KO - Earnings call transcript Q1 2019

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Operator

At this time, I'd like to welcome everyone to The Coca-Cola Company's First Quarter 2019 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. Coca-Cola's Department contact any they should questions. participants Media if Relations have Media like introduce would to I now Mr. Vice Officer. Leveridge, Tim President and Investor Relations Mr. may now you Leveridge begin.

Tim Leveridge

today. and John morning for our Chief James Good thank Murphy our I Officer. us Quincey, Officer; you. with am Executive Thank Chief Financial here and joining you

the our remind statements Reports measures during reported I'd discussion to schedules considered under release earnings conference reconcile schedules by objectives SEC earnings should may that be call tab contained statements under may posted company's we These of begin, this morning's periodic generally you including financial non-GAAP to Financial long-term Before executives contain which in section the conjunction senior concerning cautionary with as in in Investors principles. like certain website. results to the recent in this forward-looking be statements and and Information accounting company accepted our most We've referred and our report.

when refer today's from during to to continuing operations. senior performance referring they're call, comparable Finally, performance, comparable our executives

Following morning, will call we turn yourself your question. Please for limit over this questions. to prepared one the remarks

If you most reenter question your queue. please have one, then and more ask the first, pressing than

to over Now, turn the let me call James.

James Quincey

is and leverage underlying good performance beverage Tim our total off as transformation morning Thanks everyone. start good XXXX company. we a to with strong as a

soft growing non-alcoholic from and within beverage emerging ready-to-drink contribution drink sparkling a The led and industry X% industry. a win global gained strong we quarter markets in value in developed business. performance value We the continue share our to most by balanced grew with

with operating performance year. organic revenue segments. across Growth delivered each we was cycling growth, quarter, our X% X% the of last positive broad-based During

X%, was currency which we and delivered on of which be will growth, are income a offset we growth XX% XX% John clear, to in often did into comparable operating cover currency-neutral currency-neutral strong EPS EPS in quarter this timing and the topline Of course comparable a more in headwind. XX% quarter But net comparable there detail. which up benefit see basis growth partially was an quarterly we converted by comprised impacts

disciplined guidance. well we're deliver and are year our to growth our full So, on strategies working track

our to system you with drive approach growth. discipline to encompasses As continues and this evolve industry addressing our acting know our to

First, category categories brands encompasses innovating well This proactively categories that in spaces. everything it like us to investing and opportunities hot from and in lines. massive our emerging to and core address as beverages like innovation from blurring emerging Kombucha allows stem ones as

operate to our Second, a looking Global at Ventures geographic from we as existing company segments how we're our new segment.

Third, aligned with our is improved system execution. engaged and

in are investing including implementing reduced bottling costs as across equipment we're for on At more the and the We digital with as enterprise. customers, engage with strategies. same our Our capabilities. cold-drinks growth consumers, interact time, street segmented partners well growth feet revenue our incremental investing and

is it So, has for our maintain continually its and has starting includes constant which variants, growth. been updated Coke, relevance. Brand our many its brands, with product momentum sustained innovation flagship to because crucial

have that on on upliftment, value retail global of each the Zero Sugar which and Zero This course growth refined a overnight. to in Coke growth XXXX. of Coke, because it Sugar its time accelerate Zero its helped X% expanded growth We part in has success innovation taste, provides, product product the sugar. is didn't the succeeds including the years, Coke three ahead. or large past of in on year see doesn't original brand edge all the more these boost happen that energy Over of calories up over Sugar and growth because we builds

Coke to Coca-Cola where coffee well-developed. edges into that will for to spaces and We're example need extension they markets I've boost, capture to before at pushing than brand tested consumers another these want in innovate new We've we several But a the spaces year slump end. consumption its leveraging brand additional mid-afternoon This to coffee one white occasions energy around the plan logical see specific approach next us channels pursuing product Coca-Cola during to states. XX the our like which Coke? is on what's from markets We're new test isn't by the original offer reach brands energy not Coke launch to our takes in level the pilots learned more to consumers One So, of and the brand last occasions world new to You talked Asian to and work. and designed category was continue we limited year. about and innovation is Energy. what by other a is energy to Coke. designed also the edges. of with taking This brand Coke, taste. brand of now

Europe, innovation Simply, within category in brand, beverages. volume we into Challenger new double-digits, is our U.S. And premium expanded up which pipeline. almost are Explorer half the Innocent, in from about combinations the brands, year launched Within example, juice our For of of third recently growing operationalize our our plant-based improving our juice We're ago. a also way smoothies. a our country business brand a leading line

we evolution changing often how just we work. innovating in as about our products, is much talk about While

