Q4 2021 Coca-Cola Co Earnings Call
Speaker 1: I'll also highlight the broader macro environment and how we're executing in the marketplace.
So highlight the broader macro environment and how we're executing in the marketplace.
Speaker 1: Finally, I'll touch briefly on the accelerators for growth that give us confidence we can achieve the 2022 guidance we've provided today with more on them to come at Cagney Lake this month.
Finally, I will touch briefly on the accelerators to growth give us confidence we can achieve the 2022 guidance. We've provided today with more on them to come at Cagny late this month.
Speaker 1: John will then discuss financial results for the quarter and our outlook in more detail.
John will then discuss financial results for the quarter and our outlook in more detail.
Speaker 1: Before I get to it, I'd like to acknowledge that our ability to emerge stronger would not have been possible without the efforts of our dedicated employees and system partners around the world. And I'd like to thank them for their hard work, their contribution not only to our results, but to our curious, empowered, inclusive and agile culture.
Before I get to that I'd like to acknowledge that our ability to emerge stronger would not have been possible without the efforts of our dedicated employees and system partners around the world and I'd like to thank them for their hard work that contribution not only to our results.
Curious and pad inclusive and agile culture.
Speaker 1: In 2021, the operating environment remained dynamic as the pandemic continued to evolve and factors like inflation and supply chain disruptions brought additional challenges.
In 2021, the operating environment remains dynamic.
As the pandemic continues to evolve and factors like inflation and supply chain disruptions brought additional challenges.
Speaker 1: But over the year, our organization and system continue to manage through these circumstances with focus and flexibility.
But over the year, our organization and system continued to manage through these circumstances with focus and flexibility.
Speaker 1: We are pleased with the results, which were above 2019 across key metrics, and we remain focused on building a stronger total beverage company.
We are pleased with the results, which were above 2019 across key metrics and we remain focused on building a stronger total beverage company.
Speaker 1: Now looking more closely at our fourth quarter results, we saw another quarter of sequential improvement versus 2019, and we ended the year with volume ahead of 2019.
Now looking more closely at our fourth quarter results, we saw another quarter of sequential improvement versus 2019, and we ended the year with volume ahead of 2019.
Speaker 1: Notably, it was the first quarter in which away from home volume was also ahead of 2019, while at-home channels remained strong.
Notably it was the first quarter in which away from high volume was also ahead of 2019, while at home channels remains strong.
Speaker 1: So, recapping the quarter four performance around the world, starting with Asia Pacific.
So recapping the quarter four performance around the world starting with Asia Pacific.
Speaker 1: China delivered strong performance in the corner. By capturing a growing trend among consumers of zero calorie offerings, we doubled our zero sugar sparkling portfolio in terms of volume compared to the fourth quarter of 2019. We leveraged RGM strategies and targeting investments to gain share in e-commerce, thus driving growth for the overall business.
China delivered strong performance in the quarter by capturing a growing trend among consumers zero calorie offerings, we doubled as zero sugar sparkling portfolio in terms of volume compared to the fourth quarter of 2019 with.
We leveraged our GM strategies and targeting investments to gain share in e-commerce , thus driving growth for the overall business.
Speaker 1: In India, initiatives to build omni-channel presence and marketing campaigns around key occasions by leveraging festivals and passion points through occasion-led marketing and integrated execution drove a sequential increase in market share and nearly 30% growth in transactions for the quarter.
In India initiatives to build Omnichannel presence and marketing campaigns around key occasions by leveraging festivals and passion points through occasion led marketing and integrated execution drove a sequential increase in market share and nearly 30% growth in transactions for the quarter.
Speaker 1: Additionally, our local thumbs up brand became a billion dollar brand in India, driven by focused marketing and execution plans.
Additionally, our local thumbs up brand became a $1 billion brand in India, driven by focused marketing and execution plans.
Speaker 1: In Japan, while our system was faced with a very challenging year, we gained value share and consumers, driven by successful innovation and commercial strategy.
In Japan, while our system was faced with a very challenging year, we gained value share and consumers driven by successful innovation and commercial strategies.
In ASEAN and South Pacific There was strict restrictions and limited reopening in many markets for large part of the year.
Speaker 1: In ASEAN and South Pacific, there were strict restrictions and limited re-openings in many markets for a large part of the year.
Speaker 1: In Q4, acceleration of vaccine efforts and strong results from the Fanta Colourful People and Sprite Mates of Here campaigns helped drive our recovery.
In Q4 acceleration of vaccine efforts and strong results from the fancy colorful people and sprite may take campaigns helped drive our recovery.
In EMEA.
Speaker 1: volume in Europe in the quarter surpassed 2019 despite mobility restrictions, particularly in Western Europe .
Volume in Europe in the quarter surpassed 2019, despite mobility restrictions, particularly in western Europe .
Speaker 1: Despite the recovery remaining asynchronous in the region, increased investments behind our brands in the marketplace resulted in our system driving the highest incremental retail value among FMCG players in the region.
Despite the recovery mining asynchronous in the region increased investments behind our brands in the marketplace, resulting in our system driving the highest incremental retail values among FMC G players in the region.
Speaker 1: In Africa, volume continued to be ahead of 2019 in the fourth quarter, driven by our key markets with strong double-digit growth in Nigeria and Egypt.
In Africa volume continued to be ahead of 2019 in the fourth quarter driven by our key markets with strong double digit growth in Nigeria and Egypt.
Speaker 1: Additionally, increased investments behind our affordability and multi-serve packages drove value share for the full year above 2019 in the region.
Additionally, increased investments behind our affordability, our multi serve packages drove value share for the full year above 2019 in the region.
Speaker 1: In Eurasia and Middle East, the top line continues to expand faster than the macro environment, driven by strong revenue growth management, execution, and digital capability.
In Eurasia and Middle East.
Topline continues to expand faster than the macro environment, driven by strong revenue growth management execution and digital capabilities.
Speaker 1: Turkey, one of our key markets, grew 7 points of value share for the year in digital, as total digital commerce expanded by close to 90%.
Turkey, one of our key markets grew seven points of value share for the year and digital as total digital commerce expanded by close to 90%.
Speaker 1: In North America, despite COVID cases leading to business closings and some mobility restrictions, value share growth was strong in the quarter, driven by pricing, revenue growth management, and strong execution in the markets.
In North America.
<unk> Covid cases, leading to business closings and some mobility restrictions value share growth was strong in the quarter driven by pricing revenue growth management and strong execution in the market.
Speaker 1: The new Coca Cola Zero Sugar continues to deliver strong results, outpacing category growth, while Sprite and Smart Water grew drinker base and buy rates.
The new Coca Cola zero Sugar continued to deliver strong results outpacing category growth.
While sprite and Smartwater grew drinker base and buy rates.
Speaker 1: Innovations also delivered strong performances led by Coke with coffee and Simply Almond.
Innovations also delivered strong performances led by Coke with coffee and simply almond.
Speaker 1: Latin America delivered another quarter of strong performance with mid-single-digit volume growth versus 2019.
Latin America delivered another quarter of strong performance with mid single digit volume growth versus 2019.
Speaker 1: This resilience of the system has been driven by years of experience navigating volatile environments through strong and effective execution.
This resilience the system has been driven by years of experience navigating volatile environments through strong and effective execution.
Speaker 1: Within Global Ventures, Costa continued to recover through the year, but was impacted in Q4 due to COVID-related restrictions.
Within global ventures cost to continue to recover through the year was impacted in Q4 due to COVID-19 related restrictions.
Speaker 1: Costa Express continued its strong performance in the UK, delivering results ahead of expectations.
Cost of express continued its strong performance in the U K delivering results ahead of expectations.
Speaker 1: In China, the cost of ready-to-drink expansion, continuing its availability now in more than 300,000 outlets, continues to drive a share position ahead of our key competitors.
In China, the Costa ready to drink expansion continue the availability now in more than 300000 outlets continuing to drive a share position ahead of arcade comparison.
Speaker 1: Finally, our bottling investment group continues to focus on productivity and transformation initiatives, delivering strong operating margin expansion for full year 2021.
Finally, our bottling investment group continued to focus on productivity and transformation initiatives delivering strong operating margin expansion for full year 2021.
Speaker 1: Due to improved mobility throughout the year, our industry is growing in both volume and value.
Due to improved mobility throughout the year, our industry is growing in both.
Volume and value.
Speaker 1: Gaining share was a key objective in our Emerging Stronger agenda, and this year we gained value share in both at-home and away-from-home channels. Our NARCD market share is above 2019 levels at a global level and in both at-home and away-from-home channels.
Gaining share with a key objective in our emerging stronger agenda and this year, we gained value share in both at home and away from home channels.
RNA RTD market share is above 2019 levels at a global level and in both at home and away from home channels.
Speaker 1: We will continue to identify and address opportunities to further improve our value share driven by data back.
We will continue to identify and address opportunities to in further improve our value share driven by data back in size.
Speaker 1: As we close the chapter on 2021, we emerge stronger by delivering both top line and EPS ahead of 2019, and we gain share in a growing industry.
As we close the chapter on 2021, we emerged stronger by delivering both top line and EPS ahead of 2019, and we gained share in a growing industry.
Speaker 1: The actions we took during the pandemic have resulted in an agile and focused organization that is poised to capture the sizable opportunities that exist and we continue to look to the future to build on our momentum and drive growth.
The actions we took during the pandemic have resulted in an agile and focused organization that is poised to capture the sizable opportunities that exist and we continue to look to the future to build on our momentum and drive growth.
As we turn to 2022.
Speaker 1: While it is impossible for us to know whether this variant will be the last, what is clear is that our consumers, our customers, and our business are learning and adapting with great resiliency.
While it is impossible for us to know whether this will be the last what is clear is that our consumers our customers and our business are learning and adapting with great resilience.
Speaker 1: For example, while we have seen some impacts from the Omicron variant through the first few weeks of the year, we are not seeing the same level of disruption as previous waves and our system is better equipped.
For example, while we have seen some impacts from the army chrome variance through the first few weeks of the year. We are not seeing the same level of disruption as previous ways and our system is better equipped.
Speaker 1: Further recovery in 2022 will be determined by macro factors, including overall consumer sentiment, as well as supply chain challenges, labor shortages, and of course, the inflationary pressures and interest rates.
Further recovery in 2022 will be determined by macro factors, including overall consumer sentiment as well as supply chain challenges labor shortages and of course, the inflationary pressures in interest rates.
