Global Unit Case Volume Grew 8%
Net Revenues Grew 12%; Organic Revenues
(Non-GAAP) Grew 16%
Operating Income Declined 22%; Comparable
Currency Neutral Operating Income (Non-GAAP) Grew 15%
Operating Margin Was 20.7% Versus 29.8% in the
Prior Year; Comparable Operating Margin (Non-GAAP) Was 30.7% Versus
31.7% in the Prior Year
EPS Declined 28% to $0.44; Comparable EPS
(Non-GAAP) Grew 4% to $0.70
The Coca-Cola Company today reported second quarter 2022 results
that demonstrate resilience in the marketplace amidst ongoing
global challenges. “Our results this quarter reflect the agility of
our business, the strength of our streamlined portfolio of brands,
and the actions we’ve taken to execute for growth in the face of
challenges in the operating and macroeconomic environment,” said
James Quincey, Chairman and CEO of The Coca-Cola Company. “We are
staying true to our purpose, executing on our strategy and
delivering value for our stakeholders.”
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20220726005304/en/
Highlights
Quarterly Performance
- Revenues: Net revenues grew 12% to $11.3 billion, and
organic revenues (non-GAAP) grew 16%. Organic revenue (non-GAAP)
performance was strong across operating segments and included 12%
growth in price/mix and 4% growth in concentrate sales. Concentrate
sales were 4 points behind unit case volume, largely due to the
timing of concentrate shipments.
- Margin: Operating margin, which included items impacting
comparability, was 20.7% versus 29.8% in the prior year, while
comparable operating margin (non-GAAP) was 30.7% versus 31.7% in
the prior year. Comparable operating margin (non-GAAP) compression
was primarily driven by strong topline growth, more than offset by
the impact of the BODYARMOR acquisition, higher operating costs and
an increase in marketing investments versus the prior year, and
currency headwinds.
- Earnings per share: EPS declined 28% to $0.44, and
comparable EPS (non-GAAP) grew 4% to $0.70. Comparable EPS
(non-GAAP) performance included the impact of a 9-point currency
headwind.
- Market share: The company gained value share in total
nonalcoholic ready-to-drink (NARTD) beverages.
- Cash flow: Cash flow from operations was $4.5 billion
year-to-date, a decline of $1.0 billion versus the prior year, as
strong business performance was more than offset by the impact of
cycling the timing of working capital benefits in the prior year
and higher 2021 annual incentives in the current year. Free cash
flow (non-GAAP) was $4.1 billion, a decline of $1.0 billion versus
the prior year.
Company Updates
- Leveraging strategic experimentation and scale to create
global brand campaigns: The company is focused on leveraging
and scaling experiments to better engage with and expand its
consumer base. Coke Studio™, a program that connects the consumer
passion point of music with consumption occasions, is one example.
Coke Studio first launched in Pakistan, featuring established and
emerging artists from various genres collaborating in live, studio
recording sessions. Building on the success of the initial program,
Coke Studio is evolving and expanding to a global stage as a
digital-first, always-on music platform that spotlights
breakthrough talent. The program also includes leveraging QR codes
on packages to further engage consumers at the point of consumption
through a ‘Drink. Scan. Enjoy.’ activation. Coke Studio represents
the latest expression of the Real Magic™ global brand philosophy by
creating curated multi-channel experiences for consumers.
- Driving customer value and profitable growth through digital
enablement: The company is working in close partnership with
its bottlers to leverage the power of the system’s physical
footprint in the online space, creating enhanced value for
customers across the globe through eB2B platforms that drive an
industry-leading experience. For instance, the myCoke™ eB2B
platform, which is focused on North America, is a scaled mobile and
web application that is generating incremental revenue growth
opportunities and achieving strong outlet penetration, with high
customer engagement. Year to date, the system revenue generated
from myCoke has grown 55% compared to the comparable prior year
period, and the company continues to advance on integrating myCoke
across its customer base. The Coca-Cola system continues to learn
and adapt its digital commerce capabilities and investments.
- Ongoing progress toward being asset light to drive
sustainable system growth: The company continues its
refranchising efforts, in line with its focus on building
consumer-loved brands and driving scalable innovation. Recently,
the company entered into an agreement to refranchise company-owned
bottling operations in Cambodia and Vietnam with Swire Coca-Cola
Limited, a subsidiary of Swire Pacific Limited. Swire Coca-Cola has
operations in the Chinese mainland, Hong Kong, Taiwan and parts of
the western United States.
