Coca Cola : Transcript Q1 2023

Corrected Transcript

24-Apr-2023

The Coca-Cola Co. (KO)

Q1 2023 Earnings Call

	Total Pages: 19
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The Coca-Cola Co. (KO)	Corrected Transcript
Q1 2023 Earnings Call	24-Apr-2023

CORPORATE PARTICIPANTS

Robin Halpern	John Murphy
Global Director, Investor Relations, The Coca-Cola Co.	President & Chief Financial Officer, The Coca-Cola Co.
James Quincey
Chairman & Chief Executive Officer, The Coca-Cola Co.

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OTHER PARTICIPANTS

Dara Mohsenian	Nik Modi
Analyst, Morgan Stanley & Co. LLC	Analyst, RBC Capital Markets LLC
Lauren R. Lieberman	Peter Grom
Analyst, Barclays Capital, Inc.	Analyst, UBS Securities LLC
Bonnie Herzog	William B. Chappell
Analyst, Goldman Sachs & Co. LLC	Analyst, Truist Securities, Inc.
Bryan D. Spillane	Kevin Grundy
Analyst, BofA Securities, Inc.	Analyst, Jefferies LLC
Steve Powers	Chris Carey
Analyst, Deutsche Bank Securities, Inc.	Analyst, Wells Fargo Securities LLC
Andrea Teixeira	Carlos Laboy
Analyst, JPMorgan Securities LLC	Analyst, HSBC Securities (USA), Inc.
Robert Ottenstein	Charlie Higgs
Analyst, Evercore ISI	Analyst, Redburn (Europe) Ltd.

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The Coca-Cola Co. (KO)	Corrected Transcript
Q1 2023 Earnings Call	24-Apr-2023

MANAGEMENT DISCUSSION SECTION

Operator: At this time, I'd like to welcome everyone to The Coca-Cola Company's First Quarter 2023 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 a 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 Mrs. Robin Halpern, Vice President, Head of Investor Relations. Ms. Halpern, you may now begin.

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Robin Halpern

Global Director, Investor Relations, The Coca-Cola Co.

Good morning, and thank you for joining us. I'm here with James Quincey, our Chairman and Chief Executive Officer; and John Murphy, our President and Chief Financial Officer.

We posted schedules under Financial Information in the Investors section of our company website at coca- colacompany.com. These schedules reconcile certain non-GAAP financial measures which may be referred to by our senior executives during this morning's discussion to our 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.

In addition, 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 turn the call over for questions. Please limit yourself to one question. If you have more than one, please ask your most pressing question first and then reenter the queue.

Now, I'll turn the call over to James.

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James Quincey

Chairman & Chief Executive Officer, The Coca-Cola Co.

Thanks, Robin, and good morning, everyone. 2023 is off to a good start. We continue to execute well and grow amidst a dynamic macro environment. We like to say we have an all-weather strategy, one that enables us to strive with no matter what's happening in the world. We pursue excellence globally with an eye towards winning locally as a system and our brand investments continue to create value for our customers and consumers, leading to our ability to drive quality growth for our stakeholders.

Today, I'll discuss our first quarter performance and provide some perspective around today's global consumer and macro environment. I'll then reiterate why we are confident in our ability to deliver on our guidance for the full year and finally, I'll elaborate on how the actions we're taking set us up for success in any environment and how

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The Coca-Cola Co. (KO)	Corrected Transcript
Q1 2023 Earnings Call	24-Apr-2023

we're driving resilience for our business and continued growth in 2023 and over the long term. John will then discuss our results and go to more detail on the 2023 outlook.

In the first quarter, pandemic restrictions in parts of the world relaxed and many supply chain pressures abated. At the same time, inflation and geopolitical tensions persisted and new concerns emerged around the stability in the banking sector and the magnitude of the potential squeeze on consumers. In the face of these factors, we continued to generate momentum as investments in our brands got the year off to a positive start. We remained focused on creating value by meeting the needs of our customers and consumers.

We delivered 12% organic revenue growth in the quarter. This was primarily driven by pricing actions across markets and revenue growth management initiatives to retain and add consumers. We also delivered volume growth of 3%, which is in line with last year versus 2019. We saw growth across developed as well as developing and emerging markets and we continued to gain both volume and value share for the quarter, including at-home and away-from-home channels. We're encouraged by this momentum and are operating the business with a focus on growth, while closely monitoring macro trends with signs of a slowdown. As we look around the world today, the consumer picture varies across our markets.

In Asia-Pacific, the reopening of China has led to an increase in consumer activity, but consumption is still recovering to pre-pandemic levels. India's economy remains resilient with a strong job market and robust consumption. In Japan, consumers are feeling inflationary pressure for the first time in many years. In Europe, the recent banking crisis added to last year's energy spike, driving further uncertainty to purchasing behaviors and consumers continue to increasingly seek out affordable and private-label options across many FMCG categories.

