KO - Earnings call transcript Q2 2019

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Operator

At this time, I'd like to welcome everyone to The Coca-Cola Company's second quarter earnings results conference call. Today's call is being recorded.

If you have any objections, please disconnect at this time. [Operator Instructions]. 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 Tim now introduce and would to I now Mr. Officer. Leveridge, Investor Mr. Leveridge, you may begin. Relations President Vice

Timothy Leveridge

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

website schedules the Before I'd inform to financial under our non-GAAP be like we results to -- of certain Investors accepted which measures, schedules Information referred this section Reports These Financial our and generally you the at by may our company begin, reconcile tab that in www.coca-colacompany.com. during we executives accounting morning's our principles. as to reports senior reported under discussions to as posted

to on that additional company note find analysis provide our of like the section including our can materials those website, that of an you would I structure. Investors margin also

forward-looking objectives report. conjunction statements statements in addition, may including earnings release SEC most concerning this the in considered statements, be and company's earnings contain recent long-term with in should our periodic call conference contained In cautionary and

Following [Operator prepared morning, remarks the Instructions]. for your will call turn over this questions. we

turn me let James. call over Now to the

James Quincey

morning, good Tim, Thanks, and everyone.

by we that benefit The are contribution from noting, as though, we about both developed still segments plan. soft and So Worth the here between performance share emerging with business point balanced ahead our balance a drink strong company. results, including led value of in a with volume total X% year-to-date, see growth across business. revenue and underlying is halfway good all We of operating up our year, Organic are beverage growth continue to we in is and pricing. of a sparkling timing. due momentum transformation a through good as our gained markets global and

currency X% EPS partially headwind was by a year-to-date quarter. up volume X% Unit in X% stronger-than-anticipated offset EPS of comparable and growth growth case year-to-date, XX% -- X%. the resulting grew in Comparable currency-neutral

our full in business. currencies headwind, While to target performance be continued EPS underlying year focused on through achieving stronger we are the

China around we the Looking first in Pacific, revenue focused Strong we both chain system half Southeast disasters. occasions. our on markets. we volume grew This X% Asia performance strong Asia the partially by as and from through work growth line markets top half offset drove for disruptions developed underserved the natural to performance organic the year's segment and consumption of X% Japan In the was like supply during driven world, emerging first in emerging last in stemming growth India, year. where continues by delivered

our In during the implemented addition, quarter as consumers volume price over XX in Japan increase years. first system second to declined the in

levels innovation Looking juice. the adjust pricing robust ahead, we including improving in consumers new as we the Coke a to and Energy plan implement half expect back results and Innocent chilled

EMEA. to Turning

the that by performance challenging innovations the a local of organic in year-to-date macro delivering Across soft in management marketing growth Sugar are our plans environment, driven in are the our momentum X% majority Africa quickly markets growth creating and shown drink and first from are Turkey, to adapting portfolio. South as Here, grew Europe, Turkey, conditions. improved shipment we revenue European X% and solid initiatives in the And despite Europe our performance benefit execution timing. in growth the revenue quarter and sustained strong by Zero we continued sparkling volume due to

America. Latin to Turning

economic while economic expect so mixed grapple conditions. year-to-date within operating growth Here crisis. continues operating we with slowing to Argentina stable growth amidst deliver Mexico's performance a X% organic environment. revenue strong the to a Brazil execution environment driven tougher by delivered we better operating is continues

grow to ensure to plans business continues sustainably. However, we our adjusting are so affordability, the that

turning North Finally, America. to

results continued driven mark progress to execution. our improved marketing and Here, by steady

in sparkling sparkling Nielsen-measured quarter new demand growth revenue drink portfolio sales innovations well channels. X% sugar. brands soft in Our our expanding by No versions of across performance No Sugar packages some sparkling best-known with of Sugar as our enable for to drink our our soft of less consumer as brands the and beverage and investments Retail for for Strong total largely grew was soft drink driven fuel continues portfolio. the smaller core

the smartwater national ongoing strategic and premium alkaline and delivering smartwater Topo For antioxidant supported growth of our Topo water Chico, expansion smartwater brands, and launch example, are the healthy of by Chico.

disciplined stakeholders. all Beginning collaboration through portfolio a sustained portfolio platform with growth of we and for our driving system aligned growth. our are and performance engaged and Across markets, our with

year-to-date Here, we with fueling trademark our Coke the consistent and with continuing our last the explorer X% core Within leader, operationalizing sparkling are drink healthy framework of business making our outlined quarter we leaders, up portfolio in volume expansion. perform registered year-to-date volume X% challenger and soft well strategy X% the growth with progress very year. in to