- Continuing to work toward a World Without Waste: The
company is progressing on its strategy to develop a circular
economy for packaging materials aimed at eliminating waste and
reducing carbon emissions through the continual use of existing,
valuable resources, including high-quality recycled PET. This
includes ongoing work in packaging design. Leveraging the success
of the label-less package, the company launched the label-less
bottle for brand Coca-Cola™ in the online channel in Japan, which
is delivering strong performance. This is in addition to the use of
100% recycled PET bottles for 37 products under five brands already
sold in the Japan market. Also, The Ellen MacArthur Foundation and
The Coca-Cola Company recently announced a strategic partnership,
increasing their level of collaboration to the highest network tier
of the foundation. The company’s virgin plastic reduction target
and, more recently, global goal to reach 25% reusable packaging by
2030, signal circular economy leadership ambitions.
Operating Review – Three
Months Ended July 1, 2022
Revenues
and Volume
Percent Change
Concentrate Sales1
Price/Mix
Currency
Impact
Acquisitions, Divestitures and
Structural Changes, Net
Reported Net Revenues
Organic Revenues2
Unit Case Volume3
Consolidated
4
12
(6)
2
12
16
8
Europe, Middle East & Africa
0
21
(13)
0
8
21
6
Latin America
(4)
12
(1)
0
7
8
9
North America
3
10
0
6
19
13
2
Asia Pacific
15
(3)
(8)
0
4
13
11
Global Ventures4
11
(2)
(11)
0
(2)
10
14
Bottling Investments
26
3
(9)
0
20
28
26
Operating Income and EPS
Percent Change
Reported Operating Income
Items
Impacting Comparability
Currency
Impact
Comparable Currency Neutral2
Consolidated
(22)
(30)
(7)
15
Europe, Middle East & Africa
13
1
(14)
26
Latin America
(1)
3
(3)
0
North America
(12)
(31)
0
19
Asia Pacific
(2)
(1)
(7)
6
Global Ventures
(41)
9
1
(51)
Bottling Investments
22
(47)
(17)
86
Percent Change
Reported
EPS
Items
Impacting Comparability
Currency
Impact
Comparable Currency Neutral2
Consolidated EPS
(28)
(32)
(9)
13
Note: Certain rows may not add due to
rounding.
1 For Bottling Investments, this
represents the percent change in net revenues attributable to the
increase (decrease) in unit case volume computed based on total
sales (rather than average daily sales) in each of the
corresponding periods after considering the impact of structural
changes, if any.
2 Organic revenues, comparable currency
neutral operating income and comparable currency neutral EPS are
non-GAAP financial measures. Refer to the Reconciliation of GAAP
and Non-GAAP Financial Measures section.
3 Unit case volume is computed based on
average daily sales.
4 Due to the combination of multiple
business models in the Global Ventures operating segment, the
composition of concentrate sales and price/mix may fluctuate
materially on a periodic basis. Therefore, the company places
greater focus on revenue growth as the best indicator of underlying
performance of the Global Ventures operating segment.
In addition to the data in the preceding tables, operating
results included the following:
Consolidated
- Unit case volume grew 8%, with broad-based growth across all
operating segments. Volume performance was driven by continued
recovery in away-from-home channels and ongoing investments in the
marketplace. Developed markets, as well as developing and emerging
markets, grew high single digits. Growth in developed markets was
led by Mexico, Western Europe and the United States, while growth
in developing and emerging markets was led by India and
Brazil.
Category performance was as follows:
- Sparkling soft drinks grew 8%, driven by growth across all
geographic operating segments, primarily led by India, Mexico and
Brazil. Trademark Coca-Cola grew 7%, driven by growth across all
geographic operating segments and operating units. Coca-Cola® Zero
Sugar grew 12%, driven by double-digit growth across developed,
developing and emerging markets. Sparkling flavors grew 11%, led by
Asia Pacific and Europe, Middle East and Africa.
- Nutrition, juice, dairy and plant-based beverages grew 6%, led
by Maaza® in India, Del Valle® in Latin America and fairlife® in
the United States.
- Hydration, sports, coffee and tea grew 7%. Hydration grew 7%,
led by strong growth in Latin America and Europe, Middle East and
Africa. Sports drinks grew 7%, primarily driven by strong growth of
BODYARMOR and Powerade®. Tea grew 4%, led by growth in Brazil,
Western Europe and Japan. Coffee grew 15%, primarily driven by
cycling the impact of Costa® retail store closures in the United
Kingdom in the prior year and continued expansion of Costa® coffee
across markets.
