Q2 2025 The Coca-Cola Co Earnings Call
James Quincey: First half of this year, we're on track to deliver on both our top-line and updated bottom-line guides. We're confident we can navigate varying local market dynamics during the remainder of 2025 to deliver on our updated guidance.
Both our topline and updated bottom line guidance, we're confident we can navigate bearing local market dynamics during the remainder of 2025 to deliver on our updated guidance. This morning, I will provide details on the operating environment and our second quarter business performance, then I'll explain how we are pivoting.
James Quincey: This morning, I'll provide details on the operating environment and our second quarter business performance. Then I'll explain how we're pivoting our plans and building new capabilities to deliver amidst the current reality.
Our plans and building new capabilities to deliver amidst the current realities.
James Quincey: John will end by discussing our financial results and providing further commentary on the outlook for the rest of the year. Coming into the quarter, we expected the operating landscape to be choppy. Volume declined 1% during the quarter as we cycled a difficult comparison versus the prior year. Two-year volume trends were on track in April and May, but decelerated in June in the face of adverse weather in several key markets and pockets of consumer pressure. Several markets that were weaker in the first quarter improved volume sequentially, including the US and Europe. In these markets, the plans we've implemented are working, providing further confidence we can influence the trajectory of our results.
John will end by discussing our financial results and providing further commentary on the outlook for the rest of the year coming.
Coming into the quarter, we expected the operating landscape to be choppy volume declined 1% during the quarter as we cycled a difficult comparison versus the prior year too.
Two year volume trends were on track in April and May but decelerated in June in the face of adverse weather in several key markets.
And pockets of consumer pressure.
Several markets were weaker in the first quarter improved volumes sequentially, including the U S and Europe in these markets. The plans. We've implemented are working providing further confidence we can influence the trajectory of our results.
James Quincey: We also delivered 5% organic revenue growth and robust margin expansion. which led to 4% comparable earnings-to-share growth despite currency headwinds and a higher effective tax rate. More broadly, our industry remains During the quarter, we gained value share, which represented our 17th consecutive quarter of value share gain. Across the world, we're navigating complex dynamics across many markets by leveraging at global scale while stepping up local expertise. Starting in North America, while volume improved sequentially, it declined due to the continued uncertainty and pressure on some socio-economic segments We continue to invest behind our brands, which led to value share gains and revenue and profit.
We also delivered 5% organic revenue growth and robust margin expansion, which led to a 4% comparable earnings per share growth, despite currency headwinds and a higher effective tax rate.
More broadly in.
Industry remains resilient during the quarter, we gained value share, which represented our 17th consecutive quarter of value share gains across the world. We're navigating complex dynamics across many markets by leveraging our global scale, while stepping up local execution.
Starting in North America.
While volume improved sequentially. It declined due to the continued uncertainty and pressure on some socioeconomic segments of consumers.
We continue to invest behind our brands, which led to value share gains and revenue and profit growth.
James Quincey: Our price mix decelerated as growth in some of our premium stills brands moderated during the course. Our granular action plans to win back consumers with contextually relevant advertising, more focus, value and affordability in the future. and Close Customer Partnerships are working. Several bright spots in our total beverage portfolio include Coca-Cola Zero Sugar, Diet Coke, Fanta, Fairlife, Body Armor, and Powerade, which each grew volume. continuing to get good traction with our food service customers on both renewals and category expansion and our system is stepping up execution and earning increased share of visible inventory. In Latin America, volume declined, but we grew organic revenue and profits.
Our price mix decelerated as growth from some of our premium stills brands moderated during the quarter.
On a granular action plans to win back consumers with contextually relevant advertising more focused value and affordability initiatives and close customer partnerships are working.
Several bright spots in our total beverage portfolio include Coca Cola zero Sugar diet, Coke Fanta fair life body armor, and pyrite, which each grew volume.
We're continuing to get good traction with our foodservice customers on both renewables and category expansion and our system is stepping up execution and earning increased share visible inventory.
In Latin America volume declined, but we grew organic revenue and profit.
James Quincey: benefited from the improving economy in Argentina, and Coca-Cola Zero Sugar had strong volume growth in Brazil and Mexico. In Mexico, despite cycling a difficult comparison versus the prior year, and navigating a more difficult start 2-year volume trends improved during the quarter until uncharacteristically cold weather and a major hurricane impacted the trajectory. Drive Transactions, we're re-prioritizing investment. Driving affordability with refillables and premiumization with single-serve offerings and scaling connected packaging and our systems digital customer platform. In EMEA, all three of our operating units grew volume, and we also had revenue and profit growth. In Europe, volume growth was driven by both Eastern and Western markets and was partially helped by cycling an easier comparison versus the prior year.
We benefited from the improving economy in Argentina, and Coca Cola Zero Sugar had strong volume growth in Brazil and Mexico.
In Mexico, despite cycling a difficult comparison versus the prior year and navigating a more difficult start to the year two year volume trends improved during the quarter until uncharacteristically cold weather and a major hurricane impacted the trajectory in June.
To drive transactions, we are re prioritizing investments driving affordability with renewables and premium amortization with single serve offerings and scaling connected packaging and our systems digital customer platforms.
In EMEA.
All three of our operating units grew volume and we also had revenue and profit growth.
In Europe volume growth was driven by both eastern and Western markets and was partially helped by cycling an easier comparison versus the prior year.
James Quincey: Coca-Cola Zero Sugar, Sprite, and Fuze Tea, each group volume. We activated our share a coke campaign across 38 markets in Europe and included prominent musicians and influencers. The campaign leveraged a Memory Maker digital tool, which allowed drinkers in some markets to share personalized memes and videos with friends and family. We also tapped into Sprite spicy meals and won a Fana campaign. In Eurasia and Middle East, despite multiple conflicts in the region during the quarter, we grew volume and won value. We are leveraging our learnings to emphasize the localness of our students. Includes local sourcing, production, employment, and distribution.
Coca Cola zero, sugar Sprite and fuze tea each grew volume.
We activated our share a coke campaign across 38 markets in Europe and included prominent musicians and influences.
The campaign leveraged a memory maker digital tools, which allow drinkers in some markets. This year personalized names and videos with friends and family. We also tapped into sprite spicy meals and one final campaigns in Eurasia and middle East Despite multiple conflicts in the region during the quarter, we grew volume in one value share.
We're leveraging our learnings to emphasize the local Nova system, which includes local sourcing production employment and distribution.
James Quincey: We're focusing on locally relevant, sparkling flavors, innovations, and affordability with attractive absolute price points, value packages, and tailored In Africa, despite a worsening macroeconomic growth outlook, we grew volumes. Egypt, Morocco, and Nigeria each continued their strong momentum. Our system's actions are working. We've refined our packed price architecture, executed fewer but bolder integrated marketing campaigns, and accelerated cold drink equipment placement. Lastly, in Asia-Pacific, after a strong first quarter, we had mixed performance across the region. Volume declined, but we grew both revenue and comparable currency-neutral operating income. In ASEAN and South Pacific, volume declined as growth in Australia and the Philippines was more than offset by declines in Thailand, Indonesia, and Vietnam.
We are focusing on locally relevant sparkling flavors innovation and affordability with attractive absolute price points value packages and tailor promotions.
In Africa, despite a worsening macroeconomic growth outlook, we grew volume.
Morocco, and Nigeria, each continued their strong momentum.
Our system's actions are working we have refined our pack price architecture executed fewer but boulder integrated marketing campaigns and accelerated cold drink equipment placements.
Lastly in Asia Pacific After a strong first quarter, we had mixed performance across the region volume declined that we grew both revenue and comparable currency neutral operating income.
In ASEAN and South Pacific volume declined as growth in Australia, and the Philippines was more than offset by declines in Thailand, Indonesia and Vietnam.
James Quincey: However, with one value. Our system is taking action by scaling refillable offerings, increasing outlet coverage, and accelerating cooler places. In China, we grew volume despite a cautious consumer environment thanks to stronger performance from trademarked Coca-Cola and in the eating and drinking challenge. Our system is developing more granular channel and customer-specific execution strategies, driving more tailored promotional campaigns and accelerating cooler places. In India, after a strong start to the year, volume declined as our business was impacted by early monsoons and geopolitical conflict early in the important summer season. In response, we're engaging consumers with integrated marketing campaigns like Coca-Cola and Meals, supported by Execution in the QSR channel, Thumbs Up with Biriyani, Sprite with Spicy Meals, and Maza with Festivals, and tailing these activations to regional and local Also, our system is adding customer outlets and recently surpassed 1 million customers on its digital ordering platform.
However, we want value share and our system is taking action by scaling refillable offerings, increasing outlet coverage and accelerating cooler placement.
In China, we grew volume despite a cautious consumer environment, thanks to stronger performance from trademark Coca Cola and in the eating and drinking channel.
Our system is developing more granular channel and customer specific execution strategies, driving more tailored promotional campaigns and accelerating cooler placement.
In India. After a strong start the year volume declined as our business was impacted by early monsoons and geopolitical conflict early in the important summer season in.
In response, we're engaging consumers with integrated marketing campaigns like Coca Cola meals supported by execution in the <unk> channel thumbs up with biryani.
<unk> response E mails and massively festivals and tailing these activations to regional and local needs.
So our system is adding customer outlets and recently surpassed 1 million customers on its digital ordering platforms.
James Quincey: In Japan and South Korea, industry volume declined amid a challenging macro environment. Our volume was also down, reflecting industry dynamics and a strong prior year comparison. Nevertheless, two-year volume trends remain positive during the course. In response to the external environment, our system is refining channel and investment strategies to capture emerging growth.
And in Japan, and South Korea industry volume declined amid a challenging macro environment.
Volume was also down reflecting industry dynamics and a strong prior year comparisons.
Nevertheless, two year volume trends remained positive during the quarter.
In response to the external environment, our system is refining channel and investment strategies to capture emerging growth opportunities.
James Quincey: To sum everything up, while the external environment continues to evolve, we remain steadfastly focused on maintaining agility, and we're taking the appropriate actions to deliver on our updated 2025 guidance. Critically, as Lieber admits to Current Realities, we're enhancing capabilities along each facet of our strategic growth flywheel by investing to drive transactions in the back half. Our marketing transformation allows us to more quickly test ideas, share learnings, and scale successful campaigns. For example, to mitigate consumer pressure in Mexico stemming from geopolitical tensions, our teams implemented tactics similar to those developed last year in Turkey, tailored to local needs.
