around that balanced algorithm. At the end of the year, what you see is this balanced growth about volume and price/mix playing a balance algo. Whether it's gonna be three to two like we have here in the quarter or it's gonna be two to three variable during the different quarters, well, we're gonna see. We're managing all the levers to continue to deliver that. Pricing is embedded into this equation as well. We're going where the consumer is, right? Affordability continue to be part of the revenue growth management architecture that we have, not only in the U.S., but in different parts of the world as well.

The consumers that have, you know, pressure today are the low-income consumers, and we are really dialing up our affordability options, you know, to get closer to them. In North America, for instance, we went into bringing options not only on the single-serve, but on the multi-serve and the packs and helped us to continue to keep them in the franchise. In a nutshell, we believe we had a great start of the year. The [audio distortion] continue to be balanced. We have confidence that we're gonna deliver on the updated guidance to the year, and we'll continue to play on our RGM capabilities.

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

Great. Good morning, and thank you, everybody. I wanted to pivot a little bit to costs, if I could. John, you mentioned that you were fairly well-positioned despite the broader inflationary backdrop as you think about the year. You also acknowledged that could change. I guess as I think about the system broadly, I'd expect some of the pressures that, you know, we're all thinking about to be building a bit more acutely on your bottling partners already. Perhaps could you talk about how you're working with those bottling partners to address the burgeoning headwinds together and how the system overall is positioning to navigate, you know, what is likely going to be a net higher cost environment as you look through this year and potentially into next? Thanks.

Very important topic for all of us here and with our partners. You know, the environment you say is fluid. It's difficult at this stage to say exactly how it's gonna play out. As highlighted in our script, it's right now we estimate it's manageable at the company level, given we have less exposure. Our bottling partners have more exposure, particularly to aluminum and PET on the back of both the oil price impact and just the overall supply disruptions that are likely to affect us as we go through the year. You know, with the system we have, we have a playbook that we've had to use now for quite a few years on a range of disruptions.

It's, you know, it's a playbook that is working well for us. We have our RGM capabilities, as Henrique just pointed out. We have our cross-enterprise procurement group that works with the vast majority of our system partners on both resiliency and productivity initiatives. We have a number of, you know, playbooks, I would describe them at the cost management level. Yet, you know, each market is different. The way that we use these various levers will vary by market. We have confidence that the decision-making at the local level will allow us to navigate as well as we can through this. You know, as we said, the next few months are fluid, and it's important to keep agility at the center of this equation.

I guess just from the way that we've operated over the last three, four, five years on this front, gives us that confidence and it's important, I think, to be able to lead forward on a range of these topics as we look to Q2 and the rest of the year.

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

Great. Thanks. Good morning. I just have a question about trademark Coke. Henrique, you mentioned the relaunch of Zero Zero in Europe. I know that historically, I guess the system kind of struggled with how to balance time and attention and resource attributed to Diet Coke and Coke Zero concurrently, how to manage you know, and the decision to have more of a portfolio in no sugar options is a newer drive. How should we think about Zero Zero flowing into that? Maybe what are you doing from the center, from the KO level to make sure that the system kind of has the right balance to have a portfolio, you know, as you, as you make these moves and with Zero Zeros just being the latest example? Thanks.

Thank you, Lauren. Also good, great talking to you. First of all, we're very pleased also with the performance of Coca-Cola trademark overall in the quarter. We had volume growth that gives us the confidence that not only at the core of it, but all the options and variables that we bring in terms of innovation, different package sizes, are playing a big role to that. To your question regarding how actually bringing this to life in the marketplace in an effective way, we have to go back and start, you know, the conversation from years ago when we started to step up our RGM capabilities across the world, working in tandem with our bottlers. We have been doing better every day. You remember that the CAGNY was mentioning that one thing that plays in our advantage is the scale.