Our portfolio environment our are ever-changing, around more competitive become and complex organizational world. as needs the

borders. like group Ventures. some adapting. example is creation a accelerate for goal operating Coffee Global potential to is businesses, we're that The our across have One the So and Costa the of new Innocent of traditional growth

point months plays a We ensuring the line than coffee overall. While building existing Costa with is first better expectations. while in Costa transition it's more platform performing the than a into and This hot three within ever requires And connectivity spent Whitbread smoothly more acquisition Coffee significant is units. that. beverages, before. also business entry from went of the our connections in Costa

our weeks in ready-to-drink launching we'll second we Costa be products; more that hear quarter, to first As ahead. look the expect the about to

saw geographic we in our to the performance, markets many good world. results now Turning around

emerging revenue XX%, we growing growth. organic organic Russia. performance revenue well, Our driven improved organic in EMEA, in by delivering revenue markets developing and mid-single-digit growth Europe continued developed And our In markets and performing are double-digits. Turkey, and are grew

European unit in broaden portfolio. drink as price/mix, out has also only a with levels case soft Zero potentially we are innovations our We our the up safeguard for their from for hydration inventory Europe, sparkling increasing Sugar and but our This as sustained Brexit. Not a in growth momentum benefited X% markets. initiatives performance categories portfolio. our European Across disruptive majority of bottlers is benefited the growth revenue balanced was and volume tea this management creating

for growth America, price and marketing North less the progress and our to Organic driven pack unfavorably by the mount dairy. continue revenue drinks, Turning steady and quarter and to X Easter value in by results and points soft management by impacted execution. juice shift, drinks, disciplined solid within grew driven day one strong sparkling X% was value-added

pack quarter for our system continued the Our focus in value our consumption. operating In Latin on volume and volume our by the America, momentum. sparkling flavor which smaller gained price architecture volume [ph] and while to example, here X% gap our we portfolio economic new to contributing difficult the markets. Vanilla the continued And volume to and [pacing] maintaining America providing trajectory. from and in salary growth Zero high XX% and customers. case revenue declined Brazil, innovations Unit and upward The by to Mexico, consumer sizes, share revenue an in retail increased for Coke, with we're flagship in base. our we private for management initiatives environment in Orange growth impacted strong delivered our Sugar North organic bottling mini working Brazil performance increasingly double-digits, environment. pack is transactions with partners drive the X% worsened, on driving adjusting cans brand we grew declined helped like Coke In as but transactions focused value X% Coca-Cola benefited growth continue Argentina's drive our consumers on significant inflation ensure value

quarter. this up working and cooler our packages double-digits is in to plan the acceleration. of turnaround X% up availability and refillable with helping are placements volume drive transactions Incremental Our increased

additional accelerating double-digit impact and and transaction X% to organic with continues growth Southeast overall. Asia which In X% growth growth in revenue Execution in natural contributing from in up Manufacturing unit, quarter. good with ramping our the drove Finally, Japan, capacity Asia volume in around chain year. to along saw lines our system but segment business the supply China Pacific, strong, improving, performance for we in China. with is momentum last the was Chinese remains tight, India Year second New disasters deal

even. was will year. case the we capacity So In next Japan, this take until shortage, recovery unit volume expect ease full to but

in quarter a launches in we the of product innovation strong during while New cycle year. the coffee drove and soft sparkling momentum first pipeline benefit drinks last tea

a we the had to in So, good summary, year. start

Our John. strategy will for consumer shareholder And year I'll now value. of customers confident focused our being and creating the and we turn over more is deliver targets our drive are we working. full call value to

John Murphy

James, results like our year; program. you for quarter; points on to to Thank currency us. thanks I'd few in joining say cover and you, all the the our Today, our of and outlook One, of the two, remainder financial for topics. a three to I'd like three, hedging

financial our with quarter. starting So performance in the

good a the year. got we said, James start As to to off

growth in rate revenue the first EMEA recent X%, ahead we run You'll was volume. driven see price/mix strong saw was of North of and America. Price/mix the America, X% organic Latin inverse than quarter what in price/mix year of by more and that, trending composition by the our driven last cycling

shipments in cycling day impacted quarter. by adversely Our grew less concentrate X%, one X%, the

the The portfolio Brexit. we Europe timing After the case and underlying benefit ours top benefited safety and day in since largest shipments, advance in in Europe, impact to of often first our for bottlers increased think normalizing a from comprises is timing This as line X%. the both way as estimated less from global quarter per of quarter-to-quarter. points will disruptive a be impact one potentially performance quarter where price/mix high variability markets. with course the two the there revenue best in stock was timing in diverse saw concentrate Of

price/mix. remainder Over the balanced volume XXXX, expect more and of we a

performance I'm encouraged the really of organic and the first in our that going growth forward. by sustainability Importantly, quarter

