Coca-Cola (KO) Q2 2025 Earnings Call Transcript

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Moreover, Net Debt Leverage: Net debt leverage of two times EBITDA, at the low end of the targeted 2-2 (this bears monitoring). 5x net debt leverage to EBITDA range

Segment Insights: EMEA volume increased across all three operating units, with growth led by Europe, Eastern and Western, and key brands Coca-Cola Zero Sugar, Sprite, and Fuze Tea

Brand Performance: Volume for Coca-Cola Zero Sugar, Diet Coke, Fanta, Fairlife, BodyArmor, and Powerade each grew, in today's market environment

Additionally, Additionally, Fairlife: Fairlife posted double-digit volume growth, although this moderated due to capacity constraints

Strategic Execution: Management highlighted a continuation of "value gains" for the seventeenth consecutive quarter, and a focus on executing granular, contextually relevant action plans in challenged

Innovation: Sprite became the number three sparkling soft drink in the US ing the introduction of new variants, including Sprite plus Tea, which management scaled based on "strong consumer demand and positive social media reaction

Nevertheless, Meanwhile, "SUMMARYCoca-Cola (KO -0. 58%) reported 5% organic revenue growth and 4% comparable EPS growth, overcoming a 1% global volume decline tied to adverse June weather and challenging comparisons

Margin expansion was supported by accelerated ductivity realization and disciplined cost management

Additionally, President & CFO John Murphy stated, "We now expect 2025 comparable earnings per growth of apximately 3% versus $2, in today's market environment. 88 in 2024, given current economic conditions

Market showed sequential volume imvement, and restored brand equity scores among Hispanic consumers by late June after targeted advertising addressed earlier declines

Moreover, At the same time, Capacity constraints continued to limit Fairlife growth, rather than "a weakening of the position relative to the competition," according to Quincey, considering recent developments

Asia Pacific experienced mixed performance, with volume declines in ASEAN and South Pacific offsetting growth in Australia and the Philippines; China saw volume increases driven by trademark Coca-Cola performance

D operational strategy focuses on agility and rapid market pivots using digital tools, AI-driven pack price optimization, and marketing designed for local relevance (noteworthy indeed)

However, Despite persistent external volatility, management maintained confidence in achieving d guidance and sustaining long-term top-line and earnings momentum

On the other hand, INDUSTRY GLOSSARYUnit Case: Standard volume measure in the beverage industry, representing 24 eight-ounce servings of beverage (something worth watching)

At the same time, Organic Revenue: Revenue growth excluding the impact of currency fluctuations, acquisitions, and divestitures, in today's financial world

Comparable EPS: Earnings per adjusted to exclude certain items to vide a normalized measure of fitability, amid market uncertainty

Value : The company's of the total market based on revenue rather than volume (quite telling)

Price/Mix: Combined effect of changes in pricing and sales mix on revenue growth

Moreover, Refillables: Reusable beverage containers, part of affordability and sustainability initiatives in select, given current economic conditions

Fairlife: Coca-Cola’s high-tein, value-added dairy brand

All-Weather Strategy: Coca-Cola’s apach to maintaining growth and agility across varied and dynamic market environments

Full Conference Call TranscriptJames Quincey: Thanks, Robin, and good morning, everyone

To adapt, we stay close to the consumer, manage our growth portfolio of brands, and double down on our all-weather strategy

After the first half of this year, we're on track to der on both our top-line and d bottom-line guidance, given the current landscape

What the re reveals is morning, I'll vide details on the operating environment and our second-quarter performance, in today's financial world

Then I'll explain how we're pivoting our plans and building new capabilities to der amidst the current realities

Additionally, Furthermore, John will end by discussing our financial results and viding further ary on the outlook for the rest of the year

Coming into the quarter, we expected the operating landscape to be choppy

Two-year volume trends were on track in April and May, but decelerated in June in the face of adverse weather in several key and pockets of consumer pressure

However, Several that were weaker in the first quarter imved volumes sequentially, including the U, in today's market environment

In these, the plans we've implemented are working, viding further confidence we can influence the trajectory of our results

More broadly, our industry remains resilient

During the quarter, we gained value, which represented our seventeenth consecutive quarter of value gains

Across the world, we're navigating complex dynamics across many by leveraging our global scale or stepping up local execution

Additionally, Starting in North America, while volume imved sequentially, it declined due to the continued uncertainty and pressure on some socioeconomic segments of consumers

However, We continue to invest behind our brands, which led to value gains and revenue and fit growth

Nevertheless, Our price mix decelerated as growth from some of our premium stills brands moderated during the quarter, in light of current trends

Our granular action plans to win back consumers with contextually relevant advertising, more focused value and affordability initiatives, and close customer partnerships are working

Several bright spots in our total beverage portfolio include Coca-Cola Zero Sugar, Diet Coke, Fanta, Fairlife, BodyArmor, and Powerade, which each grew volume

We're continuing to get good traction with our foodservice customers on both renewals and category expansion, and our system is stepping up execution and earning increased of this

In Latin America, volume declined, but we grew organic revenue and fit (an important development)

We benefited from the imving economy in Argentina, and Coca-Cola Zero Sugar had strong volume growth in Brazil and Mexico, in light of current trends

In Mexico, despite cycling a difficult comparison versus the prior year and navigating a more difficult start of the year, two-year volume trends imved during the quarter until uncharacteristically cold weather and a major hurricane impacted the trajectory in June

