Q3 2023 Coca-Cola Co Earnings Call
Yes.
[music] applications people.
Yes.
[music].
At this time I'd like to welcome everyone to the Coca Cola Company's third quarter 2023 earnings results Conference call.
Today's call is being recorded if you have any objections. Please disconnect at this time.
All participants will be on a listen only mode until the formal question and answer portion of the call.
I would like to remind everyone that the purpose of this conference is to talk with investors and therefore questions from the media will not be addressed.
Media participants should contact Coca Cola's Media Relations Department, if they have any questions.
I would now like to introduce MS. Robyn Halpern, Vice President and head of Investor Relations Ms. <unk> you may now begin.
Good morning, and thank you for joining us I'm here with James Quincey, Our chairman and Chief Executive Officer, and John Murphy, Our President and Chief Financial Officer.
We've posted schedules under financial information in the investors section of our company website at Coca Cola Company Dot Com.
These schedules reconcile certain non-GAAP financial measures, which may be referred to by our senior executives. During this morning's discussion to our results as reported under generally accepted accounting principles you.
Unknown Executive: [inaudible] At this time, I'd like to welcome everyone to the Coca-Cola Company's third quarter 2023 earnings results conference call. Today's call is being recorded. If you have any objections, please connect at this time.
You can also find schedule in the same section of our website that provide an analysis of our growth and operating margin.
In addition, this call may contain forward looking statements, including statements concerning long term earnings objectives, which should be considered in conjunction with cautionary statements contained in our earnings release and in the company's periodic SEC report.
Following prepared remarks, we will turn the call over for questions.
If you limit yourself to one question if you have more than one. Please ask your most pressing question first and then reenter the queue.
Unknown Executive: All participants will be on a listen only mode until the formal question and answer portion of the call. I would like to remind everyone that the purpose of this conference is to talk with investors and therefore questions from the media will not be addressed.
Now I'll turn the call over to James.
Thanks, Robin and good morning, everyone.
In the third quarter, we delivered strong top line growth.
Comparable operating margin expansion.
Unknown Executive: Media participants should contact Coca-Cola's media relations department if they have any questions.
Earnings per share growth.
Our strategy is working.
Robin Halpern: I would now like to introduce Ms. Robin Halpern, Vice President and Head of Investor Relations. Ms. Halpern, you may now begin. Good morning and thank you for joining us. I'm here with James Quincey, our chairman and chief executive officer and John Murphy, our president and chief financial officer. We've posted schedules under financial information in the investor section of our company website at Coca-ColaCompany.com. These schedules reconcile certain non-gas financial measures which may be referred to by our senior executive during this morning's discussion to our results as reported under generally accepted accounting principles. You can also find schedules in the same section of our website that provide an analysis of our growth in operating margins.
These results continue our track record.
And given.
To date performance, we are raising both our top line and bottom line guidance.
This morning, I'll provide a brief update on the global consumer landscape.
Ed I'll focus much of my time on business performance across the segment.
That's how we've been investing to further strengthen our capabilities.
Longer term growth opportunities.
Don will end by discussing our financial results for the quarter, our revised guidance for full year 2023.
Early considerations for 2024.
The global operating environment is always dynamic and this quarter was no exception.
Robin Halpern: In addition, this call may contain forward-looking statements, including statements concerning long-term earnings objectives, which should be considered in conjunction with cautionary statements contained in our earnings release and in the company's periodic SEC report. Following prepared remarks, we will turn the call over for questions. Please limit yourself to one question. If you have more than one, please ask your most pressing question first and then re-enter the key.
Margins improved sequentially.
<unk> dealt with a variety of factors.
Transitory weather condition for ongoing inflationary pressures geopolitical tension and conflict.
We delivered 11% organic revenue growth this quarter.
By positive volume.
Pricing actions in the marketplace and carry over pricing coming into the base last year.
James Quincey: Now, I'll turn the call over to James. Thanks, Robin and good morning, everyone. In the third quarter, we delivered strong top-line growth, comparable operating margin expansion and earnings for shared growth.
Volume grew 2% and sequentially improved each month in the quarter with September being our strongest month.
Year to date volume growth remains consistent with underlying performance compared to 2019.
James Quincey: Our strategy is working. These results continue our track record of consistent delivery and given our year-to-date performance, we are raising both our top-line and bottom-line guidance. This morning, I'll provide a brief update on the global consumer landscape. Then, I'll focus much of my time on business performance across the segments and discuss how we've been investing the further strength in our capabilities to capture longer-term blow for four years, 2023, and some early considerations for 2024.
And overall, our industry remains vibrant and has expanded.
Executing capture that growth.
During the quarter, we gain volume and value share in both at home and away from home channels.
Consumer sentiment continues to vary around the world.
In developed markets consumer spending inaccurate.
Quite well however, some consumers feel questions we have.
Seen some shifts the discount channel switching to private label brands in a few markets and categories.
10 cities. This activity was largely the same across Europe compared to the previous quarter, but was less pronounced in the U S, Australia and Japan.
James Quincey: The global operating environment is always dynamic, and this quarter was no exception. Some markets improved sequentially, while others dealt with a variety of factors ranging from transitory weather conditions, to ongoing inflation pressures, geophilological tensions, and conflicts. We delivered 11 percent organic revenue growth this quarter, driven by positive volume, some pricing actions in the markets, and calorie over pricing coming into the base in last year. Volume grew 2 percent and sequentially improved each month in the quarter, with September being asked wrong this month.
In the developing and emerging markets. The picture is more mixed.
We're seeing broadly consumer strength across Latin America, India, and in parts of Central and South East Asia on.
On the other hand consumer spending has yet to fully recover in Africa and China.
Our revenue growth management execution capabilities give us a distinct advantage.
Leveraging these capabilities to ensure we have the right product the right packaging the right channel another bright spot.
Consumers, where they are.
James Quincey: A year-to-day volume growth remains a system with underlying performance compared to 2019. And overall, our industry remains vibrant all the expanding, and we are executing the capture that growth. During the quarter, we gained volume and value share in both at home and away from home channels. Consumer sentiment continues to vary around the world. In developed markets, consumer spending in agriculture has held up quite well. However, some consumers feel pressure. We've seen some shifts to discount channels, and switching to private label brands in a few markets for categories.
Notwithstanding the dynamics will play around the world, we have many levers to pull and continues to deliver through varying market conditions.
I'll share some more details from each region.
Starting with Asia Pacific.
We delivered organic revenue growth with operating income declined primarily as a result.
Ahead of the curve and participate in longer term opportunities.
James Quincey: The intensity of this activity was largely the same across Europe, compared to the previous quarter, but was less pronounced in the US, Australia, and Japan. In developing an emerging market, the picture is more mixed, with seeing broadly consumer strengths across Latin America, India, and in part, the central of Southeast Asia. On the other hand, consumer confidence of spending has yet to fully recover in African and China. Our revenue growth management execution capabilities give us a distinctive advantage, and we are leveraging these capabilities to ensure we have the right product in the right package, in the right channel, and at the right size for the meter tumors where they are. Now, we're standing in the dynamics to play around the world. We have many leaders to pull and continue to deliver through varying market conditions.
And incurring additional costs from strategic portfolio rationalization.
Yes, yes.
We grew top line and profit by linking up rest of drinking occasions, coupled with strong execution.
In Thailand, we launched Coke kitchen, which connected consumers two influences who shared their favorite recipes.
We also partnered with foodservice Aggregators to drive combo meal.
Pain attracted nearly 1 million consumers and we significantly increased the attachment rate averages with mail order throughput.
David.
In Japan, we're gaining volume and value share.
We continued to see strong momentum for lack Coca Cola, Georgia, coffee and I look campaign.
Execution and vending e-commerce.
<unk>.
However, in China volume declines sparkling soft drink category, you are taking longer to recover.
Those who also impacted by some strategic decisions to de prioritize lower property categories.
Our focus is to restore momentum to the sparkling soft drink category.
James Quincey: I'll share some more details from each region. Starting with Asia-Pacific, we deliver organic revenue growth to operating income clients, primarily as result, investing ahead of the curve to participate in longer-term opportunities and incurring additional cost from strategic portfolio rationalization. In Asia-Pacific, we grew top lines and profit by linking our brands to direct mutations coupled with strong execution. In Thailand, we launched co-kitchen, which connected consumers to influencers who shared their favorite recipes with Coca-Cola.
Relies on revenue growth management and execution opportunities.
In India, we delivered double digit volume and topline growth, which resulted in the highest value share gains.
Three years.
We are winning in the marketplace by generating $2 6 billion transaction at affordable cost.
And driving availability across rural regions.
Across Asia Pacific as part of our World without waste strategy helped drive the circular economy for packaging materials.
It's the most 100% recycled packaging in India, Indonesia and Thailand.
James Quincey: We also partnered with food service aggregators to drive combo meals. Campaign attracted nearly one million consumers, and we significantly increased the attachment rate of our beverages with meals ordered through food service aggregators. In Japan, we're gaining volume and value change. Co-Cola, George Coffey, and I Love Have Campaigns, and a step-up execution in bending, e-commerce, and the media channels. However, in China, volume declined as the starting soft drinks category is taking longer to recover.
Moving on to EMEA.
We delivered strong organic revenue and operating income growth.
Africa macro conditions remain challenging and that business was further impacted by natural disasters in Morocco and Libya.
Despite this environment, we drove transaction growth decelerated refillable PT expansion.
Todd.
And I think 80000 policies.
In Europe consumers are still pricing pressure in that business was unfavorably impacted by poor weather.
These dynamics, we gained value share through strong performances sparkling soft drinks and tea.
