Q3 2025 The Coca-Cola Co Earnings Call

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

Good morning, and thank you for joining us I'm here with James Quincey, Our chairman and Chief Executive Officer, and Rico Brown, our Chief operating Officer, and John Murphy, Our President and Chief Financial Officer, We've.

We've posted schedules under financial information in the investors section of our company website.

These reconcile certain non-GAAP financial measures that may be referred to this morning to results as reported under generally accepted accounting principles.

You can also find schedules in the same section of our website or provided an analysis of our gross and operating margins.

This call may contain forward looking statements, including statements concerning long term earnings objectives, which should be considered in conjunction with cautionary statements contained in our earnings release and in the company's periodic SEC report.

Following prepared remarks, we will take your questions. Please.

Please limit yourself to one question reenter the queue to ask follow up.

Now I will turn the call over to James.

Thanks, Robin and good morning, everyone.

In the third quarter, the external environment remains dynamic.

And in response, we adapted our plans as needed focusing on sharper execution and investments to drive growth.

With one quarter remaining in 2025, we're on track to deliver on our reiterated topline and bottom line guidance. We also believe we are well positioned to achieve our longer term commitments.

This morning, I'll provide some context on how we are executing over the strategy in the current operating environment.

Then I will pass the call to Enrique who will discuss our segment performance and how we're working to unlock the full potential of our system.

Finally, John will discuss financial details for the quarter.

<unk> for the full year 2025, and some early considerations for 2026.

During the quarter the operating landscape remained complex, while many consumers remaining overall good shape.

Certain segments of the population are under pressure due to varying factors.

Speaker #1: We're well-positioned to achieve our longer-term commitments. This morning, I'll provide some context on how we're executing our all-weather strategy in the current operating environment.

Some factors that trends that Sri Lanka Seasonable weather.

Others may be long lasting like the cumulative impact of inflationary pressures on certain trades.

Speaker #1: Then, I'll pass the call to Enrique, who will discuss our segment performance and how we're working to unlock the full potential of our system.

Ever changing geopolitical environment.

Despite this backdrop, we have delivered volume growth.

July and August was slow to start the September ended on a stronger note.

Speaker #1: Finally, John will discuss financial details for the quarter, our guidance for the full year 2025, and some early considerations for 2026. During the quarter, the operating landscape remained complex.

Organic revenue growth continued to be at the high end of our long term growth model and ongoing efficiency and effectiveness initiatives drove comparable operating margin expansion.

Speaker #1: While many consumers remain in overall good shape, certain segments of the population are under pressure due to varying factors. Some factors are transitory, like unseasonable weather, others may be long-lasting, like the cumulative impact of inflationary pressures, uncertain trade dynamics, and an ever-changing geopolitical environment.

This led to 6% comparable earnings per share growth, despite 6% currency headwinds.

We benefit from operating in a vibrant and resilient industry with ample headroom for growth.

For the 18th consecutive quarter, we gained overall value share we will.

Speaker #1: Despite this backdrop, we've delivered volume growth. July and August were slow to start, but September ended on a stronger note. Organic revenue growth continued to be at the high end of our long-term growth model, and ongoing efficiency and effectiveness initiatives drove comparable operating margin expansion.

Also held or gained value share across each of our geographic segments.

By offering consumers choice across our total beverage portfolio by leveraging our systems capabilities, we continue to build momentum to develop our industry and expand our lead over the long term.

To deliver in today's environment, we're capitalizing on the strength of our portfolio and focusing on improving execution across all aspects of our strategic growth flywheel.

Speaker #1: This led to 6% comparable earnings-per-share growth, despite 6% currency headwinds. We benefit from operating in a vibrant and resilient industry with ample headroom for growth.

We have unparalleled portfolio of power as demonstrated by our $30 billion brands, which we estimate represents approximately a quarter of the $1 billion brands in the industry is approximately double our nearest competitor.

Speaker #1: For the 18th consecutive quarter, we gained overall value share, we also held or gained value share across each of our geographic segments. By offering consumers choice across our total beverage portfolio, and by leveraging our system's capabilities, we continue to build momentum to develop our industry and expand our lead over the long term.

As we continue to develop love brands, we expect a number of $1 billion brands to grow.

Our marketing transformation is centered on connecting deeply with consumers through digital engagement.

Post loss experiences and cultural relevance Brooks.

Speaker #1: To deliver in today's environment, we're capitalizing on the strength of our portfolio and focusing on improving execution across all aspects of our strategic growth flywheel.

For example, we recently partnered with Universal Pictures and Bloom House on a Halloween campaign for <unk>. It was activated in approximately 50 markets.

Speaker #1: We have unparalleled portfolio power as demonstrated by our $30 billion brands, which we estimate represents approximately a quarter of the billion-dollar brands in the industry and is approximately double our nearest competitor.

Building on last year's success. The campaign featured iconic horror characters on our packaging limited time flavors and immersive retail and digital experiences.

While we are building capabilities in marketing we're all.

Speaker #1: As we continue to develop love brands, we expect our number of billion-dollar brands to grow. Our marketing transformation is centered on connecting deeply with consumers through digital engagement, personalized experiences, and cultural relevance.

Also prioritizing bigger and bolder innovation like Sprite plus T in North America, because mixed with Coca Cola in Mexico, and Europe and power. Springboks addition, in South Africa.

During the first three quarters of this year innovation contributed strongly to revenue growth and we're continuing to have strong velocities on our renovation.

Speaker #1: For example, we recently partnered with Universal Pictures and Bloomhouse on a Halloween campaign for Fanta, that was activated in approximately 50 markets. Building on last year's success, the campaign featured iconic horror characters on our packaging, limited-time flavors, and immersive retail and digital experiences.

Lost.

Marketing and innovation agenda is brought to life by execution in the market.

Over the past decade, we've been on a journey to re franchise company owned bottlers to fortify our system on the unlock further growth.

Speaker #1: While we're building capabilities in marketing, we're also prioritizing bigger and bolder innovation, like Sprite, Plus, Tea in North America, Bacardi mixed with Coca Cola in Mexico and Europe, and Powerade, Springboks Edition in South Africa.

Recently, we reached two significant steps in completing this journey.

In July we sold a 40% ownership stake in our company owned Indian Butler to the Jubilant Bartsia group.

Additionally, this morning, Coca Cola Hellenic announced its intention to acquire a controlling interest in Coca Cola beverages Africa, which is expected to close next year subject to regulatory approvals.

Speaker #1: During the first three quarters of this year, innovation contributed strongly to revenue growth, and we're continuing to have strong velocities on our innovation. Last, our marketing and innovation agenda is brought to life by execution in the market.

We believe these moves will unlock growth opportunities in India and Africa.

<unk> has built and grown consumer businesses in India and.

Speaker #1: Over the past decade, we've been on a journey to refranchise company-owned bottlers for 45 our system and unlock further growth. Recently, we reached two significant steps in completing this journey.

And Coca Cola Hellenic has demonstrated a strong track record in Nigeria and Egypt.

Our global franchise model is a strategic differentiator and it's very difficult to replicate with these milestones we have a clear line of sight to complete our refranchising strategy, allowing us to further focus on brand building and innovation complemented by integrated execution with our bottling partners.

Speaker #1: In July, we sold a 40% ownership stake in our company-owned Indian bottler to the jubilant Bhatia Group. Additionally, this morning, Coca-Cola Hellenic announced its intention to acquire a controlling interest in Coca-Cola Beverages Africa, which is expected to close next year, subject to regulatory approvals.

In summary, we're confident we can navigate what comes at us.

Deliver on our 2025 guidance and create long term value for our stakeholders.

Speaker #1: We believe these moves will unlock growth opportunities in India and Africa. Jubilant Bhatia has built and grown consumer businesses in India, and Coca-Cola Hellenic has demonstrated a strong track record in Nigeria and Egypt.

With that I'd like to hand off the call to Enrique.

In his nearly 30 years of the company and recast worked on multiple continents and has been a strong partner to me and to our system and driving sustainable growth.

Speaker #1: Our global franchise model is a strategic differentiator and is very difficult to replicate. With these milestones, we have a clear line of sight to complete our refranchising strategy, allowing us to further focus on brand building and innovation, complemented by integrated execution with our bottling partners.

Thank you James I'm glad to be joining the call today.

I'd like to begin by discussing how we responded to a variety of market dynamics during the quarter by adapting faster and then I'll spend some time covering actions that were taken to ensure we get better and sharper everyday.

Speaker #1: In summary, we're confident we can navigate what comes at us, deliver on our 2025 guidance, and create long-term value for our stakeholders. With that, I'd like to hand off the call to Enrique.

Starting with North America, we delivered strong results.

Despite ongoing differences in spending between income groups and slower traffic across channels polymer was flat and improved sequentially for the second consecutive quarter.

Speaker #1: In his nearly 30 years at the company, Enrique has worked on multiple continents, and has been a strong partner to me and to our system in driving sustainable growth.

We also gained value share and had strong revenue and profit growth.

Speaker #2: Thank you, James. I'm glad to be joining the call today. I would like to begin by discussing how we responded to a variety of market dynamics during the quarter by adapting faster and then our spend some time covering actions that we are taking to ensure we get better and sharper every day.

We are investing behind our brands, which led to broad based strength across our total beverage portfolio in <unk>.

<unk> to ongoing strength with Coca Cola zero sugar diet, Coke or had strong volume growth by reaching a new generation of consumers with campaigns like no the size, which invites drinkers to take the diet cookbook.

Speaker #2: Starting with North America, we delivered strong results. Despite ongoing differences in spending between income groups and slower traffic across channels, volume was flat and improved sequentially for the second consecutive quarter.

We also launched innovations for our loyal consumer base like read through diet Coke with Sharon and this October we are bringing back retro diet Coke with line nationwide in the U S.

Speaker #2: We also gained value share and had strong revenue and profit growth. We invested behind our brand, which led to broad-based strife across our total beverage portfolio.

Across our portfolio our system accelerated could drink equipment placement expanded availability to four key packages and one share of visible inventory.

Speaker #2: In addition to ongoing strength with Coca-Cola Zero Sugar, Diet Coke had strong volume growth by reaching a new generation of consumers with campaigns like "Know the Signs," which invites drinkers to take a Diet Coke break.

In Latin America volume was flat, but we gained value share in group organic revenue and comparable currency neutral operating income.

We have taken steps to address softening macroeconomic conditions in key markets like Mexico, we are seeing good reactions to some of our operations, but we believe it will take time.

Speaker #2: We also launched innovations for our loyal consumer base, like retro Diet Coke with cherry, and this October, we are bringing back retro Diet Coke with lime, nationwide in the US.

We had continuous growth in Brazil, where we gained value share with strong performance from Coca Cola zero sugar driven by increasing try always do opex towards the linking the brands to the mills occasion, and expanding refillable pack and jobs.

Speaker #2: Across our portfolio, our system accelerated cold drink equipment placement, expanded availability for key packages, and one share of visible inventory. In Latin America, volume was flat, but we gained value share and grew organic revenue and comparable currency neutral operating income.

Also in Mexico, Santa Clara recently became the value share leader, we think value added there.

In EMEA.

We continued to grow volume and delivered a strong revenue and profit growth.

Speaker #2: We are taking steps to address softening macroeconomic conditions in key markets like Mexico. We are seeing good reactions to some of our integrations, but we believe it will take time.

In Europe volume declines.

Even by cycling, a tougher comparison versus previous year and mixed performance across western and eastern markets.

Speaker #2: We had continued growth in Brazil, where we gained value share with strong performance from Coca Cola Zero Sugar, driven by increasing trade with Durofax, for the linking the brand to the meals occasion and expanding refillable package options.

We partner with the English Premier League with Coca Cola, Smartwater, and empower right to tap into consumer special for approval.

We featured these partnership on our packaging and offered exclusive division and access to tickets, which helped recruit weekly pleasant thinkers.

Speaker #2: Also, in Mexico, Santa Clara recently became the value share leader within value-added areas. In EMEA, we continue to grow volume and delivered strong revenue and profit growth.

Eurasia and the Middle East and in Africa, We grew volume in both operating units despite volatile macroeconomic backdrops.

Speaker #2: In Europe, volume declined, driven by cycling and tougher comparisons versus the previous year and mixed performance across Western and Eastern markets. We partnered with the English Premier League with Coca-Cola, Smartwater, and Powerade to tap into consumer passion for football.

We further emphasized our mix of local and global brands launched impactful marketing campaigns like our partnership with Springbok rugby in South Africa, and innovations like Kathy bubble in therapies.

Also we sharpened our revenue growth management capability and highlighted the local news of our system.

Speaker #2: We featured these partnerships on our packaging and offered exclusive fans activation and access to tickets, which helped recruit weekly Plus drinkers. In Eurasia and the Middle East and in Africa, we grew volume in both operating units despite volatile macroeconomic backdrops.

<unk> in Asia Pacific volume declines across each of the operating units driven by softer consumer spending weaker industry performance and inclement weather in a few markets like India and the Philippines.

However, we gained by the share and grew revenue and profit for this segment, we are focusing on granular channel execution plans tailoring our brand price pack architecture with a focus on affordability and investing for growth.

Speaker #2: We further emphasized our mix of local and global brands, launched impactful marketing campaigns like our partnership with Springboks, Rugby in South Africa, and innovations like Cappy Bubble in Turkey.

Putting it all together, we continue to execute in an uncertain external environment, we have strong plans in place and a focus on driving profitable growth.

Speaker #2: Also, we sharpened our revenue growth management capabilities and highlighted the localness of our system. Lastly, in Asia Pacific, volume declined across each of the operating units, driven by softer consumer spending, weaker industry performance, and incremental weather in a few markets like India and the Philippines.

<unk> strategy continues to deliver the world around us is changing and as we have done throughout our history. We will continue to evolve to capture the full potential of our system.

Speaker #2: However, we gained value share and grew revenue and profit for the segment. We are focusing on granular channel execution plans tailoring our brand price back architecture with a focus on affordability and investing for growth.

Together with our bottling partners, we're leveraging capabilities to deepen consumer connections build on brands and as acute effect.

Digital platforms are helping us to connect the dots across our system, enabling better experiences for our consumers and customers.

Speaker #2: Putting it all together, we continue to execute in an uncertain external environment with strong plans in place and a focus on driving profitable growth.

As we have that.

We will enhance the way, we work to move faster and with greater precision.

We will become even more customer centric to drive enduring growth for our system and industry.

Speaker #2: While our strategy continues to deliver, the world around us is changing. And as we have done throughout our history, we will continue to evolve to capture the full potential of our system.

Overall I'm encouraged by the image across the network, we're learning fast pushing boundaries and unlocking new opportunities to deliver for the long term.

Speaker #2: Together with our bottling partners, we are leveraging capabilities to deepen consumer connections, build on brands, and execute with excellence. Digital platforms are helping us to connect the dots across our system, enabling better experiences for our consumers and customers.

With that I will hand, the call over to John.

Thank you Enrique and good morning, everyone.

Today I'll comment on our third quarter performance discuss the outlook for the remainder of 2025 and provide some early commentary on 2026.

Speaker #2: As we adapt, we will enhance the way we work to move faster and with greater precision. We will become even more consumer-centric to drive enduring growth for our system and industry.

During the third quarter, we grew organic revenues 6%.

Unit cases grew 1%.

After a slower start we ended with improved performance.

Speaker #2: Overall, I'm encouraged by the energy across the network. We are learning fast, pushing boundaries, and unlocking new opportunities to deliver for the long term.

During the quarter two year volume trend accelerated each month.

Concentrate sales were one point behind unit case sales driven primarily by the timing of concentrate shipments.

Speaker #2: With that, I will hand the call over to John.

Speaker #1: Thank you, Enrique, and good morning, everyone. Today, I'll comment on our third quarter performance, discuss the outlook for the remainder of 2025, and provide some early commentary on 2026.

Price mix growth of 6% was primarily driven by approximately four points of pricing actions.

And two points of favorable mix.

Pricing from intense inflationary market.

Speaker #1: During the third quarter, we grew organic revenues 6%, unit cases grew 1%, after a slower start, we ended with improved performance, during the quarter, two-year volume trends accelerated each month.

As largely a basis.

Comparable gross margin declined approximately 10 basis points.

While comparable operating margin increased approximately 120 basis points.

Our year to date comparable operating margin expansion has been driven by our continued productivity mindset.

Speaker #1: Concentrate sales were 1.0 behind unit case sales, driven primarily by the timing of concentrate shipments. Our price mix growth of 6% was primarily driven by approximately four points of pricing actions, and two points of favorable mix.

While we are continuing to invest for growth, we're also driving productivity, including prioritizing supply chain efficiencies improve.

Improving the efficiency of our advertising spend.

Speaker #1: Pricing from intense inflationary markets has largely abated. Comparable gross margin declined approximately 10 basis points, while comparable operating margin increased approximately 120 basis points.

Being prudent with our expense base.

Putting it altogether third quarter comparable EPS.

Of 82.

Increased 6% year over year despite.

Despite 6% currency headwinds higher net interest expense and an increase in our effective tax rate.

Speaker #1: Our year-to-date comparable operating margin expansion has been driven by our continued productivity mindset. While we're continuing to invest for growth, we're also driving productivity, including prioritizing supply chain efficiencies, improving the efficiency of our advertising spend, and being prudent with our expense base.