Importantly, household soft for penetration drink we're healthy seeing portfolio. our growth sparkling

double-digit and a year encouraging we we with is innovation, also volume believe strategy what its premium now is Sugar the Whilst for our year-to-date, Coke and volume reducing calories, are trademark transactions growing focus than than Along future. of revenue growth. on is in faster faster Coke winning Zero third transactions, smaller packaging

pipeline. innovation Our

the energy launch multiple to bring inclusive a of fully evolving pipeline of expanding in remain and we category Coke partnership into more in category. edge We consumers. spaces Monster, Trademark for more for believe satisfy offering with to energy drinkers taste growing our opportunities rapidly and new to and our refreshing system are value The Coke fast in there brand. is even with great occasion the Coca-Cola and Energy, committed innovation the the to capture Our April expanded an

we launched, modern consumer and acceptance. of the it taking are results We're category rapidly X% has we initial energy first Coke indicate Coke achieved was system. outlet for that market scale our and learned already The sales encouraging. have captured Energy share Energy good similar across as In the trade as market Spain, has these with leader levels insights strong the everything repeat applying where

of the have along in and our we XX created are many XX need states end innovations, Energy being occasions We different but challengers ways, and explorers. to with Energy, are to other in XXXX, currently and in specific as target grow of Coke markets. very our available by expect we countries, particularly Coke

a X For after With revenue new from busy from is or designed ago. snack. that for of Australia, milk a in our NutriBoost this, almost or sugar mid-morning years XX% families Vietnam. with recently our on example, for now products, looking added NutriBoost afternoon success up XX% in innovation, launched from was we nutritious learning zero drink energizing consumer-centric focus its reformulated is

we a the same on capacity brands. the are At focus we taking to to the ensure time, approach our portfolio right curating to have disciplined

far, our progress multiplatform build acquisition year, over are the plans across to opportunity and Since business. zombie So moving into SKUs making this in build integrating business. we've accelerating the Costa been Costa speed on sure a a coffee multiplatform we our XXX business, also well January, executed have three We're areas: to making eliminated. finalized clients Costa's with been existing

and beans these accelerating and three products. launched on forward on ready-to-drink opportunities, machines, the ready-to-drink the And additional with is capture in edge focus vending growth. Costa coming We've allow ready-to-drink consistent months. express unique segments: innovations, brand that a plans our U.K. move and service us our in products other category to leverages already customers product roll the out machines we with for food in markets to will As

of to We're machines markets. more number across express a plans also out accelerating roll our

the placed we've year, this end of machines have X,XXX more far, So many plans and new year. for by the vending

Finally, next as seen three a over you formats week, years. last have launch with we all of their within to Coffee across the Coca-Cola reached an may agreement Hellenic markets Costa number

overall Returning to view. the

without expanding into about especially Of partners. partners this system works course, this far new our distribution a bar which in are portfolio. over and Asia horizontal them scale outlets aligned year. future, equipment. to the drive the our management so XXX,XXX are with raise working And progress, and in we're opening with new drink Globally, through to execution. our revenue opened energized before growth talked none initiatives, and bottling of collectively and investing more on our this to the committed velocity helping building making consistent Coupled I've been focus increased cold and has outlets on where we're our placing bottling

part only is other part penetration measuring and performance in performance. the gaining equation. our managing is outlets of sustained However, Consistently that the existing drives

Right leverage So, drive technology we're Execution Daily in to working and analytics better-formed real-time scorecard a our that will system. our integrated evolve from into across platform decisions execution faster point-in-time better to and capabilities order data mobile

our from and In Instead, philosophy economic in hold political Africa. Before our But be plans our announced Beverages bottling bottling bottler clear, that move Coca-Cola we changed. let address refranchise a the in off through hasn't stepping our we region. me until were of back the to period moving quickly our May, we we ownership to will onto change Africa. system, plans

with results. teams have are to to new seeing and promising time system, the meantime, right we at the right our As a buyer. all of leadership investments, sides will the energized the we bottling already sell look we In on and both

and goals with recyclable In Without in our order of world we Finally, the issue XXXX, sustainable deliver recycled our announced facing long-term, One we stakeholders. Waste must collaborate waste. material. is to growth, use recycling, plastic critical the packaging World through

making in are our working equivalent We we PET we in collection. progress recycled marketplace. of approximately have more improve XXXX. goals. also half material We packaging dozen system what over to recycled sell We XXX% importantly, or against in release, planned a with the currently our launches XX% now globally earnings our in noted XXXX. in the in market of As used is XX% refill our countries And in bottles collect

to in While of culture in given successful to working drive models beginning heart intelligent and market, this is shift in what such because to and are our and the Africa, Amatil our Coca-Cola for risks from and will by deposit our success is our people. that investments is its our show run global across to infrastructure all leading regulations time in Australia. a South to faster, need growth I Mexico return traction of performance take we're the think scheme territories as taking working year-after-year, our various already collection collaboration our Ultimately, ECOCE mistakes. PETCO been We've moving lift And continue our will results. build actively learning

year the our and confidence system summary, target in engaged in solid business our momentum stakeholders. disciplined and year And an first to driving value. full through We're in our achieve ability and half by had we portfolio sustained with performance for aligned EPS platform our evidenced rate. our gives a shareholder collaboration us a growth of good So, the organic as growth, drive