James Quincey: Our results will also impactify strategic decisions to deprioritize lower-profit categories. Our focus is to restore momentum to the starting soft drink category and capitalize on revenue growth management and ex-use opportunities. In India, we deliver double-digit volume and top-line growth, which resulted in the highest value share gain over the past three years. We're winning in the marketplace by generating 2.6 billion transactions at affordable price points and driving availability across rural regions. Across Asia-Pacific, as part of our world-with-our-way strategy to help drive the circular economy from taxi material, our system launched 100% on recycled PET packaging in India, Indonesia, and Thailand.
By partnering with us to drive value for key customers and back to the tumor.
We continue to see promising results with Jack Daniels and Coca Cola in Europe .
And expanding in our collaborations including our recent announcement about absolute bulk corn supplies.
And last in Eurasia, and Middle East, we recruited consumers through innovative occasion based marketing and events like fantasy Fest, Turkey yet.
Which focused on snacking occasions with concerts by prominent local market.
<unk> also launched a 100% recycled PVC package this summer.
In North America, we.
We generated strong organic revenue growth delivered margin expansion by executing across our total beverage portfolio.
James Quincey: Moving on to a mere, we deliver strong organic revenue and operating income growth. In Africa, macro-conditions remain challenging and our business was further impacted by natural disasters in Morocco and Libya. Despite this environment, we throw transaction growth to accelerated risk-millible PET expansion, digitizing the 100th out-mountment and adding 80,000 qualities a day. In Europe, consumers are still facing pressure and our business was unfavorably impacted by fall weather. Despite each dynamics, we gained value share through strong performance, this sparkling softness and teeth.
We continued to see away from home channel outperformed other channels.
Within sparkling soft drink elasticities are holding up well and we continued to drive quality leadership with Coca Cola Bryan and Panther.
For example at system stepped up in store activation of bright line.
And with increased display at the point of sale, which drove higher household penetration and repeat purchases.
Panther drove nearly two points of value share gain year to date through innovation and new grants, including the license Halloween the duration of the what the <unk> platform.
Outside of sparkling body armor and power access.
James Quincey: We did this by partnering with our systems to drive value by key customers and our consumers. We continue to see promising early results with Jack Daniels and Coca-Cola in Europe. We are learning and expanding in our core strengths including our recent announcement about absolute veterans by it. And last, in Eurasia and Middle East, we recruited consumers through innovative occasion-based marketing and events, like Phantoms of Fest Turkia, which focused on snacking occasions with concerts by prominent low-classes.
Dialogue coal power Smartwater on golf peak generated by the share gains and in the U S. We take water resources, we renewed a decade long partnership with the department of agriculture to restore and improve watersheds and national art and grassland.
<unk> is a critical priority, perhaps system and the communities we serve.
In Latin America, we generated double digit top line and profit growth by executing on all facets of our strategy, which resulted in value share gains in four of our top five markets.
James Quincey: They also launched 100% recycled PET packages from us. In North America, we generated strong organic revenue growth and delivered margin expansion by executing across our total beverage portfolio. We continued to see away from home channels, out-perform at home channels. Within sparkling soft drinks, elasticity is upholding at well, and we continued to drive quality leadership with Coca-Cola, Sprite and Phantoms. For example, our system sets up intra-activation on Sprite, lime age legacy, and with increased display support as well, which grew up higher household penetration and repeat purchases.
The fifth market, Mexico, we're seeing improving balance sheet trends.
A few months.
We're increasingly linking up brands to consumer passion points to build deeper connections in Brazil through Coke studio, we partnered with the town Music Festival, where we hosted <unk>.
The causes and engage with our system.
Which generated 1 billion impressions and reach nearly 50 million consumers.
We continued to drive affordability through refillable packaging, a larger PC packages.
In developing and emerging markets, Brazil levels are an important tool, but eliminate waste and offer products at lower price points.
James Quincey: Phantoms drove nearly two points of balochegane yesterday through innovation and new graphics, including the latest Halloween iterations of the Water Phantoms of Platforms. Outline is sparkling, body armor and power excellent to save lives. And fair light core power, smart water and gold peak generated balochegane. And in the US, to protect water resources, we renewed a decade-long partnership with the Department of Agriculture to install and improve watersheds in National Arts and Graphs.
Lost system stepped up availability, replacing over 270000 pool as the day to day, which increased our share of visible inventory in key outlets.
Global ventures generated strong overall growth.
At <unk>, we strengthened our revenue growth management equation about driving transaction growth.
This was supported by strong innovation and marketing campaigns, such as our global summer of <unk>.
Expansion of the refreshment category and the introduction of our close in line dropped loyalty activation in the UK.
James Quincey: Problems, Water is a critical priority for our system and the community that we serve. In Latin America, we generated double digit top lines and profit growth by executing on all facets of our strategy, which resulted in value share gains in four of our top five markets. In the fifth market, Mexico was the improving value share trends of perhaps few months. We're increasingly linking our brand to consumers' passion points to build data connections in Brazil through Coaxigia, we partnered with the Town Music Festival, where we hosted 60 hours of concerts and engaged with artists and influencers, which generated one billion equations and reached nearly 50 million consumers.
Additionally, innocent gained value share in both the UK and thoughts.
Finally, bottling investment group grew organic revenue and operating income through expanding affordable immediate consumption extra pattern.
<unk> towards strengthening our route to market.
I think trade promotions.
At the same time, we are working towards Decarbonizing, our operations in India. We are using 200 electric vehicles with plans to add more people at the end of 'twenty.
Beyond the quarter, we continue to have confidence in the long term.
We see momentum continuing across our industry and our system is galvanized more than ever to capture this opportunity.
James Quincey: We continue to drive affordability through refillable packaging of larger PC packages. In developing and emerging markets, refillables are an important tool for delimiting waste and offer products in lower five points. Last, our system sets up availability through placing over 270,000 coolies here today, which increased our share of visible infantry in Kiara. Global ventures generated strong overall growth. At cost, we strengthened our revenue growth management equation while driving transaction growth. This was supported by strong innovation and marketing campaigns, such as our global summer of ice, expansion of the refreshment category, and the introduction of our personalized free drop loyalty activation in the UK.
Leveraging data to drive better decision, making key to improving execution.
Our system is collectively invested in digital initiatives to drive on all facets of that strategy.
Solid marketing and innovation.
Our marketing transformation increasingly making apparatus more relevant to consumers.
Dave Gen Z seven to nine hours per downstream.
However, very little time spent watching traditional feedback.
We've been shifting our media spend towards digital and.
In 2019 digital with less than 30% of our total media spend.
And year to date is over 60%.
Through digital campaigns with segmenting, the population of disproportionately reaching consumers.
James Quincey: Additionally, innocent gain value share in both the UK and South. Finally, bodily investment groups through organic revenue and operating income through expanding affordable, immediate consumption action banks and progressing towards strengthening root to market and optimizing trade connections. At the same time, we're working towards decarbonizing our operations in India for using 200 electric vehicles with plans to add more before the end of 20th century. Beyond the quarter, we continue to have confidence in the long term.
Higher returns on investment.
We've seen tremendous engagement through digital first campaigns with coke with meals.
He happens and fuze tea Mega fusion among others.
With tightening bolt fit to be at the forefront of both <unk>.
Our non consumer facing generous with Ireland.
For example, we launched create real magic, which turn consumer digital creators. We also brought gen II into a creative process.
Toward winning Coca Cola off the Batesville.
Hey, guys.
I'll take a piece of this work through the sale of NFC.
James Quincey: We see momentum continuing across our industry and our system is galvanized more than ever to capture this opportunity. Leveraging data to drive better decision-making is key to improving execution. Our system is collectively invested in digital industries to drive up all factors faster. Started first is marketing and innovation. Our marketing transformation is increasingly making our brand more relevant consumers. Today, Gen. D, spent seven to nine hours per day on spring. However, very little time has been watching traditional feedback.
Recently, we launched Coke life, 3000, which is the direction and the co creation platform.
Coca Cola wisely.
World's first futuristic flavor co created with.
The launch has demonstrated strong initial results on.
On the non consumer facing thought implement agenda.
The improved access to inside market data research and trends.
Moving on to revenue management and integrated execution.
As I said, we're accelerating E b platform, the lack of better pain product pricing packaging architecture, reducing out of stocks and optimizing placement of physical inventory yes.
James Quincey: We've been shifting our media spend towards digital. In 2019, digital was less than 30% of our total media spend, and the year today is over 60%. Traditional campaigns would take many in the population and disproportionately reaching consumers where we've earned higher returns on the basis. We've seen tremendous engagement with digital first campaigns with Coco Neal. Right, he happens and few keys made a fusion among others. We're taking bold steps with a forefront of both consumer and non-consumer-saving generative AI.
Year to date, we've collected $6 9 million customers.
Feedstock homes.
We continue to expand coverage and also our customers personalization at scale initial pilot suggests that customers receive AI written pushed out indications I mean more likely approach is recommending.
Resulting in incremental retail sales.
And we're just scratching the surface of what's possible, but we are investing in digital capabilities now to expand our potential down the road.
James Quincey: For example, we launched Create Real Magic, which turned consumers into digital creators. We also brought GenII into our creative process to the award-winning Coca-Cola masterpiece film and later gave pounds of chance to play a piece of this work through the sale of NFC. Recently, we launched Coke Y3000, which is our eighth iteration in the co-creation platform. Coca-Cola Y3000, the world's first futuristic flavor, co-created with AI. The launch has demonstrated strong initial results.
To sum it all up we are encouraged by our results today and this is reflected in our updated 2023 guidance.
We have many levers to pull and have proven that we can deliver a many types of markets around the world.
We continue to win on a local level maintain.
Maintain flexibility on a global level and reinvest to build a system for the long term.
With that I'll turn the call over to John .
Thank you James and good morning, everyone.