To sum everything up while the external environment continues to evolve we remain steadfastly focused on maintaining agility and we're taking the appropriate actions to deliver on our updated 2025 guidance critically deliver amidst the current realities, we're enhancing capabilities along each facet of our strategic growth flywheel.
By investing to drive transactions in the back half of the year.
Our marketing transformation allows us to more quickly test ideas share learnings and scale successful campaigns for example to mitigate consumer pressure in Mexico stemming from geopolitical tensions.
Teams implemented tactic similar to those developed last year in Turkey tailored to local needs.
James Quincey: During the quarter, we launched the Juntos por Cien Anuals campaign, which highlights our longstanding contribution to the Mexican economy. At the same time, we leaned further into consumer passion points and pulled forward our World Cup activation by giving away 1,000 tickets to next year's event. As a result of these initiatives, combined with strong local execution, monthly value-share trends and consumer perception scores improved significantly in Mexico during the quarter. While we're lifting and shifting learnings across markets, we're also revamping and creating new campaigns and leveraging passion points. In April, we launched the return of the iconic Share A Coke campaign across more than 120 countries with over 30,000 names on approximately 10 billion bottles and cans tailored to local markets.
During the quarter, we launched the <unk> campaign, which highlights our long standing contribution to the Mexican economy.
At the same time, we lean further into consumer passion points and pull forward our World Cup activation by giving away 1000 tickets to next year's event.
As a result of these initiatives combined with strong local execution monthly value share trends and consumer perception scores improved significantly in Mexico during the quarter.
While we're lifting and shifting learnings across markets, we're also revamping and creating new campaigns and leveraging passion points.
In April we launched the return of the iconic share a coke campaign across more than 120 countries.
30000 names on approximately 10 billion bottles and cans tailored to local markets.
James Quincey: Also, in North America, we launched the Bring the Juice campaign during the quarter, which featured a collaboration between Minute Maid and World Wrestling Entertainment that includes digital experiences, limited time-only packaging, and in-store activation. Our innovation agenda supports our overall growth strategy by focusing on understanding and anticipating consumer needs. To make a greater impact and improve return on investment, we're leveraging our portfolio of $30 billion brands. For example, during the quarter, we launched Sprite Plus Tea in North America, which contributed to increased share of visible inventory. This limited time only innovation blends the refreshment of Sprite with the flavor of tea and adds to the recent hits under the Sprite trademark, including Sprite Chill, Sprite Winter Spice Cranberry and Sprite Lemonade.
Also in North America, we launched the bring the juice campaign during the quarter, which featured a collaboration between minute maid and World Wrestling Entertainment that includes digital experiences limited time, only packaging and in store Activations, our innovation agenda support our overall growth strategy by focusing on understanding and anticipate.
In consumer needs to make a greater impact and improve return on investment we're leveraging our portfolio of 30 billion dollar brands.
For example, during the quarter, we launched <unk> plus <unk> in North America, which contributed to increased share of visible inventory.
This limited time, only innovation blends the refreshment of stride with the flavor of <unk> and as to the recent hits under the sprite trademark, including spot shale sprite winter spikes cranberry and sprite eliminate.
James Quincey: Sprite Plus T started as an experimental project. We scaled the launch after seeing strong consumer demand and positive social media reaction. As a result of on-brand innovation, Sprite became the number three sparkling soft drink brand in the U.S., as Beverage Digest announced in April. We're always exploring ways to meet evolving consumer preferences for great tasting refreshment, including with our iconic Coca-Cola brand. As you may have seen last week, we appreciate the President's enthusiasm for our Coca-Cola brand. And as part of our ongoing innovation agenda, this fall in the United States we plan to expand our trademark Coca-Cola product range with U.S.
Clustered <unk> started as an experimental projects, we scaled the launch also seeing strong consumer demand and positive social media reactions. As a result of on brand innovation Sprite became the number three sparkling soft drink brand in the U S. As beverage Digest announced in April we're always exploring ways to meet evolving consumer preferences for great.
<unk> refreshment, including with our iconic Coca Cola brand.
As you May have seen last week, we appreciate the presence and to use some for our Coca Cola brand.
And as part of our ongoing innovation agenda. This fall in the United States, We plan to expand our trademark Coca Cola product range with U S cane sugar to reflect consumer interest and differentiated experiences.
James Quincey: cane sugar to reflect consumer interest in differentiated This edition is designed to complement our strong core portfolio and offer more choice across occasions and preferences. Revenue growth management is a critical tool to segment our consumers and channels, and we're increasingly integrating the capability with our marketing expertise to drive transaction growth. step up our capabilities. We're leveraging learnings across our markets and marrying digital investments with clear, compelling points of sale, messaging in stores and on packs. While it takes patience and discipline to build a refillables franchise, we're tapping into learnings from our strong capabilities in Latin America to grow refillables over the long term in Africa, the Philippines, Thailand, and parts of Eurasia and the Middle On the premiumization side, we're leveraging our experience in North America to grow mini-cans in Europe.
This addition is designed to complement our strong core portfolio and offer more choice across occasions and preferences.
Revenue growth management is a critical tool to segment, our consumers and channels and we are increasingly integrating the capability with our marketing expertise to drive transaction growth.
To step up our capabilities, we're leveraging learnings across our markets I'm marrying digital investments with clear compelling points of sale messaging in stores and on packs.
While it takes patience and discipline to build a refillable franchise, we're tapping into learnings from our strong capabilities in Latin America to grow refillable over the long term in Africa, the Philippines, Thailand, and parts of Eurasia, and the Middle East.
On the premium amortization side, we are leveraging our experience in North America to grow mini cans in Europe.
James Quincey: And finally, last year, we piloted an AI-based back price channel optimization tool in Mexico. Results so far have shown this tool improves our offerings and speed to market. So far, we've scaled this platform to eight markets across four operating Lastly, robust local execution is key to ensuring the success of our top-line initiatives. Our system is stronger than ever, which ultimately leads to commitments to further invest to drive growth. We've collectively ushered in a culture of learning from one another, and we aspire to improve every aspect of how we do business.
And finally last year, we piloted an AI based.
Channel optimization totally Mexico.
So far have shown this tool improves our offerings and speed to market. So far we scaled this platform to eight markets across four operating units.
Lastly, robust local execution is key to ensuring the success of our top line initiatives.
Our system is stronger than ever which ultimately leads to commitments to further invest to drive growth. We've collectively ushered in a culture of learning from one another and we respond to improve every aspect of how we do business.
James Quincey: To summarise, while the external environment continues to be dynamic, and there is no doubt that much uncertainty remains in the downhill, we remain growth-oriented. We're continuing to pivot our plans as needed, and we're harnessing our all-weather strategy to deliver on our growth ambitions.
To summarize while the external environment continues to be dynamic and there is no doubt that much uncertainty remains in the downhill we remain growth orientated.
We're continuing to pivot our plans as needed and we are harnessing our all weather strategy to deliver on our growth ambitions.
James Quincey: Before I conclude, I'd like to recognize the efforts and unwavering dedication of our system employees around the world.
Before I conclude I'd like to recognize the efforts and unwavering dedication of our system employees around the world.
John Murphy: With that, I'll turn the call over to Thank you, James, and good morning, everyone. In the first half of 2025, we delivered positive volume, organic revenue growth at the high end of our long term algorithm, robust margin expansion, and continued earnings per share growth in a very dynamic operating landscape. During the second quarter, we invested with discipline to achieve our objective. We grew organic revenues 5%. Unit cases declined 1% largely due to a weaker than expected June concentrate cells, or even with unit cases. Our price mix growth of 6% was primarily driven by approximately 5.5% Pricing Action and one point of favourable mix.
John: With that I'll turn the call over to John.
John: Thank you James and good morning, everyone in.
John: In the first half of 2025, we delivered positive volume organic revenue growth at the high end of our long term algorithm robo.
John: The robust margin expansion and continued earnings per share growth in a very dynamic operating landscape.
John: During the second quarter, we invested with discipline to achieve our objectives.
John: We grew organic revenue 5%.
John: Unit cases declined 1% largely due to a weaker than expected June.
John: Concentrate sales were even with unit cases.
John: Our price mix growth of 6% was.
John: It was primarily driven by approximately five points of pricing actions and one point of favorable mix.
John Murphy: pricing from intense infestory markets. Contributed to approximately one point of price mix growth down from approximately five points full year 2024. Comparable gross margin increased approximately 80 basis points. Uncomparable Operating Margin Increased Approximately 190 FACES Points Both were driven by underlying expansionism. partially offset by currency headwinds. Approximately one-third of our underlying expansion was driven by faster realization of our productivity initiatives While the rest was driven by timing of investment Putting it all together, second quarter comparable EPS of 87 cents increased 4% year over year, despite 5% currency headwinds. elevated net interest expense, and an approximate two point increase in our effective tax rate.
John: Pricing from intense inflationary markets contributed to approximately one point of price mix growth.
John: <unk> from approximately five points in full year 2024.
John: Comparable gross margin increased approximately 80 basis points.
John: And comparable operating margin increased approximately 190 basis points.
John: Both were driven by underlying expansion, partially offset by currency headwinds.
John: Approximately one third of our underlying expansion was driven by faster realization of our productivity initiatives.
John: While the rest was driven by timing of investments and favorable cycling versus the prior year.
John: Putting it altogether second quarter comparable EPS of <unk> 87.
John: Increased 4% year over year despite.
John: Despite 5% currency headwinds.
John: <unk> net interest expense and an approximate two point increase in our effective tax rate.
John Murphy: Free cash flow, excluding the Fair Life contingent consideration payment, was $3.9 billion, which is an increase of approximately $600 million versus the prior year. Growth was driven by underlying business performance and lower tax payments. partially offset by cycling working capital benefits in the prior year. During the quarter, we made our final $1.2 billion transition tax payment related to the 2017 Tax Cuts and Jobs Act. Our balance sheet remains strong, with our net debt leverage of 2 times EBITDA, which is at the low end of our targeted range of 2 to 2.5 times EBITDA. We're confident in our long term free cash flow generation and have ample balance sheet capacity to pursue our capital allocation agenda, which prioritizes continuing to invest in our business and returning capital to our shareholders.