Now turn I'll over to John. it

John Murphy

for you joining of Thank all and us. you, James, thanks to

and line year, our quarter addressing the driving I'd remainder critical to start improving process. to areas key like I disciplined are performance company, leveraging segments, capital flow cash by Before growth, of allocation specifically, in healthy few the top the expectations our the believe our and that across business a a margins expanding for discussing

growth talked James management about has our revenue efforts.

productivity our sustainable to play. leader, meet we've needs. delivered evolving our framework past consumer Latin This continued we've Asia performance processes quarter, explorer into results, challenger, Translating for tools ongoing where analytical into We're price/pack showing better and scale and work and America. customer and the it's improvement robust the top in to is margin revenue to growth organic eight implementing And now come develop contributing both to line quarters. architectures efforts

year, first our revenue and operating growth underlying of the a management the effective innovation, delivered structure. the function continued of strategies of improvement, cost margin management For half we

working our to and capital cash assets We've efforts flow increase. improving at all balance also sheet. flow our as a by We're year-to-date improve our allocation. taking capital evidenced look our advanced on cash We're close

and our we're process bottler. are costs divested to our of our stake Peruvian our part equity of reducing of York our selling the in example, business. in For New transformation related were sizable the the And productivity building program we in recently we that

and to do even we progress, making we're So, better. aim

benefit with quarter trends. to Organic performance in X% We underlying cash balance solid flow price/mix with Turning quarter. timing. revenue and volume the growth, now X-point organic and of improving delivered margin revenue broad-based grew expansion a and healthy a our from financial another

A our and performance, initiatives resulted resulted in developing our across price/mix. markets rollout strong in emerging markets developed management continued Investments in growth drove revenue Our of Group. volume good growth strong Bottling which

impact the Comparable the currency. due margins and in contracted second to quarter of acquisitions

hedging income activity underlying However, both cycling year. included operating partially X-point income from a and an on we the operating growth offset an are headwind. The currency driven impact into This X-point translated basis. currency-neutral margins growth, to by gains XX% currency expanded entirely impact operating by prior from

$X.X partially X% headwind. the comprised X% And by and of initiatives underlying capital the quarter, EPS working free growth, up timing stronger-than-expected taxes up of finally, currency-neutral cash expenditures. growth, XX% was which a offset year-to-date XX% strong comparable to largely capital flow billion, in Comparable grew currency was due and cash

While least the the in cash we $X do back not free at a half increase our flow. are expect confident year, similar we deliver ability in to in billion of

at remainder looking the the Now of year.

to taking strong first the profit up that think For performance, delivered the X%. we normalizing EPS we is year, for reverse growth, even timing expect benefit into benefit, our to comparable is stronger the is a our about full the performance, we are James beginning to the for and structural performance underlying of half which gotten this line maintain guidance are came the this half, X% full at expected But revenue better changes of currencies which in organic first performance timing and year half. back less organic enabling have a top noted, worse the Considering and us of the to guidance X% we the underlying revenue than after year. about on of for way translating from as shipments, best point underlying our as

headwinds the As quarter. consider moderating an timing few there's you of in the cycling, shipments due of of day fourth terms phasing extra model to flow items in the to and currency the expenses, year, a and

of the operating comparable in We in income expect year growth half the to fourth of quarter. back the occur the all

Specific almost prior year-over-year hedging are entirely headwinds in rate to from are the a includes impact we as gains quarter, This cycling X-point activity year to by expect third currency the income. X-point from currency softening. impact we operating driven spot a

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

spot a in Looking even hedge positions, environment and XXXX. to further expect rates we XXXX current out at compared currency benign

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

had So, year. first half we've in summary, strong the a of

driving performance remain our and are delivering improving, year business. very strategies flow focused our strong in we on is Cash guidance. Our full EPS

questions. for ready now are we Operator,

Operator

[Operator Instructions].

Our Powers Deutsche first Steve from question comes with Bank.