James Quincey: On the non-consumer-facent side, we're implementing GenII AI to improve access to insight, market data, research and trends. Moving on to revenue growth management, the integrated execution. As a system, we're accelerating EBC platforms that lack a better pay-on-product price and packaging architecture, reducing out of stock and optimizing placement of digital inventory. The year-to-date, we've connected 6.9 million customers to EBC platforms. We continue to click spam coverage and offer customers' personalization at scale.
Today I'll comment on our third quarter performance and highlights our updated 2023 guidance.
Also provide some early commentary on 2024 and the actions we are taking to continue to deliver on our objectives.
As James mentioned, we delivered strong third quarter results.
Starting with the topline.
We grew organic revenues, 11%.
Unit case growth was 2%.
If you exclude the impact of suspending our business in Russia.
We have delivered positive volume growth in each quarter since the start of 2021.
James Quincey: Initial pilots suggest the customers who receive AI-written push notifications, and we're more likely to purchase recommended at TU's, resulting in incremental retail sales. And we're just scratching the surface of what's possible, but we're investing in digital capabilities now to expand our potential down the road.
Concentrate sales were in line with unit cases for the quarter.
Price mix growth was 9%.
Driven by pricing actions across operating segments, including the impact of a few hyperinflationary markets.
Along with carryover pricing coming into the base from last year.
James Quincey: To sum it all up, we're encouraged by our results here today, and it is reflected in our update in 2023. We have many levers to pull, and are proving we can deliver in many times the market throughout the world. We continue to win on a local level, maintain flexibility on a global level, and reinvest to build our systems for the long term.
Comparable gross margin for the quarter was up approximately 100, Turkey basis points.
Driven by underlying expansion and a slight benefit from bottler refranchising, partially offset by the impact of currency headwinds.
Comparable operating margin expanded approximately 20 basis points for the quarter.
John Murphy: With that, I'll turn the call over to John. Thank you, James, and good morning everyone. Today, I'll comment on our third quarter performance and highlight our updated 2023 guidance.
This was primarily driven by strong topline growth and the impact of Refranchising bottling operations.
Partially offset by an increase in marketing investments versus the prior year.
John Murphy: I'll also provide some early commentary on 2024, and the actions we are taking to continue to deliver on our objectives. As James mentioned, we delivered strong third quarter results. Starting with the top line, we grew organic revenues 11%. Unit case growth was 2%. If you exclude the impact of suspending our business in Russia, we have delivered positive volume growth in each quarter since the start of 2021. Concentrate sales were in line with unit cases for the quarter.
As well as currency headwinds.
Putting it all together third quarter comparable EPS of <unk> 74.
Was up 7% year over year, despite higher than expected, 4% currency headwind.
Free cash flow was approximately $7 $9 billion year to date.
This was largely attributable to strong underlying operational performance and working capital benefits, partially offset by a $720 million transition tax payment and $230 million.
M&A related payments our.
John Murphy: Price makes growth was 9%, driven by pricing actions across operating segments, including the impact of a few hyperinflationary markets, along with carry-over pricing coming into the base from last year. Comparable growth margins for the quarter was up approximately 130 basis points, driven by underlying expansion and the slight benefits from bottom refranchising, partially offset by the impact of currency headwinds. Comparable operating margins expanded approximately 20 basis points for the quarter. This was primarily driven by strong top line growth and the impact of refranchising bottling operations, partially offset by an increase in marketing investments versus the prior year, as well as currency headwinds.
Balance sheet is strong and our net debt leverage of one five times EBITDA is below our targeted range of two to two five times.
Recently, we entered into a letter of intent.
To re franchise, our Philippines bottler.
As we progress on our Refranchising journey, we aspire to improve the return profile of our business and.
In 2015, when buffet investments group.
It's more than 50% of our net revenue a return on invested capital was approximately 17%.
Today Buffet investments group makes up less than 20% of net revenue.
And our return on invested capital is over 23%.
Seven point increase.
After this transaction closes our remaining assets in the bottling investments group will include operations in India.
John Murphy: But again all together third quarter comparable EPS of 74 cents was up 7% year over year, despite higher than expected 4% currency headwinds. Recast show is approximately $7.9 billion year today. This was largely attributable to strong underlying operational performance and working capital benefits, partially offset by a $720 million transition tax payment and $230 million in M&A related payments. Our balance is strong and our net debt leverage of one and a half times hibita is below our target range of two to two and a half times.
Africa, and several smaller locations primarily in Asia Pacific.
We will remain disciplined in our refranchising approach by making sure we best position our system to deliver sustainable long term growth.
Our business performance year to date gives us confidence that we can deliver on our raised 2023 guidance.
Okay.
This is comprised of.
Organic revenue growth of 10% to 11%.
Which will be led by price mix and includes positive volume growth.
We do expect pricing in developed markets to moderate in the fourth quarter as we cycle pricing initiatives from the prior year.
John Murphy: Recently, we entered into a letter of intent to refranchise our Philippines bottle. As we progressed on our refranchising journey, we aspired to improve the return profile of our business. In 2015 when bottling investment group was more than 50% of our net revenue, our return on invested capital was approximately 17%. Today, bottling investment group makes up less than 20% of net revenue and our return on invested capital is over 23% nearly a seven point increase.
There are also a few hyperinflationary markets that will continue to drive price mix.
There will be one additional day in the fourth quarter.
We now expect comparable currency neutral earnings per share growth of 13% to 14%.
Based on current rates on our hedged positions.
Now expect currency to be approximately four point headwind to comparable net revenues.
On an approximate six point currency headwind to comparable earnings per share for full year 2023.
John Murphy: After this transaction closes, our remaining assets in the bottling investment group will include operations in India, Africa, and several smaller locations, primarily in Asia Pacific. We will remain disciplined in our refranchising approach by making sure we best position our system to deliver sustainable long term growth.
Based on current rates unhedged positions, we continue to expect protest commodity price inflation in the range of a mid single digit impact on comparable cost of goods sold in 2023.
We now expect our underlying effective tax rate for 2023 to be 19%.
John Murphy: Our business performance here today gives us confidence that we can deliver on our raised 2023 guidance. This is comprised of organic revenue growth of 10 to 11%, which will be led by price mix and includes positive volume growth. We do expect pricing in developed markets to moderate in the fourth quarter as we cycle pricing initiatives from the prior year. There are also a few hyperinflationary markets that will continue to drive price mix.
All in we are updating thank comparable earnings per share growth of 7% to 8% versus $2 48 in 2022.
Yes.
We continue to expect to generate approximately $9 $5 billion of free cash flow in 2023 to approximately 11 $4 billion in cash from operations.
Approximately 1.9 billion.
And capital investments.
This guidance does not include any payment.
Related to our U S income tax dispute with the IRS.
John Murphy: There will be one additional day in the fourth quarter. We now expect comparable currency neutral earnings per share growth of 13 to 14%. Based on current rates and our hedge positions, we now expect currency to be a approximate four point headwind to comfortable net revenues and an approximate six point currency headwind to comparable earnings per share for full year 2023. Based on current rates and hedge positions, we continue to expect protest commodity price inflation in the range of a mid single digit impact on comparable costs of goods sold in 2023.
Which are unlikely to occur in 2023.
Given the momentum of our business.
Turning to our balance sheet and some proceeds that we expect to receive from Boston Refranchising.
Increased flexibility to continue to both reinvest in our business and return capital to shareowners.
While it is too early to provide specific guidance on 2024.
We wanted to share some considerations.
I won't be known today.
We're encouraged by our top line momentum across the majority of our markets.
There are a handful of hyperinflationary markets.
John Murphy: We now expect our underlying effective tax rate for 2023 to be 19%. All-in, we are updating comparable earnings per share growth of 7 to 8% versus $2.48 in 2022. We continue to expect to generate approximately $9.5 billion of free cash flow in 2023 to approximately $11.4 billion in cash from operations, let's approximately $1.9 billion in capital investments. This guidance does not include any payments related to our US income tax disputes with the IRS, which are unlikely to occur in 2023.
Is it either not possible to hedge.
It's constantly to do so.
In these markets.
We've demonstrated that we can manage currency pressures by taking price with local market inflation.
We will continue to follow this approach.
While some commodities are normalizing, we also have input costs that could be impacted by tension and conflicts.
With respect to advertising spend.
<unk> is to continue to reinvest behind our brands.
While maintaining the flexibility.
Regarding currency, if we assume current rates.
Our hedged positions.
There would be an approximate low single digit currency headwind to comparable net revenues.
John Murphy: Given the momentum of our business, the strength of our balance sheet and some proceeds that we expect to receive from bottom refranchising, we have increased flexibility to continue to both reinvest in our business and return capital to share owners.
And then approximately mid single digits currency headwind to comparable earnings per share for full year 2024.
Of course several factors.
Both our currency outlook on broader business outlook between now and February .
John Murphy: While it is too early to provide specific items on 2024, we want to share some considerations based on what we know today. We are encouraged by our top line momentum across the majority of our markets. There are a handful of hyperinflationary markets, where is either not possible to hedge or is costly to do so. In these markets, we have demonstrated that we can manage currency pressures by taking price with local market inflation, and we will continue to follow this approach.
Over the past few years, we've delivered U S dollar EPS growth.
We have many levers to continue to do so.
So in summary, we are encouraged by our business results and confident in our ability to deliver on our commitments over the long term.
Thanks to the incredible commitment of our system employees around the world.
Very clear on the direction, we are heading and well equipped to execute on the strategies to get us there.
And we continue to invest to drive sustainable long term growth.
John Murphy: While some commodities are normalizing, we also have input costs that could be impacted by tensions and conflicts. With respect to advertising spend, our bias is to continue to reinvest behind our brands while maintaining flexibility. Regarding currency, if we assume current rates and our hedge positions, there would be an approximate low single digit currency headwind to comparable net revenues, and an approximate mid single digit currency headwind to comparable earnings per share for full year 2024.