If we can actually gain a little bit, every day, you know, scale matters, and it helps us to get there. That mindset, along with the capabilities that we built over time to execute at the marketplace, a broader portfolio helped us a lot. There is one element that's key to this story. It's the connectivity to the consumer centricity approach that we have on everything that we put in the market now. The reason why Zero Zero Zero is working right now in Europe, because it started with the four I's that was mentioning before, with a big insight that at a certain time of the, you know, the day, the consumers want to load down, you know, reduce their caffeine intake, but they wanna stick to the flavors and the brands that they love.

By bringing that with the right packaging, the right pricing, right communication, we ended up getting a really good innovation and amplifying our reach to that consumer, which then in turn, and with our capabilities to execute better, you get a successful story. That it took years. It's important that also on the innovation discipline that we have developed over the years, we're bringing more insights and discipline on managing innovation and the success rates over time that gives us a better chance of success. This was the reason why we materialized that moving forward. We're seeing that not only with Zero Zero Zero. Since we're talking about Coca-Cola trademark, let me bring it to North America, where we had also opportunity to amplify our portfolio with the all cherry space, where we have Diet Coke Cherry.

If you haven't tried it's one of my favorites. We got Coca-Cola Zero Cherry Float, which is also great. We continue to expand that portfolio also with Mr. Pibb on the cherry space, which then connects with what I was saying before, more connectivity to the consumer centricity on the platform and executing better because we built the right capabilities moving forward.

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

I wanted to ask about gross margin. You know, this is, the first, you know, quarter in a few years where the underlying contribution to gross margin is a bit negative. I was wondering if you could just give us a sense of whether there are any timing elements associated with Q1, the in-inflation impacts that you might be seeing this quarter, which is really bringing that up 'cause you flagged coffee, you know, and tea. Then the general, you know, progression of the underlying contribution to gross margin as you would see it sort of going forward as the costs normalize. Then just one quick follow-up. John, I think you mentioned that the timing of CCBA could dictate, you know, margin progression in the back half.

You know, can you just dig a bit deeper into what you were referring to with that comment? Thanks so much.

Sure, Chris. Let me start with the overall gross margin profile. Q1 was somewhat anomalous given one particular item in APAC, the phasing of juice inventory costs, particularly in China. That's really is a one-off in the quarter. We have had commodity pressures in the tea and coffee space and that's going to continue somewhat through the year. At the overall level, if I take a step back and look at the underlying drivers of gross margin, for the full year, we don't see a big deviation from the playbook that we've had. We'll, you know, we see the revenue growth management architecture work as a very solid foundation to sustaining margins.

We continue to drive a lot of efficiency throughout the P&L. On the cost front, we'll be taking a number of measures to somewhat mitigate against some of the commodity pieces I talked about earlier, which I said are manageable. I don't see it as being an area that's going backwards, the gross margin trends when I take out that inventory issue I mentioned. We've got a lot of levers to work through and both as a company and as we alluded to earlier, as a system.

With regard to the CCBA piece, you know, it's a mechanical topic in terms of the impact it'll have to the margin profile of the company. If we take CCBA's numbers out, you know, a lower margin bottling business will automatically result in the overall company margin profile improving. We've highlighted, excuse me, we've highlighted that to be a second half of the year topic. For 2026 too, we've, we can say for, which is anomalous, relative to other years, FX will be a slight tailwind on the margin front too. Thanks.

Our next question comes from Robert Ottenstein from Evercore. Please go ahead, your line is open.

Great. Thank you very much. Congratulations on a great start to the year and your tenure. I was wondering if you could go into a little bit more detail on the underlying drivers of your performance in APAC, particularly China and India, two years in a row of very strong results. How sustainable is this, do you think, throughout the rest of this year and going forward? You know, what are you doing differently now than in the past to produce such strong results? Thank you.