Stephen Powers

some timing continue, is what most solid a if So, improve guess few of results the years? from this may that today. movement half, the in set that look very some factors of back as not I you the confident question can here, further just out cause notwithstanding next momentum makes you over the

do your And the perhaps how footprint as and potentially you an Or of that as I over guess current the aberration? that company clearly quarter. that underappreciated view into And an bottling you improvements I this question mean growth in profit contributed sustainably is -- part do to accretive the bottling contributions top momentum? of bottling story, factoring line see next total years? couple

James Quincey

Let thoughts, me Steve. three offer try and

long-term the industry. used I'd the you in of us we and opportunity one have the with we've investor bottles, front the think two a the the to in one refer of one back of developed worlds. tremendous one pages the worlds the of of I developing Firstly, decks in beverage

gaining small the we world of a share relatively Yes, the the the they population, but XX% in a still is With we're commercial portion that a X/X population share. is developed small and of beverage, drink there, have of aggregate what world's of world. of

So, there's developed the huge opportunity for value in world. growth

which again, in expansion. drink commercial what XX% of the they room our beverage. And part of only evolves lots from the share of yet population, X/X world developing And for the world, has is of

and of the is reunderline of growth long-term a commercial point that's and So, for in opportunity in developing markets, developed I opportunity beverages huge us. the the front the first would

you a just to of four year-to-date, average the think BIG. in and the quarters The to if on results price I get three thought you I you'd you not seeing in were is the what the momentum quarters and I second in some last second think would give take about a over benefits, aside leave the out of want four sustained last set if offer price/mix yes, volume up a or I we're we're timing end or you seeing but with is year, and without and you calculation, about think price. to cases you of average do just And with the unit you three out the the two quarter

to momentum And now that a period. I So, more looking the model even encouragingly, think X% you're of is also sustained long-term the we for, XX-month over business a growth core lapping for where period in band we X%. were were our seeing of perhaps

So, numbers we've now X%. in round got X% lapping

think multiyear. look always I we some where multiquarter encourage now timing the effects. the the are in supply is everyone I momentum and at given So, to chain average

now and we're building multiyear momentum momentum. opportunities, called long-term that So is

the BIG going And yes. top forward, to much we've given Look, the the grow line. the can I and line a bottom mission think clearly question to team of BIG how affect that

that the did the well the think countries be of where I operation. parts are bottling happened this own quarter to the -- we countries

obviously in very long-term is countries is have prospects. -- obviously bottle beverages. helpful. only X/X number was of but that commercial in But that that So BIG a largely the They're growth centered

other do right expect yes, lot given We we've as own owner operations, abandon therefore, years. operations to them operations concept coming find the to should mission obviously, for the should the we to opportunity, have better bottling and and in ward. we'll of a And good clear the just all of time. the bottling they at be So, the as look be a right we to aspiring BIG the hospital

Operator

Mohsenian Dara from Morgan with comes question next our And Stanley.

Dara Mohsenian

also, benign discuss I perhaps XXXX today, we know leverage you guess offset won't there can there any or unfavorable growth are give today, if that puts for big crack FX FX, become besides were on guidance to you takes from should up earnings are spot are to the look the John, as to explicit and us just you've guidance with algorithm you FX EPS the pull XXXX. more versus the about typical but growth where we you I rates conceptually, an range out the XXXX can outlined? comment. opened any maybe think door And earnings perspective worsen from

John Murphy

It's XXXX. Dara. Thanks, No. to Yes. very days about early talk still

interest that be go number where lot macro perform continues you as factors rates a will the The volatile. There's a -- pretty As markets know, important places there. in our And to of to ultimately us, land. we'll discussions Mexico, like are South of a there's parts into of how in lot some environment global that Africa, Argentina, of XXXX. like particularly Turkey, to moving there's

to So, very talk early it's about XXXX.

end I the of though over a context it's in we're benign for years. that look is good the X.X a the XXXX We to year, of think cycle, we hence, -- next think and the at currency. it strong is at in towards think the -- dollar environment do

With not represent to of across better from the have be holistic headwinds our -- it's We world more the dealing that markets PBT. this XX% I the almost managing the the connect going we're to potential away. topic to dots because a decisions locally taken sort us between currency, of approach think respect to emerging with starting help need to

important for it's even topic a to So, be better. address the very to in us going future,

the certainly, guidance. days the full as upside dots But early back underlying us actually half better, year the the connecting operating to call, in So is of helping I year, said for the that. on our on maintain performance yet and

Operator

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

Bryan Spillane

of the far a on been in the wanted half to in good strength year. I It's Pacific just the bit Asia first more dig pretty so segment. little

looking whether you of maybe, after of I'm little I in underlying sort or dig so could not and year, just guess, terms performance really this performance, some bit of James, this of type as sustainable. in that kind And view if what's of driving a what is is, we're beyond

James Quincey

good a in Sure. we had quarter I Pacific. mean Asia clearly,

later I by India of in of think the monsoon we India. start the later in somewhat or kind helped the were a monsoon

we're was cautious Thailand, in the Vietnam. be growth good So, I in in But saw the future. in think this Philippines, would of in some in one into saw good the last quarter clearly, in We cycling China. growth best quarter, of the we India, deprioritizing despite low-value Actually, good that quarter ASEAN, extrapolating year. water, some growth one particularly and

long-term comes But And is and But think while. of Actually, that's of Americas, if Japan part that's of take you what representative the most take We growth we population. opportunity the and South in getting continued beverage started. business. is a for world's from the -- we're the seeing if seeing North small population, it and Australia. Indian good majority the subcontinent, and and basically only we're America, money I Europe the the and for you been Africa, this vast ASEAN a world's where have China, quarter that's of

So, extrapolate the I this of I say long-term zones. large in but think quarter, one long-term population wouldn't those let's representative it's there's opportunity. four opportunity absolutely

Operator

Ali from comes question next our Dibadj with And Bernstein.