another function effect delivered innovation, line to In continued of strategies we now geographic quarter primary revenue driver, operating our and both of for and our growth the structure. margins, with growth expansion. margin the management groups underlying management, were expectations, of Turning of our margins a cost

bottler was impact comparable gross and gross expected impacted with acquisitions contracted certain point XX margin the the profit about from segment. margins currencies XXX This drove acquisitions currency. level, acquisitions. acquisitions focus of on underlying within to basis well margin. productivity driven, points basis expand our the from saw impact and about margin and point a impact timing continued net operating by basis basis offset by and underlying in basis investments we in was level, net basis primarily expenses quarter transactions the net However, a But about of gross due expansion XXX At by point bottling Currencies At the operating from XXX this as the points about points. profit impact XX respectively. XXX as

an As grew of comparable the offset currency-neutral comprised by XX% quarter currency which EPS headwind. XX% noted, growth, James was in X% growth partially comparable

currency $XXX free of Strong headwinds cash underlying payments. increase line our in flow generation with of expenditures cash million was an Finally, expectations. quarter we and with cash in along offset the tax by the in impact capital generated

Looking year. the of remainder the now at

a we expect confident do spoken included full are about we the quarterly is uneven. guidance year have We be can bit and the phasing our in We to deliver release. previously

the our move we fluid and year. safety quarter as highlight me roughly stocking some reverse received expect quarter. This this benefit is the will just stock forward, your first The current bottlers this into situation, up considerations estimate third to second in of But is factor but through models. our $X.XX a Brexit let bottlers So from we that their timing anticipation hold to into we was EPS.

out purposes modeling quarter. take would for the of the I $X.XX So fourth

functional like points. Before we've few to currencies. at a a close a I'd CAGNY, how highlight we XX taken foreign outlook, look manage exchange over currency giving Since in

large provided developed approach flows. domestic the believe have five market past right is I flow our cash important years, has over the hedging cash which currencies, our company significant mitigate for to including to the we dividend. For obligations This benefit fluctuations a strategy cash given

is emerging market our markets Our importance earnings the currencies of given challenge base. to increasing emerging

manner. to a While we versus a can have there amount exposure approaches cost-efficient do in we underperformed has not hedge other been this limited

will when forward also Going job better approach continue evolves. area. optimally a and like us overall on we communications. We'll evaluate insight that to manage to to I'd this provide our approach if

forward currency as we what going significant, it's of or hedging in component is impact out it So a cycling so clear be begin losses, quarters we'll will where calling gains next the overall year.

XXXX, example first result spot currency not was materially hedging is of quarter primarily the the change For activities impact in in operating a of affected to the and by income rates.

from includes the activity In expect a the income. will driven second following year outlook. into near-term the call. impact our we entirely for We outlook be insight impact year. year. for our gains operating to X X once we currency almost expect the have by currency provide to This to prior hedging Returning I preliminary latter also activity hedging earnings on this we quarter, from the cycling point third a are quarter point better

are currencies as the as certain near rates currencies. through We options for GXX hedged market for market well emerging current

quarter the opportunities downside have some protection we So weaken. in dollar and the upside should

As of less half headwind quarter. of the into expect a to each we currencies the impact move the become from back we year,

while the of reflect through have end currency currencies However, market currencies on and fluctuations some in the emerging our do to hard we will exposure hedged are outlook accordingly. this we XXXX,

As Relations models build-out for you always happy will to as answer team any our year. your the be questions Investor

And organic deliver Currency and is are ability year impacted and to full margin questions. now guidance. and for in pricing our are our ready So revenue but summary, in in are confident is quarter, the we driving growth underlying margins expansion. acquisitions productivity broad-based. Operator, strong we

Operator

first with Deutsche Our comes Instructions] [Operator Bank. you. Steve question Thank from Powers

line Your is now open.

Steve Powers

Great. Good morning. Thanks.

James Quincey

morning. Good

Steve Powers

quarter. on I guess -- James, congrats the

I stepping of back I just wanted terms bigger think the prepared start about remarks to gave talking actually a picture innovation. clarity. and a of in lot issue,

lot not you Or be taken you a tracking CEO. Is a I you've afraid you about new and terms products of so product there innovations of of about over fact but failure, more specifically other to comes how with And in of around introduce talked to geographies? when how as the need rates you mean, contributions growth And innovation, you back, success? what -- accelerated? fail fail do You've more you it simply it how could incremental also promise. since my work in measurement of question against metrics And just a innovation matter how some innovation? context fast maybe is categories bit if success if the are and remarks objectives? you Just shown guess fail some in cited But across product step the have innovation you You are have that those I accelerating innovation things to cheaply. prepared when you're And metrics introductions? us? share do your progress balance as to those the of or little new or assess number could, and the those of approaching and try

