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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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<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’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

coca-cola

At this time, I'd like to welcome everyone to The Coca Cola Company's fourth quarter and full year twenty twenty four 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 growth and operating margins.

This call may contain forward looking statements, including statements concerning long term earnings objectives, which should be considered in conjunction with cautionary statements contained in our earnings release and in the company's periodic SEC 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. We are pleased with our 2024 results, which include volume growth, robust organic revenue growth and comparable growth and operating margin expansion. This led to a 7% comparable earnings per share growth despite nearly double digit currency headwinds and the impact of bottler refranchising. These results reflect the continuation of delivering on our long term commitments. Through our all weather strategy, we've demonstrated we have agility to navigate what comes at us and continue to grow comparable earnings per share.

Given the strong momentum of our business, we're confident we can deliver on our 2025 guidance and longer term objectives. With that as context, I'll next provide perspective on our industry and review our business performance across our segments in the fourth quarter. Then I'll explain how we're executing our strategy by amplifying what is working and fine tuning where needed. John will end by discussing our financial results in more detail and providing an overview of our 2025 guidance. One of our fundamental strengths is that we operate in a great industry with steady growth.

No matter how you slice it by consumer, by customer, by beverage category, by geography, we have vast opportunities ahead of us. During the quarter, we leveraged the power of our portfolio and the local expertise of our franchise system to capitalize on these opportunities. We won overall share and have broad based share gains across our global beverage categories. We're making progress across our total beverage portfolio, delivering ongoing growth in sparkling soft drinks as well as momentum in other categories like value added dairy and tea, which are reaching global scale while remaining tailored to local consumer needs. And we're continuing to strengthen alignment across our system and we believe our global franchise model, which operates locally, is an advantage to drive long term balanced growth.

During the quarter, while our operating environment remained dynamic, consumer demand held up well and our industry remained strong. Starting in Asia Pacific. In ASEAN and South Pacific, we grew volume during the quarter and benefited from successful integrated marketing campaigns like Foodmarks, which was activated in over 7,000 outlets and led to trademark Coca Cola volume growth. Our system also drove affordability by increasing refillable offerings and focusing on attractive price points. Refillable offerings contributed to approximately one third of ASEAN and South Pacific volume growth in 2024.

In China, despite continued macro headwinds, we grew volume during the quarter and while early, we're seeing improved trends across our business. Trademark Coca Cola continues to gain share and Sprite, Fanta and Minute Maid each improved volume performance. Our system is stepping up integrated execution in 2024 by accelerating placement of cold drink equipment and activating integrated marketing campaigns in key channels. In Japan and South Korea, we grew volume during the quarter. Innovation was a strong contributor to growth led by resurgence of Biotaka and a number of other brands.

We're continuing to benefit from steady performance from trademark Coca Cola and stepped up integrated execution in key channels. In India, our business rebounded nicely during the quarter and we grew volume. We recruited consumers with innovative marketing campaigns that link Coca Cola with music, Sprite with travel and Thumbs Up with movies. And MASA is now our thirtieth billion dollars brand. In 2024, our system added approximately 440,000 outlets to our digital customer platforms in India, which provides more opportunities to better tailor our product, price and packaging offerings.

Moving on to EMEA. In Europe, volume declined during the quarter with mixed performance across Western and Eastern markets. Despite volume pressure, we grew both revenue and profits. We're engaging consumers with experiential marketing campaigns like The World Needs More Santas for trademark Coca Cola and by linking our brands to new occasions like Sprite with Spicy Meals. Also, innovation velocities and multi year innovation success rates both performed well in 2024.

We're seeing good traction on FuzeT, Powerade Zero, Jack and Coke, and Absolute and Sprite. In Eurasia and Middle East, despite a confluence of continued macro headwinds, we returned to volume growth during the quarter. We're emphasizing the localness of our business and seeing positive responses. For example, the Made In, Made Buy campaign in Turkiye led to strong volume growth for trademark Coca Cola. Fuze Tea also had good momentum across the region.

