- Global Unit Case Volume Grew 3%
- Net Revenues Grew 5%;
- Organic Revenues (Non-GAAP) Grew 12%
- Operating Income Declined 1%;
- Comