Q1 2024 The Coca-Cola Co Earnings Call

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Today's call is being recorded if you have any objections. Please disconnect at this time.

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All participants will be on listen only mode until the formal question and answer portion of the call.

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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.

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Media participants should contact Coca Cola's Media Relations Department, if they have any questions.

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I would now like to introduce MS. Robyn Halpern, Vice President and head of Investor Relations Ms. Halpern, who you may now begin.

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Speaker Change: At this time I'd like to welcome everyone to the Coca Cola Company's first quarter 2024 earnings results Conference call.

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.

Speaker Change: Today's call is being recorded if you have any objections. Please disconnect at this time.

We've posted schedules under financial information in the investors section of our company website. These reconcile certain non-GAAP financial measures that may be referred to this morning to results as reported under generally accepted accounting principles.

Speaker Change: All participants will be on listen only mode until the formal question and answer portion of the call.

I would like to remind everyone that the purpose of this conference is to talk with investors and therefore questions from the media will not be addressed.

You can also find schedules in the same section of our website that provided an analysis of our growth and operating margin.

Speaker Change: Media participants should contact Coca Cola's Media Relations Department, if they have any questions.

Speaker Change: I would now like to introduce MS. Robyn Halpern, Vice President and head of Investor Relations Ms. Halpern, who you may now begin.

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.

Robin Halpern: 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. These reconcile certain non-GAAP financial measures that may be referred to this morning to results.

Following prepared remarks, we will take your questions.

Please limit yourself to one question reenter the queue to ask any follow ups now I will turn the call over to James.

Thanks, Robin and good morning, everyone. We're off to a good start this year as our first quarter results continued the momentum we've been building by executing a strategy.

Robin Halpern: As reported under generally accepted accounting principles.

Robin Halpern: You can also find schedules in the same section of our website that provided an analysis of our growth and operating margin.

The operating backdrop this would greatly across some markets once again put our powerful portfolio, coupled with our systems capabilities.

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.

First with the agility, we need to deliver on our 2020 full guidance, which we are updating today.

This morning, I'll discuss the drivers in the quarter and how we use our scale and growth mindset to deliver these strong results.

Robin Halpern: Following prepared remarks, we will take your questions.

Robin Halpern: Please limit yourself to one question reenter the queue to ask any follow ups now I will turn the call over to James.

Then I'll highlight how we continue to meet consumer needs and grow our total beverage portfolio.

James Robert B. Quincey: Thanks, Robin and good morning, everyone. We're off to a good start this year as our first quarter results continued the momentum we've been building by executing a all weather strategy.

Finally, John will discuss our financial results and updated 2020 for guidance.

In the first quarter, we grew volume unexpected comparable margins and we continued to invest across the business.

The operating backdrop this would greatly across our markets once again with our powerful portfolio, coupled with our systems capabilities.

We're managing currency fluctuations to deliver earnings growth.

James Robert B. Quincey: First with the agility, we need to deliver on our 2020 full guidance, which we are updating today.

As shown by the 7% comparable earnings per share growth, despite 9% currency headwind.

Speaker Change: This morning, I'll discuss the drivers in the quarter and how we used our scale and growth mindset to deliver these strong results.

And we gained value share in both at home and away from home channels.

Across the world, we're continuing to win in the market by leveraging our scale and relying on our local expertise of our bottling partners.

Speaker Change: Then I'll highlight how we continue to meet consumer needs and grow our total beverage portfolio.

In Asia Pacific momentum continued across a large portion of our business, including Japan, South Korea, Philippines and Thailand.

Speaker Change: Finally, John will discuss our financial results and updated 2020 full guidance.

Speaker Change: In the first quarter, we grew volume and expanded comparable margins and we continued to invest across the business.

We gained traction in Indonesia with the return to volume growth.

India's momentum was impacted by some temporary factors, but recovered at the end of March.

Speaker Change: We are managing currency fluctuations to deliver earnings growth.

In China retail sales growth continues to improve the consumer confidence is still below 2019 levels.

Speaker Change: As shown by the 7% comparable earnings per share growth, despite 9% currency headwinds.

John Murphy: And we gained value share in both at home and away from home channels.

We remain optimistic about the many opportunities ahead of us and we're stepping up our execution in a number of ways. For example, greater focus on our core business through a more segmented market approach are most surgical horizontal market execution.

John Murphy: Across the world, we're continuing to win in the market by leveraging our scale and relying on our local expertise of our bottling partners.

John Murphy: In Asia Pacific momentum continued across a large portion of our business, including Japan, and South Korea, Philippines and Thailand.

In EMEA, we're seeing gradual improvement in macro trends in Europe, leading to improved consumer confidence.

John Murphy: We gained traction in Indonesia with the return to volume growth.

We pads Bryan with spicy meal locations to drive momentum in away from home channels.

John Murphy: India's momentum was impacted by some temporary factors, but recovered at the end of March.

Fuze tea and Powerade also generated strong performance and Jack Daniels and Coca Cola expanded to six more European markets during the quarter.

John Murphy: In China retail sales growth continues to improve the consumer confidence is still below 2019 levels.

Africa saw continued volume momentum from last quarter, while navigating a number of markets with significant currency devaluations.

We remain optimistic about the many opportunities ahead of us and we're stepping up our execution on a number of ways. For example, greater focus on our core business through a more segmented market approach a more surgical horizontal market execution.

Geopolitical and economic challenges in Eurasia, and the middle East continued to affect our business in the region.

We're working closely with local partners to manage these challenging dynamics and we're committed to investing behind the strength of our brands for the long term.

John Murphy: In EMEA, we're seeing gradual improvement in macro trends in Europe, leading to improved since <unk>.

John Murphy: We pads Bryan with spicy meal locations to drive momentum in away from home channels.

North America volume had a slow start to the quarter before posting sequential improvement in each of the last two months of the quarter.

John Murphy: Fuze tea and Powerade also generated strong performance and Jack Daniels and Coca Cola expanded to six more European markets during the quarter.

And elasticities remain favorable leading to ongoing share gains.

The launch of Coke spiced featured compelling in store displays.

John Murphy: Africa saw continued volume momentum from last quarter, while navigating a number of markets with significant currency devaluations.

Across our sparkling soft drink brands zero sugar performance was strong and we introduced 12 ounce slim cans to further drive premium amortization.

John Murphy: Geopolitical and economic challenges in Eurasia, and the middle East continued to affect that business in the region.

Value added dairy growth continued across their lines from coal power.

John Murphy: We're working closely with local partners to manage these challenging dynamics and we're committed to investing behind the strength of add brands for the long term.

In sports drinks, notwithstanding the noncash impairment charge that John will speak to in more detail.

We believe that two brand strategy with pyrite and body armor is gaining traction.

John Murphy: North America volume had a slow start to the quarter before posting sequential improvement in each of the last two months of the quarter.

And we've seen improved share trends, while we still have work to do stepped up execution by our dedicated sales force is driving improved on shelf execution and we're encouraged by the continued growth in sports water and the more recent body armor innovations, including zero sugar a flashlight.

John Murphy: Elasticities remain favorable leading to ongoing share gains.

John Murphy: The launch of Coke spiced featured compelling in store displays.

John Murphy: Across our sparkling soft drink brands zero sugar performance was strong and we introduced 12 ounce slim cans to further drive premium amortization.

While inflation has moderated and wages continue to trend upward in North America with closely monitoring consumer sentiment and traffic trends between at home and away from home consumption.

John Murphy: Value added dairy growth continued across their lines on coal power.

John Murphy: Sports drinks notwithstanding the noncash impairment charge that John will speak to in more detail.

In Latin America volume momentum continues.

John Murphy: We believe that two brand strategy with <unk> body armor is gaining traction.

<unk> was driven by strength in Mexico, Brazil, and Colombia, while Argentina continues to experience highly inflationary conditions.

John Murphy: And we've seen improved share trends, while we still have work to do to stepped up execution by our dedicated sales force is driving improved on shelf execution and we are encouraged by the continued growth in sports water and the more recent body armor innovations, including zero sugar Flash IV.

We have quality leadership across our portfolio in Latin America, with Coca Cola zero sugar continuing its strong performance.

Sparkling flavors.

<unk> juices and alcohol ready to drink also performed well during the quarter.

John Murphy: While inflation has moderated and wages continue to trend upward in North America with closely monitoring consumer sentiment and traffic trends between at home and away from home consumption.

Commercial initiatives are driving improved shelf space and basket incidence supported by ongoing outlet digitization.

Have suggested order capabilities and digital platforms that reached more than 3 million customers in the region.

John Murphy: In Latin America volume momentum continued to fall.

John Murphy: This was driven by strength in Mexico, Brazil, and Colombia, while Argentina continues to experience highly inflationary conditions.

Across developed markets. The overall inflationary environment is normalizing.

However across developed and emerging markets that continues to be a handful of markets that are experiencing intense inflation, which is driving elevated pricing offset by incremental currency headwinds.

John Murphy: We have quality leadership across our portfolio in Latin America, with Coca Cola zero sugar continuing its strong performance.

We are proactively managing these volatile environments and we feel confident we have the playbook to navigate challenges locally while continuing our momentum at a consolidated level.

John Murphy: Sparkling flavors.

John Murphy: <unk> juices and alcohol ready to drink also performed well during the quarter.

John Murphy: Commercial initiatives are driving improved shelf space and basket incidence supported by ongoing outlet digitization.

We're continuing to spin our strategic flywheel foster across total beverage portfolio.

John Murphy: Have suggested order capabilities and digital platforms that reached more than 3 million customers in the region.

As discussed at Cagny, we're building loved brands, and innovating and delivering bigger bolder bets.

Across developed markets. The overall inflationary environment is normalizing.

In the first quarter, we launched K wave as part of the Coke creations platform in markets across five operating units.

Lever across developed and emerging markets that continues to be a handful of markets that are experiencing intense inflation, which is driving elevated pricing offset by incremental currency headwinds.

<unk> celebrates Korean pulp will tape out fans and includes a global collaboration with three K pop groups and an AI based on experience.

John Murphy: We are proactively managing these volatile environments and we feel confident we have the playbook to navigate challenges locally while continuing our momentum at a consolidated level.

A growing number of co creation are different with each iteration and by design are only available for a limited time.

This generates buzz and excitement building relevance for the brand and reconsideration for Coke with Gen Z drinkers.

John Murphy: We're continuing to spin our strategic flywheel foster across total beverage portfolio.

We also know that sometimes the most successful lasting innovation is simply improving the taste of existing <unk>.

John Murphy: As discussed at Cagny, we're building loved brands, and innovating and delivering bigger bolder bets.

John Murphy: In the first quarter, we launched K wave as part of the Coke creations platform in markets across five operating units.

Using our deep inhouse flavor expertise and understanding of the science of case, we have work to refine the recipes for fanta and sprite to meet consumer preferences across many markets.

John Murphy: <unk> celebrates Korean pulp will kpop fans and includes a global collaboration with three K pop groups and an AI based on experience.