Free cash flow, excluding the fair life contingent consideration payment was <unk> 5 billion.

Which was an increase 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.

Speaker #1: Putting it all together, third quarter comparable EPS of $0.82 increased 6% year over year, despite 6% currency headwinds. Higher net interest expense and an increase in our effective tax rate.

Our balance sheet remains strong.

With our net debt leverage of one eight times EBITDA, which is below our targeted range of two to two five times.

We're confident in our long term free cash flow generation and have ample balance sheet capacity to pursue our capital allocation agenda.

Speaker #1: Pre-cash flow excluding the Fairlife contingent consideration payment was 8.5 billion dollars, which was an increase 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.

Which prioritizes reinvesting in our business and returning capital to our shareowners.

I also wanted to give a quick update regarding our ongoing dispute with the U S internal revenue service.

A portion of our case relates to royalties from our Brazilian affiliates that were blocked under Brazilian law.

Speaker #1: Our balance sheet remained strong, with our net debt leverage of 1.8 times EBITDA, which is below our targeted range of 2 to 2.5 times.

The recent <unk> appellate court decision addressed the same underlying regulation.

Speaker #1: We're confident in our long-term pre-cash flow generation and have ample balance sheet capacity to pursue our capital allocation agenda, which prioritizes reinvesting in our business and returning capital to our shareholders.

We believe this case is highly supportive of our position.

As we have said many times in the past.

We're continuing to vigorously defend our overall position and our.

We're encouraged about our chances of prevailing on appeal.

Speaker #1: I also want to give a quick update regarding our ongoing dispute with the US internal revenue service. A portion of our case relates to royalties from our Brazilian affiliate, that were blocked under Brazilian law.

As previously mentioned, we're confident we will deliver on our 2025 guidance.

We continue to expect organic revenue growth of 5% to 6%.

And expect comparable currency neutral earnings per share growth of approximately 8% both of which reflect delivery in line with our long term growth algorithm.

Speaker #1: The recent 3M appellate court decision addressed the same underlying regulation. We believe this case is highly supportive of our position. As we have said many times in the past, we're continuing to vigorously defend our overall position and are encouraged about our chances of prevailing on appeal.

Based on current rates on our hedge positions. We continue to expect a 1% to two point currency headwind to comparable net revenues and an approximately five points of currency headwind.

Comparable earnings per share for full year 2025.

Speaker #1: As previously mentioned, we're confident we will deliver on our 2025 guidance. We continue to expect organic revenue growth of 5% to 6% and anticipate comparable currency neutral earnings per share growth of approximately 8%, both of which reflect delivery in line with our long-term growth algorithm.

Our underlying effective tax rate for 2025 is now expected to be 27%.

All in based on what we know today, we continue to expect 2025 comparable earnings per share growth of approximately 3%.

It is $2 88 in 2024.

Speaker #1: Based on current rates and our hedged position, we continue to expect a 1% to 2% currency headwind to comparable net revenues and an approximate 5% currency headwind to comparable earnings per share for full year 2025.

Last excluding the paralyzed contingent consideration payments, we now expect to generate at least $9 8 billion of free cash flow in 2025.

There are a couple of considerations to keep in mind for the fourth quarter of 2025.

Speaker #1: Our underlying effective tax rate for 2025 is now expected to be 20.7%, all in based on what we know today we continue to expect 2025 comparable earnings per share growth of approximately 3%, versus $2.88 in 2024.

We're cycling a more difficult volume comparison in some of our key markets and due to our reporting calendar there will be one additional day in the fourth quarter.

While it is too early to provide specific guidance for 2026.

We wanted to share some considerations based on what we know today.

Speaker #1: Last, excluding the Fairlife contingent consideration payment, we now expect to generate at least $9.8 billion of pre-cash flow in 2025. There are a couple of considerations to keep in mind for the fourth quarter of 2025.

Of course, a calendar shift will impact the quarterly cadence as we will have six additional days in the first quarter.

And six fewer days in the fourth quarter.

We're focused on driving balanced top line growth with volume is a key priority.

Speaker #1: We're cycling a more difficult volume comparison in some of our key markets, and due to our reporting calendar, there will be one additional day in the fourth quarter.

As inflation moderates, we anticipate pricing to normalize and we lean into both affordability and premium amortization, depending on what the market demands.

Speaker #1: While it is too early to provide specific guidance for 2026, we want to share some considerations based on what we know today. First, a calendar shift will impact the quarterly cadence, as we will have six additional days in Q1 and six fewer days in Q4.

With respect to commodities, while we're experiencing cost inflation, we believe the overall impact is manageable.

However, the company and our system or centralize them exposed to volatility in trade dynamics.

Which could cause our outlook to vary across our markets.

Speaker #1: We're focused on driving balanced top-line growth with volume as a key priority. As inflation moderates, we anticipate a pricing to normalize and will lean into both affordability and premiumization depending on what the market demands.

We continue to challenge all aspects of how we work and we see opportunities to unlock cost efficiencies that can be reinvested to support portfolio growth and long term value creation.

Regarding currency, if we assume current rates on our hedged positions.

Speaker #1: With respect to commodities, while we're experiencing cost inflation, we believe the overall impact is manageable. However, the company and our system source several items exposed to volatility and trade dynamics, which could cause our outlook to vary across our markets.

There would be a slight tailwind to both comparable net revenues and comparable earnings per share for full year 2026.

Many factors could impact both our currency outlook.

And broader business outlook between now and when do we expect to provide guidance in February.

Speaker #1: We continue to challenge all aspects of how we work, and we see opportunities to unlock cost efficiencies that can be reinvested to support portfolio growth and long-term value creation.

In summary, while our external environment is dynamic we see great potential for our industry and remain steadfastly focused on driving growth.

We are confident in our ability to deliver on our 2025 guidance.

Speaker #1: Regarding currency, if we assume current rates and our hedged positions, there would be a slight tailwind to both comparable net revenues and comparable earnings per share for the full year 2026.

And create enduring value for our stakeholders.

And with that operator, we are ready to take questions.

Thank you, ladies and gentlemen to ask a question you May press star one on your telephone.

Speaker #1: Many factors could impact both our currency outlook and broader business outlook between now and when we expect to provide guidance in February. In summary, while our external environment is dynamic, we see great potential for our industry and remain steadfastly focused on driving growth.

Your question. Please press star one again.

The interest of time, we ask that you. Please limit yourself to one question. If you have additional questions you may rejoin the queue.

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

Great James John <unk>. Good morning, Thank you.

Speaker #1: We are confident in our ability to deliver on our 2025 guidance, and create enduring value for our stakeholders. With that operator, we are ready to take questions.

I. Thank each of you alluded to in your remarks, you know entering September you'd called out momentum that was trending a bit slower than expected in the third quarter I think I highlighted a few specific markets at the time, Mexico, and Latin America, India, Vietnam, Thailand, Indonesia.

Speaker #3: Thank you. Ladies and gentlemen, to ask a question, you'll need to press *1 on your telephone. To withdraw your question, please press *1 again.

Obviously it appears that you came out the quarter with a bit more acceleration, which is obviously encouraging but I'm curious as to whether you can ascribe that to sequential improvement in the underlying category trends.

Speaker #3: In the interest of time, we ask that you please limit yourself to one question. If you have additional questions, you may rejoin the queue.

Speaker #3: Our first question comes from Steve Powers from Deutsche Bank. Please go ahead and your line is open.

Or more your own interventions made in response to shifting consumer sentiment and then either way.

Speaker #1: Great, James, John, Enrique, good morning, thank you. As I think each of you alluded to in your remarks, you know entering September, you'd called out momentum that was trending a bit slower than expected in the third quarter, and you highlighted a few specific markets at the time, Mexico and Latin America, India and Vietnam, Thailand and Asia.

Maybe just a little bit more color on how those recent observations factor into both of your <unk> your fourth quarter views as well as your approach.

26 planning thank you.

Yes sure. Thanks.

Yeah as you say, we when I think I'd make here at the conference we pulled out a little bit of a softness the opening part of Q3, you talked about where it was Mexico and a number of parts of Asia, India, China, and some of the ASEAN countries.

Speaker #1: Obviously, it appears that you came out the quarter with seeing a bit more acceleration, which is obviously encouraging, but I'm curious as to whether you described that to sequential improvement in underlying category trends, or more your own interventions made in response to shifting consumer sentiment, and then either way, maybe just a little bit more color on how those recent observations factor into both your 4Q, your fourth quarter views, as well as your approach to fiscal '26 planning.

Clearly, we got a bit better in September some sequential improvement I think it would be fair to say as much as anything that was a doubling down by the system.

Increases in marketing and focus on innovation.

From us working with the bottlers on some affordability and revenue management options I had some step ups in execution.

Speaker #1: Thank you.

Speaker #2: Yeah, sure, thanks. Yeah, as you say, we when I think Enrique was at the conference, we pulled out a little bit of a softness in the opening part of Q3, you talked about where it was, Mexico and a number of parts of Asia, India, China, and some of the ASEAN countries, and clearly we got a bit better in September, some sequential improvement.

I don't think the environment changed markedly in September from July and August.

We just got more focused on drilling down into what needed to be done and to driving the quarter.

And I think therefore as you look out to Q4.

I don't think the environment is changing that quickly. So I think we're going to have to be on the top of our game, we certainly expect to lean into and invest for growth in the fourth quarter. We have a lot of good marketing and innovation programs coming from Halloween all the way through to.

Speaker #2: I think it would be fair to say as much as anything that was a doubling down by the system, increases in marketing and focus and innovation from us working with the bottlers on some affordability and revenue management options, and some step-ups in execution.

Christmas So we will be driving that and obviously executing with our bottlers, but I think again.

Speaker #2: So I don't think the environment changed markedly in September from July and August, we just got more focused on drilling down into what needed to be done and to driving the quarter.

As you as you kind of hinted in the question. The environment is is is going to stay more or less the same and we've got a focus on driving our own results and trying to get volume growth.

Speaker #2: And I think, therefore, as you look out to Q4, I don't think the environment is changing that quickly. So I think we're going to have to be on the top of our game.

Going into the fourth quarter, especially as we are cycling a.

Steve the comparison versus last year, and then as we look out to 'twenty six.

Speaker #2: We certainly expect to lean into and invest for growth in the fourth quarter. We have a lot of good marketing and innovation programs coming from Halloween all the way through to Christmas, so we will be driving that and obviously executing with our bottlers. I think, again, as you kind of hinted in the question, the environment is going to stay more or less the same, and we've got to focus on driving our own results and trying to get volume growth going into the fourth quarter, especially as we're cycling a steeper comparison versus last year.

That's gonna be a long a long way away from here and going through the year certainly as John commented in his considerations, we certainly expect to see inflation and pricing moderate back to a more normal range.

I think as we've talked about on the previous call.

Our long term growth model calls for four to six on the topline and we look for balance which kind of implies two to three on volume at two to three hour price.

Certainly that hopefully will get easier as we go through the year, but that's what we're aiming for.

Our long term objective remains to grow volume as a way of expanding our consumer franchise and earning the right to pricing. So that we can stay at the top end of our revenue growth algorithm.

Speaker #2: And then as we look out to '26, you know that's going to be a long way away, from here and going through the year, certainly as John commented in his considerations, we certainly expect to see inflation and pricing moderate back to a more normal range, I think as we talked about on the previous call, if our long-term growth model calls 4% to 6% on the top line, and we look for balance, which kind of implies 2% to 3% on volume and 2% to 3% on price, certainly that hopefully will get easier as we go through the year, but that's what we're aiming for.

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

Great. Thanks, good morning.

I wanted to ask you guys, a little bit about local competition in various markets because I think historically when consumers under pressure affordability becomes a discussion point, you'll start to see some bubbling up.

Local competition, particularly in sparkling. So I was wondering if you could just go through with US any markets, where that's been a factor and then kind of what youre doing in response.

Speaker #2: Our long-term objective remains to grow volume as a way of expanding our consumer franchise and earning the right to pricing, so that we can stay at the top end of our revenue growth algorithm.

Yeah. Thanks, Thanks, a lot.

I think actually there is a big overall shift to a little more local us not just from a competitive point of view if you kind of look back the last five years.

Speaker #3: Our next question comes from Lauren Lieberman from Barclays. Please go ahead; your line is open.

Speaker #4: Great, thanks. Good morning. I wanted to ask you guys a little bit about local competition in various markets, because I think historically when consumers are under pressure, affordability becomes a discussion point. You'll start to see some bubbling up of local competition, particularly in sparkling.

The whole world went almost kind of a similar journey with Tobin with locked down with coming out of lockdown being flattish.

There was a certain.

All on the same rollercoaster effect of the last five years.

Now that is starting to diverge in all sorts of wise geopolitically economic play.

Speaker #4: So I was wondering if you could just go through with us any markets where that's been a factor, and then kind of what you're doing in response.

We are certainly seeing that theres more dynamism in regional competitors.

Speaker #4: Thanks.

Speaker #2: Yeah, thanks, Lauren. I think actually there's a big overall shift to a little more localness, not just from a competitive point of view. If you kind of look back the last five years, the whole world went on a kind of a similar journey with COVID, with lockdown, with coming out of lockdown, with inflation.

And some of the local competitors I think regional would be more fair to call it that and I don't but I don't think it's just about affordability I think this is Paul I'll buy sort of kind of pendulum swings out there with things become a little more global or a little more local and then a little more global and what we're what we're seeing.

Speaker #2: There was a certain rise, all on the same roller coaster effect of the last five years. And now that is starting to diverge in all sorts of ways—geopolitically, economically—and we are certainly seeing that there's more dynamism in regional competitors and some of the local competitors.

At the moment is there's kind of a swing of the pendulum a little more originality affordability is a feature of that but it's certainly not the only feature.

The identity of the brands the innovation, that's coming you see different things in different places so as we go forward.

They're responding by driving more resources to the frontline. So that we can have different responses in different places and it's one of the things that Enrique was calling out in his pace, which like we need to get even closer to the consumer which is a way of saying we need to be able to have different responses in different places.

Speaker #2: And I think regional would be more fair to call it that. And I don't think it's just about affordability. I think this is part of a sort of kind of pendulum that swings out there with things becoming a little more global or a little more local and then a little more global, and what we're seeing at the moment is there's kind of a swing of the pendulum a little more to regionality, affordability is a feature of that, but it's certainly not the only feature that identity of the brands, the innovation that's coming, you see different things in different places.

Using the great strengths of our global system and the scale that gives us, but being able to respond to the different dynamics in the intimacy needed in the different parts of the world.

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

Speaker #2: So as we go forward, we're responding by driving more resources to the front line so that we can have different responses in different places, that's one of the things that Enrique was calling out in his piece, which like we need to get even closer to the consumer, which is a way of saying we need to be able to have different responses in different places, using the great strength of our global system and the scale that gives us, but being able to respond to the different dynamics and the intimacy needed in the different parts of the world.

Hey, good morning.

So James in a retail you mentioned some of the consumer stresses that we're seeing in general around the world I just wanted to dive a bit deeper into Latin America. It's obviously tied in with the U S economy, but also the policy changes that were seeing in the U S.

So I think it'd just be helpful to get an update on what youre seeing in the ground.

In Mexico, as well as Brazil in the last few months and just how that consumer environment. It might impact your forward performance, but also your strategy changes in that region, specifically on <unk> you mentioned some of the Mexico changes more recently.

Speaker #3: Our next question comes from Dara Mohsanian from Morgan Stanley. Please go ahead, your line is open.

Speaker #1: Hey, good morning. So, James and Enrique, you mentioned some of the consumer stresses that we're seeing in general around the world. I just wanted to dive a bit deeper into Latin America because obviously tied in with the US economy, but also the policy changes that we're seeing in the US.

Be helpful to get a deeper update there. Thanks.

Hey, Dara good.

When you look at Latin America.

Seems to be a market that.

<unk> has very strong.

System.

Speaker #1: So, I think it'd just be helpful to get an update on what you're seeing in the ground, in Mexico, as well as Brazil in the last few months, and just how that consumer environment might impact your forward performance.

And we are coming off.

Years of strong growth. Most recently, you'll have seen that we have over the last few quarters on a progressive improvement this quarter kind of coming to flat, but also it's important to unpack that saying that Brazil continues to be pretty strong Columbia.

Speaker #1: But also, your strategy changes in that region specifically, Enrique mentioned some of the Mexico changes more recently, it'd be helpful to get a deeper update there.

In Chile also grew in the quarter and then Mexico is also a big market, but it's not <unk>.

Speaker #1: Thanks.

Speaker #2: Sure. Hey, Dara, good here for you. Look, Latin America continues to be a market that has very strong system, and we are coming off like years of strong growth.

Progressive improvement, but not yet where we wanted to be.

There are macroeconomic issues.

In the country and also our plans to really pivot.

Speaker #2: Most recently, you have seen that we have over the last few quarters on a progressive improvement. This quarter, coming to flat, but also it's important to unpack that saying that Brazil continues to be very strong, Colombia and Chile also grew in the quarter, and then Mexico is also a big market, but it's on a progressive improvement, but not yet where we want it to be.

And I'll address that has been put in place in the last few quarters, we have seen some of the bright spots.

Coming out of that which store to say that we have.

Out of the woods here on getting Mexico really on a growth trajectory. What we see is thats going to take a little bit more time in there and then the rest of Latin America, we have more momentum so to your question about whether there's something more related to the whole.