- Price/mix grew 12%, driven by pricing actions in the
marketplace across operating segments along with favorable channel
and package mix primarily due to cycling the impact of the pandemic
in the prior year. Price/mix also benefited from positive segment
mix. Concentrate sales were 4 points behind unit case volume,
largely due to the timing of concentrate shipments.
- Operating income declined 22%, which included items impacting
comparability and a 7-point currency headwind. Comparable currency
neutral operating income (non-GAAP) grew 15%, driven by strong
organic revenue (non-GAAP) growth across all operating segments,
partially offset by higher operating costs and an increase in
marketing investments versus the prior year.
Europe, Middle East &
Africa
- Unit case volume grew 6%, driven by broad-based growth across
all operating units. Volume performance was led by strong growth in
Western Europe, Turkey and Pakistan.
- Price/mix grew 21%, driven by pricing actions across operating
units along with favorable channel and package mix due to cycling
the impact of the pandemic in the prior year, in addition to
inflationary pricing in Turkey. Concentrate sales were 6 points
behind unit case volume, largely due to the timing of concentrate
shipments. Year-to-date concentrate sales were 2 points behind unit
case volume, primarily due to the impact of one less day in the
first quarter of the current year.
- Operating income grew 13%, which included items impacting
comparability and a 14-point currency headwind. Comparable currency
neutral operating income (non-GAAP) grew 26%, primarily driven by
strong organic revenue (non-GAAP) growth across all operating
units, partially offset by higher operating costs and an increase
in marketing investments versus the prior year.
- The company gained value share in total NARTD beverages with
share gains across most categories.
Latin America
- Unit case volume grew 9%, with strong growth across almost all
categories. Growth was led by Mexico, Brazil and Argentina.
- Price/mix grew 12%, driven by pricing actions in the
marketplace and favorable channel and package mix, in addition to
inflationary pricing in Argentina. Concentrate sales were 13 points
behind unit case volume, largely due to the timing of concentrate
shipments. Year-to-date concentrate sales were 2 points behind unit
case volume, primarily due to the impact of one less day in the
first quarter of the current year.
- Operating income declined 1%, which included items impacting
comparability. Comparable currency neutral operating income
(non-GAAP) was even, primarily driven by strong organic revenue
(non-GAAP) growth, offset by higher operating costs and an increase
in marketing investments versus the prior year.
- The company lost value share in total NARTD beverages, as share
gains in juice and juice drinks, tea and coffee were more than
offset by pressure in sparkling soft drinks and other
categories.
North America
- Unit case volume grew 2%. Growth was driven by solid
performance in away-from-home channels. Sparkling soft drinks and
dairy beverages led growth during the quarter.
- Price/mix grew 10%, primarily driven by pricing actions in the
marketplace, continued recovery in the fountain business and
away-from-home channels, and strong growth in premium offerings.
Price/mix growth included a benefit resulting from the timing of
price increases in the prior year.
- Operating income declined 12%, which included items impacting
comparability. Comparable currency neutral operating income
(non-GAAP) grew 19%, driven by strong organic revenue (non-GAAP)
growth, partially offset by higher operating costs and an increase
in marketing investments versus the prior year.
- The company gained value share in total NARTD beverages, driven
by strong performance in at-home channels in sparkling soft drinks,
juice and juice drinks, and dairy beverages.
Asia Pacific
- Unit case volume grew 11%, driven by strong growth in India and
the Philippines, partially offset by pressure in China due to
reduced consumer mobility resulting from a resurgence in COVID-19
cases. Growth was led by sparkling soft drinks and juice and juice
drinks.
- Price/mix declined 3%, as pricing actions in the marketplace
were more than offset by negative geographic mix. Concentrate sales
were 4 points ahead of unit case volume, primarily due to the
timing of concentrate shipments.
- Operating income declined 2%, which included items impacting
comparability and an 8-point currency headwind. Comparable currency
neutral operating income (non-GAAP) grew 6%, primarily driven by
organic revenue (non-GAAP) growth across all operating units,
partially offset by higher operating costs and an increase in
marketing investments versus the prior year.
- The company gained value share in total NARTD beverages led by
share gains in China, Japan and Australia.
Global Ventures
- Net revenues declined 2%, and organic revenues (non-GAAP) grew
10%. Net revenues included an 11-point currency headwind. Revenue
performance benefited from cycling the impact of Costa retail store
closures in the United Kingdom in the prior year.