James Quincey

Sure.

of couple Steve. a you offer me thoughts, Let

metric I think or numbers contribution CAGNY one think, in I is our remember we've we overall to at some looking or and innovation presentation revenue put track, the margin I one -- if of is gross that correctly, growth. volume growth to

innovations stay the is which to innovations aimed out thesis So and but what's most simply what on that important the us there how useful was are was are base. relevant. which not and and what's just thing existing, is products, packaging, about is to quite what's all what there know stay and to tracking to contributing And relevant new new work new help just marketing that are about but to to existing us the

be seen product. It as also liquid marketing. just the as and be the seen physical packaging shouldn't as innovation to the narrowly needs So

measure So we framework about, in broad. is zombies. the and the but challenger, up product that we're leader, also which what to ladders ultimately [interested] the [ph] do narrow, we've driving is the the which the And explorer talked is

execution, packaging, more marketing, about the leadership So the in product, the the innovations positions. the end, the it's all co-brand in quality the getting

consumption. a challengers measuring the don't so of if the of there expanding how of faster a leadership because share How gaining are many each gain are they growing their we're value position? And Are than arrive year, leaders amount many in decent they share decent growing explorers never the half out We year, amount being they'll leader. each explorers then of the are double-digits? with only double-digits, many And of the at year. that are growing value was called how there scriptures one-third last so personal

that's the service for the and level So creating should of seen be that in highest metric brands the at leadership as we innovation in look end. quality

Operator

from Lieberman our And Lauren you. Thank question Barclays. with comes next

now Your line is open.

Lauren Lieberman

Great. morning. Thanks, good

James Quincey

Lauren. Hey,

Lauren Lieberman

quarter. Asia was notable in really performance this volume The

tea China, I small, about just But I'm talk just driving in so a could also China. mentioned the combination tough sure know in what's And through did you just mention know India. but And you like for specifically house you a this been and in walk Even I it's quite Asia historically. the acceleration. you sequential launch authentic release And country Southeast performance? category that's it

So put if talking comment release could because if the just it you worth you Thanks. be about. must in that, on it

James Quincey

Yeah.

Okay.

think line first growth first thing in growth I very the the the would in volume that quarter in Asia say I XXXX. is volume Pacific with was much the

was that a like the quarter quarter, the that think fourth the And when softened at the blip. think more something was that else? or the little out first quarter in with it a I was question emergence a fourth was least I there of looks blip

of So the we I a momentum XXXX. retaking in it's have think

activation the water was had by driving in of business. with single whole Chinese together China has that wrapped value that good strong the Tremendous there. water example, for been in emphasizing the category a as what marketing Obviously theme Specifically the very an New all programs well Year. was Coca-Cola as on serve China us trademark, performance in it the was, we recreating for ongoing and

good Chinese So, was but by sparkling India local there. Maaza, we really In had in local flavors, solid mango very a business. the Indian of is juice performance centered quarter up nice by really also India, so strong did with well, in the business, along juices. the Minute a the Maid the which of growth fruit we case strongly the some performance

know into were well. saw do Authentic to continue Thailand, really so it's it Vietnam Southeast a I Southeast to they made think do Asia. across House, it good double-digits, in Indonesia, And Philippines, also and Asia We I better. all starting performance the release Tea

So are initial results. a definitively the explorer. going in with we -- it's pleased It's of be to the very category

So But a I long happy up growing. before it's we long, in to there's with we end think tea in China. road where are go

Operator

Thank from Herzog Fargo. next our And you. Bonnie question comes Wells with

now is line open. Your

Bonnie Herzog

morning. All you, right good Thank

So had I The the quarter margins. on FX underlying in were a margins quite impressive your and ex question acquisitions.

strength So benefit you strong hoping how getting to the as key maybe And seeing? sense of some versus pricing the was in a you're of might help be I the of drivers the much you Thanks. savings bucket lift productivity quarter. some from could you got behind then from give the us the

John Murphy

Thank you.

me forward Let gross operating margin. start with cover a and quick first walk I'll margin on then

in geographical was was clearly in this the expansion remarks, part but partially offset that, As EMEA. And positive And of was benefit basis there growth was in by finished the good gross margin mix what's my XX margin led North to businesses. mentioned I America points Brexit due a of overall. also of benefits of underlying by the

some And were gains I prior we Argentinean hedge the were peso. related account to from also year. the they need and currency think to cycling particularly take headwinds importantly, we into

had acquisition impact which refranchising. there we of the kind slight bottling by the Philippines offset bottler a driven on And of addition the there was the a to structural In also business. mainly

underlying of where in the timing to impact XXX due expenses front, due a revenue and -- to points we On the no operating expenses. have North the the and and was productivity higher would've some margin of expansion across-the-board America had EMEA basis there also Brexit the and

on gains headwinds margin the peso though and saw and front operating before. headwinds hedging I to the also mentioned currency the on due the We acquisition

been margin expansion impacted the underlying by So and currency acquisitions. purely headwinds on positive, net but