Speaker 1: We are confident, we are well equipped to navigate this environment and deliver on the guidance we provided today.
We are confident we are well equipped to navigate this environment and deliver on the guidance we provided today.
Speaker 1: Now, I'll touch on some of the capabilities we've built to unlock the next stage of growth, and we'll elaborate more at our virtual CACME presentation later this month.
Now I'll touch on some of the capabilities, we've built to unlock the next stage of growth and we will elaborate more on our virtual Cagny presentation. Later this month.
Speaker 1: We're excited about where we are today and the substantial initiatives we have in place for 2022.
We're excited about where we are today and the substantial initiatives we have in place for 2022.
Speaker 1: The consumer continues to be the center of our strategy, and through our total beverage company agenda, we are adapting to the macro and micro trends which are shaping consumer habits.
The consumer continues to be at the center of our strategy.
Through our total beverage company agenda, we are adapting to the macro and micro trends, which are shaping consumer habits.
Speaker 1: We advanced our total beverage company agenda last year by streamlining our portfolio, focusing on the core and investing behind a portfolio of brands that allows us to meet the evolving needs of consumers.
We advanced our total beverage company agenda last year by streamlining our portfolio focusing on the core and investing behind our portfolio of brands that allows us to meet the evolving needs of consumers.
Speaker 1: We completed much of this work on brand eliminations while being deliberate with brand transition.
We completed much of this work on brand eliminations, while being deliberate with brand transitions.
Speaker 1: This optimized portfolio will ensure we follow the consumer and win in emerging and fast-growing categories. And it's complemented by the recent strategic acquisition of BodyArmor, as well as relationships like the new agreement with Constellation Brands, which will launch Fresca Mixed, and the extended relationship with Molson Coors, which will launch Simply Spiked Lemonade in the US.
<unk> optimized portfolio will ensure we follow the consumer and win in emerging and fast growing categories and is complemented by the recent strategic acquisition of body armor as well as relationships like the new agreement with constellation brands, which will launch fresca mixed and extended relationship with Molson Coors, which were launched Sim.
Spike laminate in the U S.
Speaker 1: Our network marketing model with global category teams and local operating units is allowing us to focus on end-to-end consumer experiences that are data-driven and always on.
And network marketing model with global category teams and local operating units is allowing us to focus on end to end consumer experiences that are data driven and always on.
Speaker 1: Our announcement of WPP as our global marketing network partner is a foundational component of our new marketing model.
Our announcement of WP payers that global marketing network partner is a foundational component of our new marketing model.
Speaker 1: This new agency approach gives us access to the best creative minds, regardless of source, and is underpinned by leading-edge data and technology capabilities.
This new agency approach gives us access to the best creative minds, regardless of source is underpinned by leading edge data and technology capabilities.
Speaker 1: The Real Magic campaign is the first campaign which was co-created internally, leveraging this new end-to-end approach, and the campaign is showing strong results for the consumer.
The real Magic campaign is the first campaign, which was co created internally leveraging this new end to end approach and the campaign is showing strong results with the consumers.
Speaker 1: We have good visibility into the benefits of the new marketing model. The approach will allow us to deliver best-in-class, consumer-centric marketing experiences across our categories and around the world.
We have good visibility into the benefits of the new marketing model.
Approach will allow us to deliver best in class consumer centric marketing experiences across our categories and around the world.
Speaker 1: We also built more discipline into our innovation process in 2021 with a key focus on scalable bands that can build momentum year over year. It's still early.
We also built more discipline into our innovation process in 2021 with a key focus on scalable beds that can build momentum year over year.
It's still early but the approach is working.
Speaker 1: Revenue per launch and gross profit per launch were up 30% and 25% respectively versus prior year.
Revenue per launch and gross profit per launch were up 30% and 25% respectively versus prior year.
Speaker 1: And we took intelligent local experiments and moved more rapidly to scale them across geography.
And we took intelligent local experiments and move more rapidly scale or across geographies.
Speaker 1: Sustainable packaging like refillables and labelless bottles along with brands like Coat with Coffee, Fairlife, AHA, Costa Regisdrink and Lemado are all examples of local winners that have been extended to more markets.
Sustainable packaging like refillable and label with bottles, along with brands like Coke with coffee.
Aha Costa ready to drink and Lambda are all examples of local winners that have been extended to more markets.
Speaker 1: For 2022 our innovation process is increasingly supported by data and our pipeline is robust with built in agility and consists of big bets along with many shots on goal.
But 2022, our innovation process is increasingly supported by data and our pipeline is robust with built in agility and consists of big bets along with many shots on goal.
The system has stepped up its RPM and execution capabilities, which is helping us navigate an inflationary environment driving value growth and an ex segmented way.
Speaker 1: system has stepped up its RGM and execution capabilities, which is helping us navigate an inflationary environment, driving value growth in a segmented way.
Speaker 1: Due to the strength of our bonding partners and the strong linearity of the system, we are prepared to address opportunities as well as challenges that may lie ahead.
Due to the strength of our bottling partners and stronger than ever alignment of the system. We are prepared to address opportunities as well as challenges may lie ahead.
Speaker 1: Our networked organizational structure is designed to better connect functions and operating units to help our systems scale ideas faster.
Networked organizational structure is designed to better connect functions and operating units to help our system scale ideas faster.
Speaker 1: As we've emerged stronger, we kept moving forward on integrating sustainability work into our business as it is a key driver of future growth.
As we've emerged stronger we kept moving forward on integrating sustainability work into our business as it is a key driver of future growth.
Speaker 1: During the quarter, we were recognized for our commitment to transparency and action to address environmental risks by earning an A score in CDP's assessment for water, an improvement over last year.
During the quarter, we were recognized for our commitment to transparency and action to address environmental risks by earning in a school in Cdp's assessment for water and improvements over last year.
Speaker 1: We improved or maintain our score in CDP's assessments on other important areas like climate and forest.
We improved or maintained our school in Cdp's assessments on other important areas like climate and forests.
Speaker 1: Additionally, to complement our World Without Waste goals, we announced a new global goal to reach 25% reusable packaging by 2030.
Additionally, the complement our world without waste goals, we announced a new global goal to reach 25% reusable packaging by 2030.
Speaker 1: Increasing refillable and reusable packaging options responds to consumer affordability and our sustainability aspirations and it helps create a fairer economy as refillable packages have extremely high levels of collection and are low carbon footprint beverage containers.
Increasing refillable reusable packaging options responds to consumer affordability and sustainability aspirations and it helps create a circular economy of refillable packages have extremely high levels of collection and a low carbon footprint beverage containers.
Speaker 1: Finally before I turn over to John I want to say a big thank you and recognize our associates from both the company and our bottling partners who work with great dedication and unwavering commitment throughout another challenging year.
Finally, before I turn it over to John I want to say a big Thank you and recognize our associates from both the company and our bottling partners, who work with great dedication and unwavering commitment throughout another challenging year.
Speaker 1: We expect the recovery will remain asynchronous, but we are encouraged by a growing industry, our own parallel system strength, and a strategic transformation that enables us to be agile and to adapt.
We expect the recovery will remain nice increase but we are encouraged by our growing industry.
Parallel system strength, and our strategic transformation that enables us to be agile and to adapt.
Speaker 1: Our actions drove strong results in 2021 and we have confidence in our ability to deliver another year of strong performance in 2022 and over the long term. Now John will provide more details on our results and our 2022 guidance.
Our actions drove strong results in 2021, and we have confidence in our ability to deliver another year of strong performance in 2022 and over the long term.
Now John will provide more details on our results and our 2022 guidance.
Speaker 1: Thank you, James. And good morning, everyone. In the fourth quarter, we closed the year with strong results, despite the impact of the Omicron variant across many parts of the world.
Thank you James and good morning, everyone in the fourth quarter, we closed the year with strong results. Despite the impact of the omicron variance across many parts of the world.
Speaker 2: our Q4 organic revenue growth was 9%.
Our Q4 organic revenue growth was 9%.
Speaker 2: A price mix of 10% was driven by a combination of factors, including targeted pricing, revenue growth management initiatives, as well as further improvement in away-from-home channels in many markets.
Our price mix of 10% was driven by a combination of factors, including targeted pricing revenue growth management initiatives as well as further improvement in away from home channels in many markets.
Speaker 2: unit case growth showed further sequential improvement on a two-year basis and concentrate sales lagged unit cases by 10 points in the quarter, primarily due to six fewer days in the quarter.
Unit case growth showed further sequential improvement on a two year basis and.
Concentrate sales like unit cases by 10 points in the quarter, primarily due to six fewer days in the quarter.
Speaker 2: Despite commodity market inflation and the dynamic supply chain environment, comparable gross margin for the quarter was relatively flat versus prior year.
Despite the commodity market inflation and the dynamic supply chain environment comparable gross margin for the quarter was relatively flat versus prior year.
Speaker 2: pricing initiatives and favorable channel and package mix were offset by the impact of consolidating the fast-growing finished goods body armor business along with incremental investments to sustain momentum in the overall business for 2022.
Reising initiatives and favorable channel and package mix were offset by the impact of consolidated in the fast growing finished goods body armor business along with incremental investments.
The sustained momentum in the overall business for 2022.
We continue to invest in markets as they recovered and stepped up year over year marketing dollars again in Q4 spending in a targeted way to maximize returns.
Speaker 2: We continued to invest in markets as they recovered and stepped up year-over-year marketing dollars again in Q4, spending in a targeted way to maximise returns.
Speaker 2: This increase in marketing investments, along with some top-line pressure from six fewer days in the quarter, resulted in comparable operating margin compression of approximately 500 basis points for the quarter.
This increase in marketing investments along with some top line pressure from six fewer days in the quarter resulted in comparable operating margin compression of approximately 500 basis points for the quarter.
Speaker 2: For the full year, Comparable Operating Margin was down approximately 100 basis points versus prior year, as Improved Comparable Growth Margin was offset by the significant step up in marketing.
For the full year comparable operating margin was down approximately 100 basis points versus prior year as.
As improved comparable gross margin was offset by the significant step up in marketing.
Speaker 2: Importantly, versus 2019, a key measure we have focused on, comparable operating margin was up approximately 100 basis points.
Importantly versus 2019, a key measure we are focused on comparable operating margin was up approximately 100 basis points.