Free cash flow, excluding the fair life contingent consideration payment was $3 9 billion.
John: Which is an increase of approximately $600 million versus the prior year.
John: Growth was driven by underlying business performance and lower tax payments.
John: Partially offset by cycling working capital benefits in the prior year.
John: During the quarter, we made our final $1 2 billion dollar transition tax payment related to the 2017 tax cuts and jobs Act.
John: Our balance sheet remains strong with.
John: With our net debt leverage of two times at beta which is at the low end of our targeted range of two to two five times.
John: We're confident in our long term free cash flow generation and have ample balance sheet capacity to pursue our capital allocation agenda, which prioritizes continuing to invest in our business and returning capital to our shareowners.
John Murphy: Enabled by our all weather strategy, we're updating our 2025 takes into consideration. are actions to drive growth in a dynamic context. and what we know today about our external environment. We continue to expect organic revenue growth of five to 6% would now expect comparable currency neutral earnings per share growth of approximately 8% both of which reflect delivery in line with our long-term growth algorithm. based on current rates and our hedge position. We now anticipate an approximate one to two point currency headwind to comparable net revenues. and an approximate five point currency headwind to comparable earnings per share for full year 2025.
John: Enabled by our all weather strategy, we're updating our 2025 guidance.
John: Which takes into consideration.
John: Our actions to drive growth in a dynamic context, and what we know today about our external environment.
John: We continue to expect organic revenue growth of 5% to 6%.
John: But now expect comparable currency neutral earnings per share growth of approximately 8%.
John: Both of which reflect delivery in line with our long term growth algorithm.
John: Based on current rates and our hedge positions.
John: Now anticipate an approximate 1% to two point currency headwind to comparable net revenues.
John: And an approximate <unk> five point currency headwind to comparable earnings per share for full year 2025.
John Murphy: While we recognize there's recently been some favorable currency movement We hedge much of our developed market and some of our developing market exposure and will take time to see the full benefits. We will continue to utilize the disciplined hedging strategy that provides greater certainty. for Decision Making. Our underlying effective tax rate for 2025 I still expect it to be 20.8%. which is more than a two-point increase versus the prior year. All in, based on what we know today, we now expect 2025 comparable earnings per share growth of approximately 3% versus $2.88. 2024.
John: While we recognize there's recently been some favorable currency movements.
John: We hedged much of our developed markets and some of our developing market exposure.
John: And it will take time to see the full benefits. We will continue to utilize a disciplined hedging strategy that provides greater certainty.
John: For decision, making.
John: Our underlying effective tax rate for 2025.
John: Is still expected to be 28%.
John: Which is more than a two point increase versus the prior year.
John: All in based on what we know today, we now expect 2025 comparable earnings per share growth.
John: Of approximately 3% versus $2 88.
John: In 2024.
John Murphy: There are some consideratio to keep in mind for the remainder of 2025. We continue to expect our external landscape to be dynamic. and we expect recovery in some markets to take time. We are expecting concentrate sales to run slightly behind unit cases during the third quarter. And based on what we know today, we continue to believe the impact of global trade dynamics on our cost structure will be managed. Given the strong margin expansion that came through earlier in the year, we no longer expect margins to be back halfway to 2025.
John: There are some considerations to keep in mind for the remainder of 2025.
John: We continue to expect our external landscape.
John: B dynamic.
John: And we expect a recovery in some markets to take time.
John: We are expecting concentrate sales to run slightly behind unit cases during the third quarter.
John: Based on what we know today, we continue to believe the impact of global trade dynamics on our cost structure.
John: Will be manageable.
John: Given the strong margin expansion.
John: It came through earlier in the year.
John: We no longer expect margins to be back half wages in 2025.
John Murphy: Last, due to our reporting calendar, there will be one additional day in the fourth quarter. So, in summary, while the external environment continues to evolve, we're successfully pivoting to continue to deliver top-line growth, margin expansion. In the first half of the year, we've effectively tackled many challenges not anticipated at the outset, and we will continue to adapt to whatever lies ahead. Thanks to the proven strength of our system, we have great confidence we will deliver on our updated 2025 guidance. creates enduring value for our stakeholders.
John: Last due to our reporting calendar there will be one additional day in the fourth quarter.
John: So in summary.
John: The external environment continues to evolve.
John: We're successfully pivoting to continue to deliver top line growth margin expansion.
John: And earnings per share growth in the first half of the year, we've effectively tackled many challenges not anticipated at the outset and we will continue to adapt to whatever lies ahead. Thanks.
John: Thanks to the proven strength of our system, we have great confidence, we will deliver on our updated 2025 guidance.
John: And Chris enduring value for our stakeholders.
Unknown Attendee: With that operator, we are ready to take Ladies and gentlemen, to ask a question, you'll need to press star one on your telephone to withdraw your question. Press star one again.
John: Operator, we are ready to take questions.
Operator: Ladies and gentlemen to ask a question you will need to press star one on your telephone.
John: A question press Star one again.
Unknown Attendee: 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: Interest of time, we ask that you please limit yourself to one question.
John: Have any additional questions you may rejoin the queue.
Lauren Lieberman: Our first question comes from Lauren Lieberman from Barclays. Please go ahead. Your line is open. Great, thanks. Good morning.
Speaker Change: Our first question comes from Lauren Lieberman from Barclays. Please go ahead. Your line is open.
Speaker Change: Great. Thanks, good morning.
James Quincey: I was struck by the use of the phrase, the word pivot, you know, pivoting our plans, adjusting our plans a couple times in both of your prepared remarks. And yet you had, you know, very solid, good, strong organic sales growth this quarter, profitability was really striking. And the outlook for the second half feels comparably strong, frankly, with just a little bit less margin expansion.
Speaker Change: I was struck by the use of the phrase.
Matt: Hey, Matt.
Matt: Pivoting our plans adjusting our plans a couple of times in both of your prepared remarks.
Matt: And yet you had very solid good strong organic sales growth this quarter profitability was really striking.
Matt: And the outlook for the second half feels comparably strong frankly, with just a little bit less margin expansion. So maybe I can just really focus on that pivot plans piece to understand maybe more concisely.
James Quincey: So maybe I can just really focus on that pivot plans piece to understand maybe more concisely. What it is, you know, as you're thinking about the back half of the year, does the environment feel that it's tougher? Does it mean that, you know, the sort of puts and takes of which markets you thought would go one way versus another is the key to what that pivot commentary means? But I could use a little clarification on all of that. Thanks. Sure. I think, and thank you for noticing that we had a strong first half and guidance implies a strong second half, and we certainly are aiming to deliver that.
Matt: What is your thinking about the back half of the year does the environment feel that it's tougher does it mean that.
Matt: This sort of puts and takes of which market you thought would go one way versus another is that the key to what that pivot commentary means but could you just a little clarification on all of that thanks.
Matt: Sure.
Matt: I think thank you for noticing that we had a strong first half in our.
Matt: Guidance implies a strong second half and we certainly are aiming to deliver that I think how you should interpret the pivot comment.
James Quincey: I think how you should interpret the pivot comment is really in the context of us pursuing growth under the all-weather strategy. This year has been, I think, characterized by rapid turns of events and twists and turns, which has required us to respond with greater agility and speed. So if you just compare and contrast Q1 to Q2, in Q1, the US and Europe were slightly weaker, but we pivoted or we adapted with some agility, and we got much better coming into Q2 in those developed markets. And yet, in Q2, in a couple of our big emerging markets, Mexico and India, for example, partly they had strong comparisons to prior year, but we got hit by some early monsoon in India, which is the important selling season, plus the India-Pakistan conflict, brief as it was, plus weather in Mexico, which required us to pivot to bring back growth in those parts of the world coming into the second half.
Matt: It's really in the context of us pursuing growth under the old way. The strategy. This year has been I think characterized by rapid turns of events and twists and turns.
Matt: Which has required us to respond with great agility and speed.
Matt: So if you just pumped compare and contrast, Q1 to Q2 in Q1, the U S and Europe was slightly weaker, but we pivoted all we adapted with some agility, we got much better coming into Q2 in those developed markets and yet in Q2 in couple of our big emerging markets, Mexico and India for example.
Matt: Ample partly they had strong comparisons to prior year, but we got hit by some some early monsoon in India, which is the important selling season, plus the India, Pakistan conflict brief.
Matt: A brief as it was.
Matt: Plus whether a Mexico, which required us to pivot to bring back growth in those parts of the world coming into the second half. So it's really if you like about the need for the all weather strategy that we take it up another notch in terms of how fast you can pivot and execute to still deliver.
James Quincey: So it's really, if you like, about the need for all-weather strategy to be taken up another notch in terms of how fast you can pivot and execute to still deliver the results that we're delivering.
Matt: The results that we're delivering.
Dara Mohsenian: Our next question comes from Dara Mohsenian from Morgan Stanley. Please go ahead. Your line is open. Hey, good morning. So Protein's a space that's on trend with the consumer. It's growing at very strong rates. You obviously have a clear competitive advantage with the Fairlife brand, but given all those factors, you are running into capacity constraints. So just with that as a backdrop, I was hoping you could give us a sense of how much of an unlock the plan U.S. capacity additions are starting in early 26 for Fairlife, both the total volume, but also how that will enable you to manage each of the three Fairlife product areas differently.
Dara <unk>: Our next question comes from Dara <unk> from Morgan Stanley. Please go ahead. Your line is open.
Dara: Hey, good morning.
Dara <unk>: So more proteins.
Speaker Change: A space that is on trend with the consumer it is growing at very strong rates you, obviously have a clear competitive advantage with the fair life brand, but given all those factors you are running into capacity constraints. So just with that as a backdrop I was hoping you could give us a sense of how much of an unlock the planned U S capacity additions are.
Speaker Change: Starting in early 2006 for fair life, both the total volume, but also how that will enable you to manage each of the three fair life product areas differently. And then also can you discuss if there is any international fair life plans on the horizon outside North America over the next few years I know.
