The Coca-Cola Company Reports Solid Operating Results and a Positive Start to 2018

The Coca-Cola Company’s start to 2018 built on prior momentum, with strong financial performance in the first quarter. While reported net revenues continued to be impacted by refranchising, the company delivered organic revenue (non-GAAP) and volume growth across all geographic operating groups. The company gained value share globally, in addition to seeing improved trends across the beverage industry overall.

“We’re encouraged with our first quarter performance as we continue our evolution as a consumer-centric, total beverage company,” said James Quincey, President and CEO of The Coca-Cola Company. “We have the right strategies in place and remain confident in our ability to achieve our full year guidance.”

During the first quarter, the company expanded its portfolio and continued to drive revenue growth. The company’s unit case volume grew 3% with an acceleration in smaller, immediate consumption packaging as revenue growth management initiatives were successfully executed in the market. The company’s portfolio continued to evolve and expand through world-class innovation, expansion of the lift, shift and scale model and bolt-on M&A, anchored by continued strength in core brands. These disciplined growth strategies, underpinned by a stronger and aligned system along with a winning culture, helped to drive the business forward.

• Revenues: Net revenues declined 16% to $7.6 billion for the quarter, impacted by a 26% headwind from refranchising of bottling territories. Organic revenues (non-GAAP) grew 5% for the quarter, driven by concentrate sales growth of 4% and price/mix growth of 1%.
  
• Volume: Total unit case volume grew 3%, with growth across all category clusters and geographic operating groups. Trademark Coca-Cola was the largest contributor, with a clear acceleration in all brands under the trademark.
  
• Margin: Operating margin, which included items impacting comparability, grew over 220 basis points. Comparable operating margin (non-GAAP) expanded 600 basis points, driven by divestitures of lower-margin bottling businesses and the company’s ongoing productivity efforts, partially offset by the adoption of the new revenue recognition accounting standard.
  
• Market Share: The company continued to gain value share in total nonalcoholic ready-to-drink (“NARTD”) beverages.
  
• Cash Flow: Cash from operations for the quarter was $613 million, down 20% primarily due to the refranchising of North American bottling territories and the impact of one less day in the quarter. Free cash flow (non-GAAP) was $339 million, up 5% driven by reduced capital investment needs.
  
• Share Repurchases: Purchases of stock for treasury for the quarter were $927 million. Net share repurchases (non-GAAP) totaled $471 million.

• Leveraging the strength of leader brands: The company continued to capitalize on its leadership position in sparkling soft drinks. A consistent focus on the One Brand Strategy for Trademark Coca-Cola led to 4% volume growth, fueled by 3% growth in brand Coca-Cola and double-digit growth in Coca-Cola Zero Sugar. This performance, along with driving profitability within sparkling through revenue growth management initiatives, led to 6% growth in global retail value for Trademark Coca-Cola. 
  
• Expanding presence in on-trend categories: After the recent acquisition of the U.S. rights to Topo Chico premium sparkling mineral water, the company was able to extend the brand’s reach through increased distribution, while preserving its strong heritage. The brand grew its U.S. retail value over 30% during the quarter and gained value share in the fast-growing sparkling water category.
  
• Innovation within iconic brands: Diet Coke returned to volume growth in North America during the quarter, following a full brand restage. The introduction of four bold, new flavors, along with contemporary, sleek packaging and innovative marketing, helped lift the performance of the brand.   
  
• Scaling successful brands rapidly: During the quarter, the company leveraged its strength in distribution to lift, shift and scale leading brands around the world. Fuze Tea, which was already available in 49 countries, was introduced in an additional 37 countries across Europe, featuring new herb and fruit-infused flavors with fewer calories. The single-day launch of Fuze Tea in Europe was executed on a scale that was unprecedented in the company’s history.

• All references to growth rate percentages and share compare the results of the period to those of the prior year comparable period. 
  
• All references to volume and volume percentage changes indicate unit case volume, unless otherwise noted. All volume percentage changes are computed based on average daily sales, unless otherwise noted. “Unit case” means a unit of measurement equal to 24 eight-ounce servings of finished beverage. “Unit case volume” means the number of unit cases (or unit case equivalents) of company beverages directly or indirectly sold by the company and its bottling partners to customers.
  
• “Core business” represents the combined performance from the Europe, Middle East & Africa; Latin America; North America; Asia Pacific; and Corporate operating segments offset by intersegment eliminations.
  
• “Concentrate sales” represents the amount of concentrates, syrups, beverage bases, source waters, and powders/minerals (in all instances expressed in equivalent unit cases) sold by, or used in finished beverages sold by, the company to its bottling partners or other customers. In the reconciliation of reported net revenues, “concentrate sales” represents the percent change in net revenues attributable to the increase (decrease) in concentrate sales volume for the geographic operating segments (expressed in equivalent unit cases) after considering the impact of structural changes. For the Bottling Investments operating segment, this represents the percent change in net revenues attributable to the increase (decrease) in unit case volume after considering the impact of structural changes. The Bottling Investments operating segment reflects unit case volume growth for consolidated bottlers only.   
  
• “Price/mix” represents the change in net operating revenues caused by factors such as price changes, the mix of products and packages sold, and the mix of channels and geographic territories where the sales occurred.
     
• First quarter 2018 financial results were impacted by one less day, and fourth quarter 2018 financial results will be impacted by one additional day as compared to the same periods in 2017. Unit case volume results for the quarters are not impacted by the variances in days due to the average daily sales computation referenced above.