Speaker 2: Putting it all together, fourth quarter comparable earnings per share of $0.45 was a decline of 5% year-over-year, resulting in full-year comparable earnings per share of $2.32, an increase of 19% versus the prior year, as a strong resurgence in the business also benefited from a three-point tailwind from currency and tax.
Putting it altogether fourth quarter comparable earnings per share of <unk> 45 was.
It was a decline of 5% year over year, resulting in full year comparable earnings per share of $2 32.
An increase of 19% versus the prior year as a strong resurgence in the business also benefited from a three point tailwind from currency and tax.
Speaker 2: We delivered strong free cash flow of $11.3 billion in 2021 with free cash flow conversion of approximately 115% and a dividend payout ratio well below our long term target of 75%.
We delivered strong free cash flow of $11 3 billion in 2021 with free cash flow conversion of approximately 115% and a dividend payout ratio well below our long term target of 75%.
Speaker 2: With these results, we exceeded guidance on every metric for full year 2021.
With these results we exceeded guidance on every metric for full year 2021.
Speaker 2: We have done tremendous work to emerge ahead of 2019 and set the stage to drive our growth agenda for years to come.
We have done tremendous work to emerge ahead of 2019 and set the stage to drive our growth agenda for years to come.
Speaker 2: We are spinning the strategy five wheels faster and more effectively. Our organization is focused on execution and enhancing our capabilities to fuel growth.
We are spinning the strategy flywheels faster and more effectively.
Our organization is focused on execution and enhancing our capabilities to fuel growth.
Speaker 2: As James mentioned, the pandemic will be one of the many factors along with the dynamic macro backdrop that we face in the coming year.
As James mentioned depends <unk> will be one of the many factors along with a dynamic macro backdrop that we faced in the coming year.
Speaker 2: but our local businesses are ready to adapt and execute for growth.
But our local businesses are ready to adapt and execute for growth.
Speaker 2: With that in mind, this morning we provided guidance for 2022 that builds on momentum from 2021.
With that in mind. This morning, we provided guidance for 2022 that builds on momentum from 2021.
Speaker 2: we expect organic revenue growth of approximately 7% to 8% and we expect comparable currency neutral earnings per share growth of 8% to 10% versus 2021.
We expect organic revenue growth of approximately 7% to 8%.
And we expect comparable currency neutral earnings per share growth of 8% to 10% versus 2021.
Speaker 2: Based on current rates and our hedge positions, we anticipate an approximate 3 point currency headwind to comparable revenue and an approximate 3 to 4 point currency headwind to comparable earnings per share for full year 2022.
Based on current rates and our hedge positions, we anticipate an approximate three point currency headwind to comparable revenue and an approximate three to four points of currency headwind to comparable earnings per share for full year 2022.
Speaker 2: Additionally, due to a certain change in recent regulations, we estimate an effective tax rate increase from 18.6% in 2021 to 20% for 2022, which is an estimated two percentage points headwind to EPS.
Additionally, due to a certain change in recent regulations, we estimate an effective tax rate increased from 18, 6% in 2021% to 20% for 2022, which has an estimated two percentage points headwind to EPS.
Speaker 2: Therefore, all in, we expect comparable earnings per share growth of 5% to 6% versus 2021, including the combined 5% to 6% point headwind from currency and tax.
Therefore, all in we expect comparable earnings per share growth of 5% to 6% versus 2021, including the combined 5% to six point headwind from currency and tax.
Speaker 2: We expect to generate approximately $10.5 billion of free cash flow for 2022.
We expect to generate approximately $10 $5 billion of free cash flow of 2022.
Speaker 2: to approximately $12 billion in cash from operations, less approximately $1.5 billion in capital investment.
Through approximately $12 billion in cash from operations less approximately $1 5 billion in capital investments.
Speaker 2: This implies the fourth consecutive year of free cash flow conversion above our long-term range of 90% to 95%.
This implies the fourth consecutive year of free cash flow conversion.
Our long term range of 90% to 95%.
Speaker 2: We continue to raise the performance bar across the organization and are confident in delivering on this 2022 guidance.
We continue to raise the performance bar across the organization and our confidence in delivering on the 2022 guidance.
Speaker 2: In summary, we expect to deliver another year of strong, top-line driven growth.
In summary, we expect to deliver another year of strong top line driven growth.
Speaker 2: along with maximized returns driven by the strategic changes we have made in our business.
Along with maximize returns driven by the strategic changes we have made in our business.
There are several considerations to keep in mind for 2022.
Speaker 2: There are several considerations to keep in mind for 2022.
Speaker 2: Overall, inflationary and supply chain pressures continue to impact costs across several fronts in the business, including input costs, transportation, marketing and operating expenses.
Overall inflationary and supply chain pressures.
<unk> two impact costs across several fronts of the business, including input costs transportation marketing and operating expenses.
Speaker 2: With regards to commodity costs, after benefiting from our hedging strategy in 2021, we remain well hedged in 2022, but at higher levels.
With regards to commodity costs after benefiting from our hedging strategy in 2021, we remain well hedged in 2022 bus at higher levels.
Speaker 2: Based on current rates and hedge positions, we continue to expect commodity price inflation to have a mid-single-digit impact on comparable cost of goods sold in 2022.
Based on current rates and hedge positions, we continue to expect commodity price inflation to have a mid single digit impact on comparable cost of goods sold in 2022.
Speaker 2: However, we are taking action in the marketplace using multiple levers, including RGM in its many forms, along with our productivity initiatives to help offset much of the impact.
However, we are taking actions in the marketplace using multiple levers, including RCM and as many forms.
Along with our productivity initiatives to help offset much of the impact.
Speaker 2: As a reminder for your modeling, the consolidation of the recently acquired fast-growing body armor finished goods business will have a mechanical effect on margins.
As a reminder.
Under fair modeling the consolidation of the recently acquired fast growing body armor finished goods business will have a mechanical effect on margins.
When it comes to capital.
Speaker 2: flexibility with efficient capital structure. First and foremost to invest in our business. Secondly, continuing our track record to grow our dividend. Thirdly to seek opportune M&A.
That's your flexibility with efficient capital structure first and foremost to invest in our business secondly, continuing our track record.
To grow our dividend.
Thirdly to seek opportune M&A.
Speaker 2: and to repurchase shares with excess cash.
And to repurchase shares with excess cash.
And finally due to the calendar shift there will be one less day in the first quarter and one additional day in the fourth quarter.
Speaker 2: And finally, due to the calendar shift, there will be one less day in the first quarter and one additional day in the fourth quarter.
Despite another year of uncertainty in 2021, we came together as a system to emerge stronger and position ourselves to drive sustainable growth.
Speaker 2: Despite another year of uncertainty in 2021 we came together as a system to emerge stronger and position ourselves to drive sustainable growth.
Speaker 2: We are encouraged by the momentum in our business and are clear on the direction we're headed.
We are encouraged by the momentum in our business and are clear on the direction we're headed.
Speaker 2: As we look to 2022, we feel confident in our ability to deliver on the commitments we outlined today.
As we look to 2022, we feel confident in our ability to deliver on the commitments we outlined today.
Speaker 3: Ladies and gentlemen, to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, please press star 1 again. In the interest of time, we ask that you please limit yourself to one question. If you have any additional questions, you may rejoin the queue.
Ladies and gentlemen to ask a question you will need to press star one on your telephone to withdraw your question. Please press star one again in the interest of time, we ask that you. Please limit yourself to one question.
If you have any additional questions you may rejoin the queue.
Speaker 3: Our first question comes from Dara Mussanian from Morgan Stanley . Please go ahead, your line is open.
Our first question comes from Dara <unk> from Morgan Stanley . Please go ahead. Your line is open.
Hey, good morning, So I wanted to focus on the 7% to 8% organic sales growth guidance for 2022, obviously, a robust level can you give us a bit more detail around the key drivers there and I'm wondering specifically how much of a tailwind as less COVID-19 impact for 2022 within <unk>.
Speaker 4: So I wanted to focus on the 78% organic sales growth guidance for 2022. Obviously a robust level. Can you give us a bit more detail around the key drivers there? And I'm wondering specifically how much of a tailwind is less COVID impact for 2022 than occurred in 2021 or above trend pricing given the cost situation and limited demand elasticity relative to a typical year? And the point behind the question is...
Third in 2021 or above term pricing given the cost situation and limited demand elasticity relative to a typical year and the point behind the question is sort of why are you above the 4% to 6% long term algorithm is it more sustainable factors that can sustain as we look beyond 2022.
Speaker 4: sort of why are you above the four to six percent long-term algorithm? Is it more sustainable factors that can sustain as we look beyond 2022? Is it more factors more specific for 2022? It'd be helpful to have a bit more detail there. Thanks.
Or is it more factors more specific for 2022.
It would be helpful to have a bit more detail there. Thanks.
Sure.
Morning.
Speaker 1: Firstly, we are coming out of 2021 with good, strong momentum. We have seen an improvement on the growth rate relative to 2019, both in the at-home channels and the away-from-home channels. We are coming into the year with good momentum, notwithstanding some ups and downs due to Omicron in certain parts of the world in December and January .
<unk>.
Firstly, we coming out of 2021.
Good.
Strong momentum.
We've seen.
And improvements.
On the growth rate relative to 2019.
Both in the at home channels in the away from home channel. So we're coming into the year with good momentum notwithstanding some ups and downs due to Omi chrome.
In certain parts of the World in December and January .
And I'm going to answer the second part first.
Speaker 1: The above algorithm growth in 2022 is more primarily due to the factors of COVID and inflation. But I'll come back to that. And so as you look out into the long term.
The above algorithm growth in 2020. So it is more primarily due to the factors of Covid and inflation will come back to that and so as you look out into the long term.
Speaker 1: it is much more likely we will move back into the long-term algorithm.
It is much more likely we will move back into a long term algorithm.
Speaker 1: Just to refresh, we're in a robust industry that has been growing historically, it's coming back to grow.
Just to refresh we were in a robust industry that has been growing historically at coming back to growth.
Speaker 1: And if that's an industry that's growing at 4% or 5%, and we have a long-term track record of gaining share in the industry, you can see why we focus attention on being in the top half of the revenue growth rate in the algorithm we put out that allows us to then drive.
That's an industry that's growing at four 5% and we have a long term track record of gaining share in the industry. You can see why we focus attention on being in the top half of the revenue.