Ali Dibadj

big as one that Coca-Cola transitioned Coke total will company, to for investors of beverage controversy is from pressured. margins your So, be old you around

set just savings, "underlying controversy aggregate terms margins. then an green," provided mix, that i.e., this might, in negative particularly kind and of so, to you operating controversy I remains the in get price/mix, And just very if us saw Can overall positive we to one, the And mix please improve, really maybe more margins. geographic quick from SG&A And cost idea sales percent sales margin a as you clarification. sustainability bridge momentum of in but trying broad with quarter, a into and on with comfortable margin the charts. of positive this gross the of maybe quarter, of zero and bar that

You by the this year. U.S. list? to on rolling of out Is XX Energy countries mentioned end that Coke the

James Quincey

let there's at controversy start. me not sure all. I'm So, a

half and margins rather clear would that's those one sorts and on things And movements four the I'll super we've I even not the been believe a than things. all happening couple because think in. I about rotate go of would on prefer think, the quarter there's I what operating to of here. first on of about we quarters happening clearly, let's I but of talk talk -- gallons because two, is

has of clear: very changes mechanical given particularly operating I and operations outs, different what messaging think cost the their that's on we very the plan the see ins continue to bottling clear So, and had is had structures execute been the clearly I acquisitions, removed talked the think I bridge margin because over you income operating towards our we've margins think our chart. on the can improve happened to and about, and And game to against given that we tracking all instead. time. We've that confusion, but this been target of

in ongoing first the goods. again, the or of in which half. as by can in was longer line, in the of income just the the again profit quarter are been it's of the it but better sum flat operating second the clearly improved gross in and was parts. driven those I prefer improvement cost you categories, the We're in second that's pricing. quarter, margin, basically profit happening first have the higher half gross some So see Yes, But happened time frame. yet It's getting

you've previously the in the gross franchise such seen is profit innovation is impact a and of the we manage the it then first expansion but question, able obviously, margin, half margin the drive and is flow-through And portfolio a the against of productivity it of Coke ongoing had that been the might cause great getting which on little, wash, our wash. be efforts. result. new a will the We've productivity. to a we're yes, What gross So, net will it's some categories offset be said by compression

Just new the office in because this that through operating the the back the are using investing on into wisely program, the we -- and with effectively haven't back announced marketing such SG&A is focused in margin. flowing we the on leverage still resources

continuing it. intact to we're So, game I against is plan and think drive the

Operator

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

Judy Hong

and the So, opportunity, question is laid James, plans question the how and year you've so coffee some my looking for U.S. Energy if which in of asked fits out kind about guess, Phase my of that the kind at well. the think I criteria determine into markets. can of just of that entering you question address then guess the And markets I you I is as as about determining so over X do years? what's then a next enter the the and plan in to couple the if and newer Ali

James Quincey

Clearly, Yes. the we're to mean, -- market haven't about we're ready. mean and just for would haven't the we on not right until I market U.S., timing I Energy. a when announced I markets the the announce U.S. yet, mean going starting a we're we it's Clearly, Coke big thinking be and big opportunity.

strong a an we do. opportunity therefore, lot well and robust of good -- where essentially that represent franchise, we look of of markets in us would think, we've what strength launched is how to approach Coke and a markets could at we have and and think capabilities we a number and a give know our the I in is way would ultimately, I should it launch idea

that. an be would example Spain So, of

We have a great franchise in Spain.

there the cafés a with on-premise have We and great restaurants. business

trade have a We with strong and strong relationships the modern very bottler.

So, that what that we that we we there, know if then markets, in strong represent. well would do know

and may can other that and some types graphic it's a that tactical this, X.X whether and tweaks And the in which and give it's of learning to forward. learnings way, taking purely it us, like and suit range of as Spanish execution the tweaks those the but not of give and from us from tweaks learnings our for formulation launched different U.S., Then end Energy driving the the and we've be, spectrum, tweaks a are the And something the whatever have the as markets and environments. the marketing learn. would in a perspective cycle of have it of rollout on a because X.X set probably a mix perspective us it'll in accelerating the about some approach, a that'll all experience markets Coke good learnings we in emerging strengths of that also launching

the And conceptual make So of Coke that the it the done. Energy on what next up sure or at get tried we true, to X.X need before will time countries. want them it, kind of point we've whether the of to can with to that on to that's Every countries be be done. how initial means to X.X or to coffee. cycle approach to we learn done the some we've Obviously, from the it's we will go bring you go thinking Coke back latest be set

coffee, there, clearly, rolling establishes with can machines we beverage formats and way to be brand partner and of to the the first of of necessarily consumption beans-and-machines a cafés kind play a will the ready-to-drink and looking the we're best And out coffee the the for of of kind similarly, being restaurants that a at kind think the And and express course, is drive piece. but brand vending immediate a the which not And forward. of channels part that work.