Region.

It's not specific to that it's more related to the country itself.

Yeah.

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

Hi, Good morning, everyone I wanted to ask about the Refranchising efforts given this morning announcement on <unk>.

It's clearly a very important steps in our goal of becoming the world's smallest dollar.

I guess can you walk us through what will be last after that transaction closes in terms of their territories to potentially re franchise and then in terms of the margin implications from Refranchising a few years ago, you had a target like that.

<unk> operating margin target, Florida, Coca Cola company, and it seems like Youre getting pretty close to that after this transaction. So can you walk us through like the path on the margins.

Paul.

Thank you.

Sure Filippo I'll, let John jump in on that margin target on the evolution towards it.

Look with the two deals that we have announced with the <unk> group and <unk> group in India.

With Atlantic relative to Coca Cola Beverages Africa actually those two transactions the last two large paces setting.

Setting us on the path to completing the Refranchising strategy that we started in 2015 and just to remind you know because that's taken us 10 years.

The most important thing here was to find the right partners each of those assets the right owners, who could drive the investment in capabilities into the future and we have seen through all of the Refranchising as we've done over time that if we find the right partner to put these bottles into their hands.

They invest more they do better the bottler performs better and it helps us drive overall growth for the total system. So the combination grows faster and is more profitable. So it's been a very successful strategy over the years and with these two pieces, we will largely put ourselves on the path to completing refranchising the things with that.

We will be left are just a handful of smaller countries like Malaysia and Singapore.

Think of it.

This is the final piece of stone in putting Refranchising strategy.

Bed and we now have a system that is super Cape loan set up to drive growth well into the future and I'll, let you answer the margin question John.

Sure.

Sure James Thanks.

Filippo.

Maybe it's worth taking a step back and go back a few years.

2017, or our operating margin was 26, 5% and <unk>.

Since that period.

There has been two primary positive impacts offset by ongoing FX headwinds. The first has been the refranchising today's.

And the second has been our continued focus on.

Expanding margins.

In line with the implied guidance and our long term growth model.

As you look at this year to date.

The primary driver has been the latter in other words.

As I mentioned in my remarks.

Our focus on managing our cost base a lot of.

Our focus on managing our supply chain.

And.

Getting some of the benefits to the bottom line of the marketing productivity work that we've had underway.

And so as you look to the next couple of years.

You can I think assume that.

The implied expansion that we expect from the core business will continue.

And the mass will.

Will play itself out in terms of the upper.

Lift in overall.

The overall margin profile of the company with the latest Refranchising that Tim just talked about and our expectations for the next couple of years to finish the play.

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

Hi, good morning, everyone.

I wanted to ask.

Two category questions. So just on coffee it was the second quarter of unit case growth.

After about a year and a half of the clients can you just reorient us on your latest thinking on your coffee strategy why has it been a bit tougher.

Perhaps some of the drivers of the recent improvement and how you see the general attractiveness of this category going forward and if I could just on zero sugar it's.

Really nice run of re acceleration over the past couple of years from some slowing in 2023 can you just talk about the runway there and I ask because youre starting to bring up diet coke a bit more over the past couple of quarters.

Just wanted to maybe test a bit whether there is some broadening of this.

Uh, to uh, category questions. So, just on on coffee, it was the second quarter of unique case growth.

Hi, good morning everyone. I wanted to ask uh, to uh, category questions. So, just on on coffee, it was the second quarter of unique growth.

after about a year and a half of the clients,

after about a year and a half of the clients,

Let's call it zero.

<unk> strategy.

With a bit more breadth. So thanks, so much for those two.

can you just reorient us on your your latest thinking on your coffee strategy? You know why has it been a bit tougher?

can you just reorient us on your your latest thinking on your coffee strategy? You know why has it been a bit tougher?

Yes, Thanks, Chris.

Perhaps some of the drivers of the recent Improvement.

Let me start on the coffee I mean, firstly the coffee category is a super attractive category I mean, very large is profitable and is growing and is relatively on consolidated so let's start with coffee is an interesting category. If we can find one is interesting too.

Interesting to the Coke system, if we can find a way to play and it works for us.

And how you see the general attractiveness of this category going forward? And if I could just on on zero sugar, it's it's had this really nice run of of re acceleration over the past couple of years from some slowing in. In 2023. Can you just talk about the runway there and and I asked because you're you're starting to bring up Diet Coke a bit more over the past couple of quarters. And and I just want to maybe test a bit whether there's some

Perhaps some of the drivers of the recent Improvement and how you see the general attractiveness of this category going forward? And if I could just on on zero sugar, it's it's had this really nice run of of re acceleration over the past couple of years from some slowing in. In 2023. Can you just talk about the runway there and and I asked because you're you're starting to bring up Diet Coke a bit more over the past couple of quarters. And and I just want to maybe test a bit whether there's some

And we've tried a number of things over the last decade to find a path.

Works for us in coffee costs are being the most recent iteration of that.

And what does the summary on what's happening there is actually the cost of business is doing well as you say, it's returned to volume growth we've been reinvesting in the stores principally in the UK continuing to increase the footprint of the total part of the cost of express machines on doing.

Broadening of this. Uh, you know, let's call it a zero, you know, a light strategy uh, you know with a bit more breath. So thanks so much for those 2.

Broadening of this. Uh, you know, let's call it a zero, uh, you know, a light strategy, uh, you know, with a bit more breath. So thanks so much for those 2.

Beans to machines in a number of other countries. So the business is doing well.

And it is getting some good growth from the top to the bottom line.

Commentary, we made last time is the investment hypothesis didn't work out as we expected in the sense that we were looking for much more growth in the non retail store size of the business, which much more suits the coke system.

Yeah, thanks Chris. Uh off, let me start off on coffee. I mean firstly, the coffee category is a super attractive category, I mean it's very large. Uh, it's profitable, and it's growing, and it's relatively unconsolidated. So let let's start with coffee is an interesting category. If we can find a 1, it's interesting too. It's interesting for the coke system if we can find a way to plan it, that works for us. Um and we've tried a number of things over the last decade to to find a path. Uh uh, that works for us in coffee. Uh, Costa being the most recent iteration.

And that has not we have not found a path to that.

In the last number of years and so we are kind of.

Standing back and reflecting on what that means for us on where we should go next in coffee, but in the meantime, it's a great business across the business and we continue to run it to be successful it just didn't create the multiplier.

Yeah, thanks Chris. Uh off, let me start on coffee. I mean firstly, the coffee category is a super attractive category, I mean it's very large, uh, is profitable, and is growing, and is relatively unconsolidated. So let let's start with coffee is an interesting category. If we can find a 1, it's interesting 2. It's interesting for the coke system, if we can find a way to play it, that works for us. Um, and we've tried a number of things over the last decades to, to find a path. Uh, uh, that works for us in coffee. Uh, Costa being the most recent iteration of that. Um, and and what what does the summary on what's happening? There is actually the cost of business is doing well as you say, it's returned to volume growth. We've been reinvesting, uh, in the stores, principally in the UK, continuing to increase the, the footprint of the total Park of the cost of Express machines and doing uh kind of beans to machines.

So far the we're looking for into our broader business and then on the lights.

And zeroes in diodes.

Look the headline number is zero as an <unk> or a mid teens percentage of total soft drink volume so.

There's both.

An opportunity or a possibility that they could become a bigger piece of soft drink and actually helped to continue to grow the sparkling category around the world.

And so I think youll, saying, both some degree of self cannibalization in sparkling but also.

Of that. Um, and what, what does the summary on what's happening? There is actually the cost of business is doing well as you say, it's returned to volume growth. We've been reinvesting, uh, in the stores, principally, in the UK, continuing to increase the, the footprint of the total Park of the cost of Express machines and doing uh, kind of beans to machines, uh, in a number of other countries. So, the business is doing well, um, and and is getting some good growth from the top to the bottom line. Um, the the commentary we made last time is the the investment hypothesis didn't work out as we expected in the sense that we were looking for much more growth in the non- retail store size of the business, which much more suits the co system. And that has not, we have not found the part of that uh in in the last number of years. And so we are kind of uh standing back and reflecting on what that means for us and where we should go next in coffee. Um, but in the meantime, it's a great

Our way of the sparkling category continuing to grow globally, and particularly in the developed markets and I think the yes, we called out diet Coke because I think there was a period of time.

Decade long, maybe longer maybe two decades, where diet coke, particularly in the English speaking countries was declining and it has more recently stabilized over the last years and is actually growing this year as long as well as seeing coke zero sugar to grow.

Uh, in a number of other countries. So the business is doing well, um, and and is getting some good growth from the top to the bottom line. Um, the the commentary we made last time is the the investment hypothesis didn't work out as we expected in the sense that we were looking for much more growth in the non retail store size of the business, which much more suits the co system. And that has not, we have not found the path of that uh in in the last number of years. And so we are kind of uh standing back and reflecting on what that means for us and where we should go next in coffee. Um, but in the meantime, it's a great business, the cost of business and we continue to run it um, to be successful. Uh, it just didn't create the multiplier, uh, so far that we're looking for into our broader uh, business and then on the lights, um, and and um, uh, zeros and diets. Um, look, the the the headline number is zeros and diets. Are our mid teens percentage of

Great business, the coffee business, and we continue to run it um, to be successful. Uh, it just didn't create the multiplier uh, so far that we're looking for into our broader uh, business and then on the lights, um, and and um, uh, zeros and diets. Um, look, the the the headline number is zeros and diets, are our mid teens percentage of total soft drink volume. Um, so there's both uh, uh, um, an opportunity.

So the strategy has always been there to do justice to each brand on its own.

But we have found more recently more responsiveness to investments in marketing and innovation for diet Coke in particular.

Total soft drink volume. Um, so there's both, uh, uh, uh, um, an opportunity or a possibility that they could become a bigger piece of soft drink and actually help to continue to grow the sparkling category around the world. Um, and so I think you'll see in both some degree of Self cannibalization in sparking, but also a, a way of the sparkling category continuing to grow, uh, globally and particularly in the developed, uh, markets. And

And that has gone alongside sustained growth in Coke zero, so lots of growth in the future.

Or possibility that they could become a bigger piece of soft drink and actually help to continue to grow the sparkling category around the world. Um, and so, I think you're seeing both some degree of Self cannibalization in sparking, but also a, a way of the sparkling category continuing to grow, uh, globally and particularly in the developed, uh, markets. And I think the, yes we called out Diet Coke, because I think there was a period of time.

I think the yes, we called out Diet Coke because I think there was a period of time.

Okay.

Our next question comes from coming out Gosh, a wala from Jefferies. Please go ahead. Your line is open.

Thank you.

Take a little more maybe on the consumer and CPG, particularly in the U S and Europe.

Hearing mixed messages I suppose from whether its banks and retailers versus what we're hearing from CPG and many of your Cpg's restructure so curious where you stand on where we are obviously there is no restructuring was a bit of productivity.

Can you just maybe talk about that.

Differences in what we're hearing versus what we're seeing from your business.

Yeah Okay.

Um, and it has more recently stabilized over the last few years and is actually uh growing this year as long as well as seeing uh Coke Zero sugar grow. Um, so the the strategy has always been there to do, justice to each brand on its own. Uh, but we have found, uh, more recently, uh, more responsiveness to investment in marketing and Innovation for Diet Coke in particular, um, and that has gone alongside sustained growth in Coke Zero. So lots of growth in the future.

Decades long maybe longer maybe 2 decades where Diet Coke particularly um in the um English-speaking countries uh was declining. Um and it has more recently stabilized over the last years and is actually uh growing this year as long as well as seeing uh Coke Zero sugar grow. Um, so the the strategy has always been there to do. Justice to each brand on its own. Uh, but we have found more recently, uh, more responsiveness to investment in marketing and Innovation for Diet Coke in particular, um, and that has gone alongside sustained growth in Coke Zero. So lots of growth in the future.

Let me, let me step back and have a have a thought on the.

Our next question.

The industry and where we sit in it.

Our next question comes from Camille gajra Walla from Jeffrey's please go ahead. Your line is open.

No Joshua from Jeffrey's please go ahead. Join US Open.

Certainly.

I hear from the banks of the bits of the CPG industry. Those are under pressure in recent years, but let me, let me focusing on beverages more particularly.

The beverage industry has been characterized for many many decades as being a growth industry. You can do a histogram of the growth rates of the beverage industry for decades.

The kind of all the growth rates cluster around the four to five.

<unk> percent growth each year, so its that and there are underlying structural reasons about economic growth urbanization. The drive the creation of the beverage industry and as we've talked about.

Thank you. We um, dig a little more, maybe on the consumer and cpg, particularly in the US and Europe. We're gearing mixed messages I suppose from, you know, whether its banks and retailers versus what we're hearing from cpg, and many of your cpgs have have restructured. So curious, where you stand and where we are. Obviously, there's no restructuring, there's a bit of productivity, but, um, can you just maybe talk about the, you know, the the differences in what we're hearing versus? What maybe we're seeing from your business.

Thank you. We um, dig a little more, maybe on the consumer and cpg, particularly in the US and Europe. We're gearing mixed messages I suppose from, you know, whether its banks and retailers versus what we're hearing from cpg, and many of your cpgs have have restructured. So curious, where you stand and where we are. Obviously, there's no restructuring, there's a bit of productivity, but, um, can you just maybe talk about the, you know, the the differences in what we're hearing versus? What maybe we're seeing from your business.

Um,

In previous Investor conferences actually the number one feature of the beverage industry is it yet to be created that's actually tons of potential head. So it's an industry that grows.

Wait for the last 10 years have been very focused on how the way not only be the leader in that industry, but the winner in terms of market share.

Um, yeah, okay. Uh, I mean, let me, let me stand back and and have a have a thought on, um, the industry and where we sit in it. Um, and and certainly I, you know, I hear from the banks that there's bits of the cpg industry that are on the pressure in recent years, but let me, let me focus. In on beverages more particularly

the industry and where we see it in it. Um, and and certainly I, you know, I hear from the banks that there's bits of the cpg industry that are on the pressure in re recent years, but let me, let me focus, in on beverages more particularly

Yeah.

Industry growth, which we support through our investments, but also win on late in our industry and how we've done that we've talked about the flywheels of investing in marketing innovation <unk> execution.

And we've supported those by using marketing fund, but also as John alluded to.

In his in his comments, we have had ongoing programs with productivity.

So the whole P&L, whether that be in Cogs marketing oriented SG&A, sometimes that is.

The beverage industry ha has been characterized for many many decades as being a growth industry, you can do a, a histogram of the growth rates of the beverage industry for decades. And the the the kind of all the growth rates cluster around the 4 to 5 um uh percent uh, growth each year. So it's a and there are underlying structural reasons about economic growth urbanization that drive the creation of the beverage industry. And as we've talked about um in previous investment conferences, you know actually the number 1 feature of the beverage industry is it's yet to be created. There's actually tons of potential head so it's an industry that grows.

The beverage industry ha has been characterized for many many decades as being a growth industry, you can do a, a histogram of the growth rates of the beverage industry for decades. And the the the kind of all the growth rates cluster around the 4 to 5 um uh percent uh, growth each year. So it's a and there are underlying structural reasons about economic growth urbanization that drive the creation of the beverage industry. And as we've talked about um in previous investment conferences, you know actually the number 1 feature of the beverage industry is it's yet to be created. There's actually tons of potential head so it's an industry that grows.

More of an event, we've reorganized ourselves a couple of times Youll remember lean center a number of years ago. Then we did the thing called emerging stronger coming out of Covid. So there are more episodic more big events of moving the organization around but each year, we're looking for continuous improvement and continuous productivity and.

And we for the last 5, ten years have been very focused on. How do we not only be the leader in the in that industry? But the winner in terms of market share. So we can take the industry growth, which we support through our investments, but also win and lead in that industry. And how have we done that? We've talked about the flywheels of investing in marketing, Innovation, rgm, execution.

And wait for the last 5, 10 years have been very focused on. How do we not only be the leader in the in that industry? But the winner in terms of market share. So we can take the industry growth, which we support through our investments, but also win and lead in our industry. And how have we done that? We've talked about the flywheels of investing in marketing, Innovation, rgm, execution.

And as we think about what's coming next and you you mentioned that a number of people to talk about restructuring what we see going forward is look the industry is going to keep growing we're the leader and we're winning share and what we need to do is to continue to fuel the top line growth.

There was a <unk> for a second there is a famous in the lease signings that coke.

Speech. It was written by the CEO of <unk>, Robert Woodruff on the 50th anniversary, which is almost 90 years ago.

And we've supported those by using uh marketing funds, but also as John alluded to uh in in his, in his comments, we have art had ongoing programs of productivity, through the whole pnl. Whether that be in cogs marketing, or in SGA sometimes that is, um, uh, more of an event. We've we've reorganized ourselves a couple of times, uh, you'll remember lean Center a number,

While half pages speeches with shorter in those days.

And it didn't have a Taiwan. He wrote on the title the future belongs to the discontented and I think that is the key feature of Wolfcamp, Yes, we've been growing we've been winning in the marketplace.

And we've supported those by using uh marketing funds, but also as John alluded to uh in in his in his comments we have I've had ongoing programs of productivity, through the whole pnl. Whether that be in cogs marketing or in SGA sometimes that is, um, uh, more of an event. We've we've reorganized ourselves, a couple of times. You'll remember lean Center a number of years ago. Then we did a thing called emerging stronger coming out of Co. So there are more episodic more big events of moving the organization around. But each year we're looking for continuous improvements and continuous productivity.