We remain focused on capturing the opportunities available to us.
With that operator, we are ready to take questions.
Ladies and gentlemen to ask a question you will need to press star one on your telephone to withdraw your question press.
Star one again.
Interest of time, we ask that you please limit yourself to one question.
If you have any additional questions you may rejoin the queue.
Our first question comes from Dara <unk> from Morgan Stanley . Please go ahead. Your line is open.
Yes.
Hey, good morning.
So clearly another strong set of results in Q3 and.
And obviously increased confidence for the year with the full year raised I'd love to sort of get a bit more perspective on 2024, I know you won't want to put specific numbers around the outlook.
John Murphy: Of course, several factors could impact both our currency outlook and broader business outlook between now and February. Over the past few years, we have delivered US dollar EPS growth, and we have many levers to continue to do so.
Was just hoping you can give us a sense for how you think about the pricing outlook for next year given.
Given the strength in Q3, and perhaps break that down into the price increase versus mix versus hyperinflationary market pieces of it.
John Murphy: In summary, we are encouraged by our business results and confident in our ability to deliver on our commitments over the long term. Thanks to the incredible commitment of our system employees around the world, we are very clear on the direction we are heading and well equipped to execute on the strategies together there. And we continue to invest to drive sustainable long term growth. We remain focused on capturing the opportunities available to us.
And what the competitive environment sort of pretends for next year on the pricing front. Thanks.
Yes.
Well, let me just offer up.
A few thoughts firstly, just breaking out Q.
Q3.
Because I think that's instructive as you think about the down exit the year and into next year.
Unknown Executive: With that operator, we are ready to take questions. Ladies and gentlemen, to ask a question, you will need to press star one on your telephone. To withdraw your question, press star one again.
Firstly, there is a couple of points in Q3, that's the carryover from the more inflationary environment.
Unknown Executive: In the interest of time, we ask that you please limit yourself to one question. Jason, if you have any additional questions, you may rejoin the queue.
From 2022.
Obviously that will drop out as we get into Q4, and obviously next year.
Got the regular pricing and then you've got a couple of.
Dara Mohsenian: Our first question comes from Dara Mohsenian from Morgan Stanley. Please go ahead and align this open.
Points of pricing.
Pricing that's coming from these very high inflation markets.
Argentina, Turkey, and a number of the African market.
James Quincey: Good morning. So clearly another strong set of results in queue three and obviously increased confidence for the year with the full year raise. I'd love to sort of get a bit more perspective on 2024. I know you won't want to put specific numbers around the outlook, but we're just hoping you can give us a sense for how you think about the pricing outlook for next year, you know, given the strength in queue three. And perhaps break that down into the price increase versus next versus hyperinflationary market pieces of it. And, you know, what the competitive environment sort of pretends for next year on the pricing front. Thanks.
But given the levels of inflation is making a difference.
Overall company level.
And as John mentioned in the FX guidance, we are assuming some degree of negativity from those markets next year, but.
Assuming some degree of positivity in that sense in price mix next year.
The one thing Thats uncertain about the one thing that's certain about high inflation markets is it ends unpredictably.
So it's very it's very early.
Have a full picture on what that is going to look like in 2024, and obviously, we'll update when we when we get to February so net net you're going to have continued moderation heading towards the landing zone in the developed economies.
James Quincey: Oh, let me just offer up a few thoughts. Dara, firstly, just breaking out queue three, because I think that's instructive as you think about the down after the year and into next year. Firstly, there's a couple of points in queue three that's the carryover from the more inflationary environment from 2022 and obviously that'll drop out as we get into queue four and obviously next year. And then you've got the regular pricing and then you've got a couple of points of pricing that's coming from these very high inflation markets.
Got a couple of emerging markets, which are solved normal inflation.
China.
And then you've got a mixed bag of a merging market isn't a particular importance is going to be what is the overall drilling in these high inflation marketplaces.
So that provides some.
Brian .
To think about how it lands in Q4 and into next year.
Our next question comes from Lauren Lieberman from Barclays. Please go ahead. Your line is open.
Thanks, Good morning.
So one thing that struck me is really interesting is.
James Quincey: Argentina, Turkey and a number of the African markets, but given the levels of inflation is making a difference at the overall company level. And as John mentioned in the ethics guidance, we're assuming some degree of negativity from those markets next year, but we're assuming some degree of positivity in that sense in price mix next year. The one thing that's uncertain about, well, the one thing that's certain about high inflation markets is it ends them predictably so it's, you know, it's very it's very early to have a full pitch on what that's going to look like in 2024 and obviously will update when we when we get to February.
In the release when you specifically first of all it's helpful that you called out the specific contribution from inflationary pricing.
But one thing I thought was interesting as the regions, where there was greater inflationary pricing. We're also the regions, where there was at least versus my expectations better than expected unit case volume.
I think historically right.
Logic, and the elasticity would say more pricing less volume, but here you are getting that unit case volume to come through.
Just wondering if you could talk a little bit maybe about what you're doing differently.
That's enabling that kind of combination and then also if you are able to speak to transaction growth in those markets also if that's pacing.
James Quincey: So net net you're going to have continued moderation heading towards the landing zone in the developed economies. You've got a couple of emerging markets, which are sub normal inflation like China and then you've got a mixed bag of emerging markets and a particular importance is going to be what is the overall journey in these high inflation marketplaces. So hopefully that provides some parameters with which to think about how it lands in Q4 and into next year.
Pacing relative to unit cases thanks.
Sure.
So.
Firstly.
Wallace just along the lines that we have been pursuing.
A good number of years, but very specifically this year and also we'll be pursuing.
Into next year.
No matter, what the degree of inflation in the environment, we want to protect the scale of our consumer franchise and see it grow in other words with lot, we want to see positive volume or transaction growth.
Lauren Lieberman: Our next question comes from Lauren Lieberman from Barclays. Please go ahead. Your line is open. Thanks. Good morning. So one thing to struck me is really interesting is you know in the release when you specifically first I was helpful to you called out the specific contribution from inflationary pricing. But one thing I thought was interesting is the regions where there was greater inflationary pricing were also the regions where there was at least versus my expectations better than expected unit case volume.
In the environment.
So very much our strategy of the marketing the innovation the <unk> the execution has been very much around.
Not just gaining value share in these environments, but making sure that there is volume growth embedded in it. So we very much take that approach and as it relates to the regions, where there was in place and where there is volume I mean, the two biggest pieces of the puzzle.
Lauren Lieberman: So I think historically right the logic and the elasticity would say more pricing less volume, but here you're getting that unit case volume to come through. So I just wondered if you could talk a little bit maybe about what you're doing differently, you know, that's enabling that kind of combination. And then also if you're able to speak to transaction growth in those markets also if that's pacing, you know how that's pacing relative to unit cases.
Latin America, and EMEA and taking those in order Latin America in place repricing and he's very clearly driven by Argentina, the rest of the content.
Generally speaking is in the same sort of ballpark that inflation that has been predominantly.
Therefore, the extended period of time and it's.
It is an environment, we very much know how to operate in and we have a great business there and they very much.
Our masters of executing against the marketing the innovation the execution of the <unk>.
James Quincey: Sure. So firstly, I want to just on the line that we have been pursuing for about good number of years, but very specifically this year and also we'll be pursuing in the next year is no matter what the degree of inflation in the environment, we want to protect the scale of our consumer franchise and see it grow. In other words, we want to see positive volume or transaction growth in the environment.
And then Argentina is that rollercoaster, given its inflation levels on its economic levels.
I can say that from personal experience as I was the country manager there in 2000 to more than 2002, when they had a big devaluation.
Default on that debt.
And so this is something where we know how to operate in its kind of part of what happens in certain markets in Latin America.
So we are able to execute as it relates to EMEA.
James Quincey: And so very much our strategy of the marketing, the innovation, the RGM, the execution has been very much around not just gaining value share in these environments, but making sure that there's volume growth embedded in it. So we very much take that approach.
Divided into two parts one is the European environment with inflation much like the U S is moderating down.
And the dynamic in Europe was much more around.
A moderating degree of inflation and the fact that they had a relatively poor summer in terms of the weather.
James Quincey: And as it relates to the regions where there was inflation where there's volume, I mean the two, the two biggest pieces of the puzzle are Latin America and the mayor and taking those in order. Latin America, the inflationary pricing is very clearly driven by Argentina. The rest of the constant generally speaking is in the same sort of inflation that has been predominant, therefore at extended period of time. And it's an environment we very much know how to operate in and we have a great business there and they very much masters of executing against the marketing innovation, the execution, the RGM.
And the consumer is under a little more pressure.
The U S.
Over half of the EMEA group is Eurasia and Africa.
And in that context, there are a number of very high inflation market places like Turkey.
<unk>.
<unk>, yes, it happens not cheaper to some extent agent disorder, and then when the inflation does spike you to do it you do occasionally see impacts to.
Volume, but overall, we've been able to manage through it said that on a total segment basis, we've carried it through <unk>.
James Quincey: And then Argentina is the roller coaster given its inflation levels and its economic levels. I can say that from personal experience as I was the country manager there in 2001 and 2002 when they had a big devaluation and default on their debt. And so this is something where we know how operate and it's kind of part of what happens in certain markets in Latin America. And so we are able to execute.
Certainly look to as I said maintain and grow the consumer franchise, although in some of those markets in any given quarter. The volume may be negative as inflation tends to be much more spiky the system.
Our next question comes from Bonnie Herzog from Goldman Sachs. Please go ahead. Your line is open.
Alright, Thank you good morning.