Our system is driving affordability and stepping up integrated execution by increasing cooler placement and share of visible inventory during the year. In Africa, volume declined during the quarter, driven primarily by pressure in North Africa and Nigeria and partially offset by strong volume momentum in South Africa. We took action during the quarter by adjusting our pack price architecture to further drive affordability. Our system is investing for the long term, adding refillable offerings, placing more cold drink equipment and increasing manufacturing capacity in 2024. In Latin America, despite some macroeconomic pressures, we grew volume, revenue and profit during the quarter.

We drove trial and recruited weekly plus drinkers for trademark Coca Cola in 2024 by better linking the brand to the meal occasion. Also, to drive balanced top line growth, our system focused on increasing single serve offerings. Over 90% of our fragmented trade customers are now on our system's digital customer platforms, allowing for greater opportunity to tailor offerings to customers' individual needs. Lastly, in North America, we grew both transactions and volume and had robust top line and profit growth during the quarter. Trademark Coca Cola and Fairlife remain leaders in at home retail sales growth.

Sparkling Flavors gained share during the quarter due to successful limited time innovations like Sprite Winter Spice Cranberry and Fanta Beetlejuice and stepped up integrated execution focused on increased point of sale messaging and increased share of visible inventory. Consumers responded well to value messaging in away from home channels, and we increased distribution of key affordable and premium offerings and benefited from product, package and channel mix in the quarter. To sum everything up, we have good momentum in our business. We're responding to market dynamics locally to execute on our global objectives. While we're delivering on our near term commitments, we're also investing to improve execution, build capabilities and get more granular across our strategic growth flywheel.

Our networked marketing model is integrating product, digital, live and retail experiences, and we're harnessing passion points to connect with consumers in more personalized ways. One great example, Fanta Halloween was our first ever global Halloween activation and was scaled to nearly 50 markets. Partnering with Warner Brothers Pictures, we created a limited time Fanta Beetlejuice haunted apple flavor. Consumers scanned packages to access personalized experiences and we replicated the Beetlejuice Afterlife train taking over train stations, trams and metros. The campaign was activated in store with our largest customers and contributed to Sparkling Flavor's share gain during the quarter.

Our culture increasingly emphasized with acting boldly, learning and scaling successes. This year, for the first time, our Coca Cola Christmas ad was created with generative AI, combining emerging technology with human creativity, which allowed us to produce the ad faster and at a lower cost. The power of emerging technologies like generative AI are still at early stages, and we will continue to lead and iterate our approach. We're seeing tangible results from our marketing transformation. Over the past three years, trademark Coca Cola's retail sales have increased approximately $40,000,000,000 According to Time Magazine, Coca Cola, Minute Maid, and Fairlife were named world's best brands in their respective beverage categories in 2024.

While we're building capabilities in marketing, we're also focusing on innovation that prioritizes bigger and bolder bets. Each of our innovations has a clear objective. Sometimes we innovate to create short term buzz like Coke and Oreo or Sprite Winter Spice Cranberry. In other instances, we innovate for lasting impact. This year, we focused on sustaining investments behind key innovations to improve multi year success rates and drive greater impact.

This is paying off as Fuse Pea grew retail value three times faster than the tea category, Topo Chico Suborders continued its momentum and Minute Maid Zero Sugar realized strong growth. In 2024, innovation contributed strongly to revenue growth and our innovation success rates improved versus prior year. We're excited about our innovation pipeline for 2025. Moving across our top line flywheel, our system is investing heavily in digital capabilities and sticking to the fundamentals of commercial excellence to accelerate consumer recruitment, increase consumption and win

market. Ensuring product availability is one of our system's greatest strengths, yet we still have tremendous opportunity. While our system improved share of Visible inventory in 2024 and our brands are found in 33,000,000 outlets, there remains ample headroom to increase outlet coverage, reduce out of stocks and better tail our offerings with the right placements. Basket incidents is another opportunity. Winning just one point of global beverage incidents translates into over 40,000,000,000 in additional retail sales.