It's easy to be discontented, if youre not doing well and you are under pressure from everyone else in the invest device. The hardest thing is to say I've done well and be discontented enough with your south that you know you need to change and you know you need to transform so think of walls coming out we're going to continue to drive that top line revenue growth.

And as we think about what's coming next and you, you mentioned that a number of people have talked about restructuring, what we see going forward is look, the industry is going to keep growing. We're the leader and we're winning share. And what we need to do is to continue to fuel the Topline growth. Um, there was a if I diverge for a second, there's a famous, uh, in the least famous that coke. Um, uh, speech that was written by the CEO of K Robert Woodruff on the

We're going to find the extra investments to drive that growth and yes, we will be discontented with ourselves and think what do we need to continue what do we need to evolve and what do we need to transform the generate those funds for growth and that will include ongoing.

Productivity as we bring in.

And <unk> Tec over the coming years, and we will do some restructuring of the organization.

Of years ago then we did a thing called emerging stronger coming out of Co. So there are more episodic more big events of moving the organization around. But each year, we're looking for continuous improvements and continuous productivity. And as we think about what's coming next and you, you mentioned that a number of people have talked about restructuring, what we see going forward is look, the industry is going to keep growing. We're the leader and we're winning share. And what we need to do is to continue to fuel, the Topline growth. Um, there was a if I diverge for a second, there's a famous in the least, famous that coke. Um, uh, speech that was written by the CEO of Coke Robert Woodruff on the 50th Anniversary, which is almost 90 years ago. Um, it was only 1 and a half pages speeches were shorter in those days, um, and he didn't have a time when he wrote on the title, The Future belongs to the discontented and I think that is the key feature of what's going on. Yes, we've been growing. We've been winning in the marketplace and it's easy to be discontented if you're not doing well. And

In the coming in 2026th but this is all about.

Replicating the game plan over the last 10 years of finding productivity through the whole P&L to invest and drive top line growth that falls to the bottom line.

50th Anniversary, which is almost 90 years ago. Um, it was only 1 and a half pages speeches were shorter in those days, um, and he didn't have a title and he wrote on the title, The Future belongs to the discontented, and I think that is the key feature of what's going. Yes, we've been growing. We've been winning in the marketplace and it's easy to be discontented if you're not doing well and you're under pressure from everyone else. Uh, in the investor base, the hardest thing is to say I've done well and be discontented enough with yourself that you know you need to change and you know, you need to transform. So think of what's coming, as we're going to continue to drive that Topline Revenue growth.

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

Alright. Thank you good morning, everyone I actually just had a quick question on your book.

You're under pressure from everyone else in the investor base. The hardest thing is to say I've done well and be discontented enough with yourself that you know you need to change and you know you need to transform. So think of what's coming out, we're going to continue to drive that Topline Revenue growth. We're going to find the extra Investments to drive that growth and yes we will be discontented with ourselves and think what do we need to continue? What do we need to evolve and what do we need to transform to generate those funds for growth? And that will include

We're going to find the extra Investments to drive that growth and yes we will be discontented with ourselves and think what do we need to continue? What do we need to evolve and what do we need to transform to generate those funds for growth? And that will include

Organic sales in the quarter were up 7% on accelerated sequentially. So I was hoping for some more color on the strength, we're seeing in the region and how sustainable the strong I guess high single digit price mix.

Ongoing productivity as we bring in Ai and agentic Tech over the coming years, and we'll do some restructuring uh uh of the organization uh in in in the coming in in in 2026. Um, but this is all about

Thanks.

Ongoing productivity as we bring in Ai and agentic Tech over the coming years and we'll do some restructuring uh of the organization uh in in in the coming in in in 2026. Um, but this is all about

Yes, Thanks, Bob.

This falls into the bucket of what are the sporadic questions about how strange for the Asia Pacific segment is.

Replicating, the game plan of the last 10 years of finding productivity through the whole pnl to invest and drive Topline growth that falls to the bottom line.

And what I would encourage us to look at multi quarter.

Bonnie, Herzog from Goldman.

Trends in Asia Pacific because.

If your line is open,

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

Because for management reasons Asia there.

On a different time than it is much easier to manage when you're out there and you put them all together, but they are quite desperately different businesses, you've got the emerging market businesses with let's say, India, a one end.

With huge huge huge potential for growth and volume over many many years, but much lower prices all the way through China ASEAN and then the other end of the spectrum, you get to Australia, and Japan, which have been growing but have much higher realized prices given the developed economy.

All right. Thank you. Good morning everyone. I actually just had a a quick question on your business. In Asia, organic sales in the quarter were up 7% and accelerated sequentially so I guess hoping for some more color on the strength you're seeing in the region and you know how sustainable the strong I guess High School digit price? Mix big thanks.

All right. Thank you. Good morning everyone. I actually just had a a quick question on your business. In Asia, organic sales in the quarter were up 7% and accelerated sequentially so I guess hoping for some more color on the strength you're seeing in the region and you know how sustainable the strong I guess High single digit price. Mix is thanks.

And so one of the predominant effects in Asia Pacific is how fast did each of those components grow and in this particular quarter.

As we talked about earlier, India because of the monsoon.

Because of some of the economic pressures and ASEAN those markets underperformed our expectations in volume terms and so as the mechanical effect of putting all that together that means that.

In a waiting.

The lower price countries did poor, which means that the mix looks like it's shot up about shut up with increased slightly.

Pan in Australia, which then produces a PMO effect that looks like pricing went up a lot in Asia Pacific, which is the inverse of what normally happens which is when the emerging markets growth. It looks like prices are flat to declining in Asia Pacific because of the growth.

Yeah, thanks buddy. Uh, this this falls into the bucket of what are the sporadic questions about how strange the Asia Pacific segment is? Um, and what I would encourage is to look at multiple um Trends in a specific because uh because for management reasons, as they're all on a certain time, that is much easier to manage when you're out there and you put them all together, but they are quite desperately different businesses. You've got the Emerging Market businesses, with let's say India, uh, at 1 end, uh, with huge, huge, huge potential, for growth, in volume over many, many years. But much lower prices. All the way through China Azan and then the other end of the spectrum, you get to Australia and Japan which have been growing. Uh, but have much higher uh, real life prices given the developed economy. And so 1 of the predominant effects in Asia Pacific is how fast did

Each of those components grow. And in this particular quarter,

To the bucket of. Uh, what are the sporadic questions about how strange the Asia Pacific segment is? Um, and what I would encourage is to look at multi-quarter um uh Trends in Asia Pacific, because uh, because for management reasons Asia, they're all on a different time zone. It's much easier to manage when you're out there and you put them all together, but they are quite desperately different businesses. You've got the Emerging Market businesses, with let's say India uh, at 1 end uh, with huge, huge huge, huge potential, for growth, in volume over many, many years, but much lower prices. All the way through China Asian and then the other end as a spectrum, you get to Australia and Japan which have been growing. Uh but have much higher uh realized prices given the developed economies. And so 1 of the predominant effects in Asia, Pacific is how fast did each of those components grow. And in this particular quarter

The lower price markets. So this is a mix effect problem.

At Whiting problem of the way the segment is constructed.

We manage each country to drive the business and so I would I would not overemphasize. This we should look for Asia Pacific overtime to drive volume growth in emerging markets. The pricing will go up in each country, but as that mix is out in the segment you don't see it come through in the Asia Pacific segment.

As we talked about earlier, India, because of the monsoon China, because of some of the economic pressures and Asian, those markets on the performed, our expectations in volume terms. And so as the mechanical effect of putting all that together, that means that uh in in a waiting sense uh the lower price countries did poorer, which means that the mix looks like it shot up. Well not shot up with increased slightly uh in Japan and Australia which then produces a pmo effect that looks

Quite so obviously.

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

Great. Thank you very much James.

James I was wondering if we can kind of circle back to a topic that was much discussion a couple of years ago and has faded a little bit is Q1 drugs.

And at this point you ought to have some reasonably good data.

On their impact on beverage consumption, one consultant that we work with talks about an increase in consumption of protein energy and hydration.

As we talked about earlier, India, because the monsoon China because of some of the economic pressures and Asian, those markets on the performed, our expectations in volume terms. And so, as the mechanical effects of putting all that together, that means that uh, in in a waiting sense, uh, the lower price countries did poorer, which means that the mix, looks like it shot up or not shot up with increased slightly in Japan Australia which then produces a pmo effect that looks like pricing went up a lot in Asia Pacific, which is the inverse of what normally happens, which is when you Emerging Markets grow, it looks like prices are flatly declining in nature because of the growth of the low price markets. So this is a mixed effect problem um or or a waiting problem. That way, the segment is constructed. We manage each country Drive the business and so I would, I would not overemphasize this. We should look for asia-pacific over time to drive volume growth for the Emerging Markets, the pricing will go up in

each country but allow that mixes out in the segment. You don't see it come through in the asia-pacific segment, um, quite so obviously,

Looks like pricing went up a lot in Asia Pacific, which is the inverse of what normally happens, which is, when the Emerging Markets grow, it looks like prices are flat or declining in a specific because of the growth, uh, of the lower price markets. So this is a mixed effect problem, um, or, or a waiting problem of the way the segment is constructed. Uh, we manage each country to drive the business and so I would, I would not overemphasize this. We should look for asia-pacific over time to drive volume growth for the Emerging Markets, the pricing will go up in each country. But as that mixes out in the segment you don't see it come through in the asia-pacific segment. Um, quite so obviously,

Driven products from GL Q1, so I was wondering.

Our next question comes from Robert otton.

What your data says do you see those interest increases do you see areas, where there's weakness and then just to double click on protein. If you can give us an update on your platform.

Our next question comes from Robert. Odin from evercore, please go ahead. Your line is open.

Please go ahead. Your line is open.

Great, thank you very much. Um,

Great, thank you very much. Um,

How capacity looks and when it comes on and how you see the competitive environment developing as competitors kind of sharpen.

James. I wonder if we can kind of circle back to a topic that was much discussion a couple years ago and it's faded a little bit. Um is is glp1 drugs?

Their tools and new competition comes in thank you.

Sure. Thanks, a lot.

Yes, we certainly are out there generating data on what seems to be happening with households.

And you know, at this point, you you ought to have some reasonably good data on their impact on beverage consumption. Um, 1 consultant that we work with, um, you know, talks about an increase,

James. I wonder if we can kind of circle back to a topic that was much discussion a couple of years ago and has faded a little bit. Um, is is glp1 drugs. And, you know, at this point you you ought to have some reasonably good data on their impact on beverage consumption. Um, 1 consultant that we work with, um, you know, talks about an increase in consumption of protein energy and hydration, uh,

And people that are on <unk>.

It is still ultimately early days to know the full cycle, but I think what youre seeing is very similar to what we are saying, obviously, we track not just what they do on nonalcoholic beverages, but across what they eat on the alcoholic beverages and so one can see the full the full change in the makeup.

As it relates to nonalcoholic clearly clearly we can see some very.

Some very emerging conclusions they tend to drink less.

Driven products from glp1. So I was wondering if you know what your data says, do you see those interests increases? Do you see areas where there's weakness and then just to double click on protein? If you can give us an update on your platform. Um how capacity looks and when it comes on and how you see the competitive environment developing as competitors kind of sharpen uh their tools and new competition comes in. Thank you.

In consumption of protein energy and hydration, uh, driven products from glp1. So, I was wondering if, you know what your data says, do you see those interests increases? Do you see areas where there's weakness and then just to double click on protein? If you can give us an update on your platform. Um how capacity looks and when it comes on and how you see the competitive environment developing as competitors kind of sharpen uh their tools and new competition comes in. Thank you.

Sure, uh, thanks a lot. Um,

Full sugar soft drinks that they tend to drink more.

Soft drinks also hydration more coffee and as you say a big shift towards protein.

Protein drinks I think that's a pretty standard set of inclusion so that everyone can see.

And then as it relates to what we're doing on protein.

Obviously, we got fail often co powers have been standout successes for the last number of years and continued to grow.

The third quarter.

The capacity that we've talked about the big factory in upstate New York.

Is on track, we expect to begin to produce on time.

Ramp up that capacity through the course of 2026 as.

As much as I would love it to all be available on January the first that will not be the case.

Yes, we we we certainly are, uh, out there, um, generating data on what seems to be happening uh, with households. Um, and people that are on glp ones. I, I think it's still ultimately early days to know the full cycle, but I think what you're seeing is very similar to what this we're seeing, um, obviously we track not just what they do on non-alcoholic beverages but across what they eat, uh, and the alcoholic beverages, um, and so 1 can see the full, uh, the full change in the diet makeup. Uh, as it relates to non-alcoholic, you know, clearly clearly we can see some very, uh, some very emerging conclusions. They came to drink less, uh, uh, full sugar, uh, soft drinks but they tend to drink more uh, diet, soft drinks. Also hydration more coffee. Uh, and as you say, a big shift towards protein, uh, protein drinks, I think that

And so we do see ourselves, having a much more unconstrained ability to satisfy consumer demand over the course of 2026.

Yes competitors coming into the space across all sorts of food beverages aimed.

Aimed to protein we believe we have great brands we have.

Excellent products.

There'll be a lot of new innovation, our objective is to drive that fell off in the core power brands, we have lots of new innovation.

We will have more capacity coming online.

And it's going to be it's going to be a growth area for sure in 2026.

Yeah.

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

Thank you everyone and good morning, and James I guess your comment takes me to the to the question I. Appreciate it when you said the culture of discontent and grit in the organization.

Uh, diet soft drinks. Also hydration more coffee. Uh, and as you say, a big shift towards protein, uh, protein drinks, I think that's a pretty standard set of conclusions that everyone's seeing. Um, and then as it relates to what we're doing on protein, um, obviously, we've got Fair life and Core Power, which have been standout successes, uh, for the last number of years and continue to grow, uh, in the third quarter. Um, the capacity that we've talked about at the big Factory up in New York, uh, is on track. We expect to begin to produce on time, um, and ramp up that capacity through the course of 2026. Um, as much, I would love to all be available on January the 1st. That will not be the case. Um, and so we do see ourselves having a much more unconstrained ability to satisfy consumer drugs over the course of 20206. Um, yes, competitors are coming in to the space across all sorts.

Of food and beverages, uh, into protein. We believe we have great Brands. We think we have,

And in your comment right now on fertilizer and core power you, obviously had a lot of success retailer. Thanks to an allocation and fully understand that you are not.

Speaker #2: There are macroeconomic issues in in the country, and also our plans to really pivot and address that has been put in place in the last few quarters we have seen some of the bright spots coming out of that, but it's too early to say that we are out of the woods here on getting Mexico really on a growth trajectory.

I'm going to have the capacity.

On January 1st but.

But how we shouldnt be thinking like given their location and innovation you spoke to.

Excellent products. Um, there'll be a lot of new innovation. Uh, our objective is to drive the fair Life In The Core Power Brands. We have lots of new innovation, uh and we will have more capacity coming online, um, and it's going to be it's going to be um, a growth area for sure in 2026.

Ramp up that capacity through the course of 2026. Um, as much as I would love it to all be available on January the 1st, that will not be the case. Um, and so we do see ourselves having a much more unconstrained ability to satisfy consumer demand over the course of 2026. Um, yes, competitors are coming into the space across, all sorts of food and beverages, uh, into protein, we believe we have great Brands. We think we have excellent products, um, there'll be a lot of new innovation. Uh, our objective is to drive the fair Life In The Core Power Brands. We have lots of new innovation, uh and we will have more capacity coming online, um, and it's going to be it's going to be um, a growth area for sure in 2026.

As we go into 2026, perhaps in the second half we are going to see the acceleration there and then as you think about like potentially lifting entry international understand that this is going to be more of a probably not a 2026 for the long term, we just see a fence, perhaps even like with Santa Clara in Mexico and other.

Our next question comes from Andrea Tara from JP Morgan. Just go ahead, your line is open.

Our next question comes from Andrea Tara from JP Morgan. Just go ahead, your line is open.

Speaker #2: What we see is that it's going to take a little bit more time there, and in the rest, like Latin America, we have momentum.

This is where you can.

Did you get that protein, obviously is a very difficult.

Speaker #2: So, to your question about whether it's something more related to the whole region, it's not specific to that, it's more related to the country itself.

Supply chain or I should say difficult, but just longer term supply chain.

Is that something that you're thinking longer term.

Uh, thank you everyone and good morning and, and James. I guess your your comment takes me to the, uh, to the question. I appreciate that. What you said, the culture of this content and and greet in the organization, um, and and your comment right now, on, Fair life and Core Power. You obviously had a lot of success with us too on a location and fully understand that you're not going to have the capacity, um, right on January 1st but how should we be thinking like

And then thank you all for staying in Mexico, since we spoke about Santa Clara.

Speaker #3: Our next question comes from Felipe Felloni from City. Please go ahead, your line's open.

How should we think we'd be thinking about like the sugary drink taxes that you faced obviously in 2014, you pivoted really well.

Speaker #5: Hi, good morning, everyone. I wanted to ask about the refranchising efforts, given this morning's announcement on CCBA, which is clearly a very important step in your goal of becoming the world's smallest bottler.

<unk> much higher than before.

And that was the one piece that I think.

