The Coca-Cola Company Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Adapting to Environment: Stay close to consumers, manage growth portfolio of brands, and double down on all-weather strategy; pivoting plans and building new capabilities to deliver amidst evolving external environment.
• Business Performance: Volume declined 1% in Q2, but organic revenue grew 5%, margin expanded, comparable EPS grew 4%; gained value share for 17th consecutive quarter.
• Market-Specific Actions: North America invested in brands, had value share gains; Latin America reprioritized investments in affordability and premiumization; EMEA activated campaigns (e.g., Share a Coke) and emphasized localness; Asia Pacific focused on tailored strategies for different markets.
• Innovation and Marketing: Launched campaigns like Share a Coke (across over 120 countries), Bring the Juice (North America); innovated with Sprite Plus Tea; leveraged marketing transformation for faster testing and scaling of successful campaigns.
• Execution and Capabilities: Strengthened system execution; leveraged learnings across markets; refined pack price architecture and implemented AI-based pack price channel optimization tool in 8 markets; focused on growing refillables and premiumization through regional learnings.

Segment Performance

• North America: Volume improved sequentially but declined due to consumer uncertainty; invested in brands leading to value share gains and revenue/profit growth; price mix decelerated; several beverage brands (Coca-Cola Zero Sugar, Diet Coke, Fanta, Fairlife, BodyArmor, Powerade) grew volume; foodservice customers had good traction. Revenue contribution from North America is significant but specific percentage not mentioned.
• Latin America: Volume declined, but organic revenue and profit grew; benefited from Argentina's improving economy; Coca-Cola Zero Sugar had strong growth in Brazil and Mexico; reprioritizing investments for affordability (refillables) and premiumization (single-serve offerings, connected packaging, digital customer platforms). Revenue contribution from Latin America not specified.
• EMEA: All three operating units grew volume, revenue, and profit; Europe's volume growth driven by Eastern and Western markets; activated Share a Coke campaign in 38 European markets; Eurasia and Middle East grew volume and won value share by emphasizing localness (local sourcing, production, etc.); Africa grew volume despite macroeconomic challenges; refined pack price architecture and accelerated cold drink equipment placements. Revenue contribution from EMEA not provided.
• Asia Pacific: Mixed performance; volume declined but revenue and comparable currency-neutral operating income grew; ASEAN and South Pacific had volume declines but won value share; China grew volume despite cautious consumer environment; India impacted by monsoons and geopolitical conflict; Japan and South Korea had industry volume declines but two-year trends positive. Revenue contribution from Asia Pacific not stated.

Guidance

• Expected organic revenue growth 5%-6%, comparable currency-neutral earnings per share growth of approximately 8%.
• Anticipates approximately 1-2 point currency headwind to comparable net revenues and ~5 point currency headwind to comparable EPS for full year 2025.
• Underlying effective tax rate for 2025 expected to be 20.8%, a more than 2-point increase vs prior year.
• Expect concentrate sales to run slightly behind unit cases during Q3; margins not back-half weighted in 2025; fourth quarter has an additional day.

Risks

• Dynamic external environment with varying local market dynamics; geopolitical tensions impacting consumer pressure and market performance.
• Weather events (e.g., adverse weather in key markets, cold weather/hurricane in Mexico, monsoons in India) affecting volume in some markets.
• Macroeconomic challenges in certain regions (e.g., worsening growth outlook in Africa) impacting business.
• Capacity constraints for Fairlife affecting growth potential in the protein space.

Question and Answer

Q: Lauren Lieberman asked about the pivot commentary and environment toughness.

A: James Quincey explained about adapting with agility, responding to rapid changes, and confidence in delivering results amidst evolving environment.

Q: Dara Mohsenian asked about Fairlife capacity additions and international plans.

A: James Quincey talked about Fairlife's growth, capacity coming online in 2026, and international opportunities for protein products.

Q: Steve Powers asked about rebound in Mexico and India and incremental investment in back half.

A: James Quincey discussed plans for Mexico to get back to growth and India's potential with new refranchising and marketing campaigns; mentioned incremental investment in marketing, innovation, and execution.

Q: Filippo Falorni asked about North America market outlook, QSR channel, and Hispanic consumer trend.

A: James Quincey noted North America's resilience, QSR channel trends, and resolution of Hispanic consumer issues.

Q: Bonnie Herzog asked about productivity drivers and back half productivity initiatives.

A: James Quincey explained productivity from marketing transformation and disciplined operating expense management.

Q: Chris Carey asked about North America margins and drivers.

A: James Quincey discussed productivity, mix of business units, and ongoing investment in brands.

Q: Kaumil Gajrawala asked about operating leverage and currency impact.

A: John Murphy talked about operating leverage drivers and currency hedging strategy.

Q: Robert Ottenstein asked about global consumer strength and June-July progression.

A: James Quincey noted resilient global consumer with swings in countries and ASEAN as a slightly surprising weak spot.

Q: Andrea Teixeira asked about PureCircaCane innovation and Simply Pop.

A: James Quincey discussed innovation in cane sugar products and ongoing experimentation with consumer preferences.

Q: Peter Grom asked about Fairlife growth moderation and competitive environment.

A: James Quincey confirmed moderation due to capacity constraints and focus on Fairlife's execution and future innovations.

Q: Peter Galbo asked about EMEA consumer outlook.

A: James Quincey highlighted EMEA's positive performance, resilient consumer, and focus on value-seeking behavior.

Q: Michael Lavery asked about coffee strategy.

A: James Quincey discussed Costa's performance and learning from coffee category attempts.

Q: Carlos Laboy asked about refranchising and creating demand.

A: John Murphy talked about refranchising progress and focus on growth portfolio brands and marketing innovation.

Q: Robert Moskow asked about concentrate volume return and phasing.

A: John Murphy stated confidence in positive volume growth in back half and optionality from strong first half profits