I had a question on your marketing investments they were up and I guess, a drag on operating margins in the quarter just.
James Quincey: As it relates to a mere divided into two paths, one is the European environment with inflation much like the US is moderating down and the dynamic in Europe was much more around a moderating degree of inflation and the fact that they had a relatively poor summer in terms of the weather and the consumer is absolutely under a little more pressure than the US. The other half of the Amir group is Eurasia and Africa and in that context there are a number of very high inflation marketplaces like Turkey, Symbar Boy, as it happens the Nigerian or some extent Egypt is over there.
Just hoping for some more color on these reinvestments and then James You mentioned you plan to continue to invest ahead of the curve. So could you provide a little more color on how youre thinking about this and then ultimately how much of the topline strength you plan to reinvest in our marketing whether it's Tim.
And then one pardon me.
How youre thinking about this next year.
Question in the context of greater FX headwinds I guess.
Trying to understand how flexible you are going to be to balance these investments with driving dollar EPS Scott. Thanks.
James Quincey: And there when the inflation does spike you do occasionally see impacts to volume, but overall we've been able to manage through it so that on a total segment basis we've carried it through and we certainly look through as I said maintain and grow the consumer franchise although in some of those markets in any given quarter the volume may be negative as inflation tends to be much more spikey than persistent.
Okay.
Just kind of let me try and.
Unpack that a little bit so we have a film in post COVID-19 over the last couple of years.
We expect it to rebound and we have done a lean in and invest for growth as long as growth is there rather than trying to pull back in anticipation of something.
And that modus operandi I am not sure I would characterize extra marketing as a drag on results more as I mota to driving the top line and the bottom line that we're seeing so we feel that the leaning in is working well.
Bonnie Herzog: Our next question comes from Bonnie Herzog from Goldman Sachs, please go ahead to the line is open. All right. Thank you. Good morning. I had a question on your marketing investments. They were up and I guess a drag on operating margins in the quarter. So, you know, just hoping for some more color on these three investments and then James, you mentioned, you know, your plans to continue to invest ahead of the curve.
Obviously take a follow up by the fact, we've raised both the top line and the bottom line.
I think as a model to the extent that we can continue to push that through the end of this year and into next year, we would certainly be happy to do so.
Having said that to the extent that 2020 full bring some unexpected surprises we will pivot.
Bonnie Herzog: So could you provide a little more color on, you know, how you're thinking about this and then ultimately, how much of the top line strengths you plan to reinvest in the marketing, whether it's this year and then, you know, more importantly, you know, how you're thinking about this next year, especially in the context of greater affect headwinds. I guess, you know, trying to understand how flexible you're going to be to balance, you know, these three investments with driving dollar EPS. Thanks.
Whether it's a country or region or globally.
We will keep it with speed as we did.
In the.
The second quarter of 2020, when Covid hit and we ramped down marketing spend in that environment. So we feel we've developed a much greater degree of flex.
Flexibility to move should moving be needed whatever part of the world.
But at the starting point, we're going to lean in for growth.
James Quincey: Okay. Hi. Let me try and unpack that a little bit. So we have come in, told Colville over the last couple of years and said we expected a rebound and we are going to lean in and invest for growth as long as growth is there rather than trying to fall back in anticipation of something. And that modus operandi, I'm not sure I would characterize extra marketing as a drag on results more as a motor to driving the top line and the bottom line that we're seeing.
And I think the last thing I would say as you think about the balance of all these items. If you take if you kind of zoom out a little bit and take a broader perspective.
The operating income margin, because obviously marketing is just a component of all of the different pieces.
If you take a look at operating income margin over the last five years or so.
Youll see that its been increasing in the buyout half a point a year.
Operating margin, which is broadly in line with the prior implied leverage in the long term growth model.
James Quincey: So we feel that the leaning in is working. Obviously, typified by the fact we raised both the top line and the bottom line guidance, I think as a model to the extent that we can continue to push that through the end of this year and into next year, we would certainly be happy to do so. Having said that, you know, to the extent that 2024 brings some unexpected surprises, we will pivot whether it's a country, a region or globally.
So that has been on.
An objective of ours, it's not going to happen every quarter because quarters are very lumpy.
But it is part of the way, we see App strategy.
Our next question comes from Robert Aten Stein from Evercore ISI. Please go ahead. Your line is open.
Great. Thank you very much.
Hmm.
James.
In the past.
James Quincey: We will pivot with speed as we did in the second quarter of 2020 when COVID hit and we ramped down marketing spending that environment. So we feel we've developed a much greater degree of flexibility to move should moving be needed or whatever part of the world. But as a starting point, we're going to lean in for growth. And I think the last thing I would say is, if you think about the balance of all these items, if you take us, if you kind of zoom out a little bit and take a broader perspective of the operating income margin, because obviously marketing is just a component of all the different pieces.
You've talked a Coca Cola company has talked about moving the consumer.
More commodity packs to more of that.
You can call them incident packs at the higher value added packs.
I'd I'd love to get a sense and maybe we just focus on the U S.
Hum.
Where you are in that journey.
How much room, there is to improve mix and is this something that you can do.
In a weaker economic environment, where the consumer is also looking for.
More affordability and value options. Thank you.
James Quincey: Because if you take a look at operating income margin over the what I know last five years or so, you'll see that it's been increasing at about half a point a year operating margin, which is broadly in line with the implying leverage in the long term growth model. And so that has been an objective about it's not going to happen every quarter because quarters are very lumpy, but it is part of the way we see our strategy.
Sure. Thanks.
Look I, absolutely think is true.
Tremendous opportunity in the U S marketplace to leverage greater diversity.
We're not capturing all the opportunities that are there.
And the leveraging of credit a great impact domestic actually helps in an environment, where as you have in the U S. At the moment, where certain segments of consumers be alone. The disposable income pressure would look for more affordable options and yet there are plenty of segments either in terms of their income or <unk>.
Robert Ottenstein: Our next question comes from Robert Ottenstein from Evercourt ISI. Please go ahead. Your line is open. Great. Thank you very much.
The channels that going and spending in who are who are more disposal for premium options all with the marketplace.
James Quincey: James, in the past, you've talked, the Coca-Cola company has talked about moving the consumer from, you know, more commodity packs to the more than, I think, called them incident packs or the higher value added packs. I'd love to get a sense, and maybe we just focus on the U.S, of where you are in that journey, how much room there is to improve mix, and is this something that you can do in a weaker economic environment where the consumer is also looking for more affordability and value options.
<unk> offers the opportunity of great segmentation and diversity of packaging, we have more debt.
We can do in the marketplace in the U S whether it'd be on the nature and the range.
Can sizes and shapes or the P T bottles.
I think there's plenty of runway.
In the U S to continue to leverage packaging diversity to satisfy consumer needs and deliver on the RCM equations.
We have.
The opportunity for in the U S and ultimately.
You could look at other parts of the World Latin America, Europe , which are relatively developed.
James Quincey: Thank you. I absolutely think there's a tremendous opportunity in the US marketplace to leverage greater packed diversity, we're not capturing all the opportunities that are there. And the leveraging of greater packed diversity actually helps in an environment where, as you have in the US, the moment where certain segments of consumers feel under disposable income pressure and would look for more affordable options. And yet, there are plenty of segments either in terms of their income or in terms of the channels they're going and spending in who are more disposal for premium option solvers.
Markets and see that we do successfully use more packages.
To deliver the business took the consumers want to have.
Our next question comes from Andrea Teixeira from Jpmorgan. Please go ahead. Your line is open.
Thank you good morning, So John I appreciate your commentary about the EPS growth in 2024, and James You said he would like to see volume growth, which is obviously encouraging and in line with what are your slide on the last earnings call, but given the many moving pieces for assembly and the weaker consumer and developed markets number one.
Anything that changed your thoughts sequentially.
James Quincey: The marketplace offers the opportunity of greater segmentation and diversity of packaging. We have more that we can do in the marketplace in the US, whether it be on the nature and the range of the cancises and shapes or the P.T, bottles. So I think there's plenty of wrong way in the US to continue to leverage packaging diversity, to satisfy commute consumers needs and to deliver on the RGM equations that we have the opportunity for in the US.
Two related to the 80% of the volume of course being abroad and granted that this is moving the impact of the NGL Peter Alex.
It would be dismissed if not to ask given investor concerns can you talk about how.
You are proactively approaching this potential risk obviously, it's similar to why do you have done over the many many years in terms of the sugar content and portion control, but just curious how investors should be thinking of the tools you have at your disposal. Thank you.
James Quincey: And ultimately, you could look at other parts of the world, Latin America, Europe which are relatively developed at cold markets and see that we do successfully use more packages there to deliver the business that the consumers want to have.
Thanks Andrea.
So on the first point.
If you think about 2023.
We were 12 months ago.
And what we're guiding to for the rest of this year.
It's in an environment that has had.
The same kinds of.
Forex headwinds.
Andrea Teixeira: Our next question comes from Andrea Teixeira from JP Morgan. Please go ahead. Your line is open. Thank you. Good morning. So John, I appreciate your comment here about the EPS growth in 2024. And James, you said you would like to see volume growth, which is obviously encouraging and in line what you said in the last earnings call. But given the many moving pieces recently and the weaker consumer in developed markets, number one, is that anything that changed your thoughts sequentially and to relate it to the 80% of the volumes, of course, being abroad and granted that obviously is moving the impact of the GOP drugs.
Much of the volatility.
I would expect to continue.
So the next 12 months or so and <unk>.
We have demonstrated this with both highlighted both in the script and in <unk>.
<unk> forums, the levers that we have.
Developed over the last few years too so.
So essentially managed through.
Those those.
The period with such volatility uncertainty and I expect 2024 to be.
A similar type of year.
So.
I would point you to.
Many of these levers are.
Andrea Teixeira: I think it would be dismissive, not to ask, given investor concerns. Can you actively approach this potential risk? Obviously, it's similar to what you have done over the many, many years in terms of the sugar content and portion control, but just curious how investors should be thinking of the tools you have at your disposal. Thank you. Thanks Andrea.
Improved marketing and innovation.
The revenue growth management.
The Bill and they said I think year on year are getting stronger.
The overall execution.
Our system in the marketplace.
The industry continues to be strong.
We expect that to be a feature of our underlying equation for 2024 also.
James Quincey: So on the first point, I hope you think about 2023 and where we were 12 months ago. And for guiding to the rest of this year, it's an environment that has had the same kinds of products, headwinds and much of the volatility that I would expect to continue into the next 12 months or so. And we've demonstrated that we both highlighted both in the script and in a number of forums, the deliverers that we have, has developed over the last few years to effectively manage through those periods with such volatility uncertain in.
Regarding the.
The second point you raised is an area that we are.
Very focused on.
There is still a lot of.
The views out there as to what impact if any it will have.
I would offer if you'd step above us and lock us.
The thrust of our total beverage strategy over the last few years.
We are well positioned to.
Provide choice to provide options.
For people.
Respective motivations and needs.
And so we'll continue to monitor this space.
But we're confident that the total beverage strategy, 68% of our products at low or no calories today.
James Quincey: I expect 2024 to be a similar type of year. So I would point you to many of these laborers that are improved marketing and innovation, the revenue growth management abilities that I think year on year are getting stronger and the overall execution of our system in the marketplace. So the industry continues to be strong and we expect that to be a feature of our underlying equation for 2024 also. Regarding the second point you raised, it is an area that we are very focused on.
We continue to invest in innovation.
Choice two.
Whatever comes at Us.
Our next question comes from Chris Carey from Wells Fargo Securities. Please go ahead. Your line is open.
Hey, good morning.
Wanted to ask a question about Coca Cola zero growth has decelerated a bit through the year against pretty exceptional unit case growth last year. So I was just wondering if you could reframe, where we are with the franchise.
The opportunities you see for it and if were.
Perhaps reaching any thresholds just with the expansion of the offering thanks so much.
Yes sure Chris.
James Quincey: There's still a lot of views out there as to what impact if any it will have. I would offer if you step above us and look as the trust of our total beverage strategy over the last few years, that we are well positioned to provide choice and to provide options for people's respective motivations and needs. And so we will continue to monitor the space, but we're confident that the total beverage strategy 68% of our products have lower no calories today. And we continue to invest in innovation and choice to deal with whatever comes out of us.
I don't think we're reaching a threshold in terms of the expansion of Coke zero.
Actually I think quite the opposite.
Vast potential for Coke zero going forward I think what you see in the very short term is the impact.
Some of the Big Coke zero markets Ik Europe .
They always had a very poor soma and run for a couple of months there and that makes it look like it's dipped down.
In Q3, but I think culture thereof has plenty of runway going forward and we will continue.
To invest behind it and are bullish on its long term potential.
Yeah.
Our next question comes from Bill Chappell from <unk> Securities. Please go ahead. Your line is open.
Thanks, Good morning.
Chris Carey: Our next question comes from Chris Carey from Wells Fargo Securities. Please go ahead, your line is open. Hi, good morning. I wanted to ask a question about COCO-0 growth has decelerated a bit through the year against pretty exceptional unit case growth last year. So just wondering if you could reframe where we are with the franchise, the opportunity to see Ford and if we're perhaps reaching any thresholds just with the expansion of the offering. Thanks so much.
Just a little bit on China, and I guess to some extent Africa.
Can you maybe just.
Obviously, not the first we've heard of the consumer being a little bit slow to bounce back but is there anything.
Coca Cola can do to accelerate that in terms of pricing or promotion or is it really just waiting on the market.
And did you see any real changes in that consumer as the quarter progressed, where you ended the quarter with maybe a little more.
Green shoots that things are getting better as we go into the fourth.
James Quincey: Yeah, sure because I don't think we're reaching a threshold in terms of expansion of COCO-0. Actually, I think quite the opposite thing is a vast potential for COCO-0 going forward. I think what you see in the very short term is the impact of some of the big COCO-0 markets, aka Europe. They also had a very poor summer and run for a couple of months and that makes it look like it's dipped down in Q3. But I think COCO-0 has plenty of runway going forward and we will continue to invest behind it and bullish on its long-term potential.
Yes sure Bill.
Obviously I hate the idea of just waiting for something to happen macro economically.
Certainly it helps when the tailwind from the general environment, but we're not going to wait for that.
Very focused on.
Investing to.
To try and capitalize on the opportunities on restore momentum, particularly on the sparkling business.
And there's a lot of our GM and execution opportunities for us to go and tackle in China also we need to get cranked up and have a really strong Chinese new year, which will be in the early part of 2024.
And we took a set of decisions in Q3, which created a bit of an impact on the APAC segment margin to really get focused on.
Bill Chappell: Our next question comes from Bill Chappell from Tourist Securities. Please go ahead, your line is open. Thanks, good morning. He's just a little bit on China and I guess to some extent, Africa. Can you maybe, you know, this obviously not the first we've heard of the consumer being a little bit slow to bounce back, but is there anything COCO-0 can do to accelerate that in terms of pricing or promotion? Or is it really just waiting on the market?
Invest ahead.
Make some prioritization decisions so that we can.
Drive the Chinese business forward.
Hoping that there'll be.
Plus from the tailwind to the macroeconomics that we can buy for that we need to focus on controlling what we can control and investing to drive the business.
Bill Chappell: And did you see any real changes in that consumer as the quarter progressed where you ended the quarter with maybe a little more green shoots that things are getting better as we go into the fourth. Thanks. Yeah, sure, Bill. Obviously, I hate the idea of just waiting for something to happen macroeconomically. Certainly, it helps when there's tailwind from the general environment, but we're not gone or wait for that. We're very focused on investing to try and capitalize on the opportunities and restore momentum, particularly on the sparking business.
Our next question comes from Charlie Higgs from Redburn Atlantic. Please go ahead. Your line is open.
Alright, James John I Hope, you're both well I've got a question on <unk>.
<unk> in Philippines, and James maybe you can just talk about the Philippines site level, how the countries performed I guess from a transaction why now and why CCP and then John can maybe just give some thoughts on what the transaction could mean for FY 'twenty four outlook. If it does go ahead, maybe to sales margin.
And then maybe just comment when you said <unk>.
Proceeds from nonoperating activities May go towards buybacks is that should we read that as BRG disposals. Thank you.
Bill Chappell: There's a lot of RGM and execution opportunities for us to go and tackle in China. Also, we need to get cranked up and have a really strong Chinese New Year, which will be in the early part of 2024. We took a set of decisions in Q3, which created a bit of an impact on the APAC segment margin to really get focused and invest ahead and make some prioritization decisions so that we can really drive the Chinese business forward, hoping that there will be a plus from the tailwinds of the macroeconomics that we can't wait for that. We need to focus on controlling what we can control and invest in to drive the business.
So let me stop at Charlotte.
We have.
A clear stated objective that we want to be the world's smallest butler.
And so all the time have been refranchising.
The operations, we currently hold.
All pieces of the Philippines.
Large tenants the CBA.
Significant part of the system in India, and then a number of a small number of other countries.
About a quarter in <unk>.
<unk>.
And so we are long term re franchise is the bottling operations we own.
All of the Philippines.
Had actually a good set of recent years in the Philippines, a good bounce back notwithstanding some ups and downs given availability or lack of availability of some critical commodities in.
Charlie Higgs: Our next question comes from Charlie Higgs from Redburn Atlantic. Please go ahead, your line is open. Hi, James and John. I hope you're both well. I've got a question on BIG and the Philippines, and James, maybe you can just talk about the Philippines high level of how the countries performed, and I guess from a transaction, why now and why CCP? And then John, can you just give some thoughts on what the transaction could mean for FY 24 outlook?
In the market place, but actually overall, we've had a very good run in the last number of years.
And so we've been looking for the right time in the right.
Partners to Refranchising.
Most importantly, this is a combination of a strong local long term investing family the voices group.
Charlie Higgs: It does go ahead, maybe for sales, margin, EPS, and then maybe just comment when he says, you know, portion of proceeds from non-operating activities may go towards BIG. Is that, should we read that as BIG disposal? Thank you.
<unk> with some system expertise coming from CCP. So I think it's the right combination of partners that can bring bottling expertise.
James Quincey: Sure, let me start there, Charlie. You know, we have a clear stated objective that we want to be the world's smallest bottler, and so all the time have been refranchising the operations. We currently hold basically four pieces. The Philippines, a large state of CTA, a significant part of the system in India, and then a number of a small number of other countries about a quarter in each or in rough terms. And so we are long-term refranchisers of the boiling operations we own.
The Philippine market, Philippines market together to continue the track record.
What's been achieved.
John do you want to do the other pieces.
Yeah, so on the on the transaction itself Charlie.
In February assuming that the deal closes.
We're making great progress on that at the moment.
And without giving specifics as you know from from history.
It will have a.
Revenue headwind on the <unk>.
Margin tailwind and specifics.
I'll give more details in February .
With regards to your last the last part of the long question.
James Quincey: In terms of the Philippines, we've had actually a good set of recent years in the Philippines of good bounce back, notwithstanding some ups and downs given availability or, as I said, lack of availability of some critical commodities in the marketplace, but actually overall we've had a very good run the last number of years. And so we've been looking for the right time and the right partners to refranchisers. I think most importantly, this is a combination of a strong local long-term investing family, the voices group, together with some system expertise coming from CCEP.
I would say the following one.
As we have.
<unk> developed a strong position.
And Chris and flexibility given the momentum we have in the business.
The stronger balance sheet, we have today.
Versus a few years back.
And effectively we do have proceeds coming in from from now operating sources buffer Refranchising primarily.
We continue to be very focused on reinvesting in the business and returning capital.
And as we look at some of these proceeds coming in.
James Quincey: So I think it's the right combination of partners that can bring bottling expertise and knowledge of the Philippine market, the Philippines market together to continue the track record of what's been achieved. I do want to do the other pieces. Yes, on the transaction itself, Charlie, we guide in February, assuming that the field closes. It's we're making great progress on that at the moment. And without giving specifics as you will know from history and you know, it'll have a revenue headwind and a margin tailwind, and on specifics we'll give more details in February.
Evaluate the best use including including share repurchases beyond the.
The current.
Objective, we have to cover dilution so more to come on that in February .
Our next question comes from Bryan Spillane from Bank of America. Please go ahead. Your line is open thanks.
Operator, good morning, everyone.
I had one just clarification and then a question. The clarification is did you give us how much hyper inflationary pricing affected just the total price mix at the total company level.
No we didn't give a precise number but it's about two five points depends which country countries do you want to add in the way you want to cut the line but.
James Quincey: And with regard to your last, the last part of the long question, I would say the following one is we have, I think, developed a strong position and creates a flexibility given the momentum we have in the business, the stronger balance we have today, versus a few years back. And the fact that we do have proceeds coming in from non-operating sources, i.e, the buffer, refranchising, primarily. We continue to be very focused on reinvesting in the business and returning capital.
Think of it as about two and a half points in Q3, alright. Thank you and then my question is just about North America I think in the press release.
Unit case volumes were flat.
You called out that.
You had gained share and then James I think in your prepared remarks, you talked about.
James Quincey: And as we look at some of these proceeds coming in, we'll evaluate their best use including share of repartuses beyond the current and object we have to cover dilution. So more to come on that in February.
From home growing faster than at home. So could you just sort of give us a little bit more perspective on kind of what's happening in North America in terms of.
<unk>.
And the relative channel performance anything you may be seeing in terms of value seeking behavior with consumers just I'm, just trying to get a better understanding of kind of.
How your business performed just just kind of what's happening with the category as we got through the quarter.
Sure Bob Firstly, let me start by saying.
The Nielsen Universe represents just under half of our business in the U S saw the measured channels with just under half of the total business.
Brian Spillane: Our next question comes from Brian Spillane from Bank of America. Please go ahead. Your line is open. Thanks operator. Good morning, everyone. I had one just clarification and then a question. The clarification is, did you give us how much hyperinflationary pricing affected just the total price mix at the total company level? No, we didn't give a precise number, but it's about two and a half points, depends which countries you want to add in and what you want to cut the line. But think of it as about two and a half points in Q3.
And what's happening in the consumer landscape is.
In kind of simplifying it down the lower income consumers are those most under pressure and it's shopping occasion, that's most on depression is when they're buying.
Ill.
And so that that is the betas most captured by Nielsen.
And the bit of the marketplace.
Where there is more growth.
Consumers are away from home, so thats still very.
It's still a rebound and strong growth in away from home channels, not just some of the restaurants, but the amusements travel leisure hospitality those things. So you are seeing more growth in that part of the marketplace, which is unmeasured.
James Quincey: All right, thank you. And then my question is just about North America. I think in the press release, Unicase volumes were flat and you called out that you had gained share. And then James, I think in your prepared remarks, you talked about away from home growing faster than at home. So can you just sort of give us a little bit more perspective on kind of what's happening in North America in terms of both, you know, the relative channel performance, anything you may be seeing in terms of value seeking behavior with consumers, just trying to get a better understanding of kind of, you know, how your business performed and just kind of what's happening with the category as we got through the quarter.
So thats whats really driving the strength of the U S business.
Overall.
And the revenue side, and so you see kind of a divergence of the consumer behavior between alcohol and away from home obviously.
Who is under pressure from a disposable income is clear then that feeds through into kind of the.
Observed measures channels versus the total overall marketplace.
James Quincey: Sure, firstly, let me start by saying, the Nielsen Universe represents just on the half of our business in the US. So the measured channels are just on the half of the total business. And what's happening in the consumer landscape is in kind of simplifying it down. The lower income consumers are those most under pressure and the shopping occasion that's most under pressure is when they're buying for at home. And so that that is the bit that's most captured by Nielsen.
Our next question comes from Peter Grom from UBS. Please go ahead. Your line is open.
Thanks, operator, and good morning, everyone hope you're doing well so I kind of wanted to follow up on Brian's question. There I mean, James you mentioned trade down to private label and discount channels and in your prepared remarks, but I think you also mentioned that relative to Q2, the impact was similar in Europe , but actually less pronounced in the markets like the U S Australia.
In Japan.
Well just to get your perspective on why you think it was less pronounced in those markets and then as you look out to <unk> and 'twenty, how do you kind of see this trade down dynamic evolving thanks.
James Quincey: And the bit of the marketplace is where there's more growth is when consumers are away from home. So there's still very, there's still a rebound and strong growth in away from home channels, not just some of the restaurants, but the museums travel, leisure, hospitality, those things. So you're seeing more growth in that part of the marketplace, which is unmeasured. And so that's what's really driving the strength of the US business overall and the revenue side.
Okay. So.
Sure.
I think look the European consumers on the slightly more pressure than the U S consumer from a disposable income guarantee that's the that's the starting point.
So I think that's why you see a little more trading down or tightness on basket size in Europe .
As the U S and I think that that's <unk>.
James Quincey: And so you see kind of a divergence of the consumer behavior between at home and away from home. Obviously, who's under pressure from the disposal income is clear. And then that feeds through into kind of the observed measures channels versus the total home market place.
Generally overall true and then the question of which categories are most.
Pressured by that is really about Brian strength and prioritization of occasions by the consumer so if youre going to save money you don't trade down averagely across everything you make a choice in certain categories and you preserve your choices on other categories. So very much our objective is to make sure they value our brand.
James Quincey: Our next question comes from Peter Grom from UBS. Please go ahead, your line is open. Thanks operator, and good morning, everyone. Hope you're doing well. So I kind of wanted to follow up on Brian's questions there. I mean, as you mentioned, you know, trade down to private label and discount channels and in your prepare remarks. But I think you also mentioned that relative to QQ, the impact was similar in Europe, but actually less pronounced in the markets like the US, Australia, and Japan.
So that those they make the choices in the shopping occasion.
James Quincey: And I would love this to get your perspective on why you think it was less pronounced than those markets. And then as you look out to 4Q and 24, how do you kind of see this trade down that have been evolving. Thanks.
If there is going to be.
A reduction in total spend that obviously it happens in some other categories when they trade down to the private label in those ones and we preserve our brand strengths because we deliver value for them.
In the product and the marketing and the innovation and so that's the overall dynamic.
As you as we see it and that's the difference between.
The U S and Europe .
Our next question comes from Filippo <unk> from Citi. Please go ahead. Your line is open.
James Quincey: Okay, so I think look, you use the European consumers on the slightly more pressure than the US consumer from a disposable income company. That's the starting point. So I think that's why you see a little more trading down or kindness on basket size in Europe versus the US. And I think that that's generally overall true. And then the question of which categories are most pressured by that is is really about brand strength and prioritization of occasions by the consumer.
Hey, good morning, guys.
Question on the Asia Pacific Business, James You mentioned, India business was very solid, but China was weak first maybe you can give a comment on how big of a drag China was in the quarter and what are your expectations going forward into next year, and then from a price mix standpoint price mix of one in the segment.
It was one of the lowest across all our other segments I know, there's probably some geographic mix impact, but can you talk about the pricing environment as well and in Asia Pacific. Thank you.
Sure Yes.
James Quincey: So if you're going to save money, you don't trade down averagely across everything. You make a choice in certain categories and you preserve your choices on other categories. So very much our objective is to make sure they value our brands so that they make the choices in the shopping. If there is going to be a reduction in total spend that obviously happens in some other categories when they trade down to the private label in those ones and we preserve our brand strengths because we we deliver value for them in the product in the marketing and innovation. And so that's that's the overall dynamic as you've as we see it and that's the difference between the US and Europe.
China was clearly.
<unk> in volumetric terms on the segment most importantly from a margin point of view.
It's really important to not over rotate to the numbers in any given quarter given the lumpiness of this is concentrate sales several steps back in the supply chain from the consumer. So I think it's important to always take an average of four quarters.
In the third quarter as I had commented a little earlier, we made a number of decisions on portfolio prioritization as it related.
To China.
Two investing for a fast start in 2024 in a number of markets.
In Asia Pacific.
Whether that be Japan or China.
Philippe O'Fallourney: And next question comes from Philippe O'Fallourney from city. Please go ahead and line is open. Hey, good morning guys. A question on the Asia Pacific business James you mentioned that India business was very solid but China was weak. First, maybe you can give a common or how big of a drag China was in the quarter and what your expectations going forward into next year. And then from a price mix standpoint price mix of one in the segment was one of the lowest across your other segment. I know there's probably some geographic makes impact but can you talk about the pricing environment as well in Asia Pacific. Thank you.
And so they are awesome.
Investments going that the overall pricing environment is relatively clear China.
James Quincey: Sure. Yeah, I mean China was clearly a drag in volumetric terms on the segment most importantly from a margin point of view. It's really important to not over rotate to the numbers in any given quarter given the lumpiness of this is concentrate sales several steps back in the supply chain from the consumer. So I think it's important to always take an average of four quarters in the third quarters commented a little earlier we made a number of decisions on portfolio prioritization as it related to China and to investing for a fast start in 2024 in a number of markets in Asia Pacific.