Thank you, Robert. We in APAC, we're pleased with the volume growth across all operating units in there. We also pleased with the fact that we gained share overall in the region. There's still a lot of work to be done. The reason why I'm saying that is 'cause it's one region that we're developing definitely for the future. The big majority of the countries in there are still under development stage. Take aside like Japan, Korea, you know, Australia that are in a different stage. Everything else in a huge population in there, it's equally important that we not only deliver on the volume growth, but we build this industry for the future.

We're really focused, China and India, as you mentioned, on developing first the industry and the foundations of our business as we've learned in other parts of the world with the right price package architecture, playing where we believe we can win, and then continue to expand that forward. If we drill down a little bit about China, a few years ago, we took a stand and said, "We're not gonna play in every category. We're gonna play on a quality, volume, and categories that we believe will have the rights to win." That is now starting to pay back because we continue to lead on sparkling. We are gaining share, and we're also building with our partners in there a better capability on how to execute the core to then expand to more.

If you go to India, it's equally, you know, important to build this for the long term. Place where we're fortunate to also have local brands under the portfolio that were acquired a long time ago, composing a full portfolio that gives us the opportunity to be connected with the consumers in a very unique way in that place. We're still far away from getting our overall architecture on RGM and our development capabilities with our bottlers to the stage that we can actually call it a mature market. What you're gonna see also, we saw across the region, is actually in this quarter, if you go down, you see that our price/mix was -6 points in the region. The reason is exactly connected to what I was just saying before.

We're investing for the future. We have obviously in this quarter few elements, as John pointed out, that impacted the quarter. On the long term, the most important thing in this market is to invest for growth, build a system health, economic system that allows us to invest ahead of the curve and bring more consumers to the base. John?

Yeah, just let me, given the previous questions on margin, I have no doubt there'll be in focus on the margin numbers for the Q1. 2/3 of the margin compression in Q1 is related to the inventory item I mentioned. We also have in APAC, as we've discussed in previous calls, just a structural headwind given the geographic mix of the markets, Japan versus the more developing part of the equation. While we expect us to make progress in the course of the year on overall margin profile, it is a longer term play, as Henrique said, with the priority number one is getting the consumer base even more closer to us. More to come on that as we go through the year.

Our next question comes from Bonnie Herzog from Goldman Sachs. Please go ahead, your line is open.

All right, thank you. Good morning. I just had a question on your business in Asia. You know, your top line growth was good, but your op margins contracted almost 10 points. I noticed, and you touched on this a bit, but just hoping to hear a little more color on what drove this and, you know, really how we should think about profitability in that region going forward. Thanks.

Bonnie, it's just what I just said in the last question. You know, the margin profile in Q1 was impacted by a inventory item which is unique to Q1. We do have plans in the course of the year and indeed into next year to address this. You know, priority number one is the consumer franchise getting volume growth back into the range of markets that we have and investing appropriately behind them. As Henrique said, you know, APAC is a land of opportunity. We've both lived and worked there and appreciate that it doesn't happen overnight. We're very, you know, we're bullish on the way the year has started on the volume front.

You know, we were fortunate to have a global portfolio that will allow us to invest as we need to in the short term while we get the margin profile where it needs to be longer term.

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

Thank you. Good morning. Henrique and John, obviously the resilience has been nothing short of impressive, both in terms of like your ability to sustain volumes and pricing. You did call out that volumes understandably turned negative in March in the Middle East. I was just hoping to see if you can give us some sort of color for EMEA, and obviously from two standpoints, right? The conflict, and also the fact that as you go into a situation where inflation will be more pervasive in the region and broadly in EMEA for obviously fuel, for gasoline prices, and also for the bottlers to be able to pass through. I was hoping to see if you can help us with that.

In terms of the U.S., we saw fairlife, and again, you had explained to us, in terms of the category and share category deceleration, competition in the category, anything you can help us with as you pass, you know, more capacity into the system this year? Thank you.