James Quincey: And then also, can you discuss if there's any international Fairlife plans on the horizon outside of North America over the next few years? I know replicating the North America dairy manufacturing footprint would be difficult. So just how realistic is international expansion at some point and in what timeframe?
Speaker Change: Replicating the North America dairy manufacturing footprint will be difficult. So just how.
Speaker Change: <unk> is international expansion at some point and in what timeframe. Thanks.
James Quincey: Thanks. Uh, sure. Um... Firstly, Fairlight continue to have strong growth, double-digit volume growth in the second quarter. Clearly, that's moderating slightly from Q1 and prior year. But we still expect to get volume growth in the second half, again, although moderating as we wait for the capacity to come online. I think the team has done a great job of creating some space this year to keep growing. As you point out, the New York facility will come online at the beginning of 2026. Obviously, that doesn't all turn on with a flick of the switch on day one, as much as one would wish it would be so.
Speaker Change: Sure.
Speaker Change: Firstly.
Speaker Change: <unk> continued to have strong growth.
Speaker Change: Double digit volume growth in the second quarter.
Speaker Change: Bold, writing slightly from Q1 and prior year.
Speaker Change: But we still expect to get.
Speaker Change: Volume growth in the second half again, although moderating as we wait for the capacity to come online I think the team has done a great job of creating some space this year to keep growing.
Speaker Change: As you point out the New York facility will come online at the beginning of 2026, obviously that doesn't all total AUM with a flick the switch on day, one as much as one would wish it with tweets so.
James Quincey: And that will ramp up over 2026, but it will steadily de-bottleneck our constraints on capacity across all the different Fairlight variants and package sizes. So we have that coming online in 2026. We also have, over the time, going into the future, options to expand capacity in some of the existing facilities. So I think the narrowing of the corridor is really the second half, maybe the first few months of next year. But we're basically going to get through that and doing really well with Fairlight so far.
Speaker Change: And that will ramp up over 26, but it will steadily.
Speaker Change: The bottleneck or.
Speaker Change: Constraints on capacity across all the different satellites variance and package sizes. So we have we have we have that coming online in 'twenty. Six we also have over the over the time prowler in going into the future options to expand capacity some of the existing facility. So I think that the narrowing of the Colorado.
Speaker Change: It's really the second half maybe the first few months of next year, but we're basically going to get through that and doing really well with <unk>. So far.
James Quincey: Secondly, as it relates to international, having made some investments in dairy which were unhappy in small countries and with small investments, it is worth pointing out that Santa Clara in Mexico also had a strong performance. It's now the number one value-added dairy business in Mexico. So not under the Fairlight brand, but actually a big market with a good position in value-added dairy there. And we continue to look at other international opportunities. As you rightly point out, the structure of the dairy industry in the U.S. is differential relative to other parts of the world. But protein is very on-trend.
Speaker Change: Secondly, as it relates to international.
Speaker Change: Having made some.
Speaker Change: Okay.
Speaker Change: Investments in dairy which were on.
Speaker Change: Happy in small countries and with small investments it is worth pointing out that Santa Clara in Mexico.
Speaker Change: <unk> had a strong performance is now the number one value added dairy business.
Speaker Change: Mexico, so not under the <unk> brand, but actually a big market with a good position and value added dairy that and we continue to look.
Speaker Change: International opportunities as you rightly point out.
Speaker Change: The structure of the dairy industry in the U S.
Speaker Change: He is differential relative to other parts of the world.
Speaker Change: But protein is very on trend.
James Quincey: We know that Fairlife and CorePower are strongly differentiated and preferred as products and And we are, of course, looking to see if we can deliver those sorts of consumer benefits in other parts of the world in ways that we feel would give us a competitive advantage versus whatever is in the marketplace at the time. More to come.
Speaker Change: We know that fair life on coal power.
Speaker Change: Strongly differentiated and preferred.
Speaker Change: Our products and brands and.
Speaker Change: And we are of course looking to see if we can deliver those sorts of consumer benefits.
Speaker Change: In other parts of the world in ways that we feel would make us give us a competitive advantage versus whatever's in the marketplace at the time.
Speaker Change: More to come.
Steve Powers: Our next question comes from Steve Powers from Deutsche Bank. Please go ahead. Your line is open. Thank you very much and good morning, everybody.
Speaker Change: Our next question comes from Steve Powers from Deutsche Bank. Please go ahead. Your line is open.
Steve Powers: Thank you very much and good morning, everybody.
James Quincey: James, just going back to Mexico and India, just given some of the pivots that you've made in those markets going into the back half, I guess the question is, you know, how quickly do you expect a rebound in those markets? And if there are any other markets as you go into the back half that you would flag as kind of known kind of watch points going into 3Q? I'd also like to just, because of the strong profit improvement or profit performance in the first half and in the quarter we just saw, it doesn't, it seems to imply maybe a little bit more reinvestment in the back half.
Speaker Change: James just going back to Mexico and India.
Steve Powers: Just given some of the.
Steve Powers: The pivots, you've made in those markets going into the back half I guess the question is how quickly do you expect a rebound in those markets and if there are any other markets as we go into the back half that you would.
Steve Powers: Would flag as kind of a known known kind of watch points going into <unk> I would also like to just because of the strong.
Steve Powers: Profit improvement or profit performance in the first half and in the quarter. We just we just saw it doesn't it seems to imply maybe a little bit more reinvestment in the back half.
James Quincey: And if that's the case, just any color on where that incremental investment may be targeted would be helpful. Thanks. Sure. Firstly, whilst being known to be calm, I'm not wildly known to be patient. So the sooner the volume bounces back, the better. I think in the case of Mexico, clearly the Q2 last year was the strongest quarter. It's worth being upfront and saying Q3 was the weaker quarter. So I think we're going into a cycling that should help us. We've got some strong plans to take Mexico, for one example, on affordability, doubling down on refillables and some of the value offerings.
Steve Powers: That's the case, just any color on where that incremental investment maybe target it would be helpful. Thank you.
Steve Powers: Sure.
Steve Powers: Firstly, whilst being known to be calm I'm not widely known to be patient. So the sooner the volume bounces back the better.
Steve Powers: I think in the case of Mexico.
Steve Powers: Clearly the Q2 last year was the strongest quarters worth being upfront in saying Q3 was the weaker quarter. So I think with <unk>, we're going into a cycling that should.
Steve Powers: Help us.
Steve Powers: We've got some strong plans to take Mexico for one example on affordability.
Steve Powers: <unk> down on refillable and some of the value offerings. We're also celebrating.
James Quincey: We're also celebrating our 100th anniversary in Mexico with Juntos por Cien Años, which is really about emphasizing the longstanding economic impact, which is going back to some of the Hispanic issues that bled across the border in the first half. And we're pulling together some of the marketing activation and execution activation with our bottling partners. So we're confident not just in the long term, but also in our ability to get back to growth as we come into Q2 and get out of some of the colder weather and the hurricane that was true in June.
Steve Powers: Our 100th anniversary in Mexico, with <unk>, which is really about emphasizing the long standing economic impact, which is going back to some of the Hispanic issues that led across the board in the first half.
Steve Powers: Report, we're pulling together some of the marketing activation of execution activation with our bottling partners.
Steve Powers: We're confident not just in the long term, but also in our ability to get back to growth as we come into Q2 and get out of the some of the colder weather and the hurricane that was true in June.
James Quincey: In the case of India, India, as we've talked about, John and I have said in previous calls, is never going to be a straight line. And indeed, Q2 was not. But we're very bullish on India overall. The Q2 did decline. There was, as I said, the conflict and the monsoon. But we have a lot of marketing campaigns focused on India. We have also just set up the first kind of refranchising piece with the Jubilant Group for the company-owned bottler that we have in, which is basically the bottom half of India. And that's up and running with a new CEO.
Steve Powers: In the case of India, India as we've talked.
Steve Powers: Both John and I have said in previous calls this is never going to be a straight line and.
Steve Powers: And indeed Q2 was not.
Steve Powers: But we're very bullish on India overall.
Steve Powers: The Q2 decline that was as I said, the conflict and the monsoon, but we have a lot of marketing campaigns focused on India. We are also.
Steve Powers: Just set up.
Steve Powers: The first kind of Refranchising pace.
Steve Powers: With the <unk> group for the.
Steve Powers: Company owned bottler that we have which is basically the bottom half of India.
Steve Powers: That's up and running with a new CEO.
James Quincey: So we think that will bring some new energy and dynamism and focus and proactivity to the execution in the marketplace. So we think we've got a strong plan from a marketing and innovation point of view. The local franchise bottlers were doing better than the CBO in the first half. And with some energised focus on this transition bottler, we're pretty confident on where we'll go in India. And then as it relates to the unauthorised second question, profit improvement, yes, it does imply a little bit of reinvestment. There's a piece of timing in there. We had expected more of the productivity in the second half, and we got some of it in the first half, which, of course, moves the money around.
Steve Powers: So we think that will bring some new energy and dynamism and focus on productivity.
Steve Powers: The execution in the marketplace. So we think we've got a strong plan from a marketing and innovation point of view.
Steve Powers: Local franchise wireless we're doing better than the CBO.
Steve Powers: In the first half and with some re energized focus on this transition Butler, we're pretty confident on where we'll go in India.
Steve Powers: And then as it relates to the unauthorized second question.
Steve Powers: Profit improvement.
Steve Powers: Yes, it does imply a little bit of reinvestment cycle. There is a piece of timing in there we had expected more of the productivity in the second half and we've got some more some of it in the first half which moves the moves the money around.
James Quincey: And so that's a piece of it. But we also are, as we've said in previous years, we continue to lean into growth. We've got a growth strategy, we're delivering growth, and we're going to continue to invest into that to drive momentum and assure momentum in the second half, but also set ourselves up for a good 2026.
Steve Powers: And so that's a piece of it but we also are as.
Steve Powers: As we've said in previous years, we continue to lean into growth, we got a growth strategy for delivering growth and we're going to continue to invest into that to drive momentum and assure momentum in the second half, but also set ourselves up for a good 2026.
Filippo Falorni: Our next question comes from Filippo Falorni from Citi. Please go ahead. Your line is open. Hi, good morning, everyone. I wanted to ask about the North American market.