- Operating income and comparable currency neutral operating
income (non-GAAP) both declined, as solid organic revenue
(non-GAAP) growth was more than offset by higher operating
costs.
Bottling Investments
- Unit case volume grew 26%, driven by growth in all markets, led
by India and the Philippines.
- Price/mix grew 3%, driven by pricing actions across most
markets, partially offset by negative geographic mix.
- Operating income grew 22%, which included items impacting
comparability and a 13-point headwind from currency. Comparable
currency neutral operating income (non-GAAP) grew 86%, driven by
strong organic revenue (non-GAAP) growth.
Operating Review – Six Months
Ended July 1, 2022
Revenues
and Volume
Percent Change
Concentrate Sales1
Price/Mix
Currency Impact
Acquisitions, Divestitures
and Structural Changes, Net
Reported Net Revenues
Organic Revenues2
Unit Case Volume3
Consolidated
7
10
(5)
2
14
17
8
Europe, Middle East & Africa
7
15
(11)
0
10
22
9
Latin America
7
15
(3)
0
19
23
9
North America
3
11
0
7
21
13
3
Asia Pacific
7
2
(7)
0
2
9
8
Global Ventures4
16
4
(9)
0
12
20
18
Bottling Investments
16
4
(7)
0
13
20
17
Operating Income and EPS
Percent Change
Reported Operating Income
Items
Impacting Comparability
Currency
Impact
Comparable Currency Neutral2
Consolidated
0
(13)
(7)
19
Europe, Middle East & Africa
17
4
(13)
26
Latin America
17
2
(4)
19
North America
9
(10)
0
19
Asia Pacific
(2)
1
(6)
3
Global Ventures
(6)
8
(1)
(14)
Bottling Investments
31
(21)
(11)
63
Percent Change
Reported
EPS
Items
Impacting Comparability
Currency
Impact
Comparable Currency Neutral2
Consolidated EPS
(5)
(14)
(8)
18
Note: Certain rows may not add due to
rounding.
1 For Bottling Investments, this
represents the percent change in net revenues attributable to the
increase (decrease) in unit case volume computed based on total
sales (rather than average daily sales) in each of the
corresponding periods after considering the impact of structural
changes, if any.
2 Organic revenues, comparable currency
neutral operating income and comparable currency neutral EPS are
non-GAAP financial measures. Refer to the Reconciliation of GAAP
and Non-GAAP Financial Measures section.
3 Unit case volume is computed based on
average daily sales.
4 Due to the combination of multiple
business models in the Global Ventures operating segment, the
composition of concentrate sales and price/mix may fluctuate
materially on a periodic basis. Therefore, the company places
greater focus on revenue growth as the best indicator of underlying
performance of the Global Ventures operating segment.
Outlook
The 2022 outlook information provided below includes
forward-looking non-GAAP financial measures, which management uses
in measuring performance. The company is not able to reconcile
full-year 2022 projected organic revenues (non-GAAP) to full-year
2022 projected reported net revenues, full-year 2022 projected
comparable net revenues (non-GAAP) to full-year 2022 projected
reported net revenues, full-year 2022 projected comparable cost of
goods sold (non-GAAP) to full-year 2022 projected reported cost of
goods sold, full-year 2022 projected underlying effective tax rate
(non-GAAP) to full-year 2022 projected reported effective tax rate,
full-year 2022 projected comparable currency neutral EPS (non-GAAP)
to full-year 2022 projected reported EPS or full-year 2022
projected comparable EPS (non-GAAP) to full-year 2022 projected
reported EPS without unreasonable efforts because it is not
possible to predict with a reasonable degree of certainty the
actual impact of changes in foreign currency exchange rates
throughout 2022; the exact timing and amount of acquisitions,
divestitures and/or structural changes throughout 2022; the exact
timing and amount of items impacting comparability throughout 2022;
and the actual impact of changes in commodity costs throughout
2022. The unavailable information could have a significant impact
on the company’s full-year 2022 reported financial results.
Full Year 2022
On March 8, 2022, the company announced the suspension of its
business in Russia as a result of the conflict in Ukraine. The
approximate direct impacts of this are estimated to be as
follows:
- 1% impact to unit case volume – No Change
- 1% to 2% impact to net revenues and operating income – No
Change
- $0.03 impact to comparable EPS (non-GAAP) – Updated
These estimated impacts are reflected in the outlook commentary
below.