Growth rates in the algorithm, we put out that allows us to then drive the business into the future. So we still think that is I sound long term perspective in terms of both the industry growth rate and our ability not just to be the leader, but to be the winner in terms of share to drive in the top half of the output.
Speaker 1: So we still think that is a sound long-term perspective in terms of both the industry growth rate and our ability not just to be the leader but to be the winner in terms of share and to drive in the top half of the outcome.
Speaker 1: Coming back to the near term and 2022 in particular, a couple of things that support an above algorithm number. Firstly, there are a number of countries that are not yet back at their 2019 levels of revenue or indeed even volume.
Coming back to the near term in 2022 in particular.
Couple of things that support and above.
Above algorithm number.
Firstly, there are a number of countries that are not yet back at that 2019 levels of revenue or daily volume and whilst we are not expecting everything to be rosy in 2022, we do expect to see ongoing improvements around the world in terms of reopening in terms of reactivation.
Speaker 1: And whilst we are not expecting everything to be rosy in 2022, we do expect to see ongoing improvements around the world.
Speaker 1: in terms of reopening, in terms of reactivation. And so we think there are additional tailwinds in 2022 from a reopening perspective that will support.
<unk>.
And so we think there are additional tail winds in 2022 from a reopening perspective that will support.
Speaker 1: the volume side, and then in terms of pricing.
The volume side, and then in terms of pricing clearly, it's a slightly more inflationary environment the normal.
Speaker 1: Clearly, it's a slightly more inflationary environment than normal.
Speaker 1: And we, as we have talked on previous calls with our modeling partners, very much look to price in the marketplace. We do have a view that we have to have brands.
And we as we have talked on previous calls with our bottling partners.
Much Luke.
Two.
The pricing in the marketplace, we do have a.
Our view that we have to have brands.
Speaker 1: to earn the right to take pricing, and secondly...
<unk>.
The right to take pricing.
And secondly.
Speaker 1: you know we we very much are not looking to just off-grid price
We very much are not looking to just pass through in price, but to do it intelligently because whilst.
Speaker 1: do it intelligently, because whilst, you know, it's easy to respond to inflation by putting up the prices, there is clearly, as there is broad-based inflation, going to be a squeeze on real incomes in a number of countries. And so we have very long experience in the system of managing inflation in moments when
It's easy to responsive nature by putting up the prices there is clearly.
There is broad based inflation going to be a squeeze on real incomes in a number of countries and so we.
With very long experience in the system of managing inflationary moments when.
Speaker 1: you get a squeeze on real incomes, we very much want to, yes, accompany opportunities on premiumization, leverage our strong marketing, leverage our strong innovation, but we do not want to lose consumers out of the industry, so we also will have a force in affordability. And this is a scenario where we have a lot of experience, the system has a lot of experience, and we tend to
You've got a squeeze on real incomes, we very much want to yes, the company opportunities on premium amortization leverage our strong marketing leverage our strong innovation, but we do not want to lose consumers.
Out of the industry. So we also will have a fourth in affordability.
And this is a scenario where we have a lot of experience the system houses all of our experience and we intend to push it forward. The net of all that is likely to mean that we see a balance between volume and price mix within the overall revenue guidance that we've given you.
Speaker 1: The net of all that is likely to mean that we see a balance between volume and price mix within the overall revenue guidance.
As a reminder, ladies and gentlemen that star one to ask a question. Our next question comes from Lauren Lieberman from Barclays. Please go ahead. Your line is open.
Speaker 3: As a reminder, ladies and gentlemen, that's star one to ask the question. Our next question comes from Lauren Lieberman from Barclays. Please go ahead. Your line is open.
Speaker 3: Great. Thanks. Good morning. The first thing is not a question. It's just I'm going to mention the free cash conversion and leave it at that and say.
Great. Thanks, good morning.
Thing is not a question just I'm going to mention the free cash conversion and leave it at that and say.
Speaker 3: my goodness how much things have changed. My question though was that I wanted to talk a little bit about North America's supply chain. My understanding is there's you know that's still been you know pretty challenged and I just was looking for any kind of update you could offer on on fourth quarter and outlook into next year because clearly the the market share performance everything is great but that's still with these supply chain constraints and I was wondering how that's shaping up. Thanks.
Thank goodness, how much things have changed.
My question, though is that I wanted to talk a little bit of that North American supply chain.
Understanding that still been pretty challenged and I just was looking for any kind of update you can offer on fourth quarter and outlook into next year.
The market share performance everything is great.
But that still with the supply chain constraints and I was wondering how that shaping up thanks.
Speaker 1: Yeah, sure. So, I think the system in the U.S. has done an exceptional job in trying to manage through all the different needles that needed to be threaded in terms of the supply chain to provide the brands for our consumers and our customers and have availability of the product. Was it perfect last year? No. Is it likely to be perfect this year? No. But we are doing the maximum we can to
Yes sure.
So.
I think the system in the U S.
<unk>.
Exceptional job in trying to manage through all the different needles that needed to be threat. It in terms of the supply chain.
To provide the brands, where occupancy and those of our customers and have availability of the product was the perfect last year now is it likely to be perfect. This year no.
No.
What we are doing the maximum we can too.
Speaker 1: optimize full availability. And there are issues across a number of dimensions. I would say two things underlie this, and we can take some examples.
Optimize our full available and there are issues across a number of demur.
Dimensions, I would I would say two things one the line underlie this.
Take some examples.
Speaker 1: There is two effects going on, one which I talked about on previous calls, which is the kind of the temporal supply shock when you have a crisis.
There is two effects going on one which I've talked about on previous calls, which is the kind of the temporal supply shock when you have a crisis.
Speaker 1: You know, things whip around. You suddenly sell less fountain and want to sell more cans. And the system is not set up for that. And so you get this kind of big swings, a bit like the famous case study of the beer game business school. And there you get the shock waves, a bit like an earthquake that continue to ripple through the system. And so we saw that last year, and we will see some of that again in 2022. But they're temporary.
No.
With around you suddenly sell less fountain and want to sell more cans and the system is not set up for that and so you get this kind of big swings a bit like the famous case study of the Big game business School.
And then you get the shockwaves would be like an earthquake. The continue to ripple through the system and so we saw that last year and we will see some of that again in 2022, but that temporal.
Speaker 1: But also there, I believe, were a set of underlying structural squeezes going on in the supply chain that perhaps had not been fully addressed by ourselves or by the industries involved pre-COVID. And the advent of COVID just doubled down the pressure on them. So examples of that would be trucking and freight in the US. You know, there's been a long term squeeze on.
But also I believe were set of underlying structural.
Squeezes going on in the supply chain that perhaps have not been fully addressed by ourselves by the industries involved are pre COVID-19 .
And the advent of Covid, just double down the pressure on them. So.
So examples of that would be trucking and freight in the U S.
There's been a long term.
Squeeze on.
Speaker 1: availability of trucking, whether it be the hours regulations, the aging out of the drivers, you had COVID where people didn't take the tests. And so some of these structural problems are coming home to roost. Everyone, including ourselves, are very involved in fixing them. Similarly, for example, on cans, can capacity.
The availability of trucking, whether it be the hours regulations. The aging out of the drivers you had COVID-19 where people didn't take the test.
And so some of the structural problems are coming home to roost, everyone, including ourselves are very involved in fixing them. Similarly for example on cans can capacity.
Speaker 1: manufacturing accounts have been flat for a decade. Really can use and attraction that have been creeping up and that just got squeezed as the away from home closed and the at home spiked up in COVID. People are building new canning plants new new capacities coming online. So I think what you're going to see play out through 2022 is the reduction in the kind of temporal amplitude.
Manufacturing accounts had been flat for a decade really can use and traction, but it's gonna have been creeping up.
Not just got squeezed as the away from home closed on the <unk>.
At home spiked up in Covid people are building new.
New accounting clients, new capacity is coming online so I think what youre going to see play out through 2022.
Is the reduction in the kind of temporal amplitudes from from the swings from Covid and the steady fixing of some of these structural issues.
Speaker 1: swings from COVID-19 and the steady fixing of some of these structural issues that will still take some time through 2022. Obviously we are going to do the maximum possible to leverage our portfolio of brands our portfolio of packaging auctions to maximize ability to put the drinks into the hands where the people want them and the customers want to.
That will still take some time through 2022, obviously, we're going to do the maximum possible.
To leverage our portfolio of brands a portfolio of packaging options to maximize our ability to port.
The drinks into the hands, where the people want them and the customers want to sell them.
Speaker 3: Your next question comes from Nick Modi from ABC Capital Markets. Please go ahead. Your line is open. Hey, good morning, guys. It is.
Your next question comes from Nik Modi from RBC capital markets. Please go ahead. Your line is open.
Hey, good morning, guys. It is filippo colonial some neck.
Speaker 4: So first on your outlook, can you discuss what level of global consumer mobility are you assuming relative to 2019 levels?
So first on your outlook.
Can you discuss what level of global whose tumor mobility are you assuming relative to 2019 levels.
Speaker 4: and whether the lower impact that you saw from Omicron compared to prior waves gives you more confidence that your trends are decoupling from COVID cases and away from home business.
And what.
The lower impact you saw from omicron compared to prior waves gives you more confidence that your trends are decoupling from Covid cases and away from home business.
Speaker 4: And if you can comment on the benefits from your recent reorganization in terms of better market share and better top line growth performance. Thank you.
If you can comment on the benefit from your recent reorganization in terms of better market share and better topline growth performance. Thank you.
Speaker 1: Well clearly we've been gaining market share. My favorite metric is market share versus 2019 both in the away from home and at home channels we've gained overall. We've gained in the away from home and we've gained in the at home.
Well clearly we've been gaining market share my favorite met.
Metric is market share versus 2019.
In the away from home and at home channels. We gained overall, we gained in the away from home and we again in the at home.
Speaker 1: And we are, in terms of consumer visit, we are assuming a greater degree of reopening. We can certainly begin to see that in Europe as the Omicron variant has moved through, the U.S.
And we are in terms of cause human busy we are assuming.
Greater degree of reopening.
We can certainly begin to see that.
In Europe as the Omicron variance has moved through the U S.
Speaker 1: Just this week, mask mandates are coming down, so there is going to be an improvement in mobility across the world. It's not going to be back to 2019 fully in 2022, and I think that's going to be true both in terms of
Just this week Mark mandates are coming down so there is going to be an improvement.
Mobility.