Sure. Good. Thank you, Andrea, for the question. Look, in the EMEA as a whole, right? Like, that encompasses Europe, Eurasian and Middle East and Africa, we had a good overall performance. We grew volume and profit and continued to gain share, which was great results. If you dial a little bit the conversation on Eurasian, Middle East, as you wanted to know. Yes, we grew volume actually in the quarter, and March was the month that got more impacted by the conflict, and we continue to work with our partners to support, number one, the safety of our associates and the business continuity.

It is a playbook that everyone in the region has learned from past, you know, situations similar to this, and try to focus on what we can control and continue to thrive in being closer to the consumer. If you look at the outlook from the region itself, we are confident that we can manage, you know, the complexity in there. We'll continue to be focused on the balanced growth, which is important for us, as we said, not only in the region but globally, having volume being a key driver of this balanced growth. It's gonna be a composition that in the year we will leverage the whole more than ever, you know, in a world that's gonna be very dynamic.

So far, we believe that we have everything in place to continue to thrive there, and we're gonna continue to pivot with a playbook that has worked for us in years in the region. Since you asked, I'll give chance to answer also the fairlife here. It's fantastic brand, as you know. We're excited that as planned, the Webster capacity, it's gonna start to get online in the Q2, and we're gonna ramp up through the year. That's the latest on that, and we very excited also about the fact that we investing for the next chapter of growth there on the business itself.

Our next question comes from Filippo Falorni from Citi. Please go ahead, your line is open.

Hi. Good morning, everyone. I was hoping you can touch a bit more on the North America business. Solid performance on volume to start the year. You have the FIFA World Cup coming in couple of months. Just any thoughts on, like, potential opportunities there in terms of accelerating volumes and activation at the brand level? Obviously both for the U.S. and Canada, but also if you can touch on Mexico and the opportunity there, and maybe even give some color on, like, the performance of the business post the sugar tax in Mexico. Thank you.

Okay, Filippo. Look, North America, we're definitely very happy with where we landed on the volume growth. You know, 4%. It indicates that the strategy and also how we're showing up as a system, it's in the right place. We had a broad-based growth across different categories and brands, which is ensuring that, you know, we're executing with the right impact, right in the marketplace. FIFA World Cup, look, we actually started to execute that in Q1, which was another great decision by our operators with the bottlers in North America and Mexico that you mentioned as well, and Latin America. Both of these regions decided to go head on and start the activation of FIFA World Cup in the Q1. Now in Q2 is when we're gonna realize that in there.

I wanna bring a point here that it's also very interesting in this execution of the World Cup for us, and you heard me at CAGNY saying as well, that we're not only getting closer to the consumer, but bringing digital at the core of everything that we do. If you find our packages in the market now in U.S., and you're gonna see Mexico as well, you can actually interact with that package with the right content. Actually, in U.S., we do that for the 250 celebration as well.

That interactivity, you get the content of the campaign, you also engage the consumer on a reward experience, and you have a chance to connect even with the retailer on transforming engagement of the consumers all the way down to transactions, which is what we believe we should continue to thrive in our campaigns and bringing the whole digital space into doing better what we do best. That's about North America. Since you asked about Mexico, let me, you know, talk a little bit about what we're doing there. As you know, we had the sugar tax at the beginning of the year. That had an impact. The system has a strong resilience in the playbook on how to deal with these situations. It happened in 2014 as well.

The impact is there. With the right RGM capability and granularity, as I was explaining, using everything that we already had, plus the personalization connections with consumers and our customers, we continue to do better than we expected. Still having, you know, Mexico playing a geo-mix effect in the overall price/mix volatile. Over time, during the year, we're gonna continue to dial up the campaigns, our local and global brands, which is a strength that we have also in the region, to continue to engage the consumer and to overcome, you know, the impact that we have on taxes in there. Since we're talking to Mexico, I think I should say as well that Brazil and the Central America actually offset the impact of volume declines in Mexico and Argentina.