To drive basket incidents, our system is focused on better activating integrated marketing campaigns in key channels, increasing point of sale displays, and winning impulse loans outside the traditional beverage aisle. Finally, cold drink equipment is one of the strongest consumption drivers in our systems toolbox, With approximately 14,000,000 units of cold drink equipment present in our approximately 33,000,000 customer outlets, we have significant opportunity to drive consumption by placing more cold drink equipment. In 2024, our system invested to add nearly 600,000 coolers. Strong commercial execution is enabled by our revenue growth management capabilities, which fuel both top line growth and margin expansion. We're driving affordability and premiumization across our total beverage portfolio.

The strong elasticities we're realizing today are a testament to the progress we're making in this area. By focusing on availability, basket incidents and cold drink equipment, coupled with great marketing, innovation and revenue growth management, our system recruited weekly cost drinkers, grew volume and won share in 2024. While we've made steady progress executing our all weather strategy in 2024, we're operating with the mindset that we're only just getting started. As we turn the page to 2025, we anticipate the year will bring both opportunities and challenges. While we expect the external environment will be dynamic, several underpinnings remain constant.

One, we operate in a great industry. Two, we have many opportunities available to us and we are primed to capture these and deliver sustained performance. Three, our powerful portfolio of brands, pervasive distribution system and the unwavering dedication of our system employees are clear advantages. Next Tuesday at CAGNY, I look forward to sharing more about how we're leading to deliver results in all types of backdrops and I encourage everyone to listen. With that, I'll turn the call over to John.

Thank you, James, and good morning, everyone. We closed the year with strong fourth quarter results. And as James said earlier, we delivered 7% comparable earnings per share growth in 2024 on top of 6% average comparable earnings per share growth over the prior five years. During the fourth quarter, we grew organic revenues 14%. Unit case growth was 2%, which is in line with our multi year trend.

Concentrate sales grew three points ahead of unit cases, driven primarily by two additional days in the quarter and the timing of concentrate shipments. Our pricemix growth of 9% was driven by two items. Approximately eight points of pricing split somewhat evenly between normal pricing actions across our markets and intense inflationary pricing in a handful of markets experiencing currency devaluations at approximately one point of favorable mix. Excluding the impact of intense inflationary pricing, organic revenue growth was above our long term growth algorithm. Comparable gross margin was up approximately 160 basis points and comparable operating margin was up approximately 80 basis points.

Bottle refranchising had a greater benefit to comparable gross margin and currency headwinds had a larger impact to comparable operating margin. Putting it all together, fourth quarter comparable EPS

$0.55 was up 12% year over year despite 11% currency headwinds and four percent headwinds from Rotter refranchising. Free cash flow excluding the IRS tax litigation deposit was $10,800,000,000 in 2024, an increase of 11% versus prior year. This increase was primarily driven by strong business performance and timing of working capital initiatives, partially offset by higher capital expenditures and higher tax payments. In 2024, adjusted free cash flow conversion was 93%, which is within our long term targeted range. Our balance sheet is strong and our net debt leverage of 1.8 times EBITDA is below our targeted range of two to 2.5 times.

If you include our latest estimate of $6,200,000,000 related to our Fairlife contingent consideration payment, our expected net debt leverage would be at the low end of our target range. As James mentioned, 2025 will likely bring both opportunities and challenges. Enabled by our all weather strategy, we have demonstrated our ability to deliver on our objectives and drive long term growth. Our 2025 guidance builds on the enduring momentum of our business. We expect organic revenue growth of 5% to 6% and comparable currency neutral earnings per share growth of 8% to 10%, both of which reflected delivery at the high end of our long term growth algorithm.