These changes bring new consumers to our brands as well as remind current consumers what drew them to their favorite beverages in the first place.

John Murphy: A growing number of co creation are different with each iteration and by design are only available for a limited time.

The strong financial performance in markets from Brazil to Germany to the U S. This quarter is largely due to this type of innovation, which was supported by marketing messages focus on pace and on tying the brand to snacking occasions, and local festivals like Carnival in Brazil.

John Murphy: This generates buzz and excitement building relevance for the brand and reconsideration for Coke with Gen Z drinkers.

John Murphy: We also know that sometimes the most successful lasting innovation is simply improving the taste of existing <unk>.

Elsewhere in our total beverage portfolio minute maid zero sugar kicked off its global campaign in North America, leveraging Influencers, social media and connected commerce Activations with key customers.

John Murphy: Using our deep in house flavor expertise and understanding of the science of case, we have work to refine the recipes for fanta and sprite to meet consumer preferences across many markets.

John Murphy: These changes bring new consumers to our brands as well as remind current consumers what drew them to their favorite beverages in the first place.

We are building on our innovations by driving awareness and excitement through an increasingly digital marketing media mix.

John Murphy: Our strong transit performance in markets from Brazil to Germany to the U S. This quarter is largely due to this type of innovation, which was supported by marketing messages focused on taste and on tying the brand to snacking occasions that local festivals like carnival in Brazil.

Our total beverage portfolio plays a lead role as shown by the new Guy campaign in the U S. This quarter, which featured multiple brands across categories.

Innovation is woven into the fabric of our culture and we are encouraged by our innovation pipeline as we look forward to the rest of 2024.

John Murphy: Elsewhere in our total beverage portfolio minute maid zero sugar kicked off its global campaign in North America, leveraging Influencers, social media and connected commerce Activations with key customers.

Moving across the flywheel, we're leaning into integrated execution to drive basket incidents and create incremental value for customers.

We work closely with our bottling partners and win bigger with in store displays to inspire transactions around key events like <unk> March madness in the U S and we will do this again later this summer with the Olympic and Paralympic games.

John Murphy: We are building on our innovations by driving awareness and excitement through an increasingly digital marketing media mix.

John Murphy: Our total beverage portfolio plays a lead role as shown by the new Guy campaign in the U S. This quarter, which featured multiple brands across categories.

As a system to improve quality availability, we increased outlets by 2%.

More than 600000 cooler doors and increased our share of cold space on overall shelf space in stores, we benefited from global scale, while maintaining local relevance by calling add brands to regional meals occasion.

John Murphy: Innovation is woven into the fabric of our culture and we are encouraged by our innovation pipeline as we look forward to the rest of 2024.

John Murphy: Moving across the flywheel, we're leaning into the integrated execution to drive basket incidents and create incremental value for customers.

For example, in Japan, we have associated cope with wacko and Jackie curve through the path to purchase using aimed to end consumer messaging and partnering with key customers in the modern trade in convenience retail we have seen strong Coca Cola revenue growth in Japan.

John Murphy: We work closely with our bottling partners and when Baker with in store displays to inspire transactions around key events like NCWA March madness in the U S and we will do this again later this summer with the Olympic and Paralympic games.

While we continue to grow our business. We also strive to positively impact the communities we serve.

John Murphy: As a system to improve quality availability, we increased outlets by 2%.

We do this by focusing on the issues that matter most to our system and we share his statements and learning each year, when we publish our business a sustainability report.

John Murphy: More than 600000 cooler doors and increased our share of cold space on overall shelf space in stores, we benefited from global scale, while maintaining local relevance by calling add brands to regional meals occasions.

Putting it altogether, it's early in the year, but we're off to a good start we have confidence we will achieve our guidance for the year.

John Murphy: For example, in Japan, we've associated cope with Wacko and Jack unique group through the path to purchase using aim to end consumer messaging and partnering with key customers in the modern trade in convenience retail we have seen strong Coca Cola revenue growth in Japan.

With that I'll turn the call over to John.

Thank you James and good morning, everyone.

Our first quarter results Mark a continuation of the underlying momentum in our business driven by a strong and focused system.

We delivered another quarter of volume growth.

John Murphy: While we continue to grow our business. We also strive to positively impact the communities we serve.

Even as we cycled strong results.

Additionally, we completed the refranchising of several busters during the quarter, leading to further comparable margin expansion.

John Murphy: We do this by focusing on the issues that matter most to our system and we share our statements and learning each year, when we publish our business a sustainability report.

John Murphy: Putting it altogether, it's early in the year, but we're off to a good start we have confidence we will achieve our guidance for the year.

We progress on our Refranchising agenda, while making sure we best position our system to deliver long term growth and we earn a fair return on our investments.

With that I'll turn the call over to John.

John Murphy: Thank you James and good morning, everyone.

We continue to invest behind our portfolio with discipline and flexibility thanks to our enhanced resource allocation agenda.

John Murphy: Our first quarter results Mark a continuation of the underlying momentum in our business driven by a strong and focused system.

John Murphy: We delivered another quarter of volume growth.

During the quarter, we grew organic revenues 11%.

Even as we cycled strong results.

John Murphy: Additionally, we completed the refranchising of several busters during the quarter, leading to further comparable margin expansion.

We had 1% unit case growth.

<unk> sales were behind unit case volume by three points driven by one less day in the quarter.

John Murphy: We progressed on our Refranchising agenda, while making sure we best position our system to deliver long term growth and we earn a fair return on our investments.

And the timing of concentrate shipments primarily in Mexico, and the middle East.

Our price mix growth of Turkey, and <unk> percent in the quarter.

John Murphy: We continue to invest behind our portfolio with discipline and flexibility thanks to our enhanced resource allocation agenda.

Was driven by approximately six points of.

Intense inflationary pricing.

Across a handful of markets to offset significant currency devaluation.

During the quarter, we grew organic revenues 11%.

Pricing actions across a number of markets.

We had 1% unit case growth.

And a couple of points of favorable mix.

John Murphy: Contract sales were behind unit case volume by three points driven by one less day in the quarter.

Excluding impacts from intense inflationary pricing organic revenue growth in the first quarter was at the high end of our long term growth algorithm.

John Murphy: And the timing of concentrate shipments primarily in Mexico, and the middle East.

Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and the benefit from bottler Refranchising.

John Murphy: Our price mix growth of Turkey, 80% in the quarter.

John Murphy: Was driven by approximately six points of.

John Murphy: Intense inflationary pricing.

Partially offset by the impact of currency headwinds.

John Murphy: Across a handful of markets to offset significant currency devaluation.

Comparable operating margin expanded approximately 60 basis points for the quarter. This was primarily driven by strong top line growth in Boston, Refranchising, partially offset by currency headwinds and an increase in marketing investments.

Pricing actions across a number of markets.

And a couple of points of favorable mix.

John Murphy: Excluding impacts from intense inflationary pricing organic revenue growth in the first quarter was at the high end of our long term growth algorithm.

Markets experiencing intense inflation represented only a single digit contribution to our volume.

John Murphy: Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion on the benefits from Boston Refranchising.

Let's continue to have an outsized impact on the shape of our P&L.

Putting it altogether first quarter comparable EPS of <unk> 72.

John Murphy: Partially offset by the impact of currency headwinds.

Was up 7% year over year, including 9% currency headwinds, which were driven by currency devaluation in markets experiencing intense inflation.

Comparable operating margin expanded approximately 60 basis points for the quarter. This was primarily driven by strong topline growth in Boston Refranchising.

Free cash flow was approximately $160 million.

John Murphy: Really offset by currency headwinds.

John Murphy: An increase in marketing investments.

An increase from the prior year.

John Murphy: Markets experiencing intense inflation represented only a single digit contribution to our volume.

Before moving on I wanted to discuss two items that are included in our first quarter reported results.

John Murphy: Let's continue to have an outsized impact on the shape of our P&L.

$765 million charge related to the Remeasurement of a contingent consideration liability.

John Murphy: Putting it altogether first quarter comparable EPS of <unk> 72.

For our acquisition of <unk> life.

John Murphy: It was up 7% year over year, including 9% currency headwinds.

Our final payment.

Related to the fair life acquisition will take place in 2025.

John Murphy: We're driven by currency devaluation in markets experiencing intense inflation.

This payment has grown as fair life has outperformed.

John Murphy: Free cash flow was approximately $160 million.

We continue to be encouraged by our ability to scale fairly organically.

John Murphy: An increase from the prior year.

Secondly, a noncash impairment charge of $760 million related to body armor.

John Murphy: Before moving on I wanted to discuss two items that are included in our first quarter reported results.

While we are taking a charge to reflect revised projections and the higher discount rates since the acquisition days by the AMR.

At $765 million charge related to the Remeasurement of a contingent consideration liability.

We believe in the power of our two sports brand strategy with power it and body armor.

John Murphy: For our acquisition of <unk> life.

John Murphy: Our final payment.

John Murphy: Related to the fair life acquisition will take place in 2025.

We're taking actions to help create long term value.

And we're seeing signs that this strategy is working.

John Murphy: This payment has grown as fair life has outperformed.

Our balance sheet remains strong and our net debt leverage of one six times EBITDA is below our targeted range of two to two five times.

John Murphy: We continue to be encouraged by our ability to scale fairly organically.

Secondly, a noncash impairment charge of $760 million related to body armor.

This gives us ample capacity.

For potential upcoming payments in.

John Murphy: While we are taking a charge to reflect revised projections and the higher discount rates since the acquisition days by the AMR.

In 2024 related to the IRS tax case.

Which we continue to vigorously defend.

And the upcoming fer like payment in 2025.

John Murphy: We believe in the power of our two sports brand strategy with power it and body armor.

We continued to remain consistent in our approach to prioritizing our capital allocation.

John Murphy: We're taking actions to help create long term value.

John Murphy: And we're seeing signs that this strategy is working.

We're committed to investing to drive growth and to support our dividend.

John Murphy: Our balance sheet remains strong and our net debt leverage of one six times EBITDA is below our targeted range of two to two five times.

Which we have raised our 62 consecutive years.

We're confident our business model has the flexibility to allow us to deliver on our overall objectives.

John Murphy: This gives us ample capacity.

John Murphy: For potential upcoming payments in 2024 related to the IRS tax case.

Our updated 2024 guidance reflects the underlying momentum of our business.

John Murphy: Which we continue to vigorously defend.

And we now expect organic revenue growth of 8% to 9%.

John Murphy: And the upcoming fer like payment in 2025.

And comparable currency neutral earnings per share growth.

John Murphy: We continued to remain consistent in our approach to prioritizing our capital allocation.

Of 11% to 13%.

Our revised top line guidance is totally driven by higher than expected inflationary pricing in a handful of markets, which.

John Murphy: We're committed to investing to drive growth and to support our dividend.

John Murphy: Which we have raised our 62 consecutive years.

Which we expect to moderate throughout the year.

Bottler Refranchising is still expected to be a four to five point headwind to comparable net revenues.

John Murphy: We're confident our business model has the flexibility to allow us to deliver on our overall objectives.

And a two point headwind to comparable earnings per share.

John Murphy: Our updated 2024 guidance reflects the underlying momentum of our business.

We will have a positive impact on both our margins and the return profile of our business.

John Murphy: We now expect organic revenue growth of 8% to 9%.

Yeah.

John Murphy: And comparable currency neutral earnings per share growth.

Based on current rates and our hedge positions, we anticipate an approximate 4% to five point currency headwind to comparable net revenues and an approximate 7% to eight point currency headwind.

John Murphy: Of 11% to 13%.

John Murphy: Our revised top line guidance is totally driven by higher than expected inflationary pricing in a handful of markets, which.

Which we expect to moderate throughout the year.

Comparable earnings per share for full year 2024.

John Murphy: Bottler Refranchising is still expected to be a four to five point headwind to comparable net revenues.

Okay.

This increase in currency headwind is driven by intense inflationary markets.

John Murphy: On a two point headwind to comparable earnings per share.

While the rest of the currency basket is relatively neutral to our results.

John Murphy: We'll have a positive impact on both our margins and the return profile of our business.

Our underlying effective tax rate for 2024 is now expected to be 19%.

John Murphy: Okay.

John Murphy: Based on current rates and our hedge position, we anticipate an approximate 4% to five point currency headwind to comparable net revenues and an approximate 7% to eight point currency headwind.

All in we continue to expect comparable earnings per share growth.

A 4% to 5%.

It is $2 69 and 2023.

There are some considerations to keep in mind.

John Murphy: Comparable earnings per share for full year 2024.

We estimate the ongoing conflict in the middle East at approximately a point of impact on volume growth during the first quarter of 2024.

Okay.

John Murphy: This increase in currency headwind is driven by intense inflationary markets.

It's unclear how long this impact will last.

John Murphy: While the rest of the currency basket is relatively neutral to our results.

The cadence of structural impact will be larger in the second and third quarters.

John Murphy: Our underlying effective tax rate for 2024 is now expected to be 19%.

Due to the timing of transaction closing during the first quarter and the seasonality of the businesses we refranchising.

John Murphy: All in we continue to expect comparable earnings per share growth.

Finally, there will be two additional days.

John Murphy: 4% to 5%.

John Murphy: It is $2 69 in 2023.

In the fourth quarter.

To sum it up and as Jim said the year has started off well.

John Murphy: There are some considerations to keep in mind.

John Murphy: We estimate the ongoing conflict in the middle East at approximately a point of impact on volume growth during the first quarter of 2024.

We remain focused on the execution of our all weather strategy.

Thanks to the partnership of our system.

John Murphy: It's unclear how long this impact will last.

And the ongoing dedication of our people.

We're confident we can create value for our stakeholders and deliver on our guidance for the year.

John Murphy: The cadence of structural impact will be larger in the second and third quarters.

John Murphy: Due to the timing of transaction closing during the first quarter and the seasonality of the businesses we re franchised.

And as we said at Cagny, we're primed for performance in 2024 and over the long term.

With that operator, we are ready to take questions.

John Murphy: Finally, there will be two additional days.

John Murphy: In the fourth quarter.

Ladies and gentlemen to ask a question on the press Star one on your telephone.

John Murphy: To sum it up and as Jim said the year has started off well.

Sorry, Your question Press Star one again.

John Murphy: We remain focused on the execution of our all weather strategy.

In the interest of time, we ask that you. Please limit yourself to one question.

If you have any additional questions you may rejoin the queue.

John Murphy: Thanks to the partnership of our system.

Our first question comes from Bryan Spillane from Bank of America. Please go ahead. Your line is open.

John Murphy: And the ongoing dedication of our people.

John Murphy: We're confident we can create value for stakeholders and deliver on our guidance for the year.

Thanks, Operator, hey, good morning, everyone.

John I wanted to ask a question about gross margins in the quarter. There was about 100 basis point tailwind from structural benefits and then also our structural change and then I think 60 basis points benefit underlying.

John Murphy: And as we said at Cagny, we're primed for performance in 2024 and over the long term.

Speaker Change: With that operator, we are ready to take questions.

Speaker Change: Ladies and gentlemen to ask a question you will need to press star one on your telephone.

We kind of take that first quarter performance and kind of think about it over the balance of the year can you just give us some context of how we should be thinking how much of that we should extrapolate going forward, maybe what some of the headwinds tailwind would be but just.

Sorry, Your question Press Star one again.

Speaker Change: In the interest of time, we ask that you. Please limit yourself to one question.

Speaker Change: If you have any additional questions you may rejoin the queue.

Given the gross margins were so much better our gross profit dollars were so much better than we were all modeling I just want to kind of get it.

Speaker Change: Our first question comes from Bryan Spillane from Bank of America. Please go ahead. Your line is open.

Bryan Douglass Spillane: Thanks, Operator, hey, good morning, everyone.

How much of that we should we should bank in our estimates going forward.

Bryan Douglass Spillane: John I wanted to ask a question about gross margins in the quarter. There was about 100 basis point tailwind from structural benefits and then also a structural change and then I think 60 basis points benefit underlying.

Thanks, Brian.

And.

As we think about the full year, we're going to continue to have.

A tailwind from the.

Beyond the Refranchising work that we have discussed and so I think that's going to flow through throughout the year.

Bryan Douglass Spillane: We kind of take that first quarter performance and kind of think about it over the balance of the year can you just give us some context of how we should be thinking how much of that we should extrapolate going forward, maybe what some of the headwinds tailwind would be but just given the gross margins were so much better gross profit dollars were so much better than we were all modeling I just want to kind of get it.

We expect to continue to have.

Some expansion.

As.

Reflected in our in our.

And our ongoing growth model.

Bryan Douglass Spillane: A sense of how much of that we should we should think in our estimates going forward.

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Both.

Positive <unk> impacts.

Some some productivity.

Speaker Change: Thanks, Brian so.

Input horizon is more normalized we do have some elevation on juice and sugar, which will continue to have but but the net of it all is that we'll have.

Speaker Change: As we think about the full year, we're going to continue to have.

Speaker Change: A tailwind from the.

Speaker Change: Beyond the Refranchising work that we have discussed and so I think thats going to flow through throughout the year.

Some.

Tailwind and the underlying area.

Speaker Change: We expect to continue to have.

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Currency will continue to be a headwind and you can.

Speaker Change: Some expansion.

Speaker Change: As.

Kind of extrapolate that us for for the year. So the net of it all is it will be <unk>.

Speaker Change: Reflected in our and our and our ongoing growth model driven.

Speaker Change: Driven by.

Primarily driven by the Refranchising efforts positively.

Speaker Change: Both.

Speaker Change: Positive <unk> impacts.

Underlying expansion offset by the currency headwinds.

Speaker Change: In some some productivity.

Input horizon.

Speaker Change: As more normalized we do have some elevation on juice and sugar, which will continue to have but but the net of it all is that we'll have.

As we reflected in our guidance the topline growth continues to be.

The primary driver in and the quality there and we'll I think we'll ensure that on a sustained basis at expansion, albeit.

Speaker Change: Some.

Speaker Change: Tailwind and the underlying area.

Speaker Change: <unk>.

Thus.

Speaker Change: Currency will continue to be a headwind and you can kind of extrapolate that us for for the year. So the net of it all is it'll be primarily driven by the refranchising efforts positively.

Not as potentially aggressive every quarter, but that expansion will be will be in our favor going forward.

Our next question comes from Dara <unk> from Morgan Stanley. Please go ahead. Your line is open.

Speaker Change: Underlying expansion.

Yes.

Speaker Change: Set by the currency headwind.

Hi, Good morning. So I was just hoping you could give a bit of a deeper dive into North America.

Speaker Change: As we reflected in our guidance.

Speaker Change: Top line growth continues to be.

Just wanted to get an update on what Youre seeing from the consumer any channel shifts in terms of away from home versus at home and the sequential improvement you discussed within Q1 is that something that's expected to continue going forward.

Speaker Change: The primary driver in and the quality there and we'll I think we'll ensure that on a sustained basis without expansion, albeit.

Speaker Change: Yes.

And then just be price mix was very strong at 7% in North America can you unpack that between mix and pricing.

Speaker Change: Not as potentially aggressive every quarter, but that expansion will be.

Speaker Change: It would be in our favor going forward.

Just how you think about the balance between pricing mix and volume going forward in the balance of the year in North America.

Speaker Change: Our next question comes from Dara <unk> from Morgan Stanley. Please go ahead. Your line is open.

Sure Good morning Dara.

Speaker Change: Okay.

Dara: Hi, Good morning. So I was just hoping you could give a bit of a deeper dive into North America.

Overall in terms of the consumer and how that fed into the channels.

Dara: Just wanted to get an update on what Youre seeing from the consumer any channel shifts in terms of away from home versus at home and the sequential improvement you discussed within Q1 is that something thats expected to continue going forward.

The U S consumer remains in good shape.

That is.

Some purchasing power.

Dara: Then just be price mix was very strong at 7% in North America can you unpack that between mix and pricing and just how you think about the balance between pricing mix and volume going forward in the balance of the year in North America. Thanks.

Ration.

The lower income echelons at I think it's quite clear that some behavioral shift there.

Looking for value.

I think that has led to a.

Marginal.

Campbell.

Speaker Change: Sure Good morning Dara.

Waiting or shift if you like with slightly more at home by.

Speaker Change: Overall in terms of the consumer and how that fed into the channels.

Volume versus away from home I would emphasize this is at the periphery rather than a big shift.

Dara: The U S consumer remains in good shape.

But at the margin slightly more value seeking slightly more at home slightly less.

Speaker Change: That is so.

Speaker Change: Some purchasing power compression in the lower income echelons at I think it's quite clear that some behavioral shift they're looking for value.

Our away from home.

And so we've been stepping up our <unk> efforts are packaging efforts.

Executing against that says that we.

<unk> continued to gain share.

In the quarter.

Speaker Change: That has led to a marginal charge.

As it relates to pricing.

Of those seven points in the first quarter.

Speaker Change: Channel.

Whiting or shift if you like.

Approximately two of those.

Slightly more at home by Vale.

Speaker Change: Volume versus away from home I would emphasize this is at the periphery rather than a big shift.

So timing related.

The rest is is pricing.

And where do you expect that to moderate as the year goes on.

Speaker Change: But at the margin slightly more value seeking slightly more at home slightly less.

Expect to see 2020 book in a much more normal year.

Speaker Change: Our away from home.

In terms of pricing in other words, we've largely.

Speaker Change: And so we've been stepping up our <unk> efforts.

Could it be as it was pre pre COVID-19. So are we expecting to see 2024.

Speaker Change: <unk> efforts.

Speaker Change: Executing against that says that.

Speaker Change: Continued to gain share.

I end up with a much more balanced growth equation over the over the rest of the year.

Speaker Change: In the quarter.

Speaker Change: As it relates to pricing.

Speaker Change: Of those seven points in the first quarter.

Our next question comes from Lauren Lieberman from Barclays. Please go ahead. Your line is open.

Speaker Change: Approximately two of those.

Mix or timing related.

Great. Thanks, good morning.

I wanted to talk a little bit about how the company manages.

The rest is is pricing.

And where do you expect that to moderate as the year goes on.

When the dollar is strong so outside of the markets with extreme inflation, we know from a strategic standpoint of course, the ongoing our Gms Farrington pack and channel and so on but just from a more tactical standpoint, when youre in a strengthening dollar environment. I was curious if you could share a bit more about how you manage that at a local.

Speaker Change: Expect to see 2024, and a much more normal year.

Speaker Change: In terms of pricing in other words, we've lost it.

Speaker Change: Largely.

Speaker Change: Going to be as it was pre pre COVID-19. So we're expecting to see 2024.

Speaker Change: End up with a much more balanced growth equation over the over the rest of the year.

Level because.

Delivery of dollar based EPS has become a key focus and hallmark frankly in the last couple of years and I thought a bit more color on.

Our next question comes from Lauren Lieberman from Barclays. Please go ahead. Your line is open.

How you go about that in a more tactical sense could be helpful. Thanks.

Lauren Rae Lieberman: Great. Thanks, good morning.

Lauren Rae Lieberman: I wanted to talk a little bit about how the company manages.

Sure.

So.

Lauren Rae Lieberman: The dollar is strong so outside of the markets with extreme inflation, we know from a strategic standpoint of course, the ongoing our GMO farrington pack and channel and so on but just from a more tactical standpoint, when you're in a strengthening dollar environment. I was curious if you could share a bit more about how you manage that at a local.

Markets outside the U S will roughly break down into two types.

There'll be those perhaps ticket typified by Europe.

Japan, Australia.

Some of the obvious ones.

The competition on the economic dynamics of the marketplace are predominantly local currency.

Lauren Rae Lieberman: Level because.

Lauren Rae Lieberman: Delivery of dollar based EPS has become a key focus and hallmark frankly in the last couple of years and I thought a bit more color on.

And so the in these markets.

Our approach is to compete locally in local currency given the cost structures.

Lauren Rae Lieberman: How you go about that in a more tactical sense could be helpful. Thanks.

Yes.

In those areas and we generally marry that with I.

Lauren Rae Lieberman: Sure.

Lauren Rae Lieberman: Hi.

Speaker Change: Markets outside the U S will roughly breakdown into two types.

Long term.

Currency hedging or selling forward.

Lauren Rae Lieberman: There'll be those perhaps ticket typified by Europe.

Programs, such that we can have a clear anticipation.

Lauren Rae Lieberman: Japan, Australia.

During the course of the year as to what that's likely to turn into.

Lauren Rae Lieberman: Some of the obvious ones, where the competition on the economic dynamics of the marketplace are predominantly local currency.

So thats one set of markets.

And we essentially have put ourselves in a position through the hedging program that we can compete locally.

Lauren Rae Lieberman: And so the in these markets.

And do what's necessary to continue to win in those marketplaces, which is which is generally what happens the second bucket of countries.

Lauren Rae Lieberman: Our approach is to compete locally in local currency given the cost structures in those in those areas and we generally marry that with a <unk>.

And thats much more apparent in recent quarters uneven historically were.

Lauren Rae Lieberman: Long term.

You have a.

Lauren Rae Lieberman: Currency hedging or selling forward.

Hi, whether you want to say that chicken and egg a higher level of devaluation on a higher level of inflation. These tend to be more emerging market economies.

Lauren Rae Lieberman: Programs, such that we could have a clear anticipation.

Lauren Rae Lieberman: During the course of the year as to what that's likely to turn into.

Where.

There is less availability of economically attractive hedging programs.

Lauren Rae Lieberman: So thats one set of markets.

Lauren Rae Lieberman: And we essentially have put ourselves in a position through the hedging program that we can compete locally.

And so we don't tend to have hedged them, but also given the elevated.

Lauren Rae Lieberman: And do what's necessary to continue to win in those marketplaces, which is which is generally what happens.

<unk> of the dynamic between the inflation devaluation, we do we obviously all competing locally.

Lauren Rae Lieberman: Second bucket of countries.

Lauren Rae Lieberman: And that's much more apparent in recent quarters uneven historically.

So for example, you know in the Argentina is of the world with competing predominantly locally.

Speaker Change: You have.

When in that marketplace and set ourselves up for the long term.

Lauren Rae Lieberman: Hi, whether you want to say the chicken and egg a higher level of devaluation on a higher level of inflation. These tend to be more emerging market economies.

And the inflation, that's very cyclical.

As these market cycle through high inflation in the high devaluation sometime.

Lauren Rae Lieberman: Where there is less availability of economically attractive hedging programs.

Sometimes.

The dollar value of those businesses shoots up and sometimes it shoots down.

Lauren Rae Lieberman: And so we don't tend to have hedged them, but also given the elevated nature of the dynamic between the inflation. The devaluation, we do we obviously all competing locally.

At the moment, they're in the phase of <unk>.

<unk> down in terms in dollar terms, so that declining in dollars terms, even though they're growing a lot in currency neutral, but we look at it on a long term basis to win using Dr. Jim.

Lauren Rae Lieberman: For example, you know in the Argentina is of the world with competing predominantly locally to win in that marketplace and set ourselves up for the long term.

All the other investments we make in the business and of course, they're not all in sync with each other so it's a portfolio management question and then overlay that is of course, a cooperative approach in terms of prioritization.

Lauren Rae Lieberman: And the inflation, that's very cyclical.

Where and how to best whether it's a lean in on.

Lauren Rae Lieberman: As these market cycle through high inflation and high devaluation sometimes.

Im leaning with what sorts of investments such that we are able to deliver on a corporate level.

Lauren Rae Lieberman: The dollar value of those businesses shoots up and sometimes it shoots down.

Eight months to make sure that the end of it.

Lauren Rae Lieberman: At the moment, they're in the phase of shoot.

Some of all the competing locally is more than the sum of the parts such that we can deliver.

Lauren Rae Lieberman: Shooting down and turn in dollar terms, so that declining in dollar terms, even though they're growing a lot in currency neutral, but we look at it on a long term basis to win using Dr. Jim on all of the other investments we make in the business and of course, they're not all in sync with each other so it's a portfolio management question and then overlay that is of course a corporate.

A consistent level of U S dollar EPS growth.

Yeah.

Our next question comes from Steve Powers from Deutsche Bank. Please go ahead. Your line is open.

Hey, good morning.

James and John you both mentioned.

Lauren Rae Lieberman: Approach in terms of prioritization.

Incremental progress on the two brand strategy and sports drinks with body armor empowering I was hoping you could.

Lauren Rae Lieberman: Where and how to best whether it's the leaning on.

Lauren Rae Lieberman: Im leaning with what sorts of investments such that we are able to deliver on a corporate level.

Spend a bit more on what youre seeing there.

It gives you that encouragement and.

What you see as the key initiatives for that strategy as we go forward. Thank you.

Lauren Rae Lieberman: Eight months to make sure that the end of it.

Lauren Rae Lieberman: Some of all the competing locally is more than the sum of the parts such that we can deliver.

Sure.

Clearly we.

We haven't progressed as fast as we would like with regard to the body armor notwithstanding the step up in the discount right about is reflected as John talked earlier.

Lauren Rae Lieberman: A consistent level of U S dollar EPS growth.

Lauren Rae Lieberman: Our next question comes from Steve Powers from Deutsche Bank. Please go ahead. Your line is open.

In the charge.

Stephen Robert R. Powers: Hey, good morning.

Notwithstanding that we do see long term value in the dual strategy, particularly in the U S between power and body armor, we're off to a good start with some of the plans.

Stephen Robert R. Powers: James and John you both mentioned.

Stephen Robert R. Powers: Incremental progress on the two brand strategy and sports drinks with body armor and power and I was hoping you could.

Stephen Robert R. Powers: Spend a bit more on what youre seeing there.

Speaker Change: It gives you that encouragement and.

Euro the zero calorie version is ahead of expectations the flash ought to be.

Speaker Change: What you see as the key initiatives for that strategy as we go forward. Thank you.

Got some double digit share and on the sport water version is one of the fastest growing premium water brown. So.

Speaker Change: Sure.

Speaker Change: Clearly we.

Speaker Change: We haven't progressed as fast as we would like with regards of body armor notwithstanding the.

Product innovation is getting some traction our new partnership with NHL on the marketing front and on the execution front Stefan.

Speaker Change: Up in the discount rate, that's reflected as John talked earlier.

Speaker Change: The charge.

Stepping off of the merchandising of the sales force.

Speaker Change: Notwithstanding that we do see long term value in the dual strategy, particularly in the U S between power right and body armor, we're off to a good start with some of the plans the zero zero.

Focus directed just at the sports drinks category, which is helping improve the share trend in the category.

Although not at the rate we had hoped initially but we think we.

Speaker Change: Zero calorie version is ahead of expectations, the flash ought to be.

Are in good shape going forward, obviously will have an opportunity.

With the Olympics.

Speaker Change: Got some double digit share in the sport water version is one of the fastest growing premium water Brian So.

Really.

I'll continue to step that up so plans in place across the product innovation, the marketing and the execution.

Speaker Change: Product innovation is getting some traction our new partnership with NHL on the marketing front and on the execution front I stepping off of the merchandising of the sales force.

And we think this will come to fruition over the course of the year.

Our next question comes from Bonnie Herzog from Goldman Sachs. Please go ahead. Your line is open.

Speaker Change: Focus directed just at the sports drinks category, which is helping improve the share trend in the category.

Alright. Thank you good morning, everyone.

I was hoping for a little more color on your performance in Asia in the quarter and then whether it met your expectations or possibly fell short.

Speaker Change: Although not at the right. We had hoped initially but we think we are in good shape going forward, obviously will have an opportunity.

Also you mentioned that declines in China more than offset growth in some of your key markets in the region. So maybe just hoping for a little bit more color on your business in China and how quickly you expect the market will recover.

Speaker Change: With the Olympics.

Speaker Change: Really.

Speaker Change: Continue to step that up so plans in place across the product innovation, the marketing and the execution.

Speaker Change: And we think this will come to fruition over the course of the year.

Again, given the broader macro challenges in the region. Thank you.

Speaker Change: Our next question comes from Bonnie Herzog from Goldman Sachs. Please go ahead. Your line is open.

Sure.

Let's go round.

Ah quickly are in China.

Bonnie Lee Herzog: Alright. Thank you good morning, everyone.

We're cycling in the first quarter of very strong Chinese new year or first quarter from 'twenty to 'twenty three.

Bonnie Lee Herzog: I was hoping for a little more color on your performance in Asia in the quarter and then whether it met your expectations or possibly South shore also you mentioned that declines in China more than offset growth in some of your key markets in the region. So maybe just hoping for a little bit more color on your business in China.

So I think we had a solid.

Solid quarter in China.

We focus very much on having a good Chinese new sparkling which was good.

<unk> prioritize some of the.

Bonnie Lee Herzog: And how quickly you expect the market will recover.

The lower valley water in order to do so.

And as we commented earlier the Chinese confidence isn't.

Bonnie Lee Herzog: Again, given the broader macro challenges in the region. Thank you.

As strongly rebounded as some of the other markets versus 2019.

Bonnie Lee Herzog: Sure.

Bonnie Lee Herzog: OLED lets go round.

And so we see we see an overall environment, where there'll be there'll be growth, perhaps not at the top historic levels will be growth.

Bonnie Lee Herzog: Asia quickly in China.

Bonnie Lee Herzog: We're cycling in the first quarter of very strong Chinese new year or first quarter from 'twenty to 'twenty three.

There were.

We're very much focused on what we can control and the things we need to do there is still huge opportunities.

Speaker Change: So I think we had a solid.

Bonnie Lee Herzog: Solid quarter in China, we.

In the Chinese marketplace.

Bonnie Lee Herzog: We focus very much on having a good Chinese new sparkling which was good.

Notwithstanding the macros.

And there's a lot we can execute against.

In the marketing and the innovation in the execution in the marketplace in the stores and with our jam. So theres a lot for us to achieve that's within our control.

Bonnie Lee Herzog: <unk> prioritize some of the.

Bonnie Lee Herzog: Lower valley water in order to do so.

Bonnie Lee Herzog: And as we commented earlier the Chinese confidence isn't.

Bonnie Lee Herzog: As strongly rebounded as some of the other markets versus 2019.

In China.

The rest of Asia, we had a we had a good quarter in Japan and.

Bonnie Lee Herzog: And so we see we see an overall environment, where there'll be there'll be growth, perhaps not at the top historic levels, but be growth.

South Korea, good share gains really starting to pick up the pace.

Also likewise, we had a strong performance in the Philippines, which is important market for us.

Bonnie Lee Herzog: There were.

Bonnie Lee Herzog: We're very much focused on what we can control and the things we need to do there is still huge opportunities.

And so that was.

Bonnie Lee Herzog: In the Chinese marketplace.

That was good in the quarter.

Bonnie Lee Herzog: Notwithstanding the macros.

One that was.

Bonnie Lee Herzog: And there is a lot we could execute against.

A typical or at least compared to recent quarters was India out of <unk>.

Bonnie Lee Herzog: In the marketing and the innovation in the execution in the marketplace in the stores and with our GM. So theres a lot for us to achieve that's within our control.

<unk> start in January and February.

<unk> talked in previous calls, we're very bullish on the long term prospects for the Indian business.

Bonnie Lee Herzog: In China.

Bonnie Lee Herzog: In the rest of Asia, we had a we had a good quarter in Japan, and South Korea, good share gains really starting to pick up the pace.

And we're also very clear, it's not going to be a straight line.

Metronomic Lee consistent growth and so it wasn't in the first quarter. It was a little softer Johnny Fad, but March on.

Bonnie Lee Herzog: Likewise, we had a strong performance in the Philippines, which is an important market for us.

April if now bounce back.

So we expect to see.

India continued to have a strong year this year.

Bonnie Lee Herzog: And so that was that was good in the quarter. The one that was <unk>.

Bonnie Lee Herzog: A typical or at least compared to recent quarters was India had a slower start in January or February.

Our next question comes from Andrea Teixeira from Jpmorgan. Please go ahead. Your line is open.

Thank you. Good morning, So can you comment on EMEA, you've called out, Nigeria, Germany, and South Africa growing units keys and <unk>.

Bonnie Lee Herzog: <unk> talked in previous calls, we're very bullish on the long term prospects for the Indian business.

Bonnie Lee Herzog: And we're also very clear, it's not going to be a straight line.

Driving the growth in volumes, but if my math is correct acts inflationary countries your price mix in the rest of EMEA.

Bonnie Lee Herzog: Metronomic Lee consistent growth. So it wasn't in the first quarter was a little softer January fad, but March and April have now bounce back.

7%.

So can you comment on the state of the consumer there similar to what you thought about the U S and <unk>.

Bonnie Lee Herzog: And so we expect to see.

Bonnie Lee Herzog: India continue to have a strong year this year.

The 7% price mix.

Are you seeing more stable countries in a sustainable way forward. Thank you.

Bonnie Lee Herzog: Our next question comes from Andrea Teixeira from Jpmorgan. Please go ahead. Your line is open.

Sure.

EMEA also this quarter had a whole series of.

Andrea Faria Teixeira: Thank you. Good morning. So can you comment on EMEA, you called out, Nigeria, Germany, and South Africa growing units keys.

Moving paces.

As you started on price mix.

Andrea Faria Teixeira: Driving the growth in volumes.

Clearly, there's a number of countries in there with very high inflation, not just Nigeria, but also Turkey.

Andrea Faria Teixeira: My math is correct acts inflationary countries your price mix in the rest of EMEA.

Andrea Faria Teixeira: 7%.

Andrea Faria Teixeira: So can you comment on the state of the consumer there similar to what you thought about the U S.

Somewhat.

Modestly unlikely some of the smaller African countries, given the level of inflation.

Andrea Faria Teixeira: The 7% price mix.

Can also make a difference to the pricing lever.

Andrea Faria Teixeira: He is a more stable countries in a sustainable way forward. Thank you.

In the EMEA segment.

Andrea Faria Teixeira: Sure.

EMEA segment has a substantive piece of pricing that is the inflation rate marketplaces, including many markets you would normally see.

Andrea Faria Teixeira: EMEA also this quarter had a whole series of.

Speaker Change: Moving paces.

Speaker Change: As you started on price mix.

Suspect.

Andrea Faria Teixeira: Clearly, there's a number of countries in there with very high inflation, not just Nigeria, but also Turkey.

So that's a roundabout way of saying actually the in.

In Europe pricing is much more.

Normal normalized.

And Ah based like the U S. We both see.

Andrea Faria Teixeira: Somewhat.

Andrea Faria Teixeira: Modestly unlikely some of the smaller African countries, given the level of inflation.

Improved macros.

Actually I think the number of the markets came out and said they would come out of recession from the previous quarters.

Andrea Faria Teixeira: Can also make a difference to the pricing lever.

Andrea Faria Teixeira: Sure.

Andrea Faria Teixeira: In the EMEA segment.

Like the U S. We see the lower income consumers remaining under pressure and at the margin slightly more shift towards value oriented channels at home oriented channels and less of the away from.

Andrea Faria Teixeira: EMEA segment has a substantive piece of pricing that is the inflation rate marketplaces, including many markets you would normally see.

Andrea Faria Teixeira: Suspect.

Speaker Change: So that's a roundabout way of saying actually.

Our away from home and clearly that's related to our <unk>.

Speaker Change: In Europe pricing is much more.

Focused not just on.

Speaker Change: Normal normalized.

The marketing and the innovation, but the our GM of affordability.

Speaker Change: And Ah based like the U S. We both see.

And driving.

Premium amortization, so Europe, not too dissimilar story compared to the U S. But the EMEA segment mixes in both the middle East conflict and a not quite a number of the high inflation countries.

Speaker Change: Proved macros.

Speaker Change: Actually I think the number of the markets came out and said they would come out of recession from the previous quarters.

Speaker Change: Like the U S. We see the lower income consumers remaining under pressure.

Speaker Change: At the margin slightly more shift towards value oriented channels at home oriented channels and less of the away from.

Our next question comes from Chris Carey from Wells Fargo Securities. Please go ahead. Your line is open.

Speaker Change: Our away from home and clearly that's related to a focused not just on.

Hi, good morning.

So I wanted to ask about brand Coca Cola trademark Coca Cola relevant to the sparkling flavor businesses.

Speaker Change: The marketing and the innovation, but the our GM of affordability.

Speaker Change: And driving.

Unit case.

Speaker Change: Premium amortization, so Europe, not too dissimilar story compared to the U S. But the EMEA segment mixes in both the middle East conflict and.

For sparkling flavors outperformed trademark Coca Cola in 2021.

And in 2022, but this just normalize it to the back half of 2023.

Continued into Q1 of this year. So could you just perhaps expand on whether.

Speaker Change: Quite a number of the high inflation countries.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Chris Carey from Wells Fargo Securities. Please go ahead. Your line is open.

Whether there is anything.

It's distinct.

Occurring here between brand trademark Coca Cola sparkling flavors regional considerations brand considerations I just think it's.

Christopher Michael Carey: Hi, good morning.

Christopher Michael Carey: So I wanted to ask about brand Coca Cola trademark Coca Cola relative to the sparkling flavor businesses.

Noteworthy given the relative outperformance that is just.

Turning the other way a little bit so any context would be helpful. Thanks.

Christopher Michael Carey: Unit case.

Christopher Michael Carey: For sparkling flavors outperformed trademark Coca Cola in 2021.

Yeah.

Look clearly both.

Christopher Michael Carey: And in 2022, but this normalized into the back half of 2023.

Trademark coke.

Original ties Coke zero.

Christopher Michael Carey: Continued into Q1 of this year. So could you just perhaps expand on whether there is anything.

I've been having a good wrong.

Last number is.

And really.

Focused on performance, but also perhaps online like in times more recently Pos.

Christopher Michael Carey: Distinct that's occurring here between brand trademark Coca Cola sparkling flavors regional considerations brand considerations I just think it's.

And found to have also been doing well.

This has been intentional focus for the company and the bottling system, which historically, we have looked at on managed sparkling altogether.

Christopher Michael Carey: Noteworthy given the relative outperformance that is just.

Christopher Michael Carey: Turning the other way a little bit so any context would be helpful. Thanks.

Christopher Michael Carey: Yeah.

Christopher Michael Carey: Look clearly both.

And very deliberately a number of years ago, we separated to really focusing on.

Christopher Michael Carey: Trademark coke.

Speaker Change: Original ties Coke zero.

Christopher Michael Carey: I've been having a good run.

Coke Coke trademark on its own we will be innovations, whether that would be things like K wave.

Christopher Michael Carey: Last number is.

Christopher Michael Carey: And I'm really focused on performance, but also perhaps online in times more recently, Pos sprite and Fanta have also been doing well.

Innovations of continuing to focus on Coke zero.

We've updated the updated formulas or focusing on original ties coke with the Marvell Activations is just coming out.

A real focus on Coke and that has been part of what has driven.

Christopher Michael Carey: This has been intentional focus for the company and the bottling system, which historically, we have looked at other managed sparkling altogether.

Success.

Over the last number of years and ultimately for the company to do well co cost to do well, it's kind of a mathematical.

And that has certainly been what's driving things.

Christopher Michael Carey: And very deliberately a number of years ago, we separated to really focusing on.

And then.

The separation of sprite fashion some of the regional brands.

Christopher Michael Carey: Coke Coke trademark on its own we will be innovations, whether that would be things like K wave.

Particularly perhaps some of the Indian.

<unk> brands like thumbs up.

Christopher Michael Carey: Innovations are continuing to focus on coke zero with updated the updated formulas or focusing on the original taste coke with the Marvell Activations is just coming out.

I've really.

Got their own deserve is focus.

Actually if you put all of flavored sparkling brands together, they would be one of their own.

That'd be one of their own big FMC G companies.

Christopher Michael Carey: A real focus on Coke and that has been part of what has driven.

In that round right.

Christopher Michael Carey: <unk> success.

And so really what Youre seeing is this focus on.

Christopher Michael Carey: Over the last number of years and ultimately for the company to do well co cost to do well, it's kind of a mathematical certainty.

The formulas.

All <unk> really doing much better and being teamed up each time reported to marketplace with a full marketing package. For example signed here in the U S had a good run as we updated the formula and relaunched the marketing.

Christopher Michael Carey: And that has certainly been what's driving things.

Christopher Michael Carey: And then.

Christopher Michael Carey: The separation of <unk> some of the regional brands.

Christopher Michael Carey: Particularly perhaps some of the Indian.

Christopher Michael Carey: Drink brands like thumbs up.

Christopher Michael Carey: I've really.

And so I think the.

Christopher Michael Carey: Got their own deserve is focus.

Been doing really well I think the only place where we have not succeeded particularly with some of the flavors.

Christopher Michael Carey: Actually if you put all of flavored sparkling brands together, they would be one of their own.

In the Chinese marketplace for example, given that that's really a sprite question there.

Christopher Michael Carey: That'd be one of their own big Mcg companies in that round ride and so really what youre seeing is this focus on.

But we need to continue to focus on to do better with sprite.

Christopher Michael Carey: The formulas all functions really doing much better and being teamed up each time, we brought it to marketplace with a full marketing package for example, <unk> in the U S had a good run.

In China, but otherwise Panther, sprite, and particularly the Indian flavor brands has done very well.

Coke is a pretty broad based success story.

Our next question comes from Filippo <unk> from Citi. Please go ahead. Your line is open.

Christopher Michael Carey: We updated the formula and relaunched the marketing.

Christopher Michael Carey: And so I think.

Hey, good morning, everyone I wanted to ask on the Latin America business.

Christopher Michael Carey: It's been doing really well I think the only place where we have not succeeded particularly with some of the.

Clearly theres a lot of impact from macro inflation in the market, but the volume trends continue to remain very solid.

Christopher Michael Carey: Flavors.

Christopher Michael Carey: In the Chinese marketplace for example, given that that's really a sprite question there.

In the region from a unit case standpoint, so can you talk about the consumer.

Christopher Michael Carey: We need to continue to focus on to do better.

Consumer environment, there and do you think.

Christopher Michael Carey: <unk> right.

Christopher Michael Carey: In China, but otherwise fantasy pride in the particularly the Indian flavor brands has done very well on a course coke is a pretty broad based success story.

<unk> continued to see volume growth in Latin America going forward and some of your key initiatives in the region. Thank you.

Yeah.

Absolutely.

The simple answer is yes, we believe that the business can continue to grow in Latin America, both in volume and revenue terms.

Christopher Michael Carey: Our next question comes from Filippo <unk> from Citi. Please go ahead. Your line is open.

Filippo: Hey, good morning, everyone I wanted to ask on the Latin American business.

It's been a long term success.

Filippo: Clearly theres a lot of impact from macro inflation in the market, but the volume trends continue to remain very solid.

Part of the business with a very strong.

System between ourselves and the board will those focused on the marketing the innovation the.

Filippo: In the region from a unit case standpoint, so can you talk about the consumer.

Execution on the <unk>, we will continue to build.

On the recent years momentum performance this quarter was strong in particularly in Mexico, Brazil, and Colombia, Obviously, Argentina was was impacted by the <unk>.

Filippo: Consumer environment, there and do you think.

Christopher Michael Carey: <unk> continued to see volume growth in Latin America going forward and some of your key initiatives in the region. Thank you.

Speaker Change: Yeah absolutely.

Macroeconomic condition.

Speaker Change: Absolutely.

Conditions.

Speaker Change: The simple answer is yes, we believe the business can continue to grow in Latin America, both in volume and revenue terms.

But we have a very tight <unk>.

System, we're very focused on what needs to be done.

And continuing to invest.

Speaker Change: It's been a long term success part of the business with a very strong.

In capacity.

In order to continue to unlock the volume growth.

Speaker Change: System between ourselves and the board will those focused on the marketing the innovation the.

Our next question comes from Peter Grom from UBS. Please go ahead. Your line is open.

Speaker Change: Execution on the <unk>, we will continue to build.

Speaker Change: On the recent years momentum performance this quarter was strong in particularly in Mexico, Brazil, and Colombia, Obviously, Argentina was was impacted by the macroeconomic conditions, but we have a very tight.

Thanks, operator, good morning, everyone hope you're doing well.

I had a question as it pertains to the fair life liability.

This is a sign that the underlying business is doing extremely well, but we've also seen kind of the value of this liability increased quite a bit over the last year or so so as we look ahead is there anything you can share any guardrails you can provide in terms of how we should think about the liability changing as we move through the balance of the year and into 25. Thanks.

Christopher Michael Carey: System, we're very focused on what needs to be done.

Christopher Michael Carey: Continuing to invest.

Christopher Michael Carey: <unk> capacity in order to continue to unlock the volume growth.

Yes.

So the.

The liability is very much.

Christopher Michael Carey: Our next question comes from Peter Grom from UBS. Please go ahead. Your line is open.

Linked to the ultimate performance.

As we close out this quarter.

Peter K. Grom: Thanks, operator, good morning, everyone hope you're doing well.

We're reflecting our lasers.

Peter K. Grom: Had a question as it pertains to the fair life liability clearly this is a sign that the underlying business is doing extremely well, but we've also seen kind of the value of this liability increased quite a bit over last year or so.

Best estimates as to what that will be.

The momentum of the business has been very strong.

And actually I think it's going to continue.

Peter K. Grom: We look ahead is there anything you can share any guardrails you can provide in terms of how we should think about the liability changing as we move through the balance of the year and into 25. Thanks.

And if anything there may be there may be some more upside but but.

For now we're reflecting.

Our best estimates for what that liability ultimately would be.

Peter K. Grom: So the.

Just to keep in mind that the.

Peter K. Grom: The liability is very much.

The liability will be.

Peter K. Grom: Linked to the ultimate performance.

Early 2025.

Peter K. Grom: And as we close out this quarter.

Ending to us.

<unk>.

Peter K. Grom: <unk> our latest.

Will.

We will updates we'll update as we go through this year in the event that the projections.

Peter K. Grom: Best estimates as to what that will be.

Peter K. Grom: The momentum of the business has been very strong.

Evolve.

Peter K. Grom: And.

Peter K. Grom: Actually I think is going to continue.

Our next.

Peter K. Grom: And if anything there may be there may be some more upside, but but for now we are reflecting are our best estimates.

Comes from Bill Chappell from <unk> Securities. Please go ahead your line is open.

Thanks, Good morning.

Just.

Peter K. Grom: What that liability ultimately with <unk>.

A little bit more question on the on the innovation side.

Peter K. Grom: Just to keep in mind that the.

Certainly it's been innovative company.

Peter K. Grom: The liability will be.

For five years or more new products out there, but it's tough to kind of attract some of these products that have been launched that are still on the shelf a year or two years later, so I guess question is.

Peter K. Grom: Early 2025.

Peter K. Grom: Ending to us.

Peter K. Grom: And.

Peter K. Grom: Yes.

Peter K. Grom: We'll update as we go through this year in the event that the.

Are there things in place in terms of.

Percentage of sales should come from new products in a certain region in a year or a number of new products that need to be launched per year, just trying to understand I understand youre wanting to be more innovative.

Peter K. Grom: The projections.

Peter K. Grom: <unk>.

Peter K. Grom: Okay.

Peter K. Grom: Our next question comes from Bill Chappell from tourist Securities. Please go ahead. Your line is open.

What kind of guardrails for what kind of accountability, there is around that kind of innovation.

William Bates Chappell: Thanks, Good morning.

William Bates Chappell: Just.

William Bates Chappell: A little bit more question on the on the innovation side.

Sure I think the first thing is too.

William Bates Chappell: Certainly.

William Bates Chappell: Innovative company over the past four five years or more new products out there, but it's tough to kind of attract some of these products that have been launched that are still on the shelf a year or two years later, so I guess the question is.

Bear in mind as certain segmentation.

Of the innovation.

And what I mean by that is you know.

You've got a you've got a strong focus of a part of the innovation that's around renovation.

William Bates Chappell: Are there things in place in terms of.

William Bates Chappell: Percentage of sales should come from new products in a certain region in a year or a number of new products that need to be launched per year, just trying to understand I understand youre wanting to be more innovative.

The call.

So you get into kind of a question of okay. What is the new Coke zero formula or the updated fanta formula backed with a new marketing campaign is that youre going to count that as innovation a lot. So that's the first thing is to understand that there's different types of innovation at play here all driving the business one being in a sense the renovation.

William Bates Chappell: What kind of guardrails or what kind of accountability there is around that kind of innovation.

William Bates Chappell: Sure.

Speaker Change: The first thing is too.

Core brands secondly.

William Bates Chappell: Bear in mind as certain segmentation.

Sure.

Launches intended.

William Bates Chappell: Of the innovation.

William Bates Chappell: And what I mean by that is you know.

To be ins and outs. So some of the coke creations, where the really the focus is on.

William Bates Chappell: You've got a you've got a strong focus of a part of the innovation that's around renovation.

Re engaging with consumers in a novel way to drive relevance and the core brands, so you're not expecting as the loss on that of course, there are things, we're putting into the marketplace.

William Bates Chappell: All of the call.

William Bates Chappell: So you get into kind of a question of okay. What is the new Coke zero formula or the updated fanta formula backed with a new marketing campaign is that going are you going to count that as innovation on Dol.

But our new innovations whether it would be.

Something like a minute maid zero sugar or.

William Bates Chappell: First thing is to understand that there's different types of innovation at play here all driving the business one being in a sense the renovation of core brands.

Something like the absolute fried or Jack Daniels and Coke. So these things as is and then of course, you've got non product based innovation like it's a new bottle size of our new can sizes.

William Bates Chappell: <unk>.

William Bates Chappell: Sure.

William Bates Chappell: Launches intended.

We track across all these things as it relates to.

William Bates Chappell: To be ins and outs. So some of the coke creations, where the really the focus is on.

So product innovation, we have a very clear set of metrics on whether it's still growing on the fifth quarter. After its launch is it cycling itself and continuing to accelerate so there's a lot of <unk>, but we do not.

William Bates Chappell: Re engaging with consumers in a novel way to drive relevance of the core brands, so youre not expecting them to the loss.

William Bates Chappell: And then of course, there are things, we're putting into the marketplace.

William Bates Chappell: Now that our new innovations with.

Set ourselves an artificial strategy objective of it has to be X percent.

William Bates Chappell: It would be something like a minute maid zero sugar or.

William Bates Chappell: Something like the absolute bridal the Jack Daniels and Coke. So these things as is and then of course, you've got non product based innovation like it's a new bottle size of our new can sizes. So we track across all these things as it relates to.

From innovation as it happens about 25% the growth comes from innovation, but it is not set that way.

And we are not setting ourselves up to sell what we make we got to sell what the consumers want to buy so it's about doing justice to every brand and every idea on every package in every channel.

William Bates Chappell: Product innovation, we have a very clear set of metrics on whether it's still growing on the fifth quarter. After its launch is it cycling itself and continuing to accelerate so there's a lot of collaboration but we do not.

Then service that resulting demand if that is led by great new innovation or by 130 year of classic Coke then.

William Bates Chappell: Set ourselves an artificial strategy objectives of it has to be X percent.

That's the answer.

Our next question comes from Carlos Laboy from HSBC. Please go ahead. Your line is open.

William Bates Chappell: From innovation as it happens about 25% of the growth comes from innovation, but it is not set that way.

Yes, good morning.

Okay.

William Bates Chappell: And we are not setting ourselves up to sell what we make we got to sell what the consumers want to buy so it's about doing justice to every brand and every idea on every package in every channel.

James market development.

Contrary to philosophy and it seems to me that so much of what Youre doing and what you talked about today is intended to to get shelf replenishes to become better market developers for faster growth.

William Bates Chappell: Then service that resulting demand if that is led by great new innovation or by 130 year of classic Coke.

Can you speak to how this is Vincent evolution is going in the system are there any regions or countries that standout for momentum in this in this system transformation.

William Bates Chappell: That's the answer.

Moving toward richer market development.

William Bates Chappell: Our next question comes from Carlos Laboy from HSBC. Please go ahead. Your line is open.

Less shelf replenishment order taking.

Okay.

Yeah sure look I think each part of the world.

Carlos Alberto Laboy: Yes, good morning.

Carlos Alberto Laboy: Okay.

Carlos Alberto Laboy: James market development.

And it's in its journey to continue to add value.

Carlos Alberto Laboy: Contrary to some philosophy and it seems to me that so much of what Youre doing and what you talked about Chinese intended to to get shelf replenishes to become better market developers for faster growth.

To the retailer because nbn.

This is about you know together with the bottlers, making sure that we are.

Carlos Alberto Laboy: Can you speak to how this is Vincent evolution is going in the system are there any regions or countries that standout for momentum into <unk>.

Adding value to the retailers. This is our objective at the retail level is to grow the beverage category faster than the average of that business and for us.

Carlos Alberto Laboy: This system transformation.

To grow our portfolio of Brown sources in the beverage category and to do that we go to add more value.

Carlos Alberto Laboy: Moving towards richer market development.

Carlos Alberto Laboy: Less shelf replenishment order taking.

And that takes different forms in different places.

Speaker Change: Yeah sure look I think each part of the world.

Uh huh.

And so as.

Carlos Alberto Laboy: And it's in its journey to continue to add value.

As that happens the for example, the pre sellers.

I move from just the.

Carlos Alberto Laboy: So the retail because then the and this.

Order taking to account development.

Carlos Alberto Laboy: This is about you know together with the board lows.

As it comes and it generates a suggested order for the retail outlet.

Carlos Alberto Laboy: Making sure that we up.

Carlos Alberto Laboy: Adding value to the retailers. This is our objective at the retail level is to grow the beverage category faster than the average of that business and for us.

He is demonstrably more efficient and helping the retail to drive sales and then allows the salesperson to do more account development and to expand all different ideas. So at each stage, it's about taking the system capabilities to the next level. So that we can continue to add value for the retailer.

Carlos Alberto Laboy: To grow our portfolio of brands forces within the beverage category and to do that we've got to add more value.

Carlos Alberto Laboy: And that takes different forms in different places.

The thing that was done in the past starts to become the price of entry in the future and so we need to keep adding value and so I think there's a strong growth and capabilities all around the world specifically focused on the channel structure.

Carlos Alberto Laboy: And so.

Carlos Alberto Laboy: As that happens the for example, the pre sell as they move from just the.

Carlos Alberto Laboy: Order taking to account development.

Carlos Alberto Laboy: As II comes in it generates a suggested order for the retail outlet.

The bottle is half in any given market.

And if I may just add James.

Carlos Alberto Laboy: Is demonstrably more efficient and helping the retail to drive sales and then allows the salesperson to do more account development and to expand all different ideas. So at each stage, it's about taking the system capabilities to the next level. So that we can continue to add value for the retailer.

I think one of the big <unk>.

Changes in the last three to five years is that the ambition.

But we share respectively.

With all of our Boston partners is much more at the high end of what it should be then Scott. So I think Thats and then it's working backwards from there as to what what does it take to.

Carlos Alberto Laboy: The thing that was done in the past starts to become the price of entry in the future and so we need to keep adding value and so I think there is a.

Deliver that ambition and.

Some are further along than others, but it's at.

Carlos Alberto Laboy: Our strong growth and capabilities all around the world specifically focused on the channel structure.

The ambition as a starting point that I think is helping too.

Carlos Alberto Laboy: The bottle is half in <unk>.

Drive see the progress that were seeing each quarter.

Carlos Alberto Laboy: Any given market.

Speaker Change: And if I may just add James.

Our next.

James Robert B. Quincey: I think one of the big.

Comes from Robert Moskow from TD Cowen. Please go ahead your line is open.

Carlos Alberto Laboy: Changes in the last three to five years is that the ambition.

Carlos Alberto Laboy: Then we share respectively.

Hi, there.

A couple of clarifying questions.

Carlos Alberto Laboy: With all of our Boston partners.

James.

Carlos Alberto Laboy: <unk> much more at the high end of what it should be then Scott Hartz.

On the last earnings call you were very clear. Thank you for your business.

Yes.

We can't hear you.

Carlos Alberto Laboy: And then it's working backwards from there as to what does it take to.

My apologies can you hear me now.

Carlos Alberto Laboy: Deliver that ambition and.

Yes.

Carlos Alberto Laboy: Some are further along than others, but it's.

I think last quarter, you spoke very specifically.

Carlos Alberto Laboy: Ambition is that starting point that I think is helping too.

Specifically about the business being a 2% unit volume grower.

Carlos Alberto Laboy: Drive see the progress that were seeing each quarter.

Given the timing impacts is that still how you would view this year and then secondly can you be a little more specific about those timing differences in Mexico, and I think the middle East.

Carlos Alberto Laboy: Our next question comes from Robert Moskow from TD Cowen. Please go ahead. Your line is open.

Robert Moskow: Hi, there.

Between units and concentrate what causes those discrepancies in into the naturally reverse.

Robert Moskow: Clarifying questions.

Robert Moskow: James I think.

Robert Moskow: On our last earnings call you were very clear thank you.

In the coming quarter.

Speaker Change: We can't hear you.

Sure.

Yes timing differences naturally reverse.

Speaker Change: My apologies can you hear me now.

Between concentrate units and unit cases.

Speaker Change: Yes.

Speaker Change: I think last quarter you spoke very.

Partly it happens when there is a different number of days in the quarter. Then we have the we use the full five system for all sorts of reasons.

Speaker Change: Specifically about the business being a 2% unit volume grower.

Speaker Change: Given the timing impacts is that still how you would view this year and then secondly can you be a little more specific about those timing differences in Mexico, and I think the middle East.

And that while that causes sometimes is different numbers of shipping days in quarters.

So you under sell when you've got less value is like the first quarter and of course in the fourth quarter. This year when those two extra days there'll be way more concentrate units then that were cases relatively speak so over the course of time these anomalies or differences.

Speaker Change: <unk> units and concentrate what causes those discrepancies in and do the naturally reverse.

Speaker Change: In the coming quarter.

Speaker Change: Sure.

Speaker Change: Yes timing differences naturally reverse.

Reverse themselves will average themselves.

Speaker Change: Between concentrate units at <unk>.

Donald.

Speaker Change: Cases.

And then as regards to the 2% volume.

Speaker Change: Partly it happens when there is a different number of days in the quarter. Then we have the we use the full five system for all sorts of reasons.

Yes.

Barry.

A strong view that the overall, our overall ambition to see our revenue.

Speaker Change: And that while that causes sometimes is different numbers of shipping days in quarters.

Grow at the top end of the algorithm I am leaving aside the heart to heart the intense inflation countries.

Speaker Change: So you under sell when you've got less days like the first quarter and of course in the fourth quarter. This year. When there's two extra days there'll be way more concentrate units then that were cases relatively speaking so over the course of time these anomalies or differences.

The argument about we want to grow at that five to six range.

And we want that to have a balanced contribution from volume and price mix. So implicitly looking for two to three on volume and I think we talked last quarter that in the current circumstances, that's likely to be slightly less volume is slightly more prices as prices and inflation normalizes.

Speaker Change: Reverse themselves will average themselves.

Speaker Change: Island.

Speaker Change: And then as regards to the 2% volume.

And so I think that 2% is still a pretty good number.

Speaker Change: Yes.

Speaker Change: Have a very.

Speaker Change: Strong view that the overall, our overall ambition to see our revenue.

Being the average growth rate in volume over if you'd take a compound number over the last number of years youre going to get something like a 2%.

Speaker Change: Grow at the top end of the algorithm I am leaving aside the heart the heart the intense inflation countries.

So that seems to be the momentum we're driving on.

Speaker Change: The argument of the moat, we want to grow at that 5% to six range.

If you strip Hawaii.

The inflation.

Speaker Change: And we want that to have a balanced contribution from volume or price mix. So implicitly looking for two to three on volume and I think we talked last quarter that in the current circumstances, that's likely to be slightly less volume is slightly more prices as prices and inflation normalizes.

And the witness in the first quarter of what you say is you got that 1% volume, which given the middle east headwind of 1% and actually was citing the strongest quarter of last year, you can say, it's a good volume number.

It has good underlying price mix in the normal countries. So the.

Speaker Change: And so I think that 2% is still a pretty good number.

The kind of the.

Speaker Change: <unk> been the average growth rate in volume over if you'd take a compound number over the last number of years youre going to get something like a 2%.

The normal performance is right at the top end of the algorithm there and then that feeds its way through to a 7%.

S growth, so I think right in there.

Speaker Change: That seems to be the momentum.

Main business notwithstanding the kind of peripheral noise is humming away right in line with where we said we wanted to be.

Our next question comes from Rob <unk> from Evercore ISI. Please go ahead. Your line is open.

What you say is you know.

<unk> got that 1% volume, which given the middle east headwind of 1% and actually was cycling the strongest quarter of last year, you can say, it's a good volume number.