Inflation is relatively minimal.
In Japan, we've been we've been taking pricing.
Recently.
Given the inflation in Japan, which is kind of very different to the last 30 years and then the rest of the inflation.
Is kind of relatively obvious CPI around the rest of ASEAN and Australia.
And so that's really what's driving it I think see.
The third quarter in Asia Pacific more as an anomaly in terms of price mix rather than a trend.
Our next question comes from Carlos Laboy from HSBC. Please go ahead. Your line is open.
Yes, good morning, everyone.
Can you speak to the sort of digital investments.
U S bottlers are doing and and that you are helping them with.
Is it more revenue driven or perhaps more efficiency cost supply chain.
Centric I guess, it's somewhat I'm trying to understand is.
How are your digital investments changing these U S bottlers and their capabilities.
What was the last bit of the question Carlos.
How are these digital investments changing these bottlers and their capabilities.
James Quincey: Whether that be Japan or China and so there are some investments going there the overall pricing environment is relatively clear China inflation is relatively minimal in Japan we've been we've been taking pricing recently given the inflation in Japan which is kind of very different to the last 30 years. And then the rest of the inflation is is kind of the relatively obvious CPI around the rest of Alfiana and Australia. And so that's really what's driving it I think see the third quarter in Asia Pacific more as an anomaly in terms of price mix rather than a trend.
Sure.
I mean, the U S bottlers much like the rest of the international bottlers.
We are undergoing a set of digital investments and actually it's both the answer is not either or both.
We have been making investments in technology for a long period of time to drive efficiencies.
Through the supply chain through the manufacturing through logistics, whether it be old school technology investments.
With that I am generated by AI as a kind of a different feature.
Lots going on and Theres a lot of connectivity.
Among the borders bottlers on the enterprise software side, because they are all connected through basically all use or most of them use.
James Quincey: Our next question comes from Carlos Laboy from HSBC. Please go ahead. Your line is open. Yes, good morning, everyone. Can you speak to the sort of digital investment that the US botlers are doing and that you're helping them with? Is it more revenue driven or perhaps more efficiency costs supply chain, centric? I guess in some what I'm trying to understand is how are digital investments changing these US botlers and their capabilities?
A shared platform to get things done that's referred to internally as Kona.
So theres a lot of investment.
James Quincey: What was the last bit of the question, Carlos? How are these digital investments changing these botlers and their capabilities? Sure. I mean the US bottle is much like the rest of the international botlers are undergoing a set of digital investments and actually it's both. The answer is not either it's both. We have been making investments in technology for a long period of time to drive efficiencies through the supply chain, through the manufacturing, through the logistics, whether it be old school technology investments, AI and now I'm generically AI is kind of a different feature.
Making sure the supply chain is as efficient as can be and a lot of support from.
Ecosystem partners I got it.
And then.
And then in terms of the rest of that investing in the marketplace to digitize the relationship with largely the non modern trade.
Obviously.
When you're talking to the big modern retail customers that interaction is already largely digitized and the focus there is on trying to intensify the connection.
Really from a supply chain inventory visibility and forecasting effectiveness point of view, but the connectivity already exists and then from the from the non <unk>.
Jane.
Customers, it's really about can you get them on so.
In simple terms upbeat b.
Platform saw that.
It's.
24, seven opportunities to order knowing that.
If you can digitize the relationship then it tends to be deeper and more productive and then once that exists layering on AI component.
James Quincey: There's a lot going on and there's a lot of connectivity among the botlers on the enterprise software side because they're all connected through. They basically all use or most of them use a shared platform to get things done that's referred to internally as toner. So there's a lot of investment on making sure the supply chain is as efficient as can be and a lot of support from ecosystem partners to get it done.
Which a number of the bottlers internationally.
We've been working on in coordination.
AI supported kind of B to B relationship over a platform that can then provide them suggested suggested purchase orders.
And that is also helping to drive the business of the U S. Bottlers in that sense are very much on a similar journey up to the international bottlers.
James Quincey: And then in terms of the rest of the, I mean they're investing in the marketplace to digitize the relationship with largely the non-modern trade. Obviously when you're talking to the big modern retail customers that interaction is already largely digitized and the focus there is on trying to intensify the connection really from supply chain inventory visibility and forecasting effectiveness point of view but the connectivity already exists. And then from the from the non-chain customers it's really about can you get them on to in simple terms B to B platform so that it's 24-7 opportunities to order knowing that if you can digitize the relationship then it tends to be deeper and more productive and then on once that exists layering on an AI component which a number of the botlers internationally have been working on in coordination. An AI supported kind of B2B relationship over a platform that can then provide them suggested suggested purchase orders and that is also helping to to drive the business.
Our last question will come from Brett Cooper from consumer edge. Please go ahead. Your line is open.
Thank you not necessarily looking at the third quarter or year to date results, but looking over many years coke's growth in sparkling and non sparkling hasnt been meaningfully different whereas there would seem to be a higher growth opportunity in non sparkling given just the differential in market share that you hold and the implementing implementation of category cluster management. So can you.
Speak to any impediment to higher growth in non sparkling or what I might be missing and then as I guess a part b is just within that umbrella can you talk about your ability to develop newer categories to the company and like hot coffee or alcohol. Thanks.
Sure.
We.
Our objective is to do justice to the brands in the portfolio.
And certainly.
You can make an argument that those categories, where we have lower shares.
Natural opportunity to gain share but of course that is something you need to take from someone else.
The other way of seeing the world is the size of the beverage industry seem from a global perspective, I'd reference back to the page in Cagny with all the little people on it.
<unk> majority of the page is actually wide space in other words, the beverage industry is not yet created.
James Quincey: So the US bottle is in that sense I'm very much on a similar journey to the international botlers.
And so.
Actually the idea that sparkling continues to grow.
Brett Cooper: Our last question will come from Brett Cooper from Consumer Edge please go ahead your line Thank you.
Is a representation of us operating from a position of strength to create the industry in the white spaces.
James Quincey: Not necessarily looking at the third quarter or year-to-deaf results, but looking over many years coax growth and sparkling and non sparkling hasn't been meaningfully different. Whereas there was seem to be a higher growth opportunity and non sparkling, given just a differential and market share that you hold in the implement and implementation of category cluster management. So can you speak to any impediment to higher growth and non sparkling or what I might be missing. And then as I guess a part B is just within that umbrella, can you talk about your ability? Do you develop your categories to the company like coffee or alcohol?
With our most successful and strongest brands and saw continued growth with sparkling should be a feature of our path going forward.
And then in the non sparkling categories.
Of course, we are looking to gain share we've talked.
Historically about trying to get from experiment that the challenges that lead us to quality leadership.
And I think that is a long term bill that has been playing out if you take the long term perspective, I look at the percent of the total business that is made up of non sparkling.
James Quincey: Thanks. Sure, our objective is to do justice to the brands in the portfolio. And certainly you can make an argument with those categories where we have lower shares, have a natural opportunity to gain share, but of course that is something you need to take from someone else. The other way of seeing the world is to say that the beverage industry seen from a global perspective are referenced back to the page in Cagney with all the little people on it.
<unk> it has.
Increased slowly, but it has increased consistently over the last couple of decades. So we start from a point of view of being consumer centric.
From resource and capital allocation.
And from earning the right to move up the experimentalist into the challenger into the leadership position nothing radical is going to happen overnight.
But it is a dynamic that has built steadily over the last number of years.
James Quincey: The vast majority of the page is actually white space. In other words, the beverage industry is not yet created. And so actually the idea that sparkling continues to grow is a representation of us operating from a position of strength to create the industry in the white spaces with our most successful and strongest brands. And so continued growth of sparkling should be a feature of our path going forward. And then in the non sparkling categories, of course, we are looking to gain share.
Decades of we're confident in the opportunity to rebuild industry or build the industry further into the future.
Okay.
That was the last question operator, okay. So to conclude.
Thanks, very much everyone. We've proven I hope you can see in Q3.
<unk> deliver volume topline growth and incremental U S dollar earnings per share by executing against our all weather strategy.
Im confident that we can create value over the long term.
So thank you for your interest and your investment in the company and for joining US This morning.
James Quincey: We've talked historically about you don't try to get from experimented to challenges a leader to quality leadership. And I think that is a long term bill that has been playing out. If you take the long term perspective and look at the percent of the total business that is made up of non sparkling brands, it has increased slowly, but it has increased consistently over the last couple of decades. So we start from a point of view of being consumer centric from resource and capital allocation and from earning the right to move up the experimenters into the challenger into the leadership position, nothing radical is going to happen overnight. But it is a dynamic that has built steadily over the last number of years and decades. And we're confident in the opportunity to rebuild industry, also build the industry further in the future.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
No.
Okay.
[music].
Oh geez.
Thanks, Ken.
Yes.
Okay.
Go ahead.
Yes.
Thank you.
Thank you.
Yes.
Thank you that is the magic.
Yes.
Sure.
Okay.
Yes.
Sure.
Sure.
Okay.
Okay.
Yes.
Okay.
James Quincey: Okay, that was the last question operator. Okay, so to conclude, thanks very much everyone. We've proven I hope you can see in Q3 which continues to deliver volume and top line growth and incremental US dollar earnings per share. By executing against our all weather strategy, we're confident that we can create value over the long term. So thank you for your interest and your investment in the company for joining us this morning.
Okay.
Yes.
Thank you.
Yes.
Okay.
Yeah.
Yes.
Yes.
Okay.
Sure.
Okay.
Okay.
Yes.
<unk>.
Yes.
Yes.
Sure.
Unknown Executive: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
Unknown Executive: [inaudible]
Okay.
Yes.
Yes.
Yes.
Okay.
Yes.
Yes.
Okay.
Okay.
Okay.
Yes.
Okay.