To drive transactions, we're reprioritizing investments driving affordability with refillables, and premiumization with single-serve offerings and scaling connected packaging and our systems digital customer platforms

In EMEA, all three of our operating units grew volume, and we also had revenue and fit growth

In Europe, volume growth was driven by both Eastern and Western and was partially held by cycling an easier comparison versus the prior year

Coca-Cola Zero Sugar, Sprite, and Fuze Tea each grew volume

We activated our a Coke campaign across thirty-eight in Europe and included minent musicians and influencers, in today's financial world

The campaign leveraged a memory maker digital tool, which allowed drinkers in some to personalized memes and s with friends and family

We also tapped into Sprite spicy meals and Wanna Fanta campaigns

In Eurasia and the Middle East, despite multiple conflicts in the region during the quarter, we grew volume and won value

We're leveraging our learnings to emphasize the localness of our system, which includes local sourcing, duction, employment, and distribution

We're focusing on locally relevant sparkling flavors, innovations, and affordability with attractive absolute price points, value packages, and tailored motions

In Africa, despite a worsening macroeconomic growth outlook, we grew volume (remarkable data), in this volatile climate

Egypt, Morocco, and Nigeria each continued their strong momentum

Our systems actions are working (which is quite significant), given current economic conditions

Additionally, We've refined our pack price architecture, executed fewer but bolder integrated marketing campaigns, and accelerated cold drink equipment placements (something worth watching)

Lastly, in Asia Pacific, after a strong first quarter, we had mixed performance across the region

However, Volume declined, but we grew both revenue and comparable currency-neutral operating income, in today's financial world

In ASEAN and South Pacific, volume declined as growth in Australia and the Philippines was more than offset by declines in Thailand, Indonesia, and Vietnam

However, we won value, and our system is taking action by scaling refillable offerings, increasing outlet coverage, and accelerating cooler placements (which is quite significant)

In China, we grew volume despite a cautious consumer environment thanks to stronger performance from trademark Coca-Cola and in the eating and drinking channel, considering recent developments

Our system is more granular channel and customer-specific execution strategies, driving more tailored motional campaigns, and accelerating cooler placements, given the current landscape

However, In India, after a strong start to the year, volume declined as our was impacted by early monsoons and geopolitical conflict early in the important summer season (which is quite significant) (noteworthy indeed)

In response, we're engaging consumers with integrated marketing campaigns Coca-Cola and Meals supported by execution in the QSR channel, Thums Up with Dariani, Sprite with spicy meals, and Mazzo with festivals, and tailoring these activations to regional and local needs (remarkable data)

In Japan and South Korea, industry volume declined amid a challenging macro environment

However, On the other hand, Our volume was also down, reflecting industry dynamics and a strong prior year comparison, in today's market environment

Nevertheless, two-year volume trends remained positive during the quarter

At the same time, In response to the external environment, assets

In contrast, To sum everything up, while the external environment continues to evolve, we remain steadfastly focused on maintaining agility (an important development)

Moreover, Critically, to der amidst the current realities, we're enhancing capabilities along each facet of our strategic growth flywheel by to drive transactions in the back half of the year

Our marketing transformation allows us to more quickly test ideas, learnings, and scale successful campaigns (fascinating analysis)

However, For example, to mitigate consumer pressure in mix stemming from geopolitical tensions, our teams implemented tactics similar to those developed last year in Turkey tailored to local needs, given the current landscape

Moreover, During the quarter, we launched the campaign which highlights our long-standing contribution to the Mexican economy (which is quite significant), in today's financial world

Furthermore, At the same time, we leaned further into consumer passion points and pulled forward our World Cup activation, giving away a thousand tickets to next year's event

Additionally, As a result of these initiatives, combined with strong local execution, monthly value trends and consumer perception scores imved significantly in Mexico during the quarter

On the other hand, While we're lifting and shifting learnings across, we're also revamping and creating new campaigns and leveraging passion points

Nevertheless, Also, in North America, we launched the Bring the Juice campaign, which a collaboration between Minute Maid and World Wrestling Entertainment that includes digital experiences, limited-time-only packaging, and in-store activations (an important development)

On the other hand, Our innovation agenda supports our overall growth strategy by focusing on understanding and anticipating consumer needs

For example, during the quarter, we launched Sprite plus Tea in North America, which contributed to increased of visible inventory

However, This limited-time-only innovation blends the refreshment of Sprite with the flavor of tea and adds to the recent hits under the Sprite trademark, including Sprite Chill, Sprite Winter Spiced Cranberry, and Sprite Lemonade

Sprite Plus Tea started as an experimental ject

We scaled the launch after seeing strong consumer demand and positive social media reaction, in today's financial world

As a result of on-brand innovation, Sprite became the number three sparkling soft drink brand in the US as Beverage Digest announced in April

However, We're always exploring ways to meet evolving consumer preferences for great-tasting refreshment, including with our iconic Coca-Cola brand

As you may have seen last week, we appreciate the president's enthusiasm for our Coca-Cola brand

Additionally, And as part of our innovation agenda, this fall in the United States, we plan to expand our trademark Coca-Cola duct range with US cane sugar to reflect consumer interest in differentiated experiences, given current economic conditions

This addition is designed to complement our strong core portfolio and offer more choice across occasions and preferences (quite telling)

However, Revenue growth management is a critical tool to segment our consumers and channels, and we're increasingly integrating the capability with our marketing expertise to drive transaction growth

To step up our capabilities, we are leveraging learnings across our and marrying digital investme, given the current landscape.