We continue to focus on driving balanced volume and price mix and anticipate intense inflationary pricing will play a smaller role in 2025 and will moderate throughout the year. Bottle refranchising is expected to be a slight headwind to comparable net revenues and comparable earnings per share as we cycle the impact of bottle refranchising in 2024. We continue to invest appropriately behind our brands while also driving productivity across all areas of marketing. Next week at CAGNY, we'll discuss further how our marketing transformation and enhanced resource allocation capabilities give us confidence in our ability to continue to drive more productivity. And we expect interest expense to be elevated versus prior year.

We believe the step up is manageable and we're not expecting significant leverage or deleverage below the line. Based on current rates and our hedge positions, we anticipate an approximate three to four point currency headwind to comparable net revenues and an approximate six to seven point currency headwind to comparable earnings per share for full year 2025. Our underlying effective tax rate for 2025 is expected to increase to 20.8% which is driven primarily by the impact of several countries enacting the global minimum tax regulations. All in, we expect comparable earnings per share growth of 2% to 3% versus $2.88 in 2024. Excluding the Fairlife contingent consideration payment, we expect to generate approximately $9,500,000,000 of free cash flow in 2025 through approximately $11,700,000,000 in cash from operations less approximately $2,200,000,000 in capital investments.

Included in this guidance are two items to highlight. One, a $1,200,000,000 transition tax payment, an increase of approximately $240,000,000 versus 2024. This is the final year that we will make a payment related to the Tax Cuts and Jobs Act of 2017. Number two, we expect that part of the timing of working capital initiatives that benefited 2024 free cash flow will reverse and impact 2025 free cash flow. Driven by our underlying cash flow generation, we have flexibility to invest in our business and return capital to share owners.

Significant portion of our expected capital investment is to build capacity for Fairlife and to continue to invest in our system in India and Africa. With respect to acquisitions and divestitures, we're making good progress on our agenda. Since 02/2006, we've added $9,000,000,000 brands via acquisition. Importantly, only three of these brands were billion dollar brands at the time of acquisition demonstrating progress in scaling acquisitions. In 2024, we realized $3,500,000,000 in gross proceeds from refranchising.

Bottling investments as a percent of consolidated net revenue is 13% down from 52% in 2015. Return on invested capital is up six points over the same time. Related to capital return, we have an unwavering priority to grow our dividend as we've done for sixty two consecutive years. Our dividend is supported by our long term free cash flow generation. In 2024, dividends paid as a percent of adjusted free cash flow was 73%.

On share repurchases, we've typically repurchased shares to offset any dilution from the exercise of stock options by employees in the given year. Our capital allocation policy prioritizes agility. And we're committed to driving the long term health of our business and creating value for our stakeholders. There are some considerations to keep in mind for 2025. We expect bottler refranchising to have a greater impact to comparable net revenues and comparable earnings per share during the first quarter as we cycle the impact of refranchising The Philippines, which closed during the first quarter of twenty twenty four.

We expect the productivity benefits that I previously discussed to have a larger impact during the latter half of twenty twenty five. Due to our reporting calendar, there will be two less days in the first quarter and one additional day in the fourth quarter. So in summary, we're successfully executing our all weather strategy to deliver on our objectives. Our system remains incredibly focused and motivated. We will continue to invest with discipline and believe we're well positioned to drive quality top line growth and deliver continued margin expansion.

A hallmark of our company since its inception has been our ability to create enduring value over time and we expect to continue to do so. With that, operator, we are ready to take questions.

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

Great. Thanks. Good morning, everyone. The business seemed to buck the trend that we've seen from many other Staples companies between strong 4Q results and the conviction in upper end of the sales algorithm for 2025. So I'd just be curious to hear more from you about your perspective about the consumer environment globally, particularly in developed markets where U.

S. Sentiment has been so mixed, Western Europe, there have been some flags on certain markets lagging. So curious your kind of global perspective on the consumer environment? Thanks so much.