Operator

And Goldman Hong Thank Judy you. from question our next comes with Sachs.

line Your now open. is

Judy Hong

morning. Good you. Thank

So in revenue James, bit I guess I'm color get growth full of just just organic terms little more trying year. the outlook for your a to

call, think in like timing in talked in quarter first East It markets you some a fourth Argentina. Middle seems cautions like some of around aside quarter I came the better even certainly and about the the volatility of setting some little the bit noise. of macroeconomic

Do a thought? better some kind certain you little how about being volatility are a bit like markets the Thank than about feel think or you number? X% thinking perhaps of less So cushion maybe bit there's you you. as the actually doing little you

James Quincey

quarter it's a the gate I I the think It's firstly, can I taking quarter. to mean, aside, you we And say smallest obviously quarter start. Sure. five. the out timing call with certainly come as think a encouraging the strong of first first in our

we So the to I macros ourselves can what rest XXXX. still last very go of still against long there's it of in versus as question a execute think in much was the call. And a it's the way

I we last the come IMF spoke, has again. think and its forecast the out reduced for year since

or been macro be the on can to in similar bigger executing to how the against issues pessimistic, of to the going the going a out. work. the So right have are focused the environment are we that's of a I under as of blowing we Obviously is into deal some downs we bottling of what whether on think for play have little. uncertainty Middle and trickier places with number on than the for We We're a are pressure. some and a have and to the little that's that. the planning think fundamentally, for consumers East week, plan lower to future. are customers the Depending other more growth strategy. that's it think going very a was degree have the we to of in against remains around parts the XXXX of level but last We're But a ups well XXXX Argentina that remains the we and I execution optimistic, the it what our focused of trade and against environment strategy We or months. macro think partners world

So the it I to. think in end, comes down

in a We in quarter, on had what a although the the can to quarter. first we focus result will guidance. good our manage confident in good start deliver it's And XXXX. smallest managing we are We to continue

Operator

Thank comes you. from Dibadj Ali with our question Bernstein. And next

Your line is now open.

Ali Dibadj

Hey guys.

So of to I context an Energy. there's up I was just that given related then, notwithstanding wondering understanding seems a ago? about But and parts. detail like the strong SG&A improvement. second is the you target whether years restructuring there guess, the that of ago a opportunity margin of in few It in set impact number. in And gross I It impact. of ask bit have underlying a to looked FX Coke the quarter, was $X.X What's John more pretty moment that particular room the the some thing billion lot and certainly a moving little

have mentioned You remarks. James as any the you helpful there? detail be opportunities opening well. about in That would it Thanks. further Do your

John Murphy

it's new slight there's and a and on the comparables Ali of impact. SG&A, things in but businesses, offset the at does One, a there. it increase in by of the reflect we X.X% currency integration structural Thanks. couple had

under that's enterprise ongoing operate be as have critical our North focus work some future, continue with savings costs our line some particularly ongoing margin concentrate you see plus et we quarter, underway. quote SG&A the just when of we efficiency to did way cetera. And more effective initiatives in the look I drive formulas at some arena, enterprise. sales productivity in of look going America. in the been supply on we to then always the think more embedding doing, of spend have the marketing benefit finally, that efficiently of There We to a driving with And is those timing into a area through there's opportunities the or every to be line. we digitization into opportunity We business whole OpEx during expenses So, productivity the take to of I a we harmonization and arena, across in focus ongoing have comparisons expansion the our the to key and would ways across the forward efficient, on work where more drive, account. cost at

Operator

question our comes Bill you. And Thank Chappell with SunTrust. from next

line open. Your is now

Bill Chappell

Good morning. Thanks.