In pricing so how can you think.

Speaker #5: I guess, can you walk us through what will be left after that transaction closes in terms of other territories to potentially refranchise? And then in terms of the margin implications from refranchising, a few years ago, you had a target of like a mid-30s operating margin target for the Coca Cola company.

Think about like how to face.

Surely.

That is implemented thank you.

Yeah Okay.

Uh, thank you everyone and good morning and, and James. I guess your your comment takes me to the, uh, to the question. I appreciate that. What you said, the culture of this content and and greet in the organization, um, and, and your comment right now, on, Fair life and Core Power. You obviously had a lot of success retailers are still on a location and fully understand that you're not going to have the capacity, um, right on January 1st. But how should be thinking, like, given the allocation and Innovation, you spoke to uh, as we go into 2026, perhaps, you know, second half we're going to see the acceleration there and then as you think about like potentially lifting into International understand that this is going to be more of a probably another 2026 but long term. We just see a fit perhaps even like with Santa clarity Mexico and other places where you can uh view that protein obviously is a very difficult um supply chain.

Fair life looked.

Look the New York factory wane at full capacity will give us about 30% more capacity or volume potential full time. So we certainly are going to have the opportunity to significantly grow.

Or I should say difficult, but just, you know, a longer term supply chain.

Given the allocation and Innovation, you spoke to uh as we go into 2026, perhaps, you know, second half we're going to see the acceleration there and then as you think about like potentially lifting into International understand that this is going to be more of a probably another 2026 but long term. We just see a fit perhaps even like with Santa clari, Mexico and other places where you can uh view that protein obviously is a very difficult um supply chain, or I should say difficult, but just, you know, a longer term supply chain.

Speaker #5: And it seems like you're getting pretty close there to that after this transaction. So, can you walk us through like the path on the margins post refranchising?

Speaker #5: Thank you.

Into 2026 and to move out of.

Speaker #2: Sure, Felipe. I'll let

Speaker #1: John jump in on that margin target and the evolution towards it. Look, with the two deals that we have announced with the Bhatia Group, Jubilant Bhatia Group in India, and with Hellenic relative to Coca Cola beverages Africa, actually those two transactions are the last two large pieces setting us on the path to completing the refranchising strategy that we started in 2015.

Having the product on allocation to our retail partners.

And that will take some time through 2026 so.

This is not a small factory.

I think one of the largest if not the largest dairy processing facilities in the U S.

And it's going to 30%.

Capacity.

So that'll be good and that will help us get out of the kind of bottleneck that we're in at the moment.

Speaker #1: And just to remind, you know, because that's taken us 10 years, the most important thing here was to find the right partners for each of those assets, the right owners who could drive the investment in capabilities into the future.

And get into the marketplace as it relates to international expansion you alluded to.

I've said it before that the dairy industry is a complicated and protected industry around the world.

Operator: Is being recorded. If you have any objections, please disconnect at this time. All participants will be on listen-only mode until the formal question-and-answer portion of the call. I would like to remind everyone that the purpose of this conference is to talk with investors, and therefore, questions from the media will not be addressed. Media participants should contact The Coca-Cola Company's Media Relations Department if they have any questions. I would now like to introduce Ms. Robin Halpern, Vice President and Head of Investor Relations. Ms. Halpern, you may now begin.

Speaker #1: The team at the company expects to significantly grow into 2026 and move out of having the product on allocation to our retail partners. That will take some time through 2026.

Certainly not.

Speaker #1: And we have seen through all the refranchisings we've done over time that if we find the right partner to put these bottlers into their hands, they invest more, they do better, the bottler performs better, and it helps us drive overall growth of the total system.

Listen shift in a simple sense of the word.

But obviously, we are looking at the growth in the sorts of beverages and brands that we have achieved with <unk> and we have taken some of our learnings from the U S and help to shape the way we've executed Santa Clara in Mexico.

Speaker #1: So, it, it, this is not a small factory; it's, I think, one of the largest, if not the largest, dairy processing facilities in the U.S.

Speaker #1: and it's gonna add 30%, capacity. so that, that'll be good, and that'll help us get out of the kind of bottlenecks that we're in at the moment.

Speaker #1: So, the combination grows faster and is more profitable. So, it's been a very successful strategy over the years, and with these two pieces, we will largely put ourselves on the path to completing refranchising.

Santa Clara in Mexico for example grew 13% in volume in the third quarter.

Robin Halpern: Good morning, and thank you for joining us. I'm here with James Quincey, our Chairman and Chief Executive Officer, Henrique Braun, our Chief Operating Officer, and John Murphy, our President and Chief Financial Officer. We've posted schedules under Financial Information in the Investors section of our company website. These reconcile certain non-GAAP financial measures that may be referred to this morning to results as reported under Generally Accepted Accounting Principles. You can also find schedules in the same section of our website that provide an analysis of our gross and operating margins. This call may contain forward-looking statements, including statements concerning long-term earnings objectives, which should be considered in conjunction with cautionary statements contained in our earnings release and in the company's periodic SEC reports. Following prepared remarks, we will take your questions. Please limit yourself to one question. Re-enter the queue to ask follow-up.

Speaker #1: and get into the marketplace. As it relates to international expansion, you alluded to, and it's, I, I've said it before, the, the dairy industry is a complicated and protected industry around the world.

And became the number one value added dairy brand in Mexico, I think since we bought Santa Clara a decade or so ago, we've increased its size by 10 times.

Speaker #1: The things that will be left are just a handful of smaller countries like Malaysia and Singapore. Think of this as the final piece of stone in putting the refranchising strategy to bed. We now have a system that is super capable and set up to drive growth well into the future.

Speaker #1: it's certainly not, a lift and shift in a simple sense of the word. but obviously, we are looking, at the growth, in the sorts of, beverages and brands that we have achieved with Fairlife, and we have taken some of our learnings from the US and helped to shape the way we've executed Santa Clara in Mexico, so Santa Clara in Mexico, for example, grew 13% in volume in the third quarter, and became the number one value-added dairy brand, in Mexico.

So we've clearly found something that if we have the right platform, we can make it work with the brand and the product ideas.

We have also had some failures in the dairy business Luckily the successes, we are way bigger than the failures, which was small but we do know that it's a complicated business to get into around the world, but we will be looking to see how we can leverage the essential product ideas.

Speaker #1: And I'll let you answer the margin question, John.

Speaker #2: Sure. Sure, James, thanks. Felipe,

Speaker #1: Maybe it's worth taking a step back and going back a few years. In 2017, our operating margin was 26.5%. Since that period, there have been two primary positive impacts offset by ongoing FX headwinds.

Hi, fail iPhone, Santa Clara into innovations around the rest of the world.

Speaker #1: I think since we bought Santa Clara or Decoratus some time ago, we've increased its size by ten times. So we've clearly found something that, if we have the right platform, we can make it work with the brand and the product ideas.

As it relates to the Mexico tax.

I believe was passed like a couple of days ago.

Yes. It is.

The significant increase obviously, we're working with the bottling system to look at how we accommodate and adapt to these increases that it'll be January one 2026 as you pointed out 2014, there was a tax increase in Mexico.

Speaker #1: The first has been the refranchising to date, and the second has been our continued focus on expanding margins in line with the implied guidance in our long-term growth model.

Robin Halpern: Now, I will turn the call over to James.

Speaker #1: But we also had some failures in the dairy business. Luckily, the successes were way bigger than the failures, which were small. But we do know that it's a complicated business to get into around the world. However, we will be looking to see how we can leverage the essential product ideas behind Fairlife and Santa Clara into innovations around the rest of the world.

James Quincey: Thanks, Robin, and good morning, everyone. In the third quarter, the external environment remained dynamic, and in response, we adapted our plans as needed, focusing on sharper execution and investments to drive growth. With one quarter remaining in 2025, we're on track to deliver on our reiterated top-line and bottom-line guidance. We also believe we're well-positioned to achieve our longer-term commitments. This morning, I'll provide some context on how we're executing our all-weather strategy in the current operating environment. I'll pass the call to Henrique, who will discuss our segment performance and how we're working to unlock the full potential of our system. Finally, John will discuss financial details for the quarter, our guidance for the full year 2025, and some early considerations for 2026. During the quarter, the operating landscape remained complex.

We were able to adapt to by doubling down on the marketing and the innovation using all our <unk> technology and the execution of the bottling system to come through it stronger.

Speaker #1: As you look at this year to date, the primary driver has been the latter, in other words, as I mentioned in my remarks, a lot of focus on managing our cost base, a lot of focus on managing our supply chain and getting some of the benefits to the bottom line of the marketing productivity work that we've had underway.

Speaker #1: As it relates to the Mexico tax, which I believe was passed, like, a couple of days ago, yes, it's a, it's a significant, increase, obviously, we're working with the bottling system, to look at how we accommodate and adapt, to these increases that'll be January 1, 2026.

Obviously, there's likely to be some impact in the early days.

And then as we use all the implementation to recover from that but yes, we are expecting it to come in.

In.

At the beginning of next year.

Speaker #1: And so, as you look to the next couple of years, you can I think assume that the implied expansion that we expect from the core business will continue, and the math will play itself out in terms of the uplift in overall the overall margin profile of the company with the latest refranchising that James just talked about, and our expectations for the next couple of years to finish the play.

We will be all hands on deck to come up with the latest adaptations of the strategy now that we know.

Speaker #1: As you pointed out, 2014, there was, tax increase in Mexico. which we were able, to adapt to by doubling down on the marketing and the innovation, using all our RGM technology and the execution, of the bottling system, to come through it stronger.

What the final.

Policy actually is in Mexico to come up with a plan and executed.

<unk> starting this year.

Our next question comes from Peter Galbo from Bank of America. Please go ahead. Your line is open.

James Quincey: While many consumers remain in overall good shape, certain segments of the population are under pressure due to varying factors. Some factors are transitory, like unseasonable weather. Others may be long-lasting, like the cumulative impact of inflationary pressures, uncertain trade dynamics, and an ever-changing geopolitical environment. Despite this backdrop, we've delivered volume growth. July and August were slow to start, but September ended on a stronger note. Organic revenue growth continued to be at the high end of our long-term growth model, and ongoing efficiency and effectiveness initiatives drove comparable operating margin expansion. This led to 6% comparable earnings per share growth, despite 6% currency headwinds. We benefit from operating in a vibrant and resilient industry with ample headroom for growth. For the 18th consecutive quarter, we gained overall value share. We also held or gained value share across each of our geographic segments.

Speaker #1: Obviously, there's more likely to be some impact in the early days, and then as we use all the implementation to recover from that. But yes, we are expecting it to come in at the beginning of next year, and we will be all hands on deck to come up with the latest adaptations of the strategy.

Hey, good morning, guys. Thanks for the question I had a question on North America I think it was one of the markets actually where you did see that two year stacked growth rate accelerate a bit both on volumes and maybe on organic sales and.

Speaker #3: Our next question comes from Chris Carey from Wells Fargo Securities. Please go ahead; your line is open.

And regain in your comments I think you spoke a bit about just differences between spending on income groups and then maybe some different activities on channel. So I just was hoping to get a bit more detail and color on on one hand, youre seeing in the business actually performed relatively well in North America. It seems like maybe there's a bit of cautious comments.

Speaker #1: Now that we know, what the final, policy actually is in Mexico, to come up with a plan and execute it, starting, starting this year.

Speaker #2: Our next question comes from Peter Galbo from Bank of America. Please go ahead, your line is open.

On some of the other factors bolt on consumer and on channel that would love to get a bit more detail on thanks very much.

Speaker #3: Hey, good morning, guys. Thanks, for the question. I, I had a question on North America, I, I think it was one of the, the markets actually where you did see that, you know, two-year kind of stack growth rate, i-accelerate, a bit both on, on volumes and maybe on organic sales.

Sure glad to do that so look we have.

It has a tough.

Q1, as you'll remember in <unk> than what we have been seeing sequential improvement in North America and the volume wise, we're really pleased with that and Thats in the Q3 will not only grow that but we want volume and value share. When we look from a consumer point of view.

Speaker #3: Enrique, in, in your comments, I, I think you spoke a bit about just differences between spending on, on income groups and then maybe some different activities on channels.

James Quincey: By offering consumers choice across our total beverage portfolio and by leveraging our system's capabilities, we continue to build momentum to develop our industry and expand our lead over the long term. To deliver in today's environment, we're capitalizing on the strength of our portfolio and focusing on improving execution across all aspects of our strategic growth flywheel. We have unparalleled portfolio power, as demonstrated by our $30 billion brands, which we estimate represents approximately a quarter of the billion-dollar brands in the industry and is approximately double our nearest competitor. As we continue to develop love brands, we expect our number of billion-dollar brands to grow. Our marketing transformation is centered on connecting deeply with consumers through digital engagement, personalized experiences, and cultural relevance. For example, we recently partnered with Universal Pictures and Blumhouse on a Halloween campaign for Fanta that was activated in approximately 50 markets.

Speaker #3: So I just was hoping to get a bit more detail and color on, on one hand, you're, you're seeing the business actually perform relatively well in North America.

Can you see divergence in spending between the income groups the pressure on middle and low income.

Speaker #3: It seems like maybe there's a bit of cautious commentary on some of the other factors, both on the consumer side and on the channel side, that I would love to get a bit more detail on.

Income consumers.

Still there what we have done since Q1 that has been really pay off it's really to go back to the drawing board.

Speaker #3: Thanks very much.

Speaker #1: Yeah. Sure. Glad to do that. So look, we had, we had the thought of, Q1 as you remember, and since then we have been seeing the question improvement in North America and on volume-wise, we're really pleased with that.

And have a plan that would really.

<unk>, not only affordability, but premium amortization as well.

Youll see that tax will be reflected on our price mix composition two points of positive mix came from premium brands like.

Speaker #1: And that in the Q3, we not only grew that, but we won volume and value share. When we look from a consumer point of view, we continue to see divergency in spending between the income groups.

Topo Chico is smartwater and fair life, but we also pleased with the introduction of.

Speaker #1: The pressure on middle and low-end, income consumers, it's still there. What we have done since Q1 that has been really paying off, it's really to go back to the drawing board, and have a plan that would really tackle not only affordability, but premiumization as well.

Packaging architecture that are addressing the pressure that the consumers have.

On their daily disposable income with the introduction of acquaintances of mini cans that today.

Radio represents $1 billion in revenue by itself so.

James Quincey: Building on last year's success, the campaign featured iconic horror characters on our packaging, limited-time flavors, and immersive retail and digital experiences. While we're building capabilities in marketing, we're also prioritizing bigger and bolder innovation, like Sprite + Tea in North America, Bacardi mixed with Coca-Cola in Mexico and Europe, and POWERADE Springboks Edition in South Africa. During the first three quarters of this year, innovation contributed strongly to revenue growth, and we're continuing to have strong velocities on our innovation. Last, our marketing and innovation agenda is brought to life by execution in the market. Over the past decade, we've been on a journey to refranchise company-owned bottlers to fortify our system and unlock further growth. Recently, we reached two significant steps in completing this journey. In July, we sold a 40% ownership stake in our company-owned Indian bottler to the Jubilant Bhatia Group.

Pivoting Accordingly, we note that the consumer landscape has not changed but that's going to be continue our game working together with our bottlers throughout this will come out stronger.

Speaker #1: And you see that actually reflected in our price mix composition. Two points of that positive mix came from premium brands like Topo Chico, Smartwater, and Fairlife.

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

Speaker #1: But we also pleased with the introduction of, you know, packaging architecture that addressing that pressure that the consumers have, you know, on their daily disposable income.

Thank you and good morning, everyone.

I wanted to go back to Steve's question just on the volume.

Speaker #1: With the introduction, for instance, of mini cans that, today, it's, it's already represent 1 billion US dollars in, in revenue by itself. So we, we pivoting accordingly, we know that the consumer landscape has not changed, but that's gonna be continued our game working together with our bottlers, throughout this come out stronger.

Progression, where it sounds like a lot of the improvement is.

Maybe you can better execution, rather than a better backdrop. So.

Two questions. One have you seen that improvement it sustain as we move into October and then second John you mentioned, the tougher volume comps in the fourth quarter in some key markets.

Would you anticipate unit case volume stepping back versus what we just saw or could we see continued momentum despite the tougher comps. Thanks.

Speaker #2: Our next question comes from Peter Grom from UBS. Please go ahead; your line is open.

Speaker #4: Thank you. Good morning, everyone. I wanted to go back to Steve's question just on the volume per progression where it sounds like a lot of the improvement is really related to better execution rather than a better backdrop.

So Brian it's a little early in October the KOL October brand thing.

James Quincey: Additionally, this morning, Coca-Cola Hellenic announced its intention to acquire a controlling interest in Coca-Cola Beverages Africa, which is expected to close next year, subject to regulatory approvals. We believe these moves will unlock growth opportunities in India and Africa. Jubilant Bhatia has built and grown consumer businesses in India, and Coca-Cola Hellenic has demonstrated a strong track record in Nigeria and Egypt. Our global franchise model is a strategic differentiator and is very difficult to replicate. With these milestones, we have a clear line of sight to complete our refranchising strategy, allowing us to further focus on brand building and innovation, complemented by integrated execution with our bottling partners. In summary, we're confident we can navigate what comes at us, deliver on our 2025 guidance, and create long-term value for our stakeholders. With that, I'd like to hand off the call to Henrique.