Operator

with next our question And RBC. comes from Modi Nik

Nik Modi

understand DASANI, you and doing the Peak. sparkling on you still quite when market. James, can Gold some portfolio it the that some the just Obviously, well. the U.S. to maybe just I could business talk gaps kind context POWERADE, give comes But about portfolio. I hoping is in was us of weakness there's

about brands those back of them direction. right can the and there just kind to plans of get So kind in the maybe what talk are you

James Quincey

term. around the think, course, first than I I'll again, short in mean, get you I the more half because, second Sure. quarter about things of bouncing talk the

the as brands work like due anything bit of bottles year brands, I mainstream water under case. pressure in this think to side we're of the more formats there's and be much done, in the water the on as retailer private a a so larger of where the number far labels DASANI to expansion particularly

there's So, some there. challenge

is do of with brands. side continue flip to the really water well premium The that we

grow. its wave, fantastic Chico growth continued So, Topo continued to smartwater

I see and the So, the premium mainstream diverging water brands. between a in you performance set the of market water think

is start good the the not bit faced and issues a Two has well the the Zero's Tale main of I some to growing, year, brand, know BODYARMOR POWERADE, Coke executional again POWERADE, a system. yet doing of in POWERADE had Cities.

Two So of drink’s sports the bit Tale again, a in category. Cities

the of of we Simply really juice, well a slightly some nicely. it's but of bit was terms Minute repeat. launches. in Maid growing new In did a was And soft, again, flat,

So especially bit again, slightly some see between smoothie. flattish or and this the think more premium, mainstream, the a the I off growing Simply in contrast negative in you of and case, that of

you think little see dichotomy I there. going a on So, a of

bring good a on second sampling it's worth into and think program the a I really got of back about some of of And to focus year, and on commercial some of kind as or lot and it's with those customers We going merchandising talking still activities half agreed blitzes specific media Peak smartwater the the POWERADE half. those around. categories Gold back or whether market experiential on

year. back we'll think half of I attention a reverting the focus going So, and trends of of into those lot see on the some

Operator

from comes question next our Caroline Levy with And Macquarie.

Caroline Levy

really if helpful James, be walk world. around you of the us sort would could it

globe? just specifically if around getting being the us better? question, that You though U.S. softness you you Brazil Is a and did if a bit see how not friendliness state if getting towards mention the did said of was anything's the even you looked And significantly mistaken, part about of the What's consumer Mexico you East deteriorating? stable in of could companies to talk better. and with little China for I'm example? just bit Middle worse, that And you at

James Quincey

So I back volume quarter grew the we Mexico, the still you that mentioned in we slightly, quarter in softness America just little where the in volume in Mexico. Latin second starting still but second grew mentioned, economy, Mexico in the going to -- the --

a generalized think quarter. it's Argentinian of I second So, of the The in obviously Brazil concern more suffered again business the well. environment. did

do you and I macroeconomic on completely a what crisis. in think we but a affordability macro We're clear terms environment. focused very of can't there's can execution, outrun

seeing of definitely we're So, some that.

very So, Argentina was weak.

you storm which arrive the negative. some was across that quarter. think with a the or theme on then struggle of the of there that arrive. storm of in the negative yes, horizon Clearly, that, it's East, is I don't bit But clouds year, was and the get the East there's doesn't the quite Middle once kind out Middle the

are and reports we're read forecasts that the of there at But listen conclude news, seems think things what you some to and yes, would worse. seeing. that's So look that and you when the the calm be to underneath I

we've think the As executed I the basis is macros plans. of continue Asia across Pacific as do and well to one been where of broad and of against to one our have that results, allowed a us deliver strong not on examples feared of great that plan, the number bad perhaps countries operational had we has as

Operator

Jefferies. our next comes from Grundy And Kevin with question

Kevin Grundy

Congratulations on James, strong North on first question America. half results. a

been degree, Arguably, So volumes broadly, place. very North continuing is, consistent year. behind ramped investors competitors quarters with to been I strategic and with but Pepsi watch is the to into key successful. that's industry Mountain But put like key have of spending will key they're be key other your sort is started of making the not Dew topic, course, be last three brands the for point pricing turnaround This going that indeed, guess this really Gatorade. investment some that where in negative America whether a and consecutive that changes

discuss if you with broadly, of in competitive And whether the investment environment. current your part So that, forward. the comfortable then of could levels second going you're sort portfolio

James Quincey

it's not. where and in than it is behind industry Yes, mean, the that to are of our and better game, category firstly, means on create would branding pricing I have value, to be that we I but consumer trying competitors there's say good top ultimately to an more investing Yes. the I demand if in being created think news. rational be

in So, important the think business that's ultimately we point will beneficial that very the be total beverage I think starting to a U.S.