Thank you.

Just like to drill down both on the U S and the volume question.

Can you talk about.

Has good underlying price mix in the normal countries. So the kind of the normal performance is right at the top end of the algorithm there and then that feeds its way through to a 7% EPS.

Your expectations for volume growth in North America this year.

What it'll take to get volume growth is a function of more of the economy more of the comps more of the sectors.

EPS growth, so I think right in that the main business notwithstanding the kind of peripheral noise is humming away right in line with where we said we wanted to be.

And tied to the sectors or categories I think you mentioned that.

T coffee and water were very weak.

Any color around that thank you.

Our next question comes from Ross <unk> from Evercore ISI. Please go ahead. Your line is open.

Yeah.

Oh.

Sure.

Great. Thank you.

I mean, clearly in the case of the U S.

Just like to drill down both from the U S and the volume question.

We've commented in previous calls that our expectation would be modest.

Can you talk about your.

Your expectations for volume growth in north.

Commodities growth in volume on a long term basis in North America, we have good good.

<unk> pricing clearly that remains.

Our overall.

Ambition, whether we get from the flat to something more positive.

More of the sectors.

In the rest of the year will obviously be a culmination of what we execute against.

And tied to the sectors or categories. I think you mentioned that tea coffee and water were very weak any color around that thank you.

And the and.

The trajectory of the purchasing power of the economy.

Oh.

In the balance of the year.

Sure.

But we're very focused on continuing to build the business drive the revenue and.

I mean, clearly you know in.

In the case of the U S. We we've we've commented in previous calls that our expectation with the modest flat to modest growth in volume on a long term basis in North America, we had good.

And continue to win.

In the marketplace.

And we'll see where that.

That's out too and then in the case of.

Good pricing plenty that remains.

Where we were doing well on our way not clearly we had we had a strong.

Our overall.

Ambition, whether we get from the flat or something more positive.

Quarter in terms of sparkling.

In the rest of the year will obviously be a culmination of what we execute again.

In terms of some of the other categories in North America.

And.

Yes.

Dairy obviously.

As the project.

Okay.

<unk>.

Yeah.

I don't know.

Additional charge as John talked about as the.

Okay.

Okay.

Yes.

Alright.

Alright.

Earn out is in its last year very strong quarter, a very very strong sparkling actually good on juice.

Okay.

No.

Okay.

Archrock.

When you.

Continued.

Continued.

In the market.

In the body.

The water on the <unk> and obviously to some extent the obviously the.

Hum.

Hum.

[laughter].

Sports categories were a little softer some of it on the water was selling less of the kind of the case pack water.

And then in some cases.

Okay.

Where we do well.

Where we've really well.

Oh really.

Oh really.

I think it was very much a question of <unk>.

No not at all.

How does.

<unk>.

Quarter.

Just need to focus a little more.

Quarter.

Okay.

Okay.

On some of what needs to be.

In terms of all the holidays.

Hum.

<unk> done that.

But it was more on the kind of the.

No.

No.

Sure.

Eric.

The fuse the end of the spectrum, rather than the gold peak end of the spectrum, which tends to do better.

Hello.

Hello.

Additional call it until come out.

Additional cogs until.

As the earn out.

Last year.

Yes.

All right everybody.

Ron.

Our next question comes from Callum Elliot from Bernstein. Please go ahead. Your line is open.

Okay.

Great.

It might be prolonged.

Okay.

The water.

The water.

That makes sense.

That makes sense.

Alright. Thank you very much so I have a slightly longer term question on gross margins.

The polls.

<unk>.

All right.

Okay.

Okay.

The only way at all.

Great.

Selling.

With that one.

2015, and gross margin was 61%.

Hi, Walter.

Yeah.

Let's see.

You had published a slide at Cagny in 2016, showing that you expected gross margins to get to 68%.

I would just focus a little more.

We just focus on some more.

The refranchising that had been announced at the time.

That's right, where it's been around 60% over the past 12 months.

Recognizing you guys and your currency in 2016, when that slide was published.

My question is what has happened.

I'm sure you'll point to M&A costs, CCD et cetera, but I don't think they come close to explaining to 800 basis points of Delta.

And I don't think that FX explains the gap either.

What else is it.

<unk> has refranchising, maybe just it is margin accretive.

<unk> was there some kind of other structural drag that hadn't been anticipated back in 2016.

It's a 68%.

The refranchising that had been announced at the time.

Thanks.

Yeah actually I think it does explain I think it does explain what's happened I don't have the breakdown in front of me, but at the gross margin level.

But today, we're still around 60% over the past 12 months and recognizing you guys won in your currency in 2016 when that slide was published.

When you take into account the impact of currency of some of the spotless.

My question is what has happened.

You know I'm sure your point that Manhattan, Costa body M. A C C D et cetera, but I don't think they come close to explaining the 800 basis points of Delta.

Acquisitions that came back into our portfolio that we're now in the process of Refranchising and some of the other acquisitions I think they have had a mechanical.

I don't think that FX explains the gap either but so what else is it and refranchising, maybe just not being as margin accretive.

A mechanical impact and we can come back with a little bit more color on the us.

You expected or was there some kind of other structural drag that hadn't been anticipated back in 2016.

And then I think when you look at the.

At the operating income then how it flows down into into the operating income line.

Yeah.

Yeah actually I think it does explain.

Yes.

It doesn't explain what's happened I don't have the breakdown in front of me, but at the gross margin level.

The primary driver.

Are these are these items so.

Yeah, when you take into account the impact of currency.

Yes, I don't have it in front of me, we can we can follow up.

And a bit more detail.

Some of the spotless.

Acquisitions that came back into our portfolio.

Yes, that's the story.

We're now in the process of Refranchising and some of the other acquisitions I think that they have had a mechanical.

Our last question will come from Brett Cooper from consumer Edge Research. Please go ahead. Your line is open.

That nickel impact.

You can come back with a little bit more color on the us.

Thank you good morning, just wanted to ask on the digital experience.

And then I think when you look at the at the operating income and how it flows down into into the operating income line.

And if you can turn the corner.

When you win b to b or b to b into the retailer.

Yeah.

What happens to your space receiver category performance relative to our base.

Primary driver.

Or are these are these items so.

Not so much the question of the 8% increase on a quarter, but looking back over time. Thanks.

Yeah don't have it in front of me, we can we can follow up and a bit more detail but.

Again, the automotive volume was up with the line today.

That's yeah, that's the story.

Very kind of broken up.

But I think Brett you were asking about the digital experiences and hate to be in <unk>.

Our last question will come from Brett Cooper from consumer Edge Research. Please go ahead. Your line is open.

What happened.

Sure.

In the category.

Thank you good morning, I just wanted to ask on your digital experience.

There are multiple b to B is not a singular thing.

And if you could.

The digital version of basically is the other thing, causing you to think there is a vast.

When you win B to B or B to B into marks one retailer.

What happens to your space whichever category performance relative to our base.

The amount of B to B business that has been done for many years with direct order transpose largely.

Not so much the question of the 8% increase on a quarter, but looking back over time.

Two large store mountain retailers, where order replenishment.

Again, I don't know.

<unk> has a long standing track record and is really focused on the efficiency of making sure. The shelf is not out of stock problem products.

Up with a line today that was very kind of broken up.

But I think Brett you were asking about the digital experiences and hate to be what happens.

It is more I.

Our process of support to what already.

Shares.

In the category.

It goes on and so.

There are multiple b to b, it's not a singular thing.

So actually you see it as enabling the physical presence in the analog world if you like.

The digital version of basically all the things I was thinking I think there is a vast.

Of course, there's other types of.

B today.

For example, in the mom and pop stores.

The amount of B to B business that has been done for many years with direct order transpose largely.

We have moved.

Heavily from a you have to wait for the pre sell out to a payer type of relationship with the mom and pop stores too.

Two large store mountain retailers, where order replenishment.

<unk> has a long standing track record and is really focused on the efficiency of making sure. The shelf he thought out of stock problem products and he's more eye a process of support for what already.

To where that is complemented by some sort of.

Ordering on relationship rock platform.

They come in multiple guises, depending on where you are in the world on a relative.

It goes on.

Need and cost efficiency of doing so, but those platforms allow retailers effectively to the alpha or the <unk>.

And so actually you see it is that it's enabling the physical presence in the analog world. If you like of course, there's all the types of pizza.

Make additional orders 24, seven maybe even book servicing for them for their cold drink equipment.

Speaker Change: B today.

Speaker Change: For example, in the mom and pop stores well.

Speaker Change: Where we have moved.

All our loyalty programs et cetera, et cetera, so there's a lot of different types of relationships.

Speaker Change: Heavily from a you know you have to wait for the pre sell out to a payer type of relationship with the mom and pop stores to where that is complemented by some sort of ordering and relationship cross platform.

Generally speaking they are supportive of us continuing to grow the relationship.

And two.

And to continue to do well.

Speaker Change: They come in multiple guises, depending on where you are in the world.

And but they are enabling rather than consumer facing so that kind of the share.

Speaker Change: The relative need and cost efficiency of doing so, but those platforms allow retailers effectively to the alpha or the make additional orders 24, seven maybe even book servicing for that for that cold drink equipment.

Ah is a little it's a little trickier to determine.

Determined.

Okay, I think I think that was the last one.

To summarize our first quarter of the year.

A strong start and we're confident we can continue to create value for the stakeholders and shareowners and deliver on our 2020 for our guidance. We will continue to manage through the many different types of environments out there that focus on leveraging our capabilities to drive what we can control to make sure we get.

Robin Halpern: Yes.

Robin Halpern: All our loyalty programs et cetera, et cetera, so there's a lot of different types of relationships.

Robin Halpern: Generally speaking they are supportive of us continuing to grow the relationship.

Robin Halpern: And to.

Robin Halpern: And to continue to do well.

Growth.

Robin Halpern: And but they are enabling rather than consumer facing so that kind of the share.

So thank you for your interest your investment in the company and joining US this morning.

Robin Halpern: Ah is a little it's a little trickier to to determine.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Robin Halpern: Determined.

Speaker Change: Okay, I think I think that was the last one.

Speaker Change: To summarize our first quarter of the year.

Robin Halpern: A strong start and we're confident we can continue to create value for the stakeholders and shareowners and deliver on our 2024, our guidance will continue to manage through the many different types of environments out there that focus on leveraging our capabilities to drive what we can control to make sure we get.

James Robert B. Quincey: Okay.

Speaker Change: So thank you for your interest your investment in the company and joining US this morning.

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

James Robert B. Quincey: [noise] out there.

Speaker Change: Celine.

Speaker Change: Screening.

Speaker Change: Q3.

Speaker Change: They need something.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: No.

Speaker Change: Yes.

John Murphy: Thanks Anthony.

John Murphy: Tom Monahan.

Speaker Change: Luke.

Speaker Change: Do you believe.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: Okay.

John Murphy: Okay.

John Murphy: Okay.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Right.

Speaker Change: Okay.