The company expects to deliver organic revenue (non-GAAP) growth
of 12% to 13%. – Updated
For comparable net revenues (non-GAAP), the company expects a 6%
currency headwind based on the current rates and including the
impact of hedged positions, in addition to a 2% tailwind from
acquisitions and divestitures. – Updated
The company expects commodity price inflation to be a high
single-digit percentage headwind on comparable cost of goods sold
(non-GAAP), based on the current rates and including the impact of
hedged positions. – Updated
The company’s underlying effective tax rate (non-GAAP) is
estimated to be 19.5%. This does not include the impact of ongoing
tax litigation with the U.S. Internal Revenue Service, if the
company were not to prevail. – No Change
Given the above considerations, the company expects to deliver
comparable currency neutral EPS (non-GAAP) growth of 14% to 15% and
comparable EPS (non-GAAP) growth of 5% to 6%, versus $2.32 in 2021.
– Updated
Comparable EPS (non-GAAP) percentage growth is expected to
include a 9% currency headwind based on the current rates and
including the impact of hedged positions, in addition to a 1%
headwind from acquisitions and divestitures. – Updated
The company expects to generate free cash flow (non-GAAP) of
approximately $10.5 billion through cash flow from operations of
approximately $12.0 billion, less capital expenditures of
approximately $1.5 billion. This does not include any potential
payments related to ongoing tax litigation with the U.S. Internal
Revenue Service. – No Change
Third Quarter 2022
Considerations – New
Comparable net revenues (non-GAAP) are expected to include an
approximate 7% to 8% currency headwind based on the current rates
and including the impact of hedged positions, in addition to a 3%
tailwind from acquisitions.
Comparable EPS (non-GAAP) percentage growth is expected to
include an approximate 9% to 10% currency headwind based on the
current rates and including the impact of hedged positions.
Notes
- All references to growth rate percentages and share compare the
results of the period to those of the prior year comparable period,
unless otherwise noted.
- All references to volume and volume percentage changes indicate
unit case volume, unless otherwise noted. All volume percentage
changes are computed based on average daily sales, unless otherwise
noted. “Unit case” means a unit of measurement equal to 192 U.S.
fluid ounces of finished beverage (24 eight-ounce servings), with
the exception of unit case equivalents for Costa non-ready-to-drink
beverage products which are primarily measured in number of
transactions. “Unit case volume” means the number of unit cases (or
unit case equivalents) of company beverages directly or indirectly
sold by the company and its bottling partners to customers or
consumers.
- “Concentrate sales” represents the amount of concentrates,
syrups, beverage bases, source waters and powders/minerals (in all
instances expressed in unit case equivalents) sold by, or used in
finished beverages sold by, the company to its bottling partners or
other customers. For Costa non-ready-to-drink beverage products,
“concentrate sales” represents the amount of beverages, primarily
measured in number of transactions (in all instances expressed in
unit case equivalents) sold by the company to customers or
consumers. In the reconciliation of reported net revenues,
“concentrate sales” represents the percent change in net revenues
attributable to the increase (decrease) in concentrate sales volume
for the geographic operating segments and the Global Ventures
operating segment after considering the impact of structural
changes, if any. For the Bottling Investments operating segment,
this represents the percent change in net revenues attributable to
the increase (decrease) in unit case volume computed based on total
sales (rather than average daily sales) in each of the
corresponding periods after considering the impact of structural
changes, if any. The Bottling Investments operating segment
reflects unit case volume growth for consolidated bottlers
only.
- “Price/mix” represents the change in net operating revenues
caused by factors such as price changes, the mix of products and
packages sold, and the mix of channels and geographic territories
where the sales occurred.
- First quarter 2022 financial results were impacted by one less
day as compared to first quarter 2021, and fourth quarter 2022
financial results will be impacted by one additional day as
compared to fourth quarter 2021. Unit case volume results for the
quarters are not impacted by the variances in days due to the
average daily sales computation referenced above.
Conference Call
The company is hosting a conference call with investors and
analysts to discuss second quarter 2022 operating results today,
July 26, 2022, at 8:30 a.m. ET. The company invites participants to
listen to a live webcast of the conference call on the company’s
website, http://www.coca-colacompany.com, in the “Investors”
section. An audio replay in downloadable digital format and a
transcript of the call will be available on the website within 24
hours following the call. Further, the “Investors” section of the
website includes certain supplemental information and a
reconciliation of non-GAAP financial measures to the company’s
results as reported under GAAP, which may be used during the call
when discussing financial results.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220726005304/en/
Investors and Analysts: Tim
Leveridge, koinvestorrelations@coca-cola.com Media: Scott Leith, sleith@coca-cola.com
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