James Quincey

morning. Good

Bill Chappell

talk little the Just one how to timing side? understand, Coke kind of some I a Costa? guess with they in they would launches? flows Just be that Will impact you on helpful. North how XQ, color an these XQ, of Will also, Could on Thank more through year you. especially America? more have on little And innovation in be XQ? works trying coffee coffee of the a the the

James Quincey

Sure.

in seeing in blurring with edge a the at blurring innovation the some the of product a way I the at or opportunities is sense are the we way think partly for edge firstly, categories.

in that juncture So what have really coffee at people Coke look Coke versus a of benefits the are are well-developed. benefits the beverage. are to variant way, and of markets people drink is some in of that what Said another opportunity they less developed occasions perhaps three-quarters Coca-Cola especially coffee, already in the see is the what of in where the for a commercial economies the

what quarter So of and go beverage. view certain occasions. the for what only to drinks what economies But commercial as what a drink in they a is they have a emerging

brands connecting to benefits creating a of So occasions occasions. in way a still certain of and lot the there's and of

coffee most. direct opportunities the that with in that coffee and coffee from Costa example that afternoon great got great that Georgia about in the some bring to we some see done in got there's that, we've of is Asia a opportunity to is and ready-to-drink expand more we've there and And Coke coffee, a leverage with So, of slump, Obviously, of launched. started a partners, has to coffee benefits blurring unique other way of the drinks out to nothing the the think in marketplace. Coke U.S. detracts drinks categories and we edges. I the very And really Southeast married

second later We doing will that the quarter. be in

rollout as out of we ahead coming and markets to time the the we So beans with is is likely in the concentrated we'll course, year ahead and gone we as the services Costa. back taking through The that, then of system. and being just really how connecting ready-to-drink, with not stages up be we it's for has see later the but we're platform do come we closed be them with And that the where of schedule. vending foresee the Obviously, various and and that of schedule have the Costa the machines Coke in well a the that and quarter. in second currently And to the as already beverage will coffee partner the later working solidify we'll of expansion ahead. acquisition management of synergy plans well integration to Whitbread of business plans the the the

Operator

comes Spillane Thank next you. And of Bank from Bryan with America. our question

now Your open. line is

Bryan Spillane

morning everyone. good Hey,

James Quincey

morning. Good

Bryan Spillane

was I and if long-term even net of the debt net a couple up sheet-related guess it see going balance up. questions, surprised the up. know that acquisition. with the, a is, you. was that of questions you Costa look is in little at for But I John went just One quarter guess, debt And went debt part to I

a hedging forward, the a hedging debt us first? of just on sheet give balance about if what second, to Then kind -- Coke time. you Can earlier could going for the your hedging. currency just a of balances evolution long are? the view has So So talk trade-offs the comments part been of you related currency of high-level and just

it, do decided What from you not forward? change do what's market the you have derive might doing I give that it going So currencies might just guess, emerging to the benefit you'd policy with trade-off? -- if up, now you the if you

John Murphy

Okay.

few highlights with me quarter. question and just start the Let balance the from sheet a key

have intangibles the two was all, items. by $X.X One driven is also We our Costa of our mentioned billion plants our by balances. those cash, first was and that driven driving and Costa. do an line combined saw by a increased non-current CHI. slightly issue and billion long-term our First paper the debt, higher. line. And we $X.X slightly debt lower I is by driven assets lower cash net billion. $X.X balances an the euro balance And increase that's short-term of with is, in did commercial We equipment lower debt balance quarter, there that increase affecting lower In secondly, which of acquisition in

net above back our slightly to we X.Xx. debt-to-EBITDA X.Xx our expect is range. of get So within But to target do at that

think, respect on couple of there's points that's sheet. a hedging to So I consider. balance questions, the to the With

have it's of cash year. First in it we you And then the we in and know the we why approach, slated U.S. of that certainty -- the us obligations. do when the have order cover important at with look to inflows why we for we've taken, outgoings taken in all, the place first we've we respect course those to

if volatile nothing outcome that's more delivered And We area. smooth and the be than to we've emerging And The did on of treasury currency. doing. a factor. the currency have is we for risks have, Historically, cost XX good take don't it our we sometimes what over anybody challenge the sort place a implicit the important think my remarks, more had periods. really So And if years done portfolio. weeks, other happened will more certainty approaches. volatile program by is the think in don't deployed cover currencies, a take and view is And having on worth not hedging, think the would been also area -- a you mentioned the done at know model area with we working we in has currencies as over to last it. or a in did had last or a I filling inactive far if a better actually wanted job the system team that, I developed in, have this hedging over of that has the we I actually in perfect I had the time few long when you we impact key really look emerging

give downside. short to positions, more we do medium that the certainty again us which to area the the allow minimize to us short-term work and are have an we that's on. term, prudent believe So in In continue some we and will

Operator

next question And our Teixeira you. Andrea from comes JPMorgan. with Thank

is open. line Your now

James Quincey

Hi, Andrea.

Peter Grom

on Hi, Grom Peter good is This morning, everyone. for Andrea.