Across the world is not going to be back 2019 fully in 2022.
And I think that's going to be true both in terms of domestic mobility and.
Speaker 1: domestic mobility and international mobility. I don't know if you meant...
International <unk> I don't know if you meant.
Speaker 1: to a country or people moving around the world. But anyway, the answer is basically the same, which is we are assuming an improvement in mobility, but we're not assuming a return yet to the full 2019 level.
The country old people move around the world, but anyway. The answer is basically the same which is we are assuming an improvement in mobility.
But we're not assuming.
Yes for the full 2019 levels.
Speaker 3: Your next question comes from Brian Spillane from Bank of America. Please go ahead. Your line is open. Hi. Hey, good morning, everyone.
Your next question comes from Bryan Spillane from Bank of America. Please go ahead. Your line is open.
Hey, good morning, everyone.
Speaker 4: John , I had a question just about the guidance and you know if we look at the currency neutral
Sure.
John .
Question, just about the guidance and if we look at the currency neutral.
Speaker 4: uh you know spread between earnings earnings growth and um and organic sales growth
Spread between earnings earnings growth and.
And organic sales growth.
Speaker 4: Can you just give us a little bit more color in terms of where the leverage in the income statement will be?
Can you just give us a little bit more color in terms of where the leverage in the income statement will be because the tax rate moving up interest expense net interest expense I guess, it will be higher because of the body armor deal. So it didnt seem like there is a lot of leverage below the operating income line. So I'm just trying to get a better understanding of just where the leverages.
Speaker 4: The tax rates moving up, interest expense, net interest expense, I guess, will be higher because of the body armor deal. So it didn't seem like there was a lot of leverage below the operating income line, so I was just trying to get a better understanding of just where the leverage is on the P&L.
The net.
On the P&L.
Speaker 2: Thanks, Brian . Yeah, on the, as you walk down through the P&L currency neutral,
Thanks, Brian .
Yes.
Hey.
As you walk them through the P&L currency neutral.
<unk>.
Speaker 2: I think on the on the on the first point.
I think on the.
On the first point.
Speaker 2: is top line is very robust.
His top line is very robust.
Speaker 2: We have done a really nice job, I think, going into 2022 on optimizing through our RGM efforts and the innovation pipeline that we have.
We have.
Done a really nice job I think going into 'twenty, two on optimizing to our <unk> efforts.
And the innovation pipeline that we have.
Speaker 2: at play. And then secondly, coming out of the RE-ORG work that we've done over the last couple of years, we are doing, I think, a much tighter job on overall resource allocation.
And then secondly, coming out of the.
The <unk> work that we've done over the last couple of years, we are doing I think and much tighter job on overall resource allocation.
Speaker 2: finding a good balance between investing as we need to support the top line, but also taking into account the opportunities that we have driven in the efficiency work that we have done.
A good balance between investing as we need to for.
To support the top line, but also taking into account the.
The opportunities that we have driven in.
And the efficiency work that we have done so.
Speaker 2: I feel confident that we have some flex from the gross margin line down in the currency neutral basis and below the operating line are actually our net interest expense given the tremendous work we've done to completely restructure our debt portfolio is actually a net benefit for us in 2022.
I have.
I feel confident that we have.
Some flex from the gross margin line down and the currency neutral basis.
<unk>.
Below the operating line or our actually our net interest expense.
Given the tremendous work we've done to completely.
Restructure our debt portfolio is actually a net benefit for us in 2022.
Speaker 3: Your next question comes from Camille Gajrawala from Credit Suisse. Please go ahead, your line is open.
Your next question comes from coming out of <unk> from Credit Suisse. Please go ahead. Your line is open.
Speaker 5: Everybody, good morning. Um, a couple of things on
Hey, everybody.
A couple of things.
Speaker 5: just kind of understanding the balance between the pricing needs of your own and the commodity inflation you're seeing versus the kind of pricing needs of your bottlers. I certainly understand that you work as a system, but you're obviously different businesses and different regions and such. So how do you work that balance between the two?
Just kind of understanding the balance between the pricing needs of your owned and.
Commodity inflation youre seeing versus the kind of pricing needs of your bottlers, certainly understand that you work as a system, but youre, obviously different businesses in different regions and so how do you work that balance between the two.
Uh huh.
Speaker 1: uh... let me separate uh... businesses the popular chart the business goes uh... through the ball some people uh... because i don't uh...
Let me separate.
The businesses into the vast majority of the business, which goes.
Through the bottling system in some businesses.
Go in parallel.
The when we're talking about.
Speaker 1: pricing needs of the concentrate business, the bit that goes through the bottler. In almost all cases, we have a system whereby we operate what's called incidence pricing. So we have agreements with the bottlers where our revenue will be a percent of the revenue that they achieve in the marketplace. So therefore, we're both incentivized to work diligently to increase the total size of the pie in a much more aligned way.
Pricing needs.
The concentrate business a little bit that goes through the bottler in.
In.
Almost all cases, we have a system whereby we operate was called incidence pricing. So we have agreements with the ball to those where our revenue will be a percent of the revenues that they achieved in the marketplace. So therefore, we're both incent.
Incentivized to.
We work diligently to increase the total size of the pie.
And are much more aligned way.
In terms of both chronic drive the same outcome so in that sense.
Speaker 1: So, in that sense, you know, the bottlers, we work together, and the bottlers take the pricing in the marketplace, whether it's rate pricing or working on the mix between the brands and the packages and the channels, and then we take a percentage of that. And, of course, you know, we're both looking at the various input cost challenges that we have, and we work through and come up with a pricing plan, and the bottlers, you know, take that to the marketplace, and it gets...
The bottlers, we worked together in the bottlers take the take the pricing in the marketplace, whether it's rate pricing or working on the mix between the brands.
The packages and the channels and then we take a percentage of that and of course, we are.
Both looking at the <unk>.
<unk>.
<unk> cost.
The challenges that we have and we worked through and come up with a pricing plan.
On the bottlers.
Take out to the marketplace.
And it gets it up we do have a few businesses, where we we sell the finished goods whether that be some of the for example, the chilled juice business is here in the U S.
Speaker 1: We do have a few businesses where we sell the finished goods, whether that be some of, for example, the chilled juice businesses here in the U.S. or in Europe , or the coffee
Or in Europe , or the cost of business or the <unk> business clearly there.
Speaker 1: Clearly there we're operating the vertically integrated businesses and we're doing very much what we do with the bottlers. We do on our own for those businesses and we work it all through. So I think you you can take it as you know we work very much in alignment working back from the consumer.
We're operating the vertically integrated businesses and we are doing very much what we do with the bottlers, we do on our own for those businesses.
And we work it all through so I think you can take it as we work very much in alignment working back from the consumer trying to drive value for the customers and we manage the portfolio of different input costs, including <unk>.
Speaker 1: product drive uh... value for the cost of those uh... and uh... we manage the portfolio will be profitable cost including
Speaker 1: and needs to kind of invest in marketing, invest in innovation.
Needs to kind of invest in marketing invest in innovation and invest in the execution capacity is the bonus would do.
Speaker 1: uh... investing uh... execution uh... capacity at the bottom
Speaker 3: Your next question comes from Andrea Teixeira from JP Morgan. Please go ahead, your line is open. Good morning. My question is on the pricing that you embed in your guide and is it pricing actions yet to be implemented or already in the market? And can you elaborate a bit more on James on your commentary about balancing volumes and pricing in 2022, which implies you probably expect an additional low single digit volume growth in 2022. And is that predicated mostly on the on-premise recovering as you pointed out and an improvement in supply of cans and how we should parse it out? Thank you very much.
Your next question comes from Andrea Teixeira from Jpmorgan. Please go ahead. Your line is open.
Morning. My question is on the pricing that embedded in your guide.
Is it pricing actions to be implemented are already in the market and can you elaborate a bit more on James on your commentary about balancing volumes and pricing in 2022, which implies you'd probably expect an additional low single digit volume growth from 2022 and is that predicated mostly on <unk>.
Thats very comforting as you pointed out and in an improvement in supply of cans and how we should parse it out thank you very much.
Speaker 1: Sure, so yeah, clearly by saying we're expecting a balance between volume and price in our overall rarity in New Zealand, there is an implicit volume growth that is broad-based geographically, obviously more tends to be faster, rather tends to be in the emerging markets and slower in the developed markets.
Sure. So yeah, the clearly the by saying, we're expecting a balance between volume and price in our overall rather than gallons. There is there is an implicit volume growth that is a broad based geographically, obviously more tends to be faster rather tends to be in the <unk>.
<unk> markets and slower in the developed markets.
Speaker 1: Yes, it predicated on improvements in away from home, particularly in those countries which are not yet back to 2019 levels.
Yes, it is predicated on.
<unk> and away from home, particularly in those countries, which are not yet back to 2019 levels.
Speaker 1: you know, whilst we have emerged stronger and our total business is bigger than it was in 2019, whether that be volume, revenue or profits, that is not true in every country. And so, you know, and actually in total, away from home is not back to where it was in 2019. So there's clearly more left to come back, which is why.
Whilst we have emerged stronger on our total business is bigger than it was in 2019, whether that be volume revenue or profits.
That is not true in every country.
And so on.
<unk> in total away from home is not back to where it was in 2019. So there's clearly more left to come back which is why.
Speaker 1: You know, effectively, implicitly, there's a little more volume in the 2022 guidance than in the normal long-term algorithm.
Effectively implicitly there is a little more volume into 2022 guidance setting the normal long term algorithm.
Speaker 1: And similarly, with price mix, as I commented earlier, it's going to be implicitly a little more than usual, and I think you'll have to kind of look at it. I would encourage everyone to look at some of the two-year stacked rates in terms of volume and price, to look at how it's been moving by group and by business segment as you think about your model.
Similarly.
With price makes it again as I commented earlier, it's going to be implicitly a little more than usual.
And I think you'll have to kind of look at I would encourage everyone to.
Look at some of the two year stacked rates in terms of volume and price.
Look at how it has been moving by group by business segment.
As you think about your modeling going into 'twenty.
Speaker 3: Your next question comes from Chris Carey from Weld Fargo Securities. Please go ahead. Your line is open.
Your next question comes from Chris Carey from Wells Fargo Securities. Please go ahead. Your line is open.
Speaker 5: Hi, good morning. Thanks so much. Just, um, you know, following up on that, you know, line of
Hi, good morning, Thanks, so much.