Our next question comes from Peter Galbo from Bank of America. Please go ahead, your line is open.

Hey, guys. Good morning. thanks for the question. I wanted to pivot to the away-from-home business a bit. I know that you've had maybe a more offensive-minded effort there recently with the And a Coke campaign in the U.S. John, I think you mentioned the Coke and a meal in Europe campaign. Obviously a pretty big win in the hospitality space that we've heard about. Maybe you can just, you know, dig in a little bit more on kind of the double down efforts on the away-from-home channel, just given it's a part of the business we often don't hear a lot about. Thanks very much.

Yes. Great, Peter. First of all, globally, we're seeing a channel-wise, not a significant change, but a better performance on away-from-home than at home. In the U.S. was actually the opposite in the quarter. Nevertheless, the strategy remains the same, which is connecting the consumer on every occasion and need states that we have. What we're doing actually, very consistent in the food service in North America, is to work together with our customers on understanding in detail and granularity, their consumer, you know, profiles, and how we can actually bring not only our core offerings, but other choices that they started to innovate within that category. What we're seeing is that there is an opportunity to continue to expand the beverage occasions.

We think that being the preferred partners for the majority of, you know, the food service partners, we believe that we have a great runway actually to continue to develop that category and continue to thrive. Our focus is always on driving more incidents on that channel. To that element, everything that I said, that we're building the right capabilities in in-house with RGM and being closer to consumer helps us to continue to thrive in there. More to come.

Our next question comes from Michael Lavery from Piper Sandler. Please go ahead, your line is open.

Thank you. Good morning. Henrique, I wanted to just maybe zoom out a little bit and see if there's any new learnings in the first few weeks just seeing the company through the CEO lens. It, it doesn't have to be marketing specific. But I know you've talked about a step change in recruitment, especially converting younger drinkers at the point of sale. Just curious if you could maybe lay out a little bit of some of the changes you might anticipate to the marketing approach to improve that, and how quickly it might evolve.

Thank you, Michael. Look, it's been very smooth transition. You heard me at CAGNY, there's so many things that we're doing right over the last few years that I would not be the one to touch that and change the trajectory, because I fully believe in that. It's very important to remind what those beliefs were. You know, the number one, it's this belief that we are in the best industry to be in. Not only ourselves here at the top of the house on the company, but our bottlers share the same belief. They continue to invest accordingly. That's very important. The number two is what I said also at CAGNY, this unrivaled portfolio that we have, the $32 billion brands, bringing more to the family and making the billion-dollar brands become multi-billion over time.

That's where I believe the consumer centricity in bringing the four I's can help us to actually even do better over time. The third one was about this unmatched system reach, is with our bottlers, we know we have very pervasive distribution system. If we dial this up with what I mentioned before, bringing digital to do better what we already do best, scale will help us to actually unlock further growth and bigger headroom on how to bring more consumers to the base, how to bring more value to our customers, and how to work as a system in a more integrated way.

That's what we're focusing on, but a lot of that continues to be very consistent of the way we have been working with our bottlers, our partners. And you can expect that that's gonna be the way moving forward as well.

Our next question comes from Kaumil Gajrawala from Jefferies. Please go ahead, your line is open.

Hey, everyone. Good morning. If we can dig in a little bit on the United States. and Peter's question on the away-from-home, and specifically there's, you know, for the first time, this emergence of what seems like an entirely new channel with the Dutch Bros and 7 Brew of the world and these sorts of things. McDonald's is obviously doing the same sort of thing. I'm just curious, are you evolving your food service strategy to figure out how to participate better in, you know, this evolution of retail? Maybe if you wanna talk a little bit more about the McDonald's relationship.

Of course, the news of them using Red Bull is, I think, surprising to many of us outsiders given the depth of your relationship over such a long period of time. Just curious how you're thinking about that as well. Thanks.

Coca-Cola (KO) Q1 2026 Earnings Call Transcript

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