In North America, the picture is a mixed bag. With unemployment low, gas prices improved and savings holding up, but inflation and higher mortgage rates are top of mind concerns for many consumers. In many developing and emerging markets in Latin America, Africa and the Middle East, consumers continue to face varying levels of inflation and volatility in the macroeconomic conditions. Clearly, there's uncertainty on how the consumer environment may ultimately play out in 2023. But thanks to the hard work of our people and partners, we are a more flexible network enterprise today and with our enhanced system alignment, we're confident we can win together locally in a wide variety of environments.

Let's start with the portfolio. We have a growth portfolio of consumer-centric brands across categories, including 26 billion $1 brands and networked organization is allowing us to raise the bar of innovation and marketing to leverage our loved brands more effectively in the marketplace.

We're keeping our streamlined portfolio of brands relevant with consumers and finding innovative ways to offer beverage choices for every occasion. In Japan, we recently relaunched our Georgia Coffee brand with a fresh new look and a bright proposition to inspire current consumers and expand Georgia's appeal to a broader audience, complementing Costa's premium, ready-to-drink offerings in that market.

We're expanding our exploration in alcohol ready-to-drink beverages with a keen focus on responsibility. We worked with Brown-Forman to roll out Jack and Coke cocktails in the US during the quarter, with more markets launching now. It's early days, but the ability to get one of the most popular bar-calls in the world in a can is proving to be compelling to retailers and consumers based on preliminary volumes and velocities. We're encouraged by the level of engagement as distribution expands.

We're driving bigger and bolder innovations that can leverage consumer insights, leading to a higher success rate and enduring growth. In North America, we continue to foster brand love for fairlife, which has grown volume

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The Coca-Cola Co. (KO)	Corrected Transcript
Q1 2023 Earnings Call	24-Apr-2023

double-digits for eight consecutive years. fairlife became a billion dollar brand last year and we're building on the momentum of the brand, including the success of Core Power, with fairlife Nutrition Plan. Launched with a digital- first campaign in the Club Channel, fairlife Nutrition Plan has seen strong consumer interest from those looking for a high protein, low sugar shake that tastes great and is lactose-free. We're planning to expand the product to more channels and packages in the coming months.

We're working with WPP, our global marketing network partner, and increasingly leveraging digital capabilities to engage consumers through passion points, personalized experiences and collaborations. The Coke Studio concept first drove cultural relevance and brand performance in Pakistan, with the latest season streamed over a billion times. We scaled the program to 30 markets last year and in 2023, it will become an always-on platform across the globe. Connecting consumers' love of music to consumption occasions by spotlighting breakthrough talent, Coke Studio provides a portal for live digital experiences and can be activated using QR codes on our packages. Consumers can drink, scan and enjoy their favorite beverage along with music from genres around the world.

Working as a network system with our bottlers, we're managing through macroeconomic uncertainty with enhanced capabilities in revenue growth management and integrated execution. We often talk about the many levers of revenue growth management. While the inflationary environment led to proactive pricing increases over the past 18 months, it's important to recognize that our RGM capabilities extend far beyond pricing.

At its core, revenue growth management is about consumer-centric segmentation, ensuring we have the right product in the right package in the right channel at the right price point, drive transactions and meet consumers where they are. Affordability and premiumization are key levers to maintain and expand our consumer base and we continue to balance affordable offerings with compelling premium propositions to ensure we have beverage options across income levels.

Affordability is a driver in developing and emerging markets, evidenced by double-digit volume growth in these offerings in Indonesia and Vietnam, helping to drive record sparkling share in Vietnam and driving approximately 3 billion transactions at affordable price points in India this quarter.

Premium packages like slim cans and mini cans are seeing strong growth in many markets, including Australia, where mini cans drove 40 million transactions and contributed to share growth in the region. Premiumization also include indulgent products and occasions. In addition to alcohol ready-to-drink beverages, we're also participating more broadly in adult alcohol drinking occasions.

In North America, we've expanded our Simply premium juice brand into the mixer segment with Simply Mixology available in three flavors to serve as a cocktail or mocktail. In Europe, we've relaunched our Kinley and Royal Bliss brands as harmonized platforms to participate in the adult mixer segment. For both affordability and premiumization, the value proposition is often messaged at the point-of-sale such as the expansion of the value bundle in certain channels in the US and the Mini Can Mini Price campaign that drove strong growth in small packages in Japan.

RGM, coupled with integrated execution, also drives value for our customers. By providing key insights and offering the right mix of brands, packages, price points and compelling data-driven promotions, we are able to partner with customers that deliver traffic, basket and incidence growth.

Latin America is a great example of how this came to life in the first quarter, evidenced by revenue growth ahead of transactions and transaction growth ahead of volume. By working closely with key retailers, our system focused

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