Speaker Change: Our next question comes from Filippo <unk> from Citi. Please go ahead. Your line is open.
Filippo: Hi, good morning, everyone.
Speaker Change: I wanted to ask about the North American market, we've seen a little bit on an improvement in the volume and the unit case volume is still negative but.
James Quincey: We've seen a little bit of an improvement in the volume in the unit case volume still negative, but just any thoughts on the outlook as you move forward in the backhouse, especially on two points, the QSR and away from home China more broadly, how you've seen the trends evolving there.
Speaker Change: Just any thoughts on the outlook as you move forward into the back half, especially on two points.
Speaker Change: The <unk> and away from home channel more broadly how you're seeing the trends evolving there and then also the <unk>.
James Quincey: And then also, the trends among the Hispanic consumer, which was a pressure in Q1, and it seems to have gotten better throughout Q2. Thank you. First of all, the U.S. business did a very strong job in coming back from a slower start in Q1 and getting sequentially better in Q2, getting some good revenue growth, share was good, and profit was good, so really getting better. And I think that's in the context of a pretty resilient overall consumer. The aggregate spend is holding up. Yes, there's some pressure in those with lower incomes where we're targeting some affordability and some special focus on marketing and occasions.
Speaker Change: Trends among the Hispanic consumer which was a pressure in Q1 and it seems to have gotten better throughout Q2. Thank you.
Speaker Change: Sure.
Speaker Change: The overall.
Speaker Change: The USDA business did.
Speaker Change: Did did a very strong job and coming back from a slower start in Q1 and getting sequentially better than Q2 getting some good revenue growth was good.
Speaker Change: It was good so really getting better and I think thats in the context of a pretty resilient overall consumer the aggregate spend is holding up yes. There is some pressure in those with lower incomes, where we're targeting some some affordability.
Speaker Change: At some special some special focus on marketing indications.
James Quincey: So I think the overall outlook continues to be resilient, and we're investing for growth in that. Just on the Hispanic consumer, yes, we had a problem in the first half. If you take the end of June, by the end of June, we had basically got back to the share we started the year with. We got back to the brand equity scores we were looking back, and we got back to the household penetrations. But obviously, as that went down into the valley from January to March, it had to climb out of the valley from April to June, so it was still a headwind in the second quarter.
Speaker Change: The overall outlook continues to be resilient and we are investing for growth in that.
Speaker Change: Just on the Hispanic consumer.
Speaker Change: Yes, we had a problem in the first half if you take the end of June.
Speaker Change: By the end of June we had basically got back to the share we started the year with we got back to the <unk>.
Speaker Change: <unk> equity schools, we're looking back and we got back to the household penetration, but obviously as that went down into the valley from January to March you'd have to climb out of the valet from April to June. So it was still a headwind in the second quarter, but the issue is now largely resolved.
James Quincey: But the issue is now largely resolved. We're back to where we were, and there was a lot of good stuff on some very targeted contextual advertising against basically the false video, and a lot of focus on how local the Coke business is. It's made in the U.S. It's made by U.S. employees. It's distributed by U.S. employees and U.S. retailers.
Speaker Change: We're back to where we were and there was a lot of good stuff on some very tolerated contextual advertising against the basically the default video.
Speaker Change: And a lot of focus on.
Speaker Change: How local the Coke business is.
It's made it's made in the U S. It's made by U S employees is distributed by U S employees in U.
Speaker Change: U S retailers. So I think we've kind of put that one behind us for now.
James Quincey: So I think we've kind of put that one behind us for now.
James Quincey: And then the away-from-home channel, obviously, depending on where you are on the away-from-home channel, you get slightly better or slightly worse footfall and traffic. But I think it's really not a different reflection of the overall economy, where you see some of the bits of the channels where you've got the lower-income consumers a little more focused on affordability offers, so you definitely see that coming up. But the team has done a good job on customer renewals and bringing in new accounts like Costco and Carnival. So we're seeing some pretty good reaction there, but I don't think one should think about it as that different a representation than the overall market.
Speaker Change: And then the away from home channel, obviously, depending on where you are on the way.
Speaker Change: From a channel.
Speaker Change: You get slightly better or slightly worse, footfall and traffic, but I think this is really not a different reflection of the overall economy, where you see some.
Speaker Change: Some of the bits of the channels, where you've got the lower income consumers are little more focused on affordability office. So you definitely see that coming up but the team has done a good job on customer renewals.
Speaker Change: And bringing in new accounts.
Speaker Change: Cosco and carnival. So we're seeing some some pretty good reaction there, but I don't think one should think about it is that different to representation that the overall market.
Bonnie Herzog: Our next question comes from Bonnie Herzog from Goldman Sachs. Please go ahead. Your line is open. All right. Thank you. Good morning. James, I wanted to drill down something. You mentioned that productivity came in better than expected in the first half.
Speaker Change: Our next question comes from Bonnie Herzog from Goldman Sachs. Please go ahead. Your line is open.
Bonnie Herzog: Alright, Thank you and good morning.
Speaker Change: James I wanted to come to Algonquin.
Speaker Change: Since that productivity came in better than expected in the first half so just.
John Murphy: So just, you know, hoping you could just provide a little bit more color on sort of what drove that upside and then how we should think about that in the back half and some of your, you know, the rest of your productivity initiatives planned for this year. Thank you. Sure. Two basic sources of the productivity. One was the benefit of the marketing transformation. We've been on a journey for the last few years on the marketing transformation, which is not just about the effectiveness and the digitization of the advertising and the segmenting of the advertising, but also about the efficiency both of producing it and of buying the media where we use the advertising.
Speaker Change: Hoping you could just provide a little bit more color on sort of what drove that upside and then how we should.
Speaker Change: I'm thinking about that in the back half and some of that here the rest of your productivity initiatives planned for both concepts.
Speaker Change: Sure.
Speaker Change: Two two basic sources of the productivity.
Speaker Change: One was the benefit of the marketing transformation, we've been on a journey for the last few years on the marketing transformation.
Speaker Change: Which is not just about the effect of tariffs and the Digitization.
Speaker Change: The advertising and the segmenting of the advertising, but also about the efficiency of both the producing it and buying the media, where we use the advertising.
John Murphy: And we were able to capture some of those savings. And just from a timing perspective, there was just a little more of them in the first half of the second half, but those were always on the way. And it's a product of the work we've been doing over the last couple of years to really reform how we do the marketing to be not just more effective, but to also bring some efficiency to bear. And then the other piece of the productivity was setting out to be as disciplined as possible on the operating expenses and to be a little more frugal and to invest our money a little wiser as we went in.
Speaker Change: We were able to capture some of those savings just from a timing perspective that was a just a little more of them in the first half the second half, but those were always on the why.
Speaker Change: It's a product of the work we've been doing over the last couple of years to really reform, how we do the marketing not just more effective but also bring some efficiency to Beth and then the other piece.
Speaker Change: Of the productivity, we're setting out to be as disciplined as possible on the operating expenses.
Speaker Change: And to be a little more frugal and to invest our money a little wise.
Speaker Change: As we went in and we were able to just capture some of those benefits.
John Murphy: And we were able to just capture some of those benefits as we came into Q2 ahead of the second half. So mainly just getting things done a little quicker than anticipated, which is good news.
Speaker Change: As we came into Q2.
Speaker Change: Ahead of ahead of the second half so mainly just getting things done a little quicker than anticipated, which is good news.
Speaker Change: Yeah.
Chris Carey: Our next question comes from Chris Carey from Wells Fargo. Please go ahead. Your line is open. Hi, everyone. This will be slightly, you know, connected, but a bit more specific. North America margins were incredibly strong in Q2, even with higher marketing on a year on year basis. I understand there are so many puts and takes Sure.
Speaker Change: Our next question comes from Chris Carey from Wells Fargo. Please go ahead. Your line is open.
Chris Carey: Hi, everyone. This will be slightly connected but a bit more specific north America margins were incredibly strong in Q2, even with higher marketing on a year on year basis I understand there are so many puts and takes.
Speaker Change: Would love to get your take on how these margins have been evolving.
Speaker Change: Some of the key drivers between perhaps pricing or cost savings.
Speaker Change: <unk> mix channel mix again I fully appreciate there are so many drivers every every quarter, but the evolution here has been sequentially and directionally positive and moving in the right direction. So I'd love to get your broader thoughts on on what you think is driving that sent editor ability. Thanks. So much.
Speaker Change: Sure.
James Quincey: Firstly, I mean, I'll give you some factors relative to Q2, but as I've done, normally the question comes on Asia-Pacific on margins being strange movements in inter-quarter. I would encourage you to take a multi-quarter view of any bits of the business rather than one. Having said that, clearly, the margins got better in Q2 in North America. Clearly, part of that was coming from the productivity initiatives, as I just described them. Some of it comes a little bit from with the deceleration of some of the vertically integrated businesses. They're mixing in less operating expense, so that kind of makes a difference.
Speaker Change: Firstly.
Speaker Change: I'll give you some some factors relative to Q2, but as I've done normally the question comes on Asia Pacific on margins being strange movements.
Speaker Change: Intra quarter I would I would encourage you to take a multi quarter view of any bits of the business rather than one <unk>.
Speaker Change: Having said that clearly the margins got better in Q2 in North America.
Speaker Change: Clearly part of that was coming from.
Speaker Change: From the productivity initiatives as I just described some of it comes a little bit from.
Speaker Change: With the deceleration of some of the vertically integrated business is that mixing in less operating expense. So that that kind of makes a difference the vertically integrated business is tending to have a slightly lower percent margin than the concentrate business is so that's another driver of <unk>.
James Quincey: The vertically integrated businesses are tending to have a slightly lower percent margin than the concentrate businesses, so that's another driver of what's going on.
Speaker Change: I think what.
James Quincey: What's also important to understand is none of this is happening in the absence of continuing to invest behind our brands. We were still very strongly investing not just in innovation, but actually in absolute marketing terms in the U.S. market to continue to drive growth. Whilst the margin has been improving in the U.S. marketplace over time, and if you go back four years, it was not in a great place. I think it's more normalized. What it's a feature of is that normalization and productivity, but the most important story is continuing to invest heavily behind our portfolio, our innovation, our execution to drive growth and gain share.