Following up on that line of.
Speaker 6: that line around, you know, channel mix and going into next year and how that factors into volume. You know, certainly channel mix should be, you know, a pretty good story for gross margins going into next year. Would you expect, you know, sequential improvement from the Q4 level with the away from home being ahead of 2019 levels for the first time?
That line around channel mix and going into next year, and how that factors into volume.
Certainly channel mix should be a pretty good story for gross margins going into next year would you expect sequential improvement from the Q4 level with the away from home being ahead of 2019 levels for the first time.
Would you expect barring geopolitical risks or otherwise that that sequential improvement should continue in and can you just frame, how we should be thinking about how that might benefit your your your.
Gross margin rate for the year. Thanks.
Speaker 2: Thanks, Chris. I'm just to confirm, you're talking about sequential improvement in gross margins?
Thanks, Chris I'm, just just to confirm you're talking about sequential improvement in gross margins.
Speaker 6: Sequential improvement in the away from home business from the Q4 and how that can impact and benefit your growth margin as you get through the year.
Sequential improvement in the away from home business from from the Q4, and how that can impact and benefit your gross margin as you go through the year.
Yes, okay.
Speaker 1: Clearly, as we talked about on the last question, we are expecting some extra improvement in the way from home going into 2022, as I said, as it's not yet back.
Clearly as we talked about on the last question we are expecting.
Some extra improvements in the away from home.
Going into 2022.
As I said is it is not yet back to the 2019 levels on that is.
Speaker 1: levels. And that is a plus from a gross margin point of view. I would not want to characterize that as the biggest thing happening next year. There's a lot more moving pieces.
Plus from a gross margin point of view I would not want to characterize that as the biggest thing happening.
Next year.
A lot more moving pieces.
Speaker 1: uh... going on uh... so uh... i think it's it it is a factor
Going on.
I think it is a factor.
Speaker 1: It's probably more important, the overall growth of the business.
Probably more importantly, overall growth of the business and.
Speaker 2: and the reopenings in the different geographies, but I think that's the key. I think, John , do you want to start, don't you? Yeah, no, I think it's a good juncture maybe to just say a little bit about gross margins, because I know there'll be questions on what we expect. And I think I'd like to emphasize
The reopening in the different geographies.
But I think that that's the case I think John Jordan you wanted to.
Yes, no I think I think it's a good it's a good juncture, maybe to just say a little bit about gross margins because I know there'll be questions on.
And what we expect and I think I'd like to emphasize.
Speaker 2: Really several factors are playing into the 2022 picture. We do have the mechanical effect of the body armor acquisition that I think is important to take into account.
<unk> factors are playing into into the 2022 picture.
We do have the mechanical effect of the of the body armor acquisition, because I think it is important to take into account.
Speaker 2: We had a slight currency head or tailwind in 2021 and that's going to be kind of negated with a similar expected headwind in 2022. I think it's important to keep in mind what we discussed on the impact of the commodity
We had a slight currency headwind.
Tailwind in 'twenty, one that's going to be kind of negates it with a similar expected headwinds in 2022, I think it's important to keep in mind, while we discussed on the.
The impact of the commodity.
Speaker 2: commodity pressures, there will be, I think, offsetting against that the benefit of some of the pricing power and grand leadership that we have that James has mentioned. And that will, I think, also be complemented by an improving channel mix outlook. But I think it's important to take into account all of the factors and hence that feeds into the guidance that we provided.
Commodity pressures.
We'll be I think offsetting against that.
The benefit of some of the pricing power.
Grand leadership that we have the chance as mentioned and and.
I think also be complemented by.
And improving channel mix outlook, but I think it's important to take into account.
All of the factors.
And hence the.
That feeds into the guidance that we provided this morning.
Speaker 7: Your next question comes from Carlos Laboy from HSBC. Please go ahead. Your line is open.
Your next question comes from San Carlos Laboy from HSBC. Please go ahead. Your line is open.
Speaker 4: Yes, good morning, everyone. First of all, congratulations on this 25% refillable goal, because it redirects the industry discourse completely for investors on PTA waste solutions.
Yes, good morning, everyone.
First of all congratulations on this.
25% renewable goal because it it redirects the industry. This course completely for investors on PT waste solutions.
Speaker 4: My question is about marketing and innovation. What might work?
My My question was about marketing and innovation.
My worry you about.
Speaker 4: readiness for normality and about these new marketing and innovation processes for creating new demand and new brand equity for price and power.
Readiness for normality and about these new marketing and innovation processes for creating new demand in new brand equity for pricing power.
Speaker 1: Well, thank you for calling out the reusable goal, Carlos. Clearly, achieving it will mean using much less virgin PT and make it easier to achieve our objectives of all.
Well, thank you for calling out the reusable gull, Carlos clearly achieving it remain using much less <unk>.
Urgent PC and make it easier to achieve our objectives.
Of a world without waste, where we where we tend to collect back from low plan for every one we sell by 2030.
Speaker 1: collect back a bottle or can for everyone we sell by 2030. In terms of
In terms of.
<unk>.
Speaker 1: The marketing and the innovation question, I'm not quite sure I completely capture what you're going for there, but let me throw out some thoughts.
The marketing and the innovation question I'm, not I'm not quite sure I completely capture what you got for that but let me let me throw out some thoughts.
I think that will help.
Speaker 1: you know that that the consumer last piece of the uh... price
The the consumer elasticity on pricing power.
Speaker 1: uh... yes i think a lot of people have noted it's been relatively uh... inelastic
Yes, I think a lot of people have noted it's been relatively.
Last week in recent times.
Speaker 1: uh... it's certainly a historical experience that when multiple categories uh... go off at the same time that there is that you know
It's certainly our historical experience that when multiple categories.
While at the same time that there is less elasticity.
Speaker 1: But it is also our experience that.
But it is also our it.
There is that.
Speaker 1: that often not you know environment of crisis where the uh... support of a lot of uh... injection of money economy which i think is what has been happening over the last uh... couple years it eventually moved to another place where there is
That often.
Environment of classes, where there is a.
Our support of a lot of injection of money into the economy, which I think is what has been happening over the last.
A couple of years.
<unk> moved to another place where there is.
Speaker 1: inflation and a squeeze on the incomes and so we are very attuned to the need to Burn our pricing as we go forward and earn it whether it's with the marketing that really engages with the consumers Whether it's with the innovation that again engages the consumers and gives our customers the opportunity
<unk> a squeeze on incomes and so we are very attuned to the need to be thorough in our pricing as we go forward on earnings whether it's with the marketing that really engages with the consumers.
As with innovation.
Again engage with the consumers.
Customers have the opportunity.
Speaker 1: do different things and more interesting things in the stores, or whether we earn it through the excellence in execution and the in-store presence that our bottling partners are so good at, because the next phase is much harder than the previous phase.
To do different things and more interesting things in the stores.
Or whether we earn it through the excellence in execution and in store presence with our borrowings partners are so good at.
Because the next phase is much harder than the previous phase.
Speaker 1: It's easier to do pricing in a stimulus environment where everyone else is going up, it's much harder when there's a real squeeze on income. So we're very focused on winning in the next phase. It's something that we and our boiling partners have a lot of experience with and it'll certainly be an opportunity and a necessity.
It's easier to do pricing.
Stimulus environment, where everyone else is going up it's much harder when there's a real squeeze on it. So we're very focused on winning in the next phase.
It's something that we and our bottling partners have a lot of experience with.
Certainly they.
Opportunity out of necessity deploy the whole toolkit for marketing innovation through execution to continue winning as we go forward.
Speaker 1: deployed a whole toolkit for marketing innovation through execution to continue.
Speaker 7: Our next question comes from Steve Powers from Deutsche Bank. Please go ahead, your line is open.
Our next question comes from Steve Powers from Deutsche Bank. Please go ahead. Your line is open.
Speaker 4: Yes, hey, thanks and good morning. I guess it kind of builds on on that theme. I'm thinking about it in the context of the 22 outlook and amidst all the cost pressures that we've spoken about and your plans to drive forward, you know, operating leverage and continue to progress on offering profit. I guess. Can you talk a little bit more about the embedded flexibility you have in your plan?
Yes, hey, thanks, and good morning.
I guess it kind of builds on on that theme I'm thinking about it.
Turning to outlook.
And amidst solid cost pressures that we've spoken about.
Plans to drive forward.
Operating leverage continued continued progress on operating profit I guess can you just talk a little bit more about the embedded flexibility you have in your plans around strategic investments in 'twenty, two specifically where those are targeted.
Speaker 4: around strategic investments in 22 specifically, where those are targeted, what level of strategic investment, whether it's A&P or capabilities building, just to give us a little bit more context about your ability to support the volume momentum, justify pricing, not only in 23, but to set yourself up for 23 and beyond. Thank you.
What level of strategic investments, whether it's A&P or capabilities building.
Just to give us a little more context about your ability to support the volume momentum justified pricing not only in 'twenty to set yourself up for 'twenty three and beyond thank you.
Yes sure.
Speaker 1: Yeah, sure. Um, I mean, we we have a
I mean, we have.
Speaker 1: a kind of approach where we've come, we switched during the crisis and leaning into growth or a bias to invest.
<unk>.
Kind of approach, where we've where we've come we switched during the crisis and leaning into growth. So a bias to invest as you can see through the course of the process and into 2021.
Speaker 1: As you can see through the course of the crisis and into 2021, we steadily increased our level of investment on marketing, restarted the engines on innovation, and similarly, the borders were doing so on execution and actually investing.
We steadily.
Increased our level of investment on marketing restarted the engines.
On innovation and suddenly the borders will do so.
On execution nicely investments.
Speaker 1: in supply chain. So that's our bias going into the year. We're going to invest for growth. We've got a lot of ability to drive, not just the market innovation, I would also underline the advances in the digitization of the business, whether it's the connection with the consumer, whether it's the connection with the retailers and what the bottlers are doing to digitize that part of the business. But we are leading.
In supply chain, so that's our bias going into the year, we're going to invest for growth.
We've got we've got a lot of ability.
Our ability to drive not just the marketing innovation I would also.
On the line the advances in the Digitization of the business, whether it's the connection with the consumer whether it's the connection with the retailers in the world. The bottlers are doing to digitize.
That part of the business. So we are leaning into growth.
Speaker 1: But what we have achieved over the last few years is to increase our degree of flexibility or adaptability, better said. It's not that everyone's sitting out there with, you know.