Sure. Morning, Lauren. I think the overall consumer environment is pretty, stable in the sense that there's good economic growth on a broad based view around the world and that includes both the developed and the emerging markets. If I look at the developed markets, whilst it is absolutely true that the lower income segments in The U. S.

And perhaps more even more notably in Europe and Western Europe are under disposable income pressure and have been in 2024 and quite possibly will continue for some part of '25. The rest of the consumer base is actually still gaining in terms of disposable income and is spending, maybe spending a little more in The US, North America than Western Europe, whether there was more direction to saving, but a pretty strong sustained demand level across the developed world. And similarly in the emerging markets, yes, it's a little more volatile in ups and downs, but in aggregate, again, you see pretty robust or enduring consumer demand. In the quarter, we saw India rebound, we saw China get a bit better, The Middle East got a bit better that still doing pretty well in Latin America, a little softer perhaps in Africa. But overall, we see continued robustness and growth across consumers that we need to respond to with all the strategies that we have.

It's not going to be a one size fits all. We need to focus on delivering from them with the marketing and the innovation and the execution and particularly the affordability and premiumization. So the demand is there. And I think what you see in the fourth quarter has been added to it, our ability to focus on what we have to do to get a good result for the company and that's what we're confident in continuing for 2025.

Our next question comes from Dara Mohsenian from Morgan Stanley. Please go ahead. Your line is open.

5% to 6% organic revenue growth forecast for 2025, can you just give us a bit more granularity on the balance between volume that you see as well as price and mix? And just wanted to focus on your plans on the pricing component in 2025. You mentioned there's some stress on the low end consumer in a few markets after inflation in recent years. But clearly with your Q4 results, the overall consumer seems to be handling pricing from Coke well. There's also FX pressures.

So there's just a number of volatile external circumstances. Just how does that impact how you manage pricing in 2025 and how that might be different than a typical year either on the pricing or the mix front? Thanks.

Yes, sure. Good morning, Look, I think let's start from the top level down on '25. Our long term algorithm we called out, we want to be at the top end, so five to six and expect in the long term a balance between volume and price, so let's say two to three of each. It seems more likely in 2025 there'll be a little more price and a little less volume, but there will be volume growth and obviously there'll be price growth, but perhaps a little weighted a little more to price than volume than a long term year, but still solid continued, the volume momentum which has been an enduring feature of what we have pursued over the last number of years, which is not just keeping people in our franchise, but growing our franchise for the long term. And so that's the headline of what we expect to see.

And I would say like if you take 2024 where you've got a kind of a headline price mix, of about 10%, half of that is from these high inflation countries, which we expected largely drop out in 2025. So another way of thinking of it is really ex high inflation, you had about 5% price mix in 2024 and you're going to see that continue to moderate as inflation has moderated, down to a kind of a slightly lower number in 2025 and largely the drop out of these high inflation countries in 2025, if that helped give you a factor. And so we feel we've got a level of actual pricing in the marketplace that is proportionate and reasonable relative to inflation and relative to what we can support through the actions we're taking across the whole flywheel from the marketing, the innovation, the execution, the RGM through affordability and the premiumization and all the commercial execution.

Our next question comes from Brian Spillane from Bank of America. Please go ahead. Your line is

open. Thanks, operator. Good morning, everyone. Maybe just to pick up on Dara's question. Maybe John, can you and James, can you give us just two perspectives?

One, as we think about the organic sales growth for 2025, just given

of the moving parts we saw in 4Q, just how should we kind of think about it from a phasing perspective? Does the I guess, does the pricing from some of the emerging markets or inflationary countries kind of fade as we move through the year? So that's the first one. And the second, maybe if you could also just give us a context of five percent to 6% organic sales growth and how that stands against kind of industry growth, if you can give us some perspective on kind of what the exit rate was for the industry and maybe what you're thinking about for next year? And then just last one, I forgot to call we should have called this out last time, but the hold music is amazing.

It was a real nice change and I just want to make sure that that gets recognized. Robin, doing her job.

Thanks, Brian. Well, I'm glad the last comment was out of question. So it's passed on. Yeah, on the guidance for the, for the year, well, I'm not going to get into a lot of commentary in, inside the quarter. We do have two less days in the quarter.

Coming out at 24, you have decent momentum going into it. On the, on the pricing front, some inflation in the from the more intense markets in Q1, which we expect to moderate throughout the year. And, on the volume phasing itself, I think we're, you know, we're looking at, you know, there's a Q2 I'd say is probably the more challenging uphill of the quarters ahead. As I say, on the intense inflationary markets that we've highlighted in '24, as James said, affecting the headline numbers, we see that moderating throughout the year.

Do you want me to say that? Yeah. On the industry growth, if I I mean clearly we are planning to and expect and aim to gain share. So to the extent that we end up growing 5% to 6% then that is based on the idea that the industry is growing at a more normalized level. If you look at the long term growth rate of the industry, you tend to get a 4% or 5%.

So we are absolutely expecting the industry growth rate to also moderate, which is kind of what was happening in Q4, the underlying rate if you take out the high inflation countries is kind of six or seven in the fourth quarter, and we were gaining share. So again, it's very consistent with this idea we've been talking about, which is as inflation moderates, we see a normalization of both the industry growth rate, our growth rate, with us being the long term winner in the industry, with ongoing robust industry growth.

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

Hey guys, good morning. Thank you. I guess moving down the income statement, your outlook seems to imply some pretty strong underlying margin and profitability progress just net of the FX pressures and the higher tax rate. So can you talk about some of the key drivers there? And then, I guess similar to Brian's question, any timing considerations we should keep in mind over the course of the year beyond just the number of days in each fiscal quarter?

Sure. Maybe I'll start and then John will weigh in on some of these considerations. Firstly, yes, there is some implied margin expansion in 2025 coming from some of the market expenditure and some of the SG and A. This is the culmination of many of the programs we've been putting in place over the last number to continue not just to get effectiveness but to get efficiency. And the simplest example is the marketing transformation where it is helping us continue take the Christmas ad in Q4 last year, which we made regenerative AI as a small example, it was both quicker and cheaper to make the ad.

And so what you're seeing come into 2025 is some of the fruition of work that's been going on across the organization, including the marketing transformation that is producing some productivity in 2025. But it is important to say that we are not backing off bias to investor growth. This is not less marketing, this is more productive spend. And so our mode of operation going into the year will continue to be, we believe there will be growth in 2025 in the industry. We are going to invest from the marketing all the way down through the system into the commercial levers in order to continue to drive growth as we find pluses and minuses around the world, of course, we will adapt and be flexible, but this is about leaning into growth, continuing to invest to drive the franchise and being able to capture some of the benefits of the transformational work that's been going on over the number of years.

John, do you want to add some considerations?

Sure. Let me go up a little bit and talk about gross margin, Steve, so, I can provide some additional commentary. We're not building an enormous amount of expansion on the gross margin front into our guidance. We do expect to continue to have some underlying, expansion. But as you alluded to the FX, that's to a large degree maybe offset by currency.

You know, it's we've anticipated for 'twenty five, there's quite a lot of moving parts inside of the gross margin equation. So we've, as I said, we've not for guidance purposes built in an enormous amount of expansion. Commodities will be in the low single digit range overall. Some pressures on the agriculturals, particularly juice and coffee that are a big part of our base. We have the usual set of levers that we'll deploy to, to cover those.

But for, as I say, for guidance purposes, you can assume modest, modest expansion at the gross margin line. And as James said, we've been anticipating for quite some time the '25 environment and the sort of the more for same, more for less mantra is certainly alive and well.

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

Hi. Good morning, everyone. I wanted to ask you your thoughts on just the global trade environment, obviously, with tariffs coming more into play here. It seems your supply chain is largely localized in most countries. But can you talk about some exposures in terms of importexport and also just the secondary impact on commodities?

I know a lot of it is on your balling system, but just thoughts on the recent tariffs also on aluminum and steel? Thank you.

Yes. Thanks, Oliver. Clearly, there's a it's a dynamic macro environment out there. As commodities change for whatever reason up or down, obviously, our number one objective is to look at how we mitigate through that. And whether it's the reason aluminum tariffs or any other tariff base or frankly weather based or any other variation in the input commodities, we do a number of things.

One, we have hedging programs in place that look to assure supply and price going out. Secondly, as the relative prices of different sources of ingredients and imports change, of course, we look at mitigation, productivity, efficiency, adjusting where we get our materials from, all of that goes into the equation to constantly manage how this goes through. Net net, as John just mentioned, we are expecting more variation in agricultural than industrials, notwithstanding recent actions, we will manage through it. As you said, we are predominantly a local business when it comes to making, each of the beverages. The vast majority of everything that's consumed in The US is made in The US.

Similarly, we've merged every country around the world. And so while it's a global business, it's very local. So yes, every bottle will be importing something from somewhere, as a piece of the puzzle, but the economics are more predominantly local than they are global. And so it's a piece of the puzzle we need to manage through. As John said, we have that we believe under control from a point of view of sustaining gross margin.

No doubt the environment will continue to be dynamic, but we will continue to manage and mitigate and adjust and be agile and flexible our way through the year.

And just one additional comment, your supply chain continuity continues to be, I think for many industries an ongoing challenge for a variety of reasons. '24 was no stranger to that and our cross enterprise procurement team are, managing a vast network. And in addition to the economics, just making sure that we can continue to supply our markets around the world consistently is a key priority and an important advantage I think to enjoy as well in the many markets that we're in.

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

All right. Thank you. Good morning. I guess thinking about the new administration and some potential regulatory changes, what percentage of your domestic portfolio might be subject to potential changes? And then, James, how quickly can you pivot or adapt your portfolio if some of these changes are implemented?

And then I'll ask it since it's become more topical again lately, but how are you thinking about potential impacts on consumption from GLP-one drugs? Have you seen any impact? And has your thinking on this potential headwind changed in terms of your strategy, innovation, etcetera? Thanks.

Well, Bonnie, I'm tempted to start with the answer to the first question by saying you win the prize for the Vegas question, so far this year with what might happen subject to changes. Look, there there are many things that could happen, out there in the world. And of course, we do, you know, scenario planning on regulations, on economics, on all sorts of things, and we will adapt as and when they come. And more specifically on, the GLP ones, As we've commented on previous calls, we continue to see anecdotal evidence of the impact of GLP ones on consumption of food and beverages. So far, our take is it's not a big aggregate factor for the beverage industry or the non alcoholic beverage industry.

Witness, the volume for ourselves was up 1% in the fourth quarter in North America. So we continue to see pretty sustained momentum in North America. There is anecdotal evidence that people consume slightly less alcohol perhaps and they do some switching in non alcoholic beverages. But overall, we're seeing sustained momentum and we are a total beverage company. So we believe whether it's GLP ones, drugs or changes and adaptations to regulation ingredients.

Our objective is to have the biggest possible, toolbox of ingredients of super high quality and safety, which we use to make a total beverage portfolio that works for consumers. And we believe we can adapt to anything that comes at us.

Our next question comes from Camille Gajrawala from Jefferies. Please go ahead. Your line is open.

Everyone, good morning. John, you laid out a long list of very substantial cash payments that are made this year, last year, almost all of which will be behind you very soon. So can you maybe just talk about how you think about cash or capital allocation when you're on the other side of it, whether it be buybacks, whether it be more aggressive around M and A, the magnitude of the change of the amount of cash you'll have on hand next year versus this year so substantial? I'd like to see how you might think about it differently. Thank you.

Thanks, Will. Yeah, let me maybe answer that in two parts. First of all, I don't foresee a substantial change in our focus to support the underlying business and the momentum that, that that that has. And secondly, as we just talked about in our guidance, we will continue to support the dividend. So those two areas you can assume will remain top priorities.

You know, as we get into '26, it's a little early to anticipate exactly what '26 will deliver for us. But as you say, clearly we the transition tax will be in the rear view mirror. Some of the M and A payments likewise. And, it will give us the opportunity to take a closer look at the M and A and the, share repurchase agenda. So I think it's premature to, to to get too specific on what '26 might bring for us.

But I'm looking forward actually to, to having to deal with that challenge in the next year or so. Yeah, we also have, as you are well aware, we also have a keen focus on the overall health of the balance sheet and we'll take into account the puts and takes on that. We continue to have a, the tax case in, in the next couple of years to deal with. So the name of the game for me is to, you know, is would be to have more, to manage in a flexible manner some of the opportunities that may present themselves.

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

Great. Thank you. So Walmart has created now, I guess, what you call the modern soda shelves. And I'd love to get your thoughts on that category broadly speaking. Is this something that is a fad in your view?

Or is this something that represents some kind of departure and is just very responsive to consumer needs? Is it something like Fairlife where you just have a better product? And how do you look to play in this so called modern soda area that Walmart seems to at least have some confidence in? Thank you.

Hey, Rob. Yes, look, it's great news that people are innovating and willing to create new brands and dedicate more shelf space to the beverage industry, which is I think goes to the whole idea. This is a vibrant industry with lots of growth. So that's the first one. Secondly, also growth.

So that's the first one. Secondly, we are a total beverage company. We look to compete everywhere we see enduring consumer demand and traction, including some of the stuff that goes here. Look, in the end, these are these are soda beverages that are great tasting. That's the central idea.

And and I think, you know, to the extent that's enduring, we'll take a really hard look at it. But I think the most important thing to take from this, is the confidence in the overall industry of beverages to continue to grow. And as John alluded to, and we'll talk more at CACNA when you look at the track record of the Coca Cola Company in terms of creating organically and scaling small bolt on M and A into billion dollar brands, we are by far and away the clear leaders in the industry and the winners.

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

Hi everyone. James, you mentioned, agricultural commodities. You also I think said something to the effect of industrial commodities or perhaps moving a bit less, but you're watching developments. I'm assuming you're speaking to aluminum. Can you just maybe provide some context, number one, on how incremental moves in aluminum might impact your cost per case outlook, number one?

And just related, there's this element of the system will need to respond to incremental inflation from aluminum. Can you just talk about comfort that affordability and volume durability will not be impacted if the system needs to respond to climbing inflation. So it's a little bit of a two part question and the impact to the model, but also a bit forward looking and what may be required to protect the model and the impact on the consumer in

Yes, sure. I mean, firstly, this is predominantly an impact, in the North American or in The US business, but let's say the North American business, which is obviously a piece of the puzzle. So from a total company perspective, bear in mind, this is over just one of the four segments largely speaking as we sit here today.

And, you know, of course, as it relates to our strategies around ensuring affordability and ensuring consumer demand, if one package, suffers some increase in input costs, we continue to have other packaging offerings that will allow us to compete in the affordability space. So for example, if aluminum cans become more expensive, we can put more emphasis on PET bottles, etcetera, etcetera. So we will adapt the packaging strategy in function of changes in the relative input costs of what goes into that. So that is part of the total adaptation plan that we use around the world. Secondly, so I don't believe if part of the question in the second half is, do you think this is going to fundamentally undermine the ability of the system to do well in volume in 2025?

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.

Coca-Cola (KO) Q4 2024 Earnings Call Transcript

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