It's also important to understand is none of this is happening in the absence of continuing to invest behind our brands. We will bear. It we were still very strongly investing not just innovation, but actually in absolute marketing terms.
Speaker Change: In the U S market to continue to drive growth so.
Speaker Change: It's not it's not a whilst the margin has been improving in the U S marketplace.
Speaker Change: Over time I mean, if you go back four years it was not in a great place. So I think it's kind of more normalized.
Speaker Change: And what is the feature all of us that normalization of productivity, but the most important story is continuing to invest heavily.
Behind our portfolio, our innovation, our execution to drive growth and gain share.
Kaumil Gajrawala: Our next question comes from Kaumil Gajrawala from Jeffrey. Please go ahead. Your line is open. Hey guys, good morning. I guess three questions in a row on margins, but this will be a bit different. Obviously, productivity coming in a little bit better, the margins look great. At the same time, the impact from foreign currency seems to be abating, and if it continues in this way, might even move in a positive direction as we get into next year.
Speaker Change: Our next question comes from Camille Kashiwa from Jefferies. Please go ahead. Your line is open.
Camille Kashiwa: Hey, guys good morning.
Speaker Change: I guess three questions in a row on margins, but this will be a bit different.
Speaker Change: Obviously productivity coming in a little bit better the margins looked great at the same time the.
Speaker Change: The impact from foreign currency seems to be abating and if it continues in this way it might even moving in a positive direction as we get into next year can you maybe just talk about.
John Murphy: Can you maybe just talk about the operating leverage across the P&L, given how much has changed so far, and these two factors? Very much moving in your favor.
Speaker Change: The operating leverage across the P&L, given how much of a change so far in these really two factors.
Speaker Change: Very much moving in your favor.
Speaker Change: Sure.
Speaker Change: Okay.
John Murphy: Let me, let me take that one, James. So yeah, you've got two, you've got two distinctive factors. I think James covered well. The drivers of operating leverage on both the growth and operating margin lines, which we continue to expect to deliver in the second half of the year, albeit at a slightly lower rate than we had previously flagged. And then on the currency front, as you all know, we hedge as a fluctuations and provide greater certainty at the local market level. And in the year to date, the main influence of the year to date has been the performance of the G10 currencies, which we hedge on a consistent basis.
Speaker Change: Let me, let me take that one.
Speaker Change: So yes, you've got to you've got two distinctive face I think tim's covered well.
Speaker Change: The the drivers of operating leverage on both the gross and operating margin lines, which we continue to expect to do.
Speaker Change: In the second half of the year, albeit at a slightly lower rate than we had previously site.
Speaker Change: And then on the currency front.
Speaker Change: As you.
Speaker Change: As you all know we hedged two.
Speaker Change: As a risk management tool to help us smooth.
Speaker Change: Fluctuations and.
Speaker Change: And provide greater certainty in the at the local market level.
Speaker Change: <unk>.
Speaker Change: Year to date.
Speaker Change: The main the main influence at year to date.
Speaker Change: And then the performance of the G 10 currencies.
Speaker Change: We which we hedge on a consistent basis.
John Murphy: And there, those hedges are somewhat offsetting the actual dollar weakness that we have seen in those against those currencies emerging on the emerging markets front, not as much.
Speaker Change: Those hedges are somewhat offsetting.
Speaker Change: The actual the actual dollar weakness.
Speaker Change: But we have seen in those against those currencies emerging on the emerging markets front.
Speaker Change: Not as much.
John Murphy: And so as we look to the second half of the year, we provide more color in October on our outlook for 2026. The updated guidance reflects a softening of the negative impact that we had been experiencing on the overall currency front. So net-net, slightly better environment, we continue to hedge to, as I said, to smooth the fluctuations that we typically experience.
Speaker Change: And so as we look to the second half of the year and we'll provide more color in October on.
Speaker Change: Our outlook for 2026.
Speaker Change: The updated guidance reflects a softening of the.
Speaker Change: Of the of the negative impact that we.
Speaker Change: We had been experiencing.
Speaker Change: On the overall currency prompt so net net.
Speaker Change: Slightly better environment, we continue to to hedge.
Speaker Change: <unk>.
So as I say, it's a smooth the fluctuations that we typically experience.
John Murphy: We'll provide. an update for 26 on the on the October call.
Speaker Change: We will provide.
Speaker Change: An update for 2006 on the on the October call.
Robert Ottenstein: Our next question comes from Robert Ottenstein from Evercore. Please go ahead. Your line is open. Great, thank you very much. James, can you talk a little bit about, you know, globally, what you're seeing in terms of consumer strength? The sense I got, and maybe I misheard, but the sense I got was that you were a little bit surprised by some pockets of consumer weakness globally, apart from the weather, apart from geopolitical issues. So is that right? What are you seeing, you know, from the consumer globally? And if things did weaken a bit in June, how has that progressed into July?
Speaker Change: Our next question comes from Robert <unk> from Evercore. Please go ahead. Your line is open.
Robert: Great. Thank you very much.
Speaker Change: James can you talk a little bit about.
Speaker Change: Globally, what youre seeing in terms of consumer strength.
Speaker Change: The sense I got and maybe I misheard, but the sense I got was that you were a little bit surprised.
Speaker Change: By some pockets of consumer weakness globally apart from the weather apart from geopolitical issues.
Speaker Change: Is that right what are you seeing from the consumer globally.
Speaker Change: And if things did weaken a bit in June.
Speaker Change: That progressed into July thank you.
James Quincey: Thanks.
Speaker Change: Yeah.
Speaker Change: Yeah. Thanks.
James Quincey: Yeah, thanks, Robert. Yeah, I mean, let me just stand back again on the volume around the world. The second quarter, we had good performances and improving sequentially, so North America improved sequentially, Europe was up, Middle East was up, Africa was up, China was up. And apart from the two that I mentioned in terms of the weaker performance, India and Mexico, there was a little bit of weakness in Japan, but there was also some. I think the one that kind of was the most, I don't know if it goes as far as surprising, but Let's go with surprising, just for the sake of the argument, with more Thailand, Indonesia, Vietnam, the ASEAN markets, we saw some weakness in Q2, which was perhaps a little more than we've been expecting.
Speaker Change: Yes, I mean, let me just let me just stand back again on the volume around the world.
Speaker Change: The second quarter, but we had good performances and improving sequentially.
Speaker Change: So North America improved sequentially Europe, Europe was up Middle East Africa was up China was up.
Speaker Change: And apart from the two that I mentioned in terms of the weaker performers India Mexico.
Speaker Change: There was a little bit of weakness in Japan, but there was also some.
Speaker Change: I think the one those kind of was the most I don't know go as far as surprising but.
Speaker Change: Let's go with surprising just like the argument was more Thailand, Indonesia Vietnam.
Speaker Change: The ASEAN markets, we saw some weakness in Q2, which was perhaps a little more than we'd been expecting so I would I would say overall.
James Quincey: So I would say overall that the global economy and the global consumer remains resilient. There have been some swings in countries, a bit like I said at the beginning, and I'll than perhaps historically, and so something can get worse and then better again at a faster velocity than perhaps in the past. And there have obviously been some geopolitical events that happened in Q2, and they've come in and out quickly too, some of them. So the rate of surprise is kind of speeded up. But I think you've got to stand back and say, actually, overall, there was a pretty resilient consumer environment.
Speaker Change: The global economy, and the global consumer remains resilient there have been some swings in countries a bit but like I said at the beginning and also one of the questions.
Speaker Change: Things have come in and outs at greater speed than perhaps historically.
Speaker Change: And so somebody can get worse, and then better again at a faster velocity than perhaps.
Speaker Change: In the past.
Speaker Change: And there's obviously been some geopolitical events that happened in Q2, and they've come in and out quickly to some of them.
Speaker Change: So the rate of surprise as kind of speed it up.
Speaker Change: But I think you've got to stand back and we are actually overall, there was a pretty resilient consumer.
Speaker Change: Consumer environment.
James Quincey: Pluses and minuses by the countries. If I had to say one that was a little surprising, it would be ASEAN, leaving aside weather and things like that.
Speaker Change: Pluses and minuses by the countries if I had to say one that was a little surprising with the ASEAN.
Speaker Change: Leaving aside weather and things like that but we're confident we're investing in the right programs for the second half marketing innovation, our GM execution to make sure that as we drive our top line algorithm for the second half that will come with a better volume component.
James Quincey: But we're confident we're investing in the right programs for the second half, marketing, innovation, RGM, execution, to make sure that as we drive our top line algorithm for the second half, that will come with a better volume component.
Speaker Change: Yes.
Andrea Teixeira: Our next question comes from Andrea Teixeira from JP Morgan. Please go ahead. Your line is open.
Speaker Change: Our next question comes from Andrea Teixeira from Jpmorgan. Please go ahead. Your line is open.
James Quincey: Good morning. I wanted to ask on the potential innovation into pure sugarcane and then if you can talk about it like in the context of consumer preference and appetite to expand into more fiber. You see like a competitor launching to prebiotic under their main trademark and how it is simply performing or thoughts on participating more in that segment. Yeah, look we're always, I don't think just us, but I think the industry given its size, its attractiveness, and its growth potential, we're always looking for opportunities to innovate and see where there's an intersection of new ideas and where consumer preferences are evolving towards.
Andrea Teixeira: Hi, Good morning, I wanted to ask on the.
Speaker Change: The potential innovation into pure sugarcane.
Andrea Teixeira: And then.
Andrea Teixeira: And then if you can talk about it like in the context of consumer preference and appetite to expand into more fiber.
Andrea Teixeira: You see like a competitor amounting to prebiotic under their main trademark and how it is.
Andrea Teixeira: Simply pop performing or thoughts on participating more in that segment. Thank you.
Andrea Teixeira: Yeah. Thanks.
Andrea Teixeira: Look we're always.
Speaker Change: Just us, but I think the industry given its size its attractiveness and its growth potential we're always looking for opportunities to innovate.
Speaker Change: See whether there's an intersection of new ideas and where consumer preferences are evolving towards remembering that actually most innovations don't work in the long run.