But what we have achieved over the last few years is to increase our degree of flexibility or adaptability better said, it's not that.
Hey, Ron sitting out there with.
Speaker 1: pots of flexibility, it's more that we can adapt as circumstances change. We double down on our ability to make quicker, clearer decisions coming in to the crisis. And with the reorganization that we did recently, have a more networked organization, we feel good about our ability to prioritize and redirect resources.
Also flexibility it's more that we can adapt as circumstances change we doubled down on our ability to make quicker.
There are decisions coming in to the crisis.
And with the reorganization that we did recently.
Have a more networked organization, we feel good about our ability to prior our ties and redirect resources as and when needed during the year, whether that's to move from one part of the world to the other or one brand to another or even pull.
Speaker 1: as and when needed during the year whether that's to move from one part of the world to the other or one brand to another or even to pull back where the growth is not there. So we feel we've got the levers in hand and we feel we've become more agile.
Pull back where the growth is not there. So we feel we've got the levers.
The hand, and we feel we become more agile.
And using them.
Speaker 7: Your next question comes from Bill Chappelle from Truist Securities. Please go ahead. Your line is open.
Your next question comes from Bill Chapell from <unk> Securities. Please go ahead. Your line is open.
Okay.
Good morning.
Speaker 4: you just uh wanted a quick question on costa or not quick but uh a question on costa and kind of how you're viewing it going forward i guess
Can you just.
Wanted to a quick question on cost of or not quick, but a question on costa and kind of how youre viewing it going forward I guess.
Speaker 4: Two, three years ago when it was purchased, it was kind of a thought that was to be a big splash or a bigger splash into coffee for the system, and obviously the pandemic showed up.
Three years ago. When it was purchased it was kind of a thought there was going be a big splash or a bigger splash into coffee for the system.
And obviously the pandemic showed up but at the same point you can kind of move more aggressively into alcohol into body armor to other things and so didn't know if you.
Speaker 4: But at the same point, you've kind of moved more aggressively into alcohol, and to body armor, and to other things. And so didn't know if the thought process had changed.
Thought process had changed.
Speaker 4: or evolved in terms of wanting to move forward and expand that, you know, kind of worldwide or if
We're involved in terms of wanting to move forward and expand that kind of worldwide or is.
Speaker 4: You know, it's another kind of arrow in the quiver, which was always part of the plan.
Another kind of arrow in the quiver.
It's always part of the plant.
Thanks.
Speaker 1: Sure, Pyro, I think that the short answer first, it was always intended to be one of the arrows in the quiver. The longer version of that answer...
Sure.
I think the the.
Short answer first it was always intended to be one of the arrows in the quiver.
The longer version of that answers.
Speaker 1: You know clearly cold it impacted not just our total business but it impacted the cost of business which is almost entirely away from home.
Clearly COVID-19 impacted not just our total business, but it impacted the cost of business, which is almost entirely away from home business.
Speaker 1: And so it was very much a bit like our founded business in the U.S. It was very much in the crosshairs of the COVID impact, particularly in 2020, at the beginning when the lockdowns were very severe. And in fact, most of the.
It was very much a bit like the our foundry business in the U S. It was very much in the crosshairs of the Covid impact, particularly in 2020.
At the beginning when the Lockdowns were very severe and in fact, most of the coffee shops are all closed in 2020. So it was it was very hard on the cost of the business. The 2021 quite a lot of progress re openings.
Speaker 1: coffee shops are all closed in 2020. So it was it was very hard on the cost of business. The 2021 made a lot of progress reopening.
Speaker 1: Not back to where we were yet, so the coffee stores are bouncing back, but not back to where they were yet. The vision we had for coffee included a number of other components.
Not back to where we were yes.
So the coffee stores are bouncing back with Nevada wherever they were yet.
<unk>.
The vision, we have for coffee included a number of the components.
Speaker 1: One was the express machines, the digital kind of barista. Obviously 2020 was hard to install new machines, but the performance of the existing machines was extraordinary and very positive. And last year we began to install thousands of new machines.
One was.
The express machines, the digital kind of varistor obviously.
Obviously 2020 was.
Hard to install new machines, but the performance of the existing machines was extraordinary are very positive on it.
Last year, we began to install.
A new machines and then we've launched.
Speaker 1: And then we've launched, partnered with our bottlers to have Proud to Serve, where they provide the beans and machines to the Horeca channel. And we've launched Ready to Drink, where it's done really well in certain parts of the world. So the vision is still there. We see it as one of the arrows in the quiver.
Partnered with our bottlers to how proud to serve where they provide the beans and machines.
The <unk> channel and we've launched our ready to drink, where it's done really well in certain parts of the world. So the vision is still there we see it as one of the hours of equivalent clearly we've lost a couple of years I mean, there's no there's no beating around the bush.
Speaker 1: couple of years. I mean there's no there's no beating around the bush and we're going to have to bounce back from it. But the learnings we had and the experience with where we were able to do things give us give us some confidence and belief that we need that we have an opportunity to execute against the vision which of course we still need to do.
And we're going to have to bounce back from it but the learnings we had and the experience with where we were able to do things.
Give us give us some confidence and belief that we need that we have an opportunity to execute against the vision, which of course, we still need to do.
Speaker 7: Your next question comes from Kevin Grundy from Jeffries. Please go ahead. Your line is open.
Your next question comes from Kevin Grundy from Jefferies. Please go ahead. Your line is open.
Speaker 8: Great. Thanks. Morning, everyone. Question for John on share repurchases. I'd also like to tie it into the bottling divestitures and potential proceeds there because the topic is related. So, again, to echo sentiment earlier, great job on improving pre-cash flow conversion. That's outstanding. As you sit here now with $10 billion in share buybacks, in addition to the fact that you have the CCBA offering coming up later this year, you've been very clear about your intent to divest the remaining bottling assets. So, kind of tying this together, number one, what are thoughts? What's embedded on repurchases? When can you get back to that? The company has been fairly inactive for reasons that we understand. And then relatedly with the proceeds from CCBA and what potentially may come in the near to intermediate term around further bottling divestitures, does it seem likely that you would put those proceeds towards buybacks? So, thanks for your comments there.
Great. Thanks, Good morning, everyone question for John .
On share repurchases and I'd also like to tie it into the bottling divestitures and potential proceeds there because the topic is related.
Again to echo sentiment earlier, great job on improving free cash flow conversion that's outstanding.
Now a $10 billion in share buybacks.
In addition to the fact that you have the CBA offering coming up later this year <unk> been very clear about your intent to divest the remaining bottling assets. So kind of tying this together number one what are thoughts what's embedded on repurchases. When can you get back to that the company has been fairly inactive for reasons that we understand and then relatedly with the proceeds for.
CBA and what potentially may come in the near to intermediate term around further bottling divestitures.
It would seem likely that you would.
Put that put those proceeds towards buybacks. So thanks for your comments there.
Thanks, Kevin.
Speaker 2: Thanks Kevin, it was a reason we used the word sort of a more vigorous pursuit in the script.
Yes, there was the reason we use the words sort of a more vigorous pursuit.
<unk> in the script.
Speaker 2: Because as you say, our situation today is very different to where it was not that long ago with our pre-cash conversion gone from
Cause I should say our situation today is very different to where it was not that long ago with our free cash conversion has gone from.
Speaker 2: 70% to over 100%. Our net death leverage has gone from outside of our...
70% to over 100 net.
Net debt leverage has gone from sort of outside of our of our range to it.
Speaker 2: of our range to at the low end of it, dividend conversion is now at 70% more or less.
At the low end of us.
Dividend conversion is now at 70%.
More or less.
Speaker 2: And as I mentioned earlier on the call, the restructuring of the debt portfolio has been a very robust piece of work.
And I know that I've mentioned earlier on the call the restructuring of the debt portfolio is has been a has been very.
That's a very robust piece of work.
Speaker 2: So as we look to the future, I think it's your question. We need to couch it in the context of the broader capital allocation agenda. We continue to.
As we look as.
As we look to the future I think your question, we need to couch. It in the context of the broader capital allocation agenda.
We continue to prioritize growth of the business.
Speaker 2: growth of the business. We touched upon some of that in the earlier questions, both in terms of...
We touched upon some of that in the earlier questions.
Both in terms of the capital that we need to to drive some of the businesses that we're in and the marketing that we need to support the brands.
Speaker 2: the capital that we need to drive some of the businesses that we're in and the marketing that we need to support the brand.
Speaker 2: Secondly, we don't waver from our ongoing support.
Secondly, we don't waver from our ongoing support and.
Speaker 2: objectives to continue to grow the dividend. And then we're left with the two more dynamic areas, the M&A agenda and share repo. So on both of those, I think on M&A, we'll be opportunistic.
Objective to continue to grow the dividend.
Then we're left with the with the two with the two more more dynamic areas.
M&A agenda and share repo.
So on both of those I think M&A will be opportunistic.
Speaker 2: There's not a lot of obvious candidates out there but we will continue to be very open to that whole area and not on this call on the whole topic of share repurchases but it's certainly an area that with excess cash that as we have communicated in the past.
Theres not a lot of obvious candidates.
Out there, but we will continue to be very open to that whole area and.
Not on this call the whole topic of share repurchases, but it's certainly an area that with excess cash that as.
As we have communicated in the past, we will look to leverage so.
Speaker 2: we will look to leverage. So more to come on those topics as we go through the year. Thank you.
More to come on.
Those topics as we as we go through the year. Thank you.
Speaker 7: Our next question comes from Johan Grande from Guggenheim. Please go ahead, your line is open.
Our next question comes from Mohan Grande from Guggenheim. Please go ahead. Your line is open.
Speaker 5: Hey, good morning, James, John . I'd like to focus this morning on BodyArmor. So if I'm correct, BodyArmor manufacturing is not expected to migrate to the concentrate model this year in the US. But wherever you are launching it internationally in the brand, it will be in the concentrate model.
Hey, good morning, James Sean.
I'd like to focus this morning on body armor, so if I'm correct, but the AMR manufacturing.
He is not expected to migrate to the concentrate model this year in the U S.
You are launching it internationally and the brands that we will be in the concentrate model.
Speaker 5: So, if I'm correct, and please correct me if I'm not, when are you planning to migrate the U.S. manufacturing to the concentrate moment, which it has a significant impact on top line margins, and also any indication of your launch plan outside of the U.S. would be great. Thanks.