But I would say.

The market is still growing is this is not this is not something that there's some sort of a precipitous decline in NSE.

Speaker #4: So two questions. One, have you seen that improvement sustain as we move into October? And then second, John, you mentioned tougher volume comps in the fourth quarter and some key markets.

Thing going on.

It's just I think the way Oh, what's going to drive success is.

Speaker #4: So would you anticipate unit case volume stepping back versus what we just saw, or, or could we see continued momentum despite the tougher comps?

More a slightly more.

On our own actions, our own marketing our own innovation on our own execution and yes, the tougher comps will be there, but that's not all.

Speaker #4: Thanks.

Way of saying, we want a decline in the fourth quarter. We are certainly looking to continue to rebuild momentum.

Speaker #1: Hi, Brent. Oh, it's a little early in October to, to call October for anything. a-and but I would say, it's, you know, the, the, the market is still growing.

And we will see where we get to on.

Speaker #1: This is not, this is not something that there's some sort of, precipice at all decline, in anything going on. it's just I think the, the weight, of what's gonna drive success is, more a slightly more, on our, own actions, our own marketing, our own innovation, and our own, execution.

On that.

Our next question comes from Michael <unk> from Piper Sandler. Please go ahead. Your line is open.

Thank you and good morning, I wanted to ask a margin question, maybe with two kind of quick components.

James Quincey: In his nearly 30 years at the company, Henrique has worked on multiple continents and has been a strong partner to me and to our system in driving sustainable growth.

Wanted to just maybe understanding if you have any visibility on currency impact next year, you called out the 100.

Speaker #1: And, and yes, the, the tougher comps will be there, but that's not, a way of saying we want to decline in the fourth quarter.

At this point.

Henrique Braun: Thank you, James. I'm glad to be joining the call today. I'd like to begin by discussing how we responded to a variety of market dynamics during the quarter by adapting faster, and then I will spend some time covering actions that we are taking to ensure we get better and sharper every day. Starting with North America, we delivered strong results. Despite ongoing differences in spending between income groups and slower traffic across channels, volume was flat and improved sequentially for the second consecutive quarter. We also gained value share and had strong revenue and profit growth. We are investing behind our brands, which led to broad-based strength across our total beverage portfolio.

Turning to the transactional headwind in the gross margin build.

Speaker #1: we are certainly, looking to continue to rebuild momentum, and we'll see where we get to, on that.

Is that likely to defend or how do we think about maybe how that flows through in 2006, if you've got the better.

Currency on the top and EPS side, and then just also in the quarter you had EBIT.

Speaker #2: Our next question comes from Michael Lavery from Piper Sandler. Please go ahead, your line is open.

EBIT margins.

Well ahead of the gross margin performance were there any.

Speaker #5: Thank you. Good morning. I wanted to ask a margin question, maybe with two kinds of quick components. One is just maybe understanding, if you have any visibility on currency impact next year.

Timing considerations or.

How sticky should we consider that to be is there anything in there we need to think about.

Maybe a one off.

Speaker #5: You talked about the 100, basis points, I, I, I I assume transactional had been in the, in the growth margin build. Is that likely to, to fade, or how do you think about maybe how that was through in '26 if, if you've got a better, currency on the, the top and UPS side?

Thanks.

Michael Let me on the first one.

I think in my script I mentioned, we right now.

Based on everything we know.

Henrique Braun: In addition to ongoing strength with Coca-Cola Zero Sugar, Diet Coke had strong volume growth by reaching a new generation of consumers with campaigns like Know the Sign, which invites drinkers to take a Diet Coke break. We also launched innovations for our loyal consumer base, like Retro Diet Coke with Cherry, and this October, we are bringing back Retro Diet Coke with Lime nationwide in the U.S. Across our portfolio, our system-accelerated Coke drink equipment placement expanded availability for key packages and won share of visible inventory. In Latin America, volume was flat, but we gained value share and grew organic revenue and comparable currency-neutral operating income. We are taking steps to address softening macroeconomic conditions in key markets like Mexico. We are seeing good reactions to some of our interventions, but we believe it will take time.

There will be a slight tailwind.

Speaker #5: And then just also doing a quarter you've had, EBIT margins. That's well ahead of, of the gross margin performance. Were there any timing considerations or, you know, how steady should we consider that to be?

For 2026.

And assuming that that.

Actually materializes, yes, I think we would see a.

A slight benefit to the.

Speaker #5: Is there anything in there we need to think about that's maybe a one-off?

On the margin front so.

Part one part two.

Stefan.

Speaker #1: Thanks. Michael, let me on the first one, you know, I think in my script I mentioned we, right now, if all the based on everything that we know, there will be a slice tailwind for 2026.

I know we spend most of the time on the quarter itself I think when it comes to the margin.

Trends I really like to step back and look at the trends over multiple quarters and.

In line with our with the long term algorithm, we continue to be focused on delivering against that over time.

Speaker #1: And assuming that that actually materializes, yes, I think we would see a, a slight benefit to the, on the margin front. So part one.

We have had.

Some timing.

Benefits in Q3.

And we also are in 2025.

Speaker #1: Part two, step out of, you know, we, we, I know we, we spend most of the time on the quarter itself. I, I, I think when it comes to the margin, trends, I, I really like to step back and, and look at the trends over multiple quarters.

Okay.

Earnings.

More productivity in the marketing area with some of the Digitization work et cetera that we have underway.

Henrique Braun: We had continued growth in Brazil, where we gained value share with strong performance from Coca-Cola Zero Sugar, driven by increasing trial with Duo Packs, further linking the brand to the meals occasion and expanding refillable packaging options. Also, in Mexico, Santa Clara recently became the value share leader within value-added areas. In EMEA, we continued to grow volume and delivered strong revenue and profit growth. In Europe, volume declined, driven by cycling and tougher comparison versus previous year and mixed performance across Western and Eastern markets. We partnered with the English Premier League with Coca-Cola, smartwater, and POWERADE to tap into consumers' passion for football. We featured this partnership on our packaging and offered exclusive fans' activation and access to tickets, which helped recruit weekly Plus drinkers. In Eurasia, the Middle East, and in Africa, we grew volume in both operating units despite volatile macroeconomic backdrops.

That is more pronounced for this year I don't see that thing.

Speaker #1: And in line with our, with the long-term algorithm, we, we, we continue to be focused on delivering against that over time. we have had some timing benefits in Q3, and we also are in 2025 earning more productivity in the marketing area with some of the digitization work, etc., that we have underway.

The same every year, but as we go into 'twenty six.

Yes, we should have a little bit of a tailwind and the objective will be to continue to have.

That expansion.

The expansion of margins in line with the with the algorithm.

Our next question comes from Kevin Grundy from BNP Paribas. Please go ahead. Your line is open.

Great. Thanks, good morning, everyone.

Speaker #1: that's is more pronounced for this year. I don't see that being, the same every year. But, as we go into '26, we, you know, we should have a little bit of tailwind, and the objective will be to continue to have, that, expansion of margins in line with the, with the algorithm.

I wanted to come back to Lauren's question on competition, but focus here on North America. So there are two key competitors are addressing bigger structural considerations with activist investors uniquely involved both pepsico anchored Dr. Pepper can.

Can you. Please comment on what you think this will mean for the Coca Cola company, both near term and longer term and to the extent you care to comment and you may not.

What dynamics, whether this is potential refranchising, just a more deliberate strategic focus scope of brand support do you think is potentially most critical competitively for the Coca Cola company. So your thoughts there would be appreciated. Thank you.

Speaker #2: Our next question comes from Kevin Grundy from BNP Paribas. Please go ahead, your line is open.

Henrique Braun: We further emphasized our mix of local and global brands, launched impactful marketing campaigns like our partnership with Springboks Rugby in South Africa, and innovations like Capybubble in Turkey. Also, we sharpened our revenue growth management capabilities and highlighted the localness of our system. Lastly, in Asia Pacific, volume declined across each of the operating units, driven by softer consumer spending, weaker industry performance, and inclement weather in a few markets like India and the Philippines. However, we gained value share and grew revenue and profit for the segment. We are focusing on granular channel execution plans, tailoring our brand price pack architecture with a focus on affordability and investing for growth. Putting it all together, we continue to execute in an uncertain external environment with strong plans in place and a focus on driving profitable growth. While our strategy continues to deliver, the world around us is changing.

Speaker #6: Great. thanks. Morning, everyone. I wanted to come back to Lauren's question on competition, but focus here on North America. So your two key competitors are addressing bigger structural considerations with activist investors, uniquely involved in both PepsiCo and current Dr. Pepper.

You almost got that Kevin to my favorite answer wishes I couldn't possibly comment because it's M&A.

Look clean.

Clearly theres a lot going on around us globally and in particular in North America, where the competition, but let me go back a little bit to what I said with long.

Speaker #6: Can you please comment on what you think this will mean for the Coca-Cola Company, both near-term and longer-term? And to the extent you care to comment—and you may not—what dynamics, whether this is potential refranchising, just a more deliberate strategic focus, or scope of brand support, do you think is potentially most critical competitively for the Coca-Cola Company?

It's a great industry, that's why people want to be in it.

We're the leader and we've been winning share consistently over the last number of years clearly we have to focus on what we need to do.

Speaker #6: So your thoughts there would be appreciated. Thank you.

And to the extent that competitors are doing other things Aldo then fine.

Speaker #1: You almost got that, Kevin, to my favorite answer, which is I couldn't possibly comment 'cause it's M&A. look, clearly there's a lot going on around us, globally, and, in particular, in North America with the competition.

Immediately in the market place and I'm sure that I've got a sense of urgency anyway.

As I said on the call we got a remain discontented we've been doing well.

The number one thing we got to do is avoid being contented with our performance on what's happened around us we've got to think about what's next when we go to transform from a position of solid performance.

Speaker #1: But let me go back a little bit to what I said with Lauren. It's a great industry; that's why people want to be in it.

Speaker #1: We're the leader and we've been winning share consistently over the last number of years. Clearly, we have to focus on what we need to do, and to the extent that competitors are doing other things other than trying to win immediately in the marketplace—and I'm sure they've got a sense of urgency anyway—we, as I said on the call, gotta remain discontented.

That's what's going to drive the extra investment drive the growth and extend our leadership in the marketplace.

Henrique Braun: As we have done throughout our history, we will continue to evolve to capture the full potential of our system. Together with our bottling partners, we are leveraging capabilities to deepen consumer connections, build on brands, and execute effects. Digital platforms are helping us to connect the dots across our system, enabling better experiences for our consumers and customers. As we adapt, we will enhance the way we work to move faster and with greater precision. We will become even more consumer-centric to drive enduring growth for our system and industry. Overall, I'm encouraged by the energy across the network. We are learning fast, pushing boundaries, and unlocking new opportunities to deliver for the long term. With that, I will hand the call over to John.

That's all we can do.

We got to take this opportunity to double down on pull further ahead in the U S and around the world.

Speaker #1: We've been doing well, and the number one thing we've got to do is avoid being content with our performance and what's happened around us. We've got to think about what's next, and we've got to transform from a position of solid performance. That's what's going to drive the extra investment, drive the growth, and extend our leadership in the marketplace.

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

Hi.

Just a quick question on Europe.

It's not a huge part of your business, but volume was down and I thought with the hot weather.

Third quarter that would have provided a tailwind to offset.

Speaker #1: And that's, that's all we can do. and we've gotta take this opportunity to double down and pull further ahead in the US and around the world.

The tough comparisons to a year ago.

Can you be more specific about your market share in Europe on a volume basis was it up or was it down.

Okay.

Speaker #2: Our next question comes from Robert Moscow from TD Tallinn. Please go ahead, your line is open.

Look Europe.

There were parts of the world.

John Murphy: Thank you, Henrique, and good morning, everyone. Today, I'll comment on our third quarter performance, discuss the outlook for the remainder of 2025, and provide some early commentary on 2026. During the third quarter, we grew organic revenues 6%. Unit cases grew 1%. After a slower start, we ended with improved performance. During the quarter, two-year volume trends accelerated each month. Concentrate sales were one point behind unit case sales, driven primarily by the timing of concentrate shipments. Our price/mix growth of 6% was primarily driven by approximately four points of pricing actions and two points of favorable mix. Pricing from intense inflationary markets has largely abated. Comparable gross margin declined approximately 10 basis points, while comparable operating margin increased approximately 120 basis points. Our year-to-date comparable operating margin expansion has been driven by our continued productivity mindset.

Speaker #7: Hi. just a, a quick question on Europe. It, it's not a huge part of your business, but, but volume was down, and, and I thought, you know, with the hot weather, in third quarter, that would've provided a tailwind to offset, you know, the tough comparisons to a year ago.

I'll pause there wasn't there were some places in Europe, which had had strong weather.

I would say that Europe has been largely resilience in the third quarter and an overtime, but you know.

It's also true what we talked about.

In terms of the U S. Consumer is also relatively true for the European consumer the top end of the pyramid has golf money on has been investing.

Speaker #7: can you be more specific about your market share in Europe? on a volume basis, was it up or was it down?

Speaker #1: look, Europe, there were hot parts of the world, there were hot parts. There were some, there were some places in Europe which had, had strong weather.

But the bottom end has been under pressure and so we've been doing we think doing okay in Europe, but there is definitely pressure the same way that is.

In the U S on the bottom end of the consumer and you can see those same.

Speaker #1: I would say that Europe has been largely resilient in the third quarter and, and over time. But, you know, it's, it's also true what we talked about, in terms of the US consumer, it's also relatively true, for the European consumer.

Kind of.

Value seeking behavior trends that you that you see in the U S for the bottom and in terms of channel.

In terms of package mix.

In terms of channel performance, So I don't think thats anything much more to say there.

Speaker #1: The top end, the of the pyramid has got money and has been investing, but the bottom end has been under pressure. And so, we've been doing, we've been doing okay in Europe.

But I think the European business has been doing okay.

And we will continue to focus on on where we need to go.

Speaker #1: but there's definitely pressure the same way there is, in the US on the bottom end of the consumer, and you can see those same, kind of, value-seeking behavior trends that you, that you see in the US for the bottom end in terms of channel, in terms of package mix, i-in terms of channel, performance.

Our last question today will come from Carlos Laboy from HSBC. Please go ahead. Your line is open yes. Good morning. Thank you James you spoke about how you continue to evolve to drive revenues. It would be good to hear how your governance principles keep improving with the borrowers for that purpose.

John Murphy: While we're continuing to invest for growth, we're also driving productivity, including prioritizing supply chain efficiencies, improving the efficiency of our advertising spend, and being prudent with our expense base. Putting it all together, third quarter comparable EPS of $0.82 increased 6% year over year, despite 6% currency headwinds, higher net interest expense, and an increase in our effective tax rate. Free cash flow, excluding the fairlife contingent consideration payment, was $8.5 billion, which was an increase 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. Our balance sheet remains strong, with our net debt leverage of 1.8 times EBITDA, which is below our targeted range of 2 to 2.5 times.

So in Latin America for example, five years ago, you redesigned the governance principles with the bonds and we got that LTE RM agreement and some common kpis.

Speaker #1: So I don't think there's anything much more to say there. but I think the European business, has been doing okay. and, we'll continue to focus on, on where we need to go.

Between bottling executives and your executives and it's produced.

More and more capex and faster revenue and higher higher ROIC from the bottlers. So against that backdrop can you speak to how you.

Speaker #2: Our last question today will come from Carlos Laboy from HSBC. Please go ahead, your line is open.

We visited the locally relevant.

Speaker #8: Yes. Good morning. Thank you. James, you spoke about how you continue to evolve to drive revenues. I-it'd be good to hear, your governance principles keep improving with the bottlers for that purpose.

<unk> principles and these recently franchise territories of Africa, India, maybe Philippines, Indonesia, or with other bottlers in order to to continue to rebound. It's mutually agreed clarity would each time as opposed to do and allow us to keep for the purpose of faster revenues and higher ROIC.

Speaker #8: So, in Latin America, for example, five years ago, you redesigned the governance principles with the bottlers, and we got that LTRM agreement and some common KPIs.

Yeah, Thanks, Carlos Yes.

Speaker #8: Between bottling executives and your executives, and it's produced you know, more, more CapEx and, and, and faster revenue and higher, higher ROIC from the bottlers.

Look as we've gone around the Refranchising outside Latin America, I think two things are important to highlight.

Speaker #8: So against that backdrop, can you speak to how you've revisited the locally relevant governance principles in these recently franchised territories of Africa and India, maybe the Philippines and Indonesia, or with other bottlers in order to continue to evolve this mutually agreed clarity of what each side is supposed to do and allowed to keep for the purpose of faster revenues and higher ROIC?

One a week.

John Murphy: 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 reinvesting in our business and returning capital to our shareholders. I also want to give a quick update regarding our ongoing dispute with the U.S. Internal Revenue Service. A portion of our case relates to royalties from our Brazilian affiliate that were blocked under Brazilian law. The recent 3M appellate court decision addressed the same underlying regulation. We believe this case is highly supportive of our position. As we have said many times in the past, we're continuing to vigorously defend our overall position and are encouraged about our chances of prevailing on appeal. As previously mentioned, we're confident we will deliver on our 2025 guidance.

I kind of alluded to earlier, which is the process of choosing the new ownership groups and very much thinking.