James Quincey: Remembering that actually most innovations don't work in the long run, but I think you know it's a good sign that the industry, including ourselves, are trying lots of different things.
Speaker Change: But I think it's a good sign that the industry, including ourselves are trying lots of different things as it relates to the cane sugar, yes, we're going to be bringing.
James Quincey: As it relates to the cane sugar, yes we're going to be bringing a Coke sweetened with US cane sugar into the market this fall, and I think that will be an enduring option for consumers. Actually we use cane sugar in a number of our other brands in the US portfolio, from lemonades to teas, some of the coffee stuff, some of the vitamin water drinks, so that it's blended into some of our other products, and so we are definitely looking to use the whole toolbox, the whole toolkit of available sweetening options to some extent where there are consumer preferences.
Speaker Change: Our coke sweetened with USDA and should go into the market. This fall.
Speaker Change: And I think that will be an enduring option for consumers.
Speaker Change: Actually we used cane sugar in a number of our other brands in the U S portfolio from M&A fees.
Speaker Change: Some of the coffee stuff some of the vitamin water drinks, so that it's blended into some of our all of the products. So we are definitely looking to use the whole toolbox the whole toolkit.
Speaker Change: Available sweetening options.
Speaker Change: To some extent, whether a consumer preferences. So we will continue to do that and as we experiment, yes with fiber I think youre, referring to the cope with fiber in Japan.
James Quincey: So we will continue to do that, and as we experiment, yes, you know, with fiber, I think you're referring to the Coke with fiber in Japan, and so that's, you know, been an interesting option, and we collected some valuable learnings for it.
Speaker Change: And so that's been an interesting option.
Speaker Change: We collected some valuable.
Speaker Change: Earnings learnings for it.
Peter Grom: So we just continue to focus on trying things, understanding it takes a long time to build a new franchise with consumers, but you've got to try things, and we know our success rates, you know, substantially above the industry, but it's still a Our next question comes from Peter Grom from UBS. Please go ahead. Your line is. Thanks, operator. And good morning, everyone.
Speaker Change: So we just continue to focus on trying things understanding it takes a long time to build a new franchise with consumers that you've got.
Speaker Change: You got it you got to try things that we know our success rates.
Speaker Change: Substantially above the industry, but it's still a question of it takes time.
Speaker Change: And commitments to build something new.
Speaker Change: Our next question comes from Peter Grom from UBS. Please go ahead. Your line is open.
Speaker Change: Thanks, operator, and good morning, everyone. James I wanted to ask a follow up question on unfair life and just.
James Quincey: James, I wanted to ask a follow up question on Fair Life and just in your response to Dara's question, You talked about the growth is kind of moderated sequentially and you expect it to moderate further in the back half of the year. I'm assuming that that's simply related to the capacity constraints you mentioned and that your outlook or expectations for category growth or the competitive environment haven't shifted. So maybe just confirming that. And then just on that last point, I think it'll be helpful to get some perspective on the competitive environment and how you see that evolving in the back half of the year and into 26.
Speaker Change: In your response to <unk> question, you talked about that growth has kind of moderated sequentially and you expect it to moderate further in the back half of the year.
Speaker Change: I'm, assuming that that's simply related to the capacity constraints you mentioned in that your outlook or expectations for category growth or the competitive environment haven't shifted so maybe just confirming that and then just on that last point I think it'll be.
Speaker Change: Hopefully we get some perspective.
Speaker Change: On the competitive environment, and how you see that evolving in the back half of the year and into 2000.
James Quincey: Thanks. Sure, yes, I can confirm the moderation we're expecting is the law of big numbers and the capacity constraint rather than a weakening of the proposition relative to the competition. Now, we're still very excited about the opportunity for FairLife and CorePower and the FairLife nutrition plan. I have no doubt in my mind that if we had more capacity, we could sell more product today, tomorrow and going into the rest of the year. So it really is a capacity narrowing of the bottleneck that we're experiencing. Of course, it's getting bigger and bigger and bigger that the percentages will come down even if the absolutes continue to be speaking growth terms. And yes, it's not surprising that when our competitors and other people see the standout growth and success of a product like FairLife and CorePower, they will naturally seek to see if they can launch.
Speaker Change: So yes, I can confirm the moderation we're expecting is the law of big numbers on the capacity constraint rather than a weakening of the proposition relative to the competition, but we're still very excited about the opportunity for biolife on coal power.
Speaker Change: And the fair life Nutrition plan.
Speaker Change: Have no doubt in my mind that if we have more capacity, we could sell more product today tomorrow and going into the rest of the year.
Speaker Change: It really is a capacity.
Speaker Change: A narrowing of the bottleneck.
Speaker Change: We are experiencing.
Speaker Change: Of course, it gets bigger and bigger and bigger the percentages will come down even if the absolute continue to be big in broad terms.
Speaker Change: And yes, it's not surprising that when.
Speaker Change: Our competitors and other people say the standout growth and success of our product lifestyle life of coal power.
Speaker Change: Will they will naturally seek to see if they can launch and thats the nature of the industry and it keeps us all on our toes to know the competition is always trying to catch us up so.
James Quincey: And that's the nature of the industry. And it keeps us all on our toes to know the competition is always trying to catch us up. And so we'll be very focused on doing the best of FairLife, not just on the marketing, but on the execution. And of course, increasingly, as we have new capacity with new innovations and new thinking on where we can take the FairLife brand and the CorePower brand.
Speaker Change: It will be very focused on doing doing the best to fair life, not just on the marketing, but on the execution and of course increasingly as we have new capacity with new innovations and new thinking on where we can take the <unk> brand on the coal co power brand.
James Quincey: But exciting times ahead.
Speaker Change: But exciting times ahead.
Peter Galbo: Our next question comes from Peter Galbo from Bank of America. Please go ahead. Your line is open. Hey guys, good morning. Thanks for taking the question.
Speaker Change: Our next question comes from Peter Galbo from Bank of America. Please go ahead. Your line is open.
Peter Galbo: Hey, guys. Good morning, Thanks for taking the question.
James Quincey: It seems like we've gone the whole call without actually talking about Europe. So wanted to ask there. You know, James, it seems like as we get into the back half, EMEA is probably going to be you know, driving the bus a bit from from a unique case perspective. So just wanted to get your perspectives on how the consumer there is going to be held up better relative to other developed markets, and how you see the second half playing out across EMEA.
Peter Galbo: It seems like we've gotten the whole call without actually talking about Europe. So wanted to ask there.
Speaker Change: James It seems like as we get into the back half EMEA is probably going to be driving the bus a bit from from a unit case perspective. So just wanted to get your perspectives on how the consumer there is gonna be held up better relative to other developed markets and how you see the second half playing out across EMEA. Thanks very much.
James Quincey: Thanks Yeah, so you interchanged Europe and EMEA, so I'll kind of break that down. Europe certainly did better in the second quarter, it had positive volume growth, it had price mix, a pretty balanced growth across the different aspects and both East and West contributing to the growth. And so I think it's still worth saying that Europe is a bit like the US in the sense that there's a pretty resilient consumer overall in aggregate, but at the lower end of the income spectrum, we do see a lot of value seeking and affordability behavior. So we're having to double down on that.
Peter Galbo: Yeah. So.
Speaker Change: Uinta changed Europe, and EMEA, so I'll kind of break that down.
Speaker Change: Europe, certainly did better in the second quarter, we had positive.
Speaker Change: Volume growth price makes a pretty balanced growth across the different aspects on both.
Speaker Change: Eastern west contributing to the growth.
Speaker Change: And so I think it's still worth saying that Europe is a bit like the U S. In the sense that there is a pretty resilient consumer oval overall in aggregate.
Speaker Change: The lower end of the income spectrum, we do see a lot of.
Speaker Change: Value seeking and affordability behavior.
Speaker Change: So we're having to double down on that we had.
James Quincey: And within that, we had a great quarter in terms of Coke Zero Sugar and Sprite and Fuse Tea, and I think there was some really good programs on Fanta as well.
Speaker Change: Within that we had a great we had a great quarter in terms of Coke zero sugar and sprite and fuze tea and I think there was some really good programs on factor as well so Europe overall, a great start.
James Quincey: So Europe overall, a great start as it relates to the other bits of EMEA. Overall, we gained value in EMEA, Africa grew volume. Execution by the System.
Speaker Change: As it relates to all the bits of.
Speaker Change: EMEA.
Speaker Change: Overall, we gained value in EMEA Africa grew volumes.
Speaker Change: <unk> cycling, some pretty tough comps and obviously the macro is can be pretty dynamic in in Africa, but.
Speaker Change: Good strong performance across Africa.
Speaker Change: And then in Eurasia.
Speaker Change: We've been leaning into the local most of the business.
Speaker Change: I'm not part of the World was also able to grow volume so actually a good performance across the three main components of the EMEA group.
Speaker Change: I think in Africa in EMEA, It was driven by Coke and flavors.
Speaker Change: And some great execution by the system.
Michael Lavery: Our next question comes from Michael Lavery from Piper Sandler. Please go ahead. Your line is open. Thank you. Good morning.
Speaker Change: Our next question comes from Michael Laughery from Piper Sandler. Please go ahead. Your line is open.
Michael Laughery: Thank you and good morning.
James Quincey: Just wanted to switch maybe a little bit longer term question on coffee. You've obviously got brands like Georgia and Costa that are strong in certain markets, but globally, it's a it's a big attractive category. I guess maybe just would love to hear some of what you're learning as you reflect on your strategy there and what it might take to win and how your participation in the category might evolve over Yeah, thanks, Michael. Yeah, Costa, I think that counts as, if we're going to count Georgia as one attempt, Costa would count as our fourth attempt in coffee, because you've got Georgia, Costa, we tried with an investment in Koorig, and there was something in the 60s called Duncan, D-U-N-C-A-N Coffee.
Speaker Change: Just wanted to switch maybe a little bit longer term question on coffee.
Michael Laughery: You've obviously got.
Michael Laughery: Brands like Georgia and cost of it are strong in certain markets, but globally.
Michael Laughery: Big attractive category I guess, maybe just would love to hear some of what you are learning as you reflect on your strategy, there and what it might take to win and how your participation in the category might evolve over time.