If im correct and please correct me if I'm not.
When are you planning to migrate to U S manufacturing to the comes from Hikma alone.
We see a significant impact on top line and margins and also any indication of your launch plan outside of the U S would be great. Thanks.
Speaker 1: Yeah, thanks, Ron. I mean, as you say, it's, as Jon has noted, it's a Finnish product business that we are integrating into our company and that has some mechanical effects.
Yeah, Thanks, Ross as you say it.
John .
Noted, it's a finished product business that we are integrating into the into our into our company.
And then also some mechanical effects.
Speaker 1: And as you say, we have not chosen to change it to a concentrate model.
And as you say we have not.
The chosen to change it to a concentrate model.
In fact to be more specific we are keeping the current operating model.
Speaker 1: to be more specific, we're keeping the current operating model where the manufacturing of the product is largely done with co-packers and that is what has been driving the momentum and we have no plans to change the model with using the co-packers at this stage. They're doing a great job and then obviously the distribution of the product is done through the co-bottling system here in the U.S.
Where the where the manufacturing of the product is largely done with co Packers.
And that is what has been driving the momentum we have no plans to change the model.
Using co Packers at this stage.
They're doing a great job and then obviously the distribution of the of the product is done through through the Coke bottling system.
Here in the U S.
Speaker 1: If we were to try and change the concentrate model, that we would let you know in due course. We have no immediate plans to do so. Again, it would be a mechanical effect on the revenue and the gross margins because it wouldn't be changing the profit coming from body armor. It would be more of a...
If we were to.
Try and change the concentrate model that we would let you know in.
In Q calls.
We have no immediate plans to do so again it would be a mechanical.
Effect on the revenue and the gross margins because it wouldn't be true.
Ranging the profit coming from body armor, it would be more of them.
Speaker 1: mechanical effect on the top and the gross margin for operating model reasons. But as I said, our intention is to operate it very broadly as we do at the moment, connected but not integrated, so that we can continue to drive the growth as what have been a very successful brand. They've tripled sales in the last three years, gained a lot of share in the sports strength category, actually expanded the category, and it's done a really good job. So we're going to kind of keep focused on driving that into more success.
Mechanical effect on the top on the gross margin for operating model reasons, but as I said, our intention is to operate at very broadly as we do at the moment connected but not integrated so that we can continue to drive the growth was what had been a very successful brand that tripled sales in the last three years gained a lot of share in the sports drink category actually expanded.
Category.
And has done a really good job. So we're going to kind of keep focused on driving that into more success in the coming years and as we expand internationally.
Speaker 1: Then as we expand internationally, we have not.
We have not decided where and when as of yet we will be doing that work. This year and then as we get there we will of course in that process look at the appropriate operating model, whether there's any whether it should be finished product will concentrate daily.
Speaker 1: where and when. As of yet we will be doing that work this year and then as we get there we will of course in that process look at the appropriate operating model whether there's any whether it should be finished product or concentrate. Clearly our preferred route to market is with the bottlers and it certainly seemed to make more sense to organize it as a concentrate model whether that's then toll-packed or
Our preferred route to market as volatile as it certainly seemed to make more sense to organize it as a concentrate model whether thats then told tactful produced by the bottlers is very situational.
Speaker 1: produced by the bottlers is very situational.
And capacity driven but.
Speaker 1: but see the concentrate versus finished product as a mechanical effect on the top line rather than an impact on the bottom line. But our focus is driving the growth.
The concentrate versus finished product is a mechanical effect on the topline rather than an impact on the bottom line, but our focus is.
Driving the growth of the business.
Speaker 7: Our next question comes from Rob Ottenstein from Evercore. Please go ahead, your line is open.
Our next question comes from Rob <unk> from Evercore. Please go ahead. Your line is open.
Speaker 6: Great, thank you very much. James, you've done a lot over the last couple of years.
Great. Thank you very much James you've done a lot over the last couple of years.
Speaker 4: uh... in terms of the organization the culture uh... to drive more agility accountability leaner uh... uh...
In terms of the organization and the culture to drive more agility accountability leaner.
Yeah.
Speaker 6: reward risk-taking, wondering if you maybe can talk about how that has played out in your mind, maybe kind of benchmark or kind of give yourself a report card on that, and any new moves or, you know, further evolution of that this year. And then, more specifically, one of the actions that you took was, you know, the brand and SKU rationalization.
Reward risk taking.
So I'm wondering if you maybe can talk about how that has played out in your mind.
Maybe kind of benchmark or kind of give yourself a report card on that.
And any new moves or.
Evolute further evolution of that this year and then more specifically one of the actions that you took.
The brand and SKU rationalization.
Speaker 6: Can you quantify, you know, the impact of that on results in 21 and any, you know, potential results in 22? Thank you.
Can you quantify the impact of that on results in 'twenty, one and any potential resulted in 22. Thank you.
Sure I'm going to go with the back half of <unk>.
Speaker 1: or we'll call it one question and I'll go with the back half of the expanded question first and then come back to it.
Call. It one question I'll go with the back half of the expanded question first and then come out of it.
The.
Speaker 1: The rationalization of the brands and the SKUs, and remember that that rationalization, some of the brands we stopped, some of them we transitioned into other brand names, and some of them, actually a couple of them, we either discontinued.
The rationalization of the brands and Skus and remember that that rationalization. Some of the brands. We stopped some of them were transitioned into all the brand names and some of them actually a couple of them. We are the discontinued itself.
Speaker 1: My take is the impact in 2021 was minimal and the impact in 2022 is going to be negative.
My take is the impact in 2021 was minimal.
The impact in 2022 is going to be negligible.
Speaker 1: And the reason I say that is, firstly, the sum of all these brands was a relatively small, low single-digit percent of sales and contribution, but with a much higher number in terms of occupation of SKUs.
And the reason I say that is firstly the sum of all these brands was a relatively small low single digit percent of sales.
And contribution what was a high much higher number in terms of.
Occupation of Skus and mine space and in supply chain.
Speaker 1: mine space and supply chain and so we've removed...
And so we removed.
Speaker 1: The slower-growing or declining brands with the least long-term potential to be leaders in their categories free up more space.
The slower growing or declining brands with the leased long term potential to be leaders in their categories free up more space for the brands that really are moving handful future innovations and future brands now actually.
Speaker 1: all the proud that the really are moving ample future innovations future uh... actually
Speaker 1: comfortable making the argument that even just stopping them actually could have been positive to sales and profit. It freed up space for those brands and those SKUs that are doing much better. So I think it was, if you'd like to see it, it was pruning, pruning the garden to let the better plants grow. And so I actually see it as positive for the business even though you're cutting off something.
Entirely comfortable making the argument that even just stopping them actually could have been positive to sales and profit freed up space for those brands and those skus that are doing much better. So I think it was a it was if you'd like to say it was pruning pruning the garden to let the better plants grow until I actually see it.
<unk> was positive for the business, even though you're cutting off something.
Here have some sales and profits and.
Speaker 1: uh... we are largely uh... complete with that process we've we've uh... the brand eliminations about seventy five percent and and and we're not quite halfway with the bracket addition we're in good shape uh... but i wouldn't uh... if you're thinking about it from a modeling point of view i would just like
We are largely complete with our process.
The brand eliminations is about 75%.
We're not quite half way with the brand transition.
We are in good shape.
But I wouldnt, if youre thinking about it from a modeling point of view I would just like.
Assume it's negligible in terms.
Speaker 1: In terms of the culture and the organization, clearly we made a lot of moves. We're very focused on driving agility of the organization in terms of the culture and the growth behaviors and staying...
Of the culture in the organization clearly we made a lot of moves.
We're very focused on driving agility of the organization.
In terms of the culture and the growth behaviors in Spain <unk>.
Speaker 1: Constructively discontent about the future and looking for the opportunities
Constructively discontent about the future and looking for the opportunities.
Speaker 1: I think we still have another year to bed down what we've done over the last couple of years. Big changes in the marketing model, we've got some campaigns coming out already, they're doing very well in the marketplace, we're pleased.
I think we still have another year to bed down what we've done over the last couple of years Big changes in the marketing model. We've got some campaigns coming out already that it's doing very well in the marketplace. We're pleased with the SEC.
Speaker 1: impact and the effectiveness of them. We've obviously got our platform services that are up and running, you know, but there's like, you have to do X before you can do Y before you can do Z. And so we still have things left to do to bring that to the kind of level of performance that we're looking for, similarly in terms of some of the supply chain stuff. So I think
Room rate path and the effectiveness of them.
We've obviously got our platform services that are up and running.
But this like we have to do X before he can do why before you can do that and so we still have things left to do to bring that to the kind of.
Level of performance that we're looking for.
Similarly in terms of some of the supply chain stuff. So I think we should see 2022 as a year of really fine tuning and optimizing the work we've done in terms of the organization over the last couple of years and continue to really focus the culture on a growth mindset.
Speaker 1: 2022 as a year of really fine-tuning and optimizing the work that we've done in terms of the organization over the last couple of years and continue to really focus the culture on a growth plan.
Speaker 7: Ladies and gentlemen, this concludes our question and answer session. I would now like to turn the call back over to James Quincy for his closing remarks.
Ladies and gentlemen, this concludes our question and answer session I would now like to turn the call back over to James Quincey for closing remarks.
Speaker 1: Great. Thanks very much, everyone. To summarize, as we move to 2022, our flyer rules for growth are really working in unison, propelling the organization. We're going to drive top-line growth, maximize returns, and again, it's an attractive and growing industry. Our innovation pipeline is robust and scaled for impact.
Right, Thanks, very much everyone to summarize.
As we move to 2022, our flywheel for growth are really working in unison.
Propelling the organization, we're going to drive topline growth maximize returns and again, it's an attractive and growing industry.
Our innovation pipeline is robust and scale for impact.
Speaker 1: Our marketing agenda is designed to deliver the most effective consumer engagement with agility and speed. Our bottlers are engaged and executing the marketplace, and we're bringing this vision to life. So thank you for your interest, your investment in the company, and for joining us this morning.
Marketing agenda is designed to deliver the most effective consumer gateways with agility and speed.
Bottlers are engaged and executing the marketplace.
We're bringing this vision to life. So thank you for your interest.
And the company and for joining us this morning.
Speaker 7: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Speaker 9: ?
Okay.
[music].