James Quincey

Peter. Hi,

Peter Grom

ask So follow-up on quick Energy. wanted Coke a to I just

maybe the So Thanks. James think in Or the white of a yet is specific spaces looking not where to world? that prepared in remarks developed. more the that speaking at you talked category sub-segment about are you particular you launching category countries the energy Is across underdeveloped? is

James Quincey

that I the blurring Yeah. Coke is Energy the -- of some the between and some of dynamic categories categories. the of of the this the boundary mean, debase something again

markets. to category energy energy a the every core in to to America is in no other forward energy North connect an has world. to The mean, many got is Europe itself been to the have people adding the be. to the in innovations propelled the the And dynamic. in based category, I complement there ingredients core from the of some other proposition category category brands on the boundary category in everyone of be boundary. then starting central to within to of connect the category -- central And the category the stands it's opportunity parts what there's a the of that work as to and categories. different. able Energy And So the growth understands There's with need of by what's that therefore, the category credentials energy is energy category states. development origins made very other few largely at in benefits case some in still and the lot that's Coke emerging a in for And, and there's and of and a of the core

that going we how with energy obviously, think the category And then, successfully that works the will we it Energy see this So that And our refine see brands and grow. other and whole geographies. in help we see category. complement series can space experiment to Coke as we're across And it sell a of where the proposition.

Operator

question Robert our you. Ottenstein Thank And next Evercore. with from comes

now line open. Your is

Brendan Metrano

for James, Robert. build quick on staples turning trends operating for the quantify that in business I'm The guys. and a to Brazil gross initiatives and of you the Metrano an benefit in some to Mexico is, be you. that from you company Brendan a EMEA? you're important Brazil obviously, could Mexico Could and for follow-up implementing Thanks. John, margin expand markets. in is wondering seems those in you while. This concentrate for morning. for And then if Good

John Murphy

Okay.

Let Yes, take basis margins me timing the the Brexit quarter. benefit XX on question. points to the Brexit in was

Brendan Metrano

And that was for gross and operating?

John Murphy

Operating.

Brendan Metrano

Operating?

John Murphy

Yes.

James Quincey

at to before everyone back give one. else? the We'll come questions Is the there someone we shot second a

Operator

from Our Gajrawala Kaumil comes next question Suisse. Credit with

open. now is line Your

Kaumil Gajrawala

ask of good wanted Hey, Coke more Zero period on for specifically I little to detail guys. you've Coke bit had a Sugar for morning little maybe the brand. a time. a And

Now orange energy. How maybe innovations? do not and brand a you on overextending underlying stable you less and reliant know lot the and have you're business more coffee newest and the the becomes

James Quincey

question. Great Yeah.

are the be the what's the a central central there's either brand part or in and what noncore between innovations or identity are way to likely think most brand. of to difference a or the out to I in that

Zero for, Coca-Cola key would as and And Sugar so brand Coke it therefore stands of is. the what see a Coke I brand what and part

I a countries. that availability. different the In those to or like is things obviously, And starts are -- sense the variants connection into over with danger total they to brand. variant and And another what vibrancy interest end, And Whether tell. I up be are we and category of they have crossing marketed not that we'll Vanilla, add But the in doesn't think the say some to Orange history course, different steward not of driven that's some ultimately and of management how metrics with a that will really see they endures by brand. the We've is at some there of end of beginning or Coke in available flavors. and there brand. the think We as Now those time the metrics. core the nature think becomes ones of metrics, in-market as itself. There you teams, them develops. of change challenge Clearly, to coffee number up but ultimately market are that that's will a product do through whole is I that key make imperative, and for that the in the it well. an series be proving flavor. it the had brand is a just one not is And that a for it consumer and that whether that's a get it coffee. support

Operator

next question with Consumer our And you. Brett from Thank Cooper comes Edge.

Your line is now open.

Brett Cooper

from wondering morning. particularly the center about and was expanding between of happens that you the be? what guys from then, it talk guess you can can doing the interested that? of And Thanks. you And the just speed if rollout? where information Good pulled is about country. in innovation or I whether original market, process it the from pushed final I and And want test the further thing is to talk is

James Quincey

you'd CEO rather challenge on Well fast it, is to ever philosophically. something improve that's in with a as as how nature can management in than nothing live of is or you I corporate speed being like think the but its

a ensuring at a in tends that the it's and the instructions and around to up or anyone a as and markets the just focus the It's not an markets. in The system everything directed that be could possible to all you needs think on to look Coke very on innovation In before then get decisions highest-leverage to a amount of large world allows moving the When to of an successful allow a the will Why? That decisions. know possible market can to that has stay enterprise it an on organic have we not as center focusing the seen issue innovation I center have there's directed on from center. anything. it's culture innovation self-generation. there's from a bit everything few system But set say big talent neighboring in impossible form. a to the enough that. and to system Because have is and end, for likelihood reality the rely high it that it of a that everything. different one certain moved be a