In evaluating that if he likes rose kind of skill and will matrix like who has the scale who has the will and who has the capital to drive these franchises forward into the future and that's why we've been very.

Speaker #1: Yeah. thanks, Carlos. Yeah. look, as we've gone around the refranchising, a-outside Latin America, I think two things are important, to highlight. one, which I kind of alluded to earlier, which is the process of choosing the new ownership groups.

Choice full and finding the right partners and taking our time to set this up well and then as it relates to how we set the relationship itself of course, we've done so in a very similar way around the world for the way that we have evolved the relationships in Latin America, which were of course, not refranchising, but evolutions of Berry.

Speaker #1: And very much, thinking and evaluating that, if you like, through a kind of skill and will matrix, like who has the skill, who has the will, and who has the capital to drive these franchises forward into the future.

In jewelry long lasting relationships with long term owners of our bottling assets in Latin America and.

It was a very similar mindset. We have started these relationships around the rest of the world whether it be the creation of CCP in Europe. The Refranchising of the Philippines. The most recent deals are in India or in Africa, or even in other parts of Asia.

Speaker #1: And that's why we've been very choiceful in finding the right partners and taking our time to set these up well. As it relates to how we set the relationships up, of course, we've done so in a very similar way around the world to the way that we have evolved the relationships in Latin America, which we're, of course, not re-refranchising, but rather, evolutions of very enduring, long-lasting relationships with long-term owners who are bottling assets in Latin America.

John Murphy: We continue to expect organic revenue growth of 5 to 6% and 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 continue to expect a 1 to 2-point currency headwind to comparable net revenues and an approximate 5-point currency headwind to comparable earnings per share for full year 2025. Our underlying effective tax rate for 2025 is now expected to be 20.7%. All in, based on what we know today, we continue to expect 2025 comparable earnings per share growth of approximately 3% versus $2.88 in 2024. Last, excluding the fairlife contingent consideration payment, we now expect to generate at least $9.8 billion of free cash flow in 2025. There are a couple of considerations to keep in mind for the fourth quarter of 2025.

The direction of travel is very clear color at all.

The Latin America.

Ladies and gentlemen.

That concludes our question and answer session I would like to turn the call back over to James Quincey for closing remarks.

Speaker #1: And with a very similar mindset, we have, started these relationships around the rest of the world, whether it be the creation of, CCP in Europe, the refranchising of the Philippines, the most recent deals, in India, or, or, or, or in Africa, or even in other parts of Asia, the, the, the direction of travel is a very clear corridor, similar to Latin America.

Thank you operator.

So to summarize we're confident we'll deliver on our near term and longer term objectives, we're continuing to invest behind our brands and enhance our capabilities and fortify asked us to drive long term growth.

Thank you for your interest your investment in the company and for joining US This morning.

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

Speaker #2: Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the call back over to James Quincey for closing remarks.

Speaker #1: Thank you, operator. To summarize, we're confident we'll deliver on our near-term and longer-term objectives. We'll continue to invest behind our brands, enhance our capabilities, and fortify our system to drive long-term growth.

John Murphy: We're cycling a more difficult volume comparison in some of our key markets, and due to our reporting calendar, there will be one additional day in the fourth quarter. While it is too early to provide specific guidance for 2026, we want to share some considerations based on what we know today. First, a calendar shift will impact the quarterly cadence, as we will have six additional days in the first quarter and six fewer days in the fourth quarter. We're focused on driving balanced top-line growth with volume as a key priority. As inflation moderates, we anticipate pricing to normalize, and we'll lean into both affordability and premiumization, depending on what the market demands. With respect to commodities, while we're experiencing cost inflation, we believe the overall impact is manageable.

Speaker #1: Thank you for your interest, your investment in the company, and for joining us this morning.

John Murphy: However, the company and our system saw several items exposed to volatility and trade dynamics, which could cause our outlook to vary across our markets. We continue to challenge all aspects of how we work, and we see opportunities to unlock cost efficiencies that can be reinvested to support portfolio growth and long-term value creation. Regarding currency, if we assume current rates and our hedge position, there would be a slight tailwind to both comparable net revenues and comparable earnings per share for full year 2026. Many factors could impact both our currency outlook and broader business outlook between now and when we expect to provide guidance in February. In summary, while our external environment is dynamic, we see great potential for our industry and remain steadfastly focused on driving growth. We are confident in our ability to deliver on our 2025 guidance and create enduring value for our stakeholders.

John Murphy: With that, operator, we are ready to take questions.

Operator: Thank you. Ladies and gentlemen, to ask a question, you'll need to press star one on your telephone. To withdraw your question, please press star one again. In the interest of time, we ask that you please limit yourself to one question. If you have additional questions, you may rejoin the queue. Our first question comes from Steve Powers from Deutsche Bank. Please go ahead, your line is open.

[Analyst 1]: Great. James, John, Henrique, good morning. Thank you. As I think each of you alluded to in your remarks, you know, entering September, you'd called out momentum that was trending a bit slower than expected in the third quarter, and you highlighted a few specific markets at the time: Mexico and Latin America, India, Vietnam, Thailand, and Asia. Obviously, it appears that you came out the quarter with seeing a bit more acceleration, which is obviously encouraging. I'm curious as to whether you describe that to sequential improvement in underlying category trends or more your own interventions made in response to shifting consumer sentiment. Either way, maybe just a little bit more color on how those recent observations factor into both your fourth quarter views, as well as your approach to fiscal 2026 planning. Thank you.

James Quincey: Yeah, sure. Thanks, Steve. Yeah, as you say, when I think Henrique was at the conference, we pulled out a little bit of softness at the opening part of Q3. You talked about where it was, Mexico and a number of parts of Asia, India, China, and some of the ASEAN countries. Clearly, we got a bit better in September, some sequential improvement. I think it would be fair to say, as much as anything, that was a doubling down by the system, increases in marketing and focus and innovation from us working with the bottlers on some affordability and revenue management options and some step-ups in execution. I don't think the environment changed markedly in September from July and August. We just got more focused on drilling down into what needed to be done and to driving the quarter.

James Quincey: I think, therefore, as you look out to Q4, I don't think the environment is changing that quickly. I think we're going to have to be on the top of our game. We certainly expect to lean into and invest for growth in the fourth quarter. We have a lot of good marketing and innovations programs coming from Halloween all the way through to Christmas. We'll be driving that and obviously executing with our bottlers. I think, again, as you kind of hinted in the question, the environment is going to stay more or less the same, and we've got to focus on driving our own results and trying to get volume growth going into the fourth quarter, especially as we're cycling a steeper comparison versus last year. As we look out to 2026, that's going to be a long way away from here and going through the year.

James Quincey: Certainly, as John commented in his considerations, we certainly expect to see inflation and pricing moderate back to a more normal range. I think, as we talked about on the previous call, if our long-term growth model calls for 4% to 6% on the top line and we look for balance, which kind of implies 2% to 3% on volume and 2% to 3% on price, certainly that hopefully will get easier as we go through the year. That's what we're aiming for. Our long-term objective remains to grow volume as a way of expanding our consumer franchise and earning the right to pricing so that we can stay at the top end of our revenue growth algorithm.

Operator: Our next question comes from Lauren Lieberman from Barclays. Please go ahead, your line is open.

[Analyst 2]: Great, thanks. Good morning. I wanted to ask you guys a little bit about local competition in various markets because I think historically, when consumers are under pressure, affordability becomes a discussion point. You'll start to see some bubbling up of local competition, particularly in sparkling. I was wondering if you could just go through with us any markets where that's been a factor and then kind of what you're doing in response. Thanks.

James Quincey: Yeah, thanks. Thanks, Lauren. I think, actually, there's a big overall shift to a little more localness, not just from a competitive point of view. If you kind of look back the last five years, the whole world went on a kind of a similar journey with COVID, with lockdown, with coming out of lockdown, with inflation. There was a certain all-on-the-same roller coaster effect of the last five years. Now that is starting to diverge in all sorts of ways, geopolitically, economically. We are certainly seeing that there's more dynamism in regional competitors and some of the local competition. I think regional would be more fair to call it that. I don't think it's just about affordability.

James Quincey: I think this is part of a sort of kind of pendulum that swings out there with things becoming a little more global or a little more local and then a little more global. What we're seeing at the moment is there's kind of a swing of the pendulum a little more to regionality. Affordability is a feature of that, but it's certainly not the only feature. The identity of the brands, the innovation that's coming, you see different things in different places. As we go forward, we're responding by driving more resources to the front line so that we can have different responses in different places.

James Quincey: It's one of the things that Henrique was calling out in his piece, which looks like we need to get even closer to the consumer, which is a way of saying we need to be able to have different responses in different places using the great strengths of our global system and the scale that gives us, but being able to respond to the different dynamics and the intimacy needed in the different parts of the world.

Operator: Our next question comes from Dara Mohsenian from Morgan Stanley. Please go ahead, your line is open.

[Analyst 3]: Hey, good morning. James and Henrique, you mentioned some of the consumer stresses that we're seeing in general around the world. I just want to dive a bit deeper into Latin America. It's obviously tied in with the U.S. economy, but also the policy changes that we're seeing in the U.S. I think it'd just be helpful to get an update on what you're seeing on the ground in Mexico, as well as Brazil in the last few months, and just how that consumer environment might impact your forward performance, but also your strategy changes in that region specifically. Henrique mentioned some of the Mexico changes more recently. It'd be helpful to get a deeper update there. Thanks.

Henrique Braun: Yeah. Hey, Dara, good to hear from you. Look, Latin America continues to be a market that has a very strong system, and we are coming off years of strong growth. Most recently, you have seen that we have, over the last few quarters, seen a progressive improvement. This quarter, you know, coming to flat, but also it's important to unpack that, saying that Brazil continues to be very strong. Colombia and Chile also grew in the quarter. Mexico is also a big market, but it's on a progressive improvement, not yet where we want it to be. There are macroeconomic issues in the country, and our plans to really pivot and address that have been put in place in the last few quarters.

Henrique Braun: We have seen some of the bright spots coming out of that, but it's too early to say that we are out of the woods here on getting Mexico really on a growth trajectory. What we see is that it's going to take a little bit more time in there, and in the rest of Latin America, we have more momentum. To your question about whether it's something more related to the whole region, it's not specific to that. It's more related to the country itself.

Operator: Our next question comes from Filippo Falorni from Citi. Please go ahead, your line is open.

[Analyst 4]: Hi, good morning, everyone. I wanted to ask about the refranchising efforts given this morning's announcement on Coca-Cola Beverages Africa, which is clearly a very important step in your goal of becoming the world's smallest bottler. Can you walk us through what will be left after that transaction closes in terms of other territories to potentially refranchise? In terms of the margin implications from refranchising, a few years ago, you had a target of like a mid-30s operating margin target for The Coca-Cola Company, and it seems like you're getting pretty close to that after this transaction. Can you walk us through the path on the margins post-refranchising? Thank you.

James Quincey: Sure, Filippo. I'll let John jump in on that margin target and the evolution towards it. Look, with the two deals that we have announced with the Jubilant Bhatia Group in India, and with Hellenic relative to Coca-Cola Beverages Africa, actually, those two transactions are the last two large pieces setting us on the path to completing the refranchising strategy that we started in 2015. Just to remind, you know, because that's taken us 10 years, the most important thing here was to find the right partners for each of those assets, the right owners who could drive the investment in capabilities into the future.

James Quincey: We have seen through all the refranchisings we've done over time that if we find the right partner to put these bottlers into their hands, they invest more, they do better, the bottler performs better, and it helps us drive overall growth for the total system so that the combination grows faster and is more profitable. It has been a very successful strategy over the years. With these two pieces, we will largely put ourselves on the path to completing refranchising. The things that will be left are just a handful of smaller countries like Malaysia and Singapore. Think of it as this is the final piece of stone in putting the refranchising strategy to bed, and we now have a system that is super capable and set up to drive growth well into the future. I'll let you answer the margin question, John.

[Analyst 3]: Sure. Sure, James. Thanks, Filippo. Maybe it's worth taking a step back and going back a few years. In 2017, our operating margin was 26.5%. Since that period, there have been two primary positive impacts offset by ongoing FX headwinds. The first has been the refranchising to date, and the second has been our continued focus on expanding margins in line with the implied guidance in our long-term growth model. As you look at this year to date, the primary driver has been the latter. In other words, as I mentioned in my remarks, a lot of focus on managing our cost base, a lot of focus on managing our supply chain, and getting some of the benefits to the bottom line of the marketing productivity work that we've had underway.

[Analyst 3]: As you look to the next couple of years, you can, I think, assume that the implied expansion that we expect from the core business will continue, and the math will play itself out in terms of the uplift in the overall margin profile of the company with the latest refranchising that James just talked about and our expectations for the next couple of years to finish the play.

Operator: Our next question comes from Chris Carey from Wells Fargo Securities. Please go ahead, your line is open.

[Analyst 1]: Hi, good morning, everyone. I wanted to ask two category questions. Just on coffee, it was the second quarter of unit case growth after about a year and a half of declines. Can you just reorient us on your latest thinking on your coffee strategy? Why has it been a bit tougher? Perhaps some of the drivers of the recent improvement and how you see the general attractiveness of this category going forward. If I could, just on Zero Sugar, it's had this really nice run of reacceleration over the past couple of years from some slowing in 2023. Can you just talk about the runway there?

[Analyst 1]: I ask because you're starting to bring up Diet Coke a bit more over the past couple of quarters, and I just want to maybe test a bit whether there's some broadening of this, let's call it a zero, a light strategy, with a bit more breadth. Thanks so much for those two.

James Quincey: Yeah, thanks, Chris. Let me start on coffee. Firstly, the coffee category is a super attractive category. It's very large, it's profitable, and it's growing, and it's relatively unconsolidated. Let's start with coffee is an interesting category. If we can find a, one, it's interesting. Two, it's interesting for the Coke system if we can find a way to plan it that works for us. We've tried a number of things over the last decades to find a path that works for us in coffee, Costa being the most recent iteration of that. The summary on what's happening there is actually the Costa business is doing well. As you say, it's returned to volume growth.

James Quincey: We've been reinvesting in the stores, principally in the UK, continuing to increase the footprint of the total park of the Costa Express machines and doing kind of beans to machines in a number of other countries. The business is doing well and is getting some good growth from the top to the bottom line. The commentary we made last time is the investment hypothesis didn't work out as we expected in the sense that we were looking for much more growth in the non-retail store side of the business, which much more suits the Coke system. We have not found a path to that in the last number of years. We are kind of standing back and reflecting on what that means for us and where we should go next in coffee.

James Quincey: In the meantime, it's a great business, the coffee business, and we continue to run it to be successful. It just didn't create a multiplier so far that we're looking for into our broader business. On the likes and zeros and diets, look, the headline number is zeros and diets are our mid-teens % of total soft drink volume. There's both an opportunity or a possibility that they could become a bigger piece of soft drink and actually help to continue to grow the sparkling category around the world. I think you're seeing both some degree of self-cannibalization in sparkling, but also a way of the sparkling category continuing to grow globally and particularly in the developed markets.

James Quincey: I think that, yes, we called out Diet Coke because I think there was a period of time, decade-long, maybe longer, maybe two decades, where Diet Coke, particularly in the English-speaking countries, was declining. It has more recently stabilized over the last years and is actually growing this year, as well as seeing Coca-Cola Zero Sugar grow. The strategy has always been there to do justice to each brand on its own, but we have found more recently more responsiveness to investment in marketing and innovation for Diet Coke in particular, and that has gone alongside sustained growth in Coca-Cola Zero Sugar. Lots of growth in the future.

Operator: Our next question comes from Camille Gajrawala from Jefferies. Please go ahead, your line is open.

[Analyst 5]: Thank you. Can we dig a little more maybe on the consumer and CPG, particularly in the U.S. and Europe? We're hearing mixed messages, I suppose, from whether it's banks and retailers versus what we're hearing from CPG. Many of your CPGs have restructured. Curious where you stand on where we are. Obviously, there's no restructuring. There's a bit of productivity, but can you just maybe talk about the differences in what we're hearing versus what maybe we're seeing from your business?

James Quincey: Yeah. Okay. Let me stand back and have a thought on the industry and where we sit in it. Certainly, I hear from the banks that there's bits of the CPG industry that are under pressure in recent years. Let me focus in on beverages more particularly. The beverage industry has been characterized for many, many decades as being a growth industry. You can do a histogram of the growth rates of the beverage industry for decades, and kind of all the growth rates cluster around the 4% to 5% growth each year. There are underlying structural reasons about economic growth, urbanization that drive the creation of the beverage industry. As we've talked about in previous investor conferences, you know, actually, the number one feature of the beverage industry is it's yet to be created. There's actually tons of potential ahead. It's an industry that grows.

James Quincey: We, for the last 10 years, have been very focused on how do we not only be the leader in that industry, but the winner in terms of market share. We can take the industry growth, which we support through our investments, but also win and lead in that industry. How have we done that? We've talked about the flywheels of investing in marketing, innovation, RGM, execution. We've supported those by using marketing funds. Also, as John alluded to in his comments, we have had ongoing programs of productivity through the whole P&L, whether that be in COGS, marketing, or in SG&A. Sometimes that is more of an event. We've reorganized ourselves a couple of times. You'll remember Lean Center a number of years ago. We did a thing called Emerging Stronger coming out of COVID. There are more episodic, more big events of moving the organization around.