In terms negative slightly of the was I the the volume, volume U.S. mean, in

bit it's engagement, a focus of some We're we've what to sparkling the in packages remember smaller of in trying for the the do we're what drive done, and the building U.S. focused price/mix. that be on of of can little the stabilize we But transaction created means of long bit we volume term negative, us ultimately little in growth it's if and hasn't particularly think the important to concerned a volume's that some even so and lot think the We'd consumer a a flat. business. because on love I positive. value through have brands, if the is have the

positive versus consumer to of So, really bit interactions, volume. sticking Obviously, driving like of on packages. see with smaller heavy a the the lean strategy more volume U.S., but case in the the price little

portfolio with some the piece that is course, the the of goes that reformulation. and Sugars Of Zero

what strong growth see I think revenue North that's from you the turning rates into America.

revenue well So, number over time the growth, sparkling broad from gaining swathe market still categories. a terms you're of in America to North of across they're consistently seeing share categories a of and do

it's think we strategy for good investment at We working the moment. for levels are a So, that's what the we're us. think seeing

Of review business the especially, necessary. course, variables well as as we be we we or all up of to mix we control down constantly the will believe and and aspects and appropriate go

Operator

from comes with UBS. question next King Sean our And

Sean King

in alcoholic expanded the Japan. launch about beverages question A of

to or I While Japan? not maybe besides other recognize market-specific why might demographic be look markets competitor there considerations,

James Quincey

we and a which sparkling Japan, an overlaps going in talked drinks the competitive this case can Lemon-Do, logic local when very here. operate consumer the in and wine, customers, of a occasion multicategory, clearly, and of we but stills, competing one and and for beer launched The spirits Japanese soft it the about to set competitors set, same not heavily which face just Well, regionally. evades a a in

the logic business still So, the seeing business, Japan. context small in of is there's a business very expansion Japanese in horizontal the lot even context and the Japanese of a what in you're distribution in our

Coca-Cola has it of taking not Company. elsewhere The logic The been clear for

parts logic our so logic Japanese beer -- been the brewers our we very and to historically, with carefully there in course, have Japanese or is the need should do But anything has where example, example carried why distribution been there's where relationships have clear different. of been the it world the we else very that own some partners. business be for the bottling bottlers considered something be that and brand Of would -- would

Operator

[Operator Instructions].

Our Fargo. next Wells question from with Herzog comes Bonnie

Bonnie Herzog

guidance. better than back circle that to originally wanted actually to so you results line I your year Obviously, given full top right. guidance. this your year increased your expected All were you far

highlight outlook So, your you second but back point why you surprise drivers could from to an for maybe expect still the the or this of being or comps essentially Are are two? what on highlight your was your perspective? a half? half, or you you organic the then just us grow main with upside conservative summarize for And tough, sales could

James Quincey

momentum story that do think momentum coming We a executing number strategy had, had a 'XX. clear And out of have ago. going I We line top started the forward and years Look, to we the ahead capture getting strong and -- us, what view of to the in follows Sure. were momentum on we getting we trajectory. still we opportunity ultimately 'XX. have a and with need good were result, of

year in point our top still we've and talked horizon about, little there, cautious the view. this the like guidance our at we're beginning of the did arrived. the line in as February plans a never The from of storm but We still, on a clouds but macro see more are clouds,

the being a in headwinds better first not I executing right of did there. and right it's result mean, plans we the place the so, And ultimately, the half. and

we whether little that and I So, a seen of we've some Pacific doing benefit? where or parts the think across benefit the Africa. whole series better, it's have of Asia the seen Europe places bit of a

think the place. wasn't So, just it one execution, it's but I flow-through of

growth the cycling of gallons think a you it's question, there the average get can and other that X more it's that rates. or price/mix whether quarters of really on of average all or talked a to the quarters come the on like As the of the answer and just minutia of X taking do But of simple ultimately, of the ways half and this sort at five, or and X, first a are you of basically than gets X that a whether you stuff. first cases the four lots the I the answer the simple you thumb getting headline I into as and or about the timing it's unit Brexit, two detail rule

good really momentum there. there's So,

hasn't then arrived. are clouds And the the there. storm The second when count half, you still

plans. great have We

and have with momentum. a strategy a bottling system We

so, our to second an in five underlying And can way we think delivering the half. we see through

that's it's those if course, than be won't the working. But a system softer reported slightly momentum plan that second conclusion the numbers reversed, detract timing from Of going five that with that half. that's to a creating are ultimate around the elements in