It out learnings. the They time yes, it everything. worrying end Asia have the or be with trend next went with formula, then to of there every to the up on against Coke to push and to was from then one based in the on second today about thing far it went been as actually the one make So further answer. Corporate XXX the formula. it being moved one came something the the things thinks Center to how there's Pacific. already is the formulas evolutions The version, the necessarily looking that have the thought but from how Obviously, to XXX variant X.X then move has make it of we'd coffee. wrong of updated really developed. by being are at. we've got to better And started started done we so try the unity take market further, is the That versions seller the X.X about talked Because some was that before ultimately, to about it have in They is of probably country example out sure we've also it that some so up with variant. and doesn't market

we both we yet to of efficiency appropriate a an believe overall pressure differences, an so local and satisfy is of get corridor a brand that drive do a to growth of process chain. consumer And global apply into supply the

Brett Cooper

Thank you.

John Murphy

just comment. I if add -- And one I'd add additional

a couple of more last I spoke model. think is moved and model we've my the of network from from experience Just hub Brett years, to over a that

now is center operations. reporting into local R&D Our

and wired Brussels Tokyo, have together Shanghai, our one much Mexico. units. and in very to they're connected business We And

years, speed So it would part stuff referenced. lot of ideally is we the last around what that be, certainly overall just for but increased James want a key at not has which to a over two profit the moving the it's

Operator

next with Thank Grandet from our question Securities. Laurent you. comes Guggenheim And

now open. is line Your

Laurent Grandet

franchise to if That outside help. will us I the it's Any Thank The and on maybe of James. morning, Coke on Europe? Energy focus from from please already are reception update share mean, If Energy Coke bottlers on Good again. John. like the you from Europe? retailers morning, update launches Coke upcoming to I'd and in consumers? incremental Good could sales taking competition? launch or you.

James Quincey

Yeah. Sure.

I It's think only been early the really too that headline is launched. just tell. gone – really to Laurent only just unfortunately it's

sales have are first It made. to only in being seems The of just resonated couple weeks. first well the

not we're sales on the are given early how it's call the coming – incremental make a at it so where on And really not stage we is, from. good where can

So they're still small at this stage.

looking be So able I too at clearer be think and coming we'll Obviously, to we months, tell. to it's early very and forward. – in weeks we'll it it's the go become as

Operator

Capital Sharma you. comes our final from question with BMO Amit Thank And Markets.

now is open. line Your

Drew Levine

about for ask taking question. environment the everyone. for I Amit. in on the wanted the competitive just to is Hi, Drew Levine This U.S. Thanks

Your their not anymore. said main brand losing that, are least on cola share at competitor they

scope brand? of BODYARMOR just happy wanted additional sports of kind for with to competitor you're And see the the you're their sports to your to Thanks. or to the cola. given I market own increase drinks So your any on then share in market, seeing spending plans expand that performance support what plans in drinks related some if in by

James Quincey

out with with new marketplace building the execute smaller strategy Yeah. good We've packaging refranchising in the got brands, of network the to a approach U.S. focused on in a a strategy investing post working bottlers packaging. the in the the portfolio,

in been industry us our We to in year. to share allowing gain again that able the strategy be played for for have and out to industry, and first U.S. a customers, has grow the within in help this successful to us quarter that that the total standing

two parties us. things. industry, So it large the strategy the for we works says, – it's it other a One our industry invest that think think Obviously, I says as in small or up I And profitability. our says, attractive, And more to the to growth competitive. That's because people is to it game because want going enter. become and it's industry need is we our last Coca-Cola got end driving focused beverages number been the and to of category. drinks for it had Zero has in The the a been Coke over North certainly of sparkling start sports good on that's continuing that's particularly driving in think America. We've news Sugar. well, things that's BODYARMOR certainly do in the the been It's been in good years that one growth and category. why Company

continue plans brands we're make our as overall customers, on game the so to attractive focus consumers in we plan. our We're working value competitive So going we'll going as to to can this relevant to invest. And for and our for industry. to remain creating stick

Operator

today's further call you. would like to to our Quincey gentlemen, question-and-answer remarks. and call. that Thank I now turn for James concludes for over Ladies any session back the

James Quincey

solid start drive everyone you of our year. the today. coming of We to continue to Thank capitalized out for year. remainder we To the the on our We've and XXXX remain joining call a strategies for had momentum we'll conclude, the confident.

We will full deliver our year guidance.

interest, we joining investment you. thank As company always, your us in and your you for for today. Thank our

Operator

Everyone today's for Ladies This conclude and have all in and may program gentlemen, conference. participating thank today's disconnect. does a day. wonderful you you

The Coca-Cola Company (KO) 23 Apr 192019 Q1 Earnings call transcript