James Quincey: Each year, we're looking for continuous improvements and continuous productivity. As we think about what's coming next, and you mentioned that a number of people are talking about restructuring, what we see going forward is, look, the industry is going to keep growing. We're the leader and we're winning share. What we need to do is to continue to fuel the top-line growth. If I diverge for a second, there's a famous, at least famous at Coke, speech that was written by the CEO of Coke, Robert Woodruff, on the 50th anniversary, which is almost 90 years ago. It was only one and a half pages. Speeches were shorter in those days. He didn't have a title, and he wrote on the title, "The Future Belongs to the Discontented." I think that is the key feature of what's gone. Yes, we've been growing. We've been winning in the marketplace.

James Quincey: It's easy to be discontented if you're not doing well and you're under pressure from everyone else in the investor base. The hardest thing is to say, "I've done well," and be discontented enough with yourself that you know you need to change and you know you need to transform. Think of what's coming as we're going to continue to drive that top-line revenue growth. We're going to find the extra investments to drive that growth. Yes, we will be discontented with ourselves and think, "What do we need to continue? What do we need to evolve? What do we need to transform to generate those funds for growth?" That will include ongoing productivity as we bring in AI and agentic tech over the coming years. We'll do some restructuring of the organization in 2026.

James Quincey: This is all about replicating the game plan of the last 10 years of finding productivity through the whole P&L to invest and drive top-line growth that falls to the bottom line.

Operator: Our next question comes from Bonnie Herzog from Goldman Sachs. Please go ahead, your line is open.

[Analyst 2]: All right. Thank you. Good morning, everyone. I actually just had a quick question on your business in Asia. Organic sales in the quarter were up 7% and accelerated sequentially. I guess hoping for some more color on the strength you're seeing in the region and how sustainable the strong, I guess, high single-digit price/mix is. Thanks.

James Quincey: Yeah, thanks, Bonnie. This falls into the bucket of one of the sporadic questions about how strange the Asia-Pacific segment is. I would encourage looking at multi-quarter trends in Asia-Pacific because, for management reasons, Asia, they're all on a different time zone. It's much easier to manage when you're out there and you put them all together. They are quite disparately different businesses. You've got the emerging market businesses with, let's say, India at one end with huge, huge, huge potential for growth in volume over many, many years, but much lower prices all the way through China, ASEAN. At the other end of the spectrum, you get to Australia and Japan, which have been growing but have much higher realized prices given the developed economy. One of the predominant effects in Asia-Pacific is how fast did each of those components grow?

James Quincey: In this particular quarter, as we talked about earlier, India, because of the monsoon, China, because of some of the economic pressures, and ASEAN, those markets underperformed our expectations in volume terms. As the mechanical effect of putting all that together, that means that in a weighting sense, the lower-priced countries did poorer, which means that the mix looks like it increased slightly in Japan and Australia, which then produces a price/mix effect that looks like pricing went up a lot in Asia-Pacific, which is the inverse of what normally happens, which is when the emerging markets grow, it looks like prices are flat or declining in Asia-Pacific because of the growth of the lower-priced markets. This is a mix effect problem or a weighting problem of the way the segment is constructed. We manage each country to drive the business. I would not overemphasize this.

James Quincey: We should look for Asia-Pacific over time to drive volume growth for the emerging markets. The pricing will go up in each country. As that mixes out in the segment, you don't see it come through in the Asia-Pacific segment quite so obviously.

Operator: Our next question comes from Robert Ottenstein from Evercore. Please go ahead, your line is open.

[Analyst 3]: Great. Thank you very much. James, I wonder if we can kind of circle back to a topic that was in much discussion a couple of years ago, and it's faded a little bit, is GLP-1 drugs. At this point, you ought to have some reasonably good data on their impact on beverage consumption. One consultant that we work with talks about an increase in consumption of protein, energy, and hydration-driven products from GLP-1. I was wondering what your data says, do you see those interests, increases? Do you see areas where there's weakness? To double-click on protein, if you can give us an update on your platform, how capacity looks, and when it comes on, and how you see the competitive environment developing as competitors kind of sharpen their tools and new competition comes in. Thank you.

James Quincey: Sure. Thanks, Bob. Yes, we certainly are out there generating data on what seems to be happening with households and people that are on GLP-1s. I think it's still ultimately early days to know the full cycle, but I think what you're seeing is very similar to what we're seeing. Obviously, we track not just what they do on non-alcoholic beverages, but across what they eat and the alcoholic beverages. One can see the full change in the diet makeup. As it relates to non-alcoholic, you know, clearly we can see some very emerging conclusions. They tend to drink less full-sugar soft drinks, but they tend to drink more diet soft drinks, also hydration, more coffee, and as you say, a big shift towards protein drinks. I think that's a pretty standard set of conclusions that everyone's seeing.

James Quincey: As it relates to what we're doing on protein, obviously, we've got fairlife and Core Power, which have been standout successes for the last number of years and continued to grow in the third quarter. The capacity that we've talked about at the big factory in upstate New York is on track. We expect to begin to produce on time and ramp up that capacity through the course of 2026. As much as I would love it to all be available on January 1, that will not be the case. We do see ourselves having a much more unconstrained ability to satisfy consumer demand over the course of 2026. Yes, competitors are coming into the space across all sorts of food and beverages into protein. We believe we have great brands. We think we have excellent products. There will be a lot of new innovation.

James Quincey: Our objective is to drive the fairlife and the Core Power brands. We have lots of new innovation, and we will have more capacity coming online. It's going to be a growth area for sure in 2026.

Operator: Our next question comes from Andrea Teixeira from J.P. Morgan. Please go ahead, your line is open.

[Analyst 6]: Thank you, everyone, and good morning. James, I guess your comment takes me to the question. I appreciate what you said, the culture of discontent and grit in the organization. Your comment right now on fairlife and Core Power, you obviously had a lot of success. Retailers are still on allocation and fully understand that you're not going to have the capacity right on January 1. How should we be thinking, given the allocation and innovation you spoke to, as we go into 2026, perhaps in the second half, we're going to see the acceleration there? As you think about potentially lifting into international, I understand that this is going to be more of a probably not a 2026, but long-term, would you see a fit perhaps even with Santa Clara in Mexico and other places where you can build that protein?

[Analyst 6]: Obviously, it's a very difficult supply chain, or I shouldn't say difficult, but just a longer-term supply chain. Is that something that you're thinking longer-term? Thinking of staying in Mexico since we spoke about Santa Clara, how should we be thinking about the sugar drink taxes that you faced? Obviously, in 2014, you pivoted really well. You bounced back much higher than you were before. That was one pivot, I think, in pricing. How can you think about how to face potentially if that is implemented? Thank you.

James Quincey: Yeah. Okay. fairlife. Look, the New York factory, when at full capacity, will give us about 30% more capacity or volume potential for fairlife. We certainly are going to have the opportunity to significantly grow into 2026 and to move out of having the product on allocation to our retail partners. That'll take some time through 2026. This is not a small factory. It's, I think, one of the largest, if not the largest, dairy processing facilities in the U.S. It's going to add 30% capacity. That'll be good, and that'll help us get out of the kind of bottleneck that we're in at the moment and get into the marketplace. As it relates to international expansion, you alluded to, and I've said it before, that the dairy industry is a complicated and protected industry around the world.

James Quincey: It's certainly not a lift and shift in a simple sense of the word. Obviously, we are looking at the growth in the sorts of beverages and brands that we have achieved with fairlife. We have taken some of our learnings from the U.S. and helped to shape the way we've executed Santa Clara in Mexico. Santa Clara in Mexico, for example, grew 13% in volume in the third quarter and became the number one value-added dairy brand in Mexico. I think since we bought Santa Clara a decade or so ago, we've increased its size by 10 times. We've clearly found something that if we have the right platform, we can make it work with the brand and the product ideas. We have also had some failures in the dairy business. Luckily, the successes were way bigger than the failures, which were small.

James Quincey: We do know that it's a complicated business to get into around the world. We will be looking to see how we can leverage the essential product ideas behind fairlife and Santa Clara into innovations around the rest of the world. As it relates to the Mexico tax, which I believe was passed a couple of days ago, yes, it's a significant increase. Obviously, we're working with the bottling system to look at how we accommodate and adapt to these increases that will be January 1, 2026. As you pointed out, in 2014, there was a tax increase in Mexico, which we were able to adapt to by doubling down on the marketing and the innovation, using all our RGM technology and the execution of the bottling system to come through it stronger.

James Quincey: Obviously, there's likely to be some impact in the early days, and then as we use all the implementation to recover from that. Yes, we are expecting it to come in at the beginning of next year, and we will be all hands on deck to come up with the latest adaptations of the strategy now that we know what the final policy actually is in Mexico to come up with a plan and execute it starting this year.

Operator: Our next question comes from Peter Galbo from Bank of America. Please go ahead, your line is open.

[Analyst 3]: Hey, good morning, guys. Thanks for the question. I had a question on North America. I think it was one of the markets where you did see that two-year kind of stack growth rate accelerate a bit, both on volumes and maybe on organic sales. Henrique, in your comments, I think you spoke a bit about just differences between spending on income groups and then maybe some different activities on channel. I was hoping to get a bit more detail and color on, on one hand, you're seeing the business actually perform relatively well in North America. It seems like maybe there's a bit of cautious comments on some of the other factors, both on consumer and on channel, that I would love to get a bit more detail on. Thanks very much.

Henrique Braun: Yeah. Sure. Glad to do that. Look, we had a tough Q1, as you remember, and since then, we have been seeing sequential improvement in North America and volume-wise. We're really pleased with that. In Q3, we not only grew that, but we won volume and value share. When we look from a consumer point of view, we continue to see divergency in spending between the income groups. The pressure on middle and low-end income consumers is still there. What we have done since Q1 that has been really paying off is really to go back to the drawing board and have a plan that would really tackle not only affordability, but premiumization as well. You see that actually reflected on our price/mix composition. Two points of that positive mix came from premium brands like Topo Chico, smartwater, and fairlife.

Henrique Braun: We're also pleased with the introduction of packaging architecture that is addressing that pressure that the consumers have on their daily disposable income with the introduction, for instance, of mini cans that today already represent $1 billion in revenue by itself. We're pivoting accordingly. We know that the consumer landscape has not changed, but that is going to be continuing our game, working together with our bottlers throughout this to come out stronger.

Operator: Our next question comes from Peter Grauer from UBS. Please go ahead, your line is open.

[Analyst 4]: Thank you. Good morning, everyone. I wanted to go back to Steve's question just on the volume progression, where it sounds like a lot of the improvement is related to better execution rather than a better backdraft. Two questions. One, have you seen that improvement sustain as we move into October? Second, John, you mentioned tougher volume comps in the fourth quarter in some key markets. Would you anticipate unit case volume stepping back versus what we just saw, or could we see continued momentum despite the tougher comps? Thanks.

James Quincey: Hi, Brent. It's a little early in October to call October for anything. I would say, you know, the market is still growing. This is not something that there's some sort of precipitable decline in anything going on. I think the weight of what's going to drive success is slightly more on our own actions, our own marketing, our own innovation, and our own execution. Yes, the tougher comps will be there, but that's not a way of saying we want a decline in the fourth quarter. We are certainly looking to continue to rebuild momentum, and we'll see where we get to on that.

Operator: Our next question comes from Michael Labrie from Piper Sandler. Please go ahead, your line is open.

[Analyst 3]: Thank you. Good morning. I wanted to ask a margin question, maybe with two kind of quick components. One is just maybe understanding if you have any visibility on currency impact next year. You called out the 100 basis points. I assume transactional headwind in the marked gross margin build. Is that likely to fade, or how do we think about maybe how that flows through in 2026 if you've got the better currency on the top and EPS side? Also, in the quarter, you had EBIT margins up well ahead of the gross margin performance. Were there any timing considerations, or how sticky should we consider that to be? Is there anything in there we need to think about that's maybe a one-off? Thanks, Michael.

[Analyst 3]: Let me, on the first one, I think in my script, I mentioned we right now, if all based on everything that we know, there will be a slight tailwind for 2026. Assuming that actually materializes, yes, I think we would see a slight benefit on the margin front. Part one. Part two, step out of, I know we spend most of the time on the quarter itself. I think when it comes to the margin trends, I really like to step back and look at the trends over multiple quarters. In line with our long-term algorithm, we continue to be focused on delivering against that over time. We have had some timing benefits in Q3, and we also are in 2025 earning more productivity in the marketing area with some of the digitization work, etc., that we have underway. That is more pronounced for this year.

[Analyst 3]: I don't see that being the same every year. As we go into 2026, we should have a little bit of a tailwind, and the objective will be to continue to have that expansion of margins in line with the algorithm.

Operator: Our next question comes from Kevin Grundy from BNP Paribas. Please go ahead, your line is open.

[Analyst 1]: Great. Thanks. Morning, everyone. I wanted to come back to Lauren's question on competition, but focus here on North America. Your two key competitors are addressing bigger structural considerations with activist investors uniquely involved at both PepsiCo and Keurig Dr Pepper. Can you please comment on what you think this will mean for The Coca-Cola Company, both near-term and longer term? To the extent you care to comment, and you may not, what dynamics, whether this is potential refranchising, just a more deliberate strategic focus, scope of brand support, do you think is potentially most critical competitively for The Coca-Cola Company? Your thoughts there would be appreciated. Thank you.

James Quincey: You almost got that, Kevin, to my favorite answer, which is I couldn't possibly comment because it's M&A. Clearly, there's a lot going on around us globally, and in particular in North America with the competition. Let me go back a little bit to what I said with Lauren. It's a great industry. That's why people want to be in it. We're the leader, and we've been winning share consistently over the last number of years. Clearly, we have to focus on what we need to do. To the extent that competitors are doing other things other than trying to win immediately in the marketplace, and I'm sure they've got a sense of urgency anyway, we, as I said on the call, we got to remain discontented.

James Quincey: We've been doing well, and the number one thing we've got to do is avoid being contented with our performance and what's happened around us. We've got to think about what's next, and we've got to transform from a position of solid performance. That's what's going to drive the extra investment, drive the growth, and extend our leadership in the marketplace. That's all we can do. We've got to take this opportunity to double down and pull further ahead in the U.S. and around the world.

Operator: Our next question comes from Robert Moskow from TD Cowen. Please go ahead, your line is open.

[Analyst 3]: Hi. Just a quick question on Europe. It's not a huge part of your business, but volume was down. I thought, you know, with the hot weather in the third quarter, that would have provided a tailwind to offset the tough comparisons to a year ago. Can you be more specific about your market share in Europe on a volume basis? Was it up or was it down?

James Quincey: Look, Europe, there were hot parts of the world. There were hot parts of it. There were some places in Europe which had strong weather. I would say that Europe has been largely resilient in the third quarter and over time. You know, it's also true what we talked about in terms of the U.S. consumer. It's also relatively true for the European consumer. The top end of the pyramid has got money and has been investing, but the bottom end has been under pressure. We've been doing okay in Europe, but there's definitely pressure the same way there is in the U.S. on the bottom end of the consumer. You can see those same kind of value-seeking behavior trends that you see in the U.S. for the bottom end in terms of channel, in terms of package mix, in terms of channel performance.

James Quincey: I don't think there's anything much more to say there. I think the European business has been doing okay and will continue to focus on.

Operator: Last question today will come from Carlos Laboy from HSBC. Please go ahead, your line is open.

Robin Halpern: Yes, good morning. Thank you. James, you spoke about how you continue to evolve to drive revenues. It'd be good to hear how your governance principles keep improving with the bottlers for that purpose. In Latin America, for example, five years ago, you redesigned the governance principles with the bottlers, and we got that LTRM agreement and some common KPIs between bottling executives and your executives, and it's produced more CapEx and faster revenue and higher ROIC from the bottlers. Against that backdrop, can you speak to how you've revisited the locally relevant governance principles in these recently franchised territories of Africa, India, maybe Philippines, Indonesia, or with other bottlers in order to continue to evolve this mutually agreed clarity of what each side is supposed to do and allowed to keep for the purpose of faster revenues and higher ROIC?

James Quincey: Yeah, thanks, Carlos. Yeah. Look, as we've gone around the refranchising outside Latin America, I think two things are important to highlight. One, which I kind of alluded to earlier, is the process of choosing the new ownership groups and very much thinking and evaluating that, if you like, through a kind of skill and will matrix. Like, who has the skill, who has the will, and who has the capital to drive these franchises forward into the future? That's why we've been very choiceful in finding the right partners and taking our time to set these up well.

James Quincey: As it relates to how we set the relationships up, of course, we've done so in a very similar way around the world to the way that we have evolved the relationships in Latin America, which were, of course, not refranchising, but evolutions of very enduring, long-lasting relationships with long-term owners of our bottling assets in Latin America. With a very similar mindset, we have started these relationships around the rest of the world, whether it be the creation of CCP in Europe, the refranchising of the Philippines, the most recent deals in India or in Africa, or even in other parts of Asia. The direction of travel is a very clear corridor, similar to Latin America.

Operator: Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the floor back over to James Quincey for closing remarks.

James Quincey: Thank you, operator. To summarize, we're confident we'll deliver on our near-term and longer-term objectives. We're continuing to invest behind our brands, enhance our capabilities, and fortify our system to drive long-term growth. Thank you for your interest, your investment in the company, and for joining us this morning.

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