Operator

comes question next from our Lauren And Barclays. Lieberman with

Lauren Lieberman

Great. you've there Asia, was that the developing in you Japan highlighted because we really more think supply Japan issues bit through. on hoping commentary about I a emerging were markets. so I And and that little offered in chain far you have talk could year cycling would been last

run kind what's as you why out of contributor. can Japan through if that called doing just in stronger being wasn't So, a and

James Quincey

No, reasons. there detractor Japan was and some very Sure. specific in a this quarter for

facilities out important bottle the -- year. bottling one in Firstly, one of knocked important completely was manufacturing year, our natural last of of last our the disasters

doing doing to So, but in defeat cannot it, we hard great lost the they're capacity job new as to and capacity. physics. very were just a working of in one business, Japanese They're laws grow install starting the we

year. that's the going business a so this online over be to the of this year, and that constraint course And brought produced has on

in the reason, second broad decades. couple a The is taken first of in pretty is we Japan in increase have a super one which price important, April,

our that's the competitors big they whilst not of And by a immediately, us So quarter. did deal. follow end us follow the did

bit course, the of in lower-margin that we those quarter. water of in deprioritized gone constraint, we But of will think normalize. And in context suffered of volume second So the course, of circumstances there the leadership little they've capacity too, some as is -- we that, up, a a the was volume. of hit price

invest trends -- stuff making brand the and drive right and more the We've So, Japan, through well. we the got some innovation coming with to specific future. digital very in and decisions packaging some got the into stuff product reasons We've pricing the focused improving in on going platform channel. as some some are vending but

decisions -- track us we capacity these allow that back So, back we results to some Japan the as on track better comes production of into year. second think go in get will production the start half on as the comes really to

we in it's but disasters the was believe needed up setting see it to as future. decisions of as -- the and point more more what the was it we natural given in for business time, So, done be a right the much terms

Operator

question with our comes And next from Bill Chappell SunTrust.

Grant O'Brien

This Bill. is for actually on Grant

are guys free Just just is touch year-to-date. timing you that of a little on some on focused flow cash bit. more. want to it But wondering little I Obviously, a bit understand place of on room the some in on maybe initiatives flow of the of some to conversion going you changes cash to and and free guys forward kind have improve made that. run

John Murphy

our last the talked there's working know over improving to focus go Yes, such, capital. We is being key area a of we've months we of a elements number as about it that forward. One as in Thanks. few $XXX area in in we of and can position is the of and between almost where opportunity benefits capital quarter, significant sit We number to quarter. we've today we payables with where know we do delivered is. in our better. and -- to strides million arena, this working best-in-class And the we -- have the made this

with particularly North onetime in area the have the part second cash reducing of to That -- a as A work, us and the of bit in decline in that we that is impacting quarter. forward second little we've we that talked number amount of favorably outflows about the saw a key move America. going is been transformation refranchising

time to area would back a Africa. forward. That's being South run we in for the be the fact rate CapEx, should think and that get little going to longer line expenditures, with have we Philippines our capital then be what taken take third bit the given going the And the

our them is the did the expenditure flow capital working in of have this And in from year quarter, to year. cash back the payments more we in XXXX, the And weighted improvements, so, second capital the addition not tax timing benefits for in half.

quarter. of the the we'll timing cash that as So we've good progress very the we on that in to free deliver given. half guidance we working confident second the capital, are benefits look some But flow year,

Operator

comes Suisse. And Kaumil Crédit our next from Gajrawala question with

Kaumil Gajrawala

done don't that the growth just question, you're I Well words in help been is of but I John, of everybody. that volume? if little could believe quarter, it's strong One understand Coke a Energy? coming mentioned? felt this of And really end then a and kind some dollars source two you of remember you us exactly, Can guys to as any you you from market have Energy think I now provide on And on curious to bit. coming I Red of the said Is your coming from for there's us on Bull the guess context the then you first the give things. seeing second I'm that comment. cycle, something outside it

John Murphy

Sure.

When Let the the on number over longest environment had, is on to the one. us And my through take the the XXXX. over macro we and point step cycle or look based of that to political XX me it point. some it play XX at and has XX high does back current a the today the being XX indicators in spot commentary the a environment in number dollar that rates see around you plus at end the you we've be next both last -- start when second lenses world, to comments outlook strength. hence, we dollar benign of with at as both the the of been months And a you look years, cycles one look the at

Operator

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

James Quincey

Thank you, everyone.

delivering Just hard performance us. near-term, making our our to aligned. improved summarize business. long-term in good just collective strong And We're the again, for progress working is with but execution. very seeing We're across system not bottling We're we're goals.

your and us interest investment your Thank for thank always, So and joining you as in for you. the company today.

Operator

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

The Coca-Cola Company (KO) 23 Jul 192019 Q2 Earnings call transcript