Michael Laughery: Yes, Thanks, Michael.
Costa: Yes Costa.
Speaker Change: I think that counts as if we're going to count Georgia is one time cost of account count as our fourth attempt in coffee, we got Georgia, Costa with we tried with investment in Korea, and there was something in the six fiscal Duncan Du and CIA in coffee.
James Quincey: So we totally recognize what you're pointing out, which is that coffee is a large, fragmented, growing category in the total beverage industry. So it's clearly attractive if we in the bottling system can find ways to participate more deeply in that category. Now having said that, our investment in Costa is not where we wanted it to be from an investment hypothesis point of view. I mean, the business is still a good business, but it's not quite delivered on the different verticals of growth that we were hoping to accelerate much quicker, the ready to drink coffee, the express and that, the at home, and therefore the business remains more weighted towards the stores and the stores we've been driving the affordability and actually doing a good job on refreshing the stores and driving the speed of service.
Speaker Change: So we totally recognize what youre pointing out we should have the coffee is a large.
Speaker Change: Fragmented growing category in the total beverage industry. So it's clearly attractive.
Speaker Change: We in the bottling system can find ways to participate more deeply.
Speaker Change: In that category.
Speaker Change: Now having said that.
Speaker Change: Our investment in Costa.
Speaker Change: Is not where we wanted it to be from an investment hypothesis point of view I mean, the business is still a good business.
Speaker Change: But it's not quite delivered on the different verticals of growth. So we were hoping to accelerate much quicker.
Speaker Change: Screen coffee, the express and that the at home and therefore, the business remains more weighted towards stores.
Speaker Change: And the stores, we have been driving the affordability and actually doing a good job on refreshing the stores and driving the speed of service, but still the investment hypothesis. As originally intended has not played out.
James Quincey: But still, the investment hypothesis as originally intended has not played out despite the improvement in the store business. So I think I would say we're in the mode of reflecting on what we've learned, thinking about how we might want to find new avenues to grow in the coffee category while continuing to run the Costa business successfully, because it's still a lot of money we put down and we want that money to work as hard as possible.
Speaker Change: Despite the improvement in the store business. So I think I would say we're in the mode of reflecting on what we've learned thinking about how we might want to.
Speaker Change: Find new avenues to grow in the coffee category, while continuing to run the cost of business successfully.
Speaker Change: There's still a lot of money, we put down and we want that money to work as hard as possible.
Carlos Laboy: Our next question comes from Carlos Laboy from HSBC. Please go ahead. Your line is open. Yes, good morning. This question may be perhaps for John. John, for years, we've heard you talk about wanting to refranchise for the purpose of focusing more on creating demand.
Speaker Change: Our next question comes from Carlos Laboy from HSBC. Please go ahead. Your line is open.
Carlos Laboy: Yes. Good morning question, maybe perhaps for John John for years, We've heard you talk about.
Carlos Laboy: Wanting to re franchise.
Carlos Laboy: For the purpose of focusing more on creating demand.
John Murphy: With most of this refranchising done now, how is the focus and capability of creating demand of recruiting new consumers intensifying? Thanks, Carlos.
Carlos Laboy: With most of this refranchising done now how is the focus and capability of creating demand of recruiting new consumers intensifying.
Carlos Laboy: Thanks Carlos.
John Murphy: First, maybe just a comment on the refranchising. So we still got a couple of big chunks to go. And, and yet we are As as we've discussed in the past, we're very focused on getting those over the line as as quickly as is as feasible. You know, and adjacent to that, and it's I think it's been a feature of the last few years, is is this underlying emphasis on driving top line growth through a increasingly strong, stronger growth portfolio of brands. We have $30 Billion Brands in Our Portfolio Today About half of them organic, the other half inorganic.
Carlos Laboy: Maybe just a comment on the Refranchising. So we've still got a couple of big chunks to go.
Carlos Laboy: And yet we are.
Carlos Laboy: As we've discussed in the past, we're very focused on getting those over the line.
Carlos Laboy: Quickly as a feasible.
Jason: Yes, Jason.
Jason: Adjacent to that and it's I think it's been a feature.
Jason: Over the last few years.
Jason: Is this.
Jason: Underlying emphasis on driving top line growth through.
Jason: <unk>.
Jason: Increasingly strong stronger growth portfolio of brands.
Jason: We have.
Jason: $31 billion brands in our portfolio today.
Jason: But half of them organic the other half inorganic.
John Murphy: There's a lot of runway left on those brands, and the marketing and innovation transformation that we have also discussed in prior meetings, there's still a tremendous amount to do there. we expect to double down even more on both the existing portfolio that we have and then through the innovation lens to either continue to develop either organically or stay opportunistic on the inorganic front.
Jason: There's a lot of runway left on those brands.
Jason: On the marketing and innovation transformation that we have also.
Jason: Disgusting.
Jason: Prior meetings.
Jason: It's still there's still a tremendous amount to do there so.
Jason: We expect to double down even more on both the existing portfolio that we have.
Jason: Then through the innovation lens to either.
Jason: We continue to develop either organically or say opportunistic on the on the inorganic front.
John Murphy: That's part one. Part two is I think the relationship that we have with our partners around the world has evolved significantly in the past few years with even greater clarity on what we expect from each other. And as a result, stronger partnerships that leads to overall better execution. With a scale business, the daily execution piece requires both of us to be at our best. And a sort of a net-net outcome of the refranchising that you just asked about is that it allows us to do so. And it allows us to have the franchises in the hands of partners who are equally committed to raising the bar.
Jason: That's part one part two is I think the.
Jason: The relationship that we have with our bottling partners around the world.
Jason: As has evolved significantly in the past few years.
Jason: Even greater clarity on what we expect from each other.
Jason: And as a result stronger partnerships that leads to overall better execution.
Jason: With a scale business.
Jason: The daily execution piece.
Jason: Requires both of us to be at our best.
Jason: <unk>.
Jason: A sort of a net net.
Jason: Come off the Refranchising that you just asked of US is that it allows us to do so and it allows us to have the franchises in the hands of partners, who are equally committed to raising the bar.
Robert Moskow: Our last question today will come from Robert Moskow from TD Cowen. Please go ahead. Your line is open. I thank you for the question.
Jason: Our last question today will come from Robert Moskow from TD Cowen. Please go ahead. Your line is open.
Speaker Change: Hi, Thank you for the question John I, just wanted to get a sense of your level of conviction that concentrate volume returned to positive territory in the back half of the year.
John Murphy: John, I just wanted to get a sense of your level of conviction that concentrate volume returns to positive territory in the back half of the year. There appear to have been some transitory elements negatively impacting 2Q and also a tough comp. And then secondly, just in terms of phasing, it would appear that fourth quarter has a tough comp in terms of concentrate volume. Am I looking at that correctly and is there anything that you can add to that? Thanks. Sure. Our guidance for the full year reflects a confidence that we will have positive volume growth in the second half of the year.
Speaker Change: There appear to be some transitory elements negatively impacting <unk> and also a tough comp.
Speaker Change: And then secondly, just in terms of phasing it would appear that fourth quarter has a tough comp.
Speaker Change: In terms of concentrate volume am I looking at that correctly and is there anything that you can add to that.
Speaker Change: Sure. So yes, so we.
Speaker Change: Our guidance for the for the full year.
It reflects a high confidence that we will have positive volume growth in the second half of the year.
John Murphy: I think here of the two quarters, Q3, we're certainly cycling a more modest prior year. I think rather than be overly focused on the prior year, I think our ability to influence the next six months is what's most important. If you look at Q2, and you take away a couple of the, I would call them anomalies in some of the key markets, there's still pretty good underlying momentum in the business. We have the opportunity on the back of a stronger than expected first half on the profit front to have more optionality on how we continue to invest some of our efficiencies, which we plan to do.
Speaker Change: After two quarters Q3, we're certainly cycling.
Speaker Change: On a more modest more modest prior year.
Speaker Change: Yes, I think I think rather than the overly focused on the prior year.
Speaker Change: Our.
Speaker Change: Our ability to influence the next six months is what's most important.
Speaker Change: And if you if.
Speaker Change: If you look at Q2.
Speaker Change: You take away a couple of the.
Speaker Change: Call them anomalies in and then some of the key markets there.
Speaker Change: They're still pretty good underlying momentum in the business.
Speaker Change: We have the opportunity on the back of a stronger than expected first half on the profit front too.
Speaker Change: To have more optionality on how we continue to invest some of the.
Speaker Change: Some of our efficiencies.
Speaker Change: Which we plan to do so so we've got a robust second half on the investment front.
John Murphy: We've got a robust second half on the investment front. Underlying trends in general are good. A couple of the outliers that have been headwind in recent months, we are comfortable that they can get back on track.
Speaker Change: Underlying trends for in general are a good and a couple of outliers that have.
Speaker Change: Ben.
Speaker Change: A headwind in recent months.
Speaker Change: We are comfortable that they can get back on track.
Speaker Change: Okay.
James Quincey: Ladies and gentlemen, this concludes our question and answer session. I would like to turn the call back over to James Quincey for any closing remarks.
Speaker Change: Ladies and gentlemen, this concludes our question and answer session I would like to turn the call back over to James Quincey for any closing remarks.
James Quincey: Thank you, operator. So to summarize, we believe we're well positioned to deliver on our updated 2025 ambitions and guidance. We're continuing to build our systems to drive long term growth. And we're confident we will continue to create enduring value for our stakeholders.
Speaker Change: Thank you operator.
Speaker Change: So to summarize we believe we are well positioned to deliver on our updated 2025 ambitions and guidance.
Speaker Change: Continuing to build our systems to drive long term growth.
Speaker Change: We are confident we will continue to create enduring value for our stakeholders. Thank you for your interest your investment in our company and for joining US. This morning. Thank you.
Unknown Attendee: Thank you for your interest, your investment in our company and for joining us this morning. Thank you.
Unknown Attendee: Ladies and gentlemen, this concludes today's conference call. Thank you for participating.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Unknown Attendee: You may now disconnect. Hello world, where you been? I've been waiting for you and your friends One love begins, tips out, we're starting at ten If you believe that we can make some every day but day, yeah If you believe that we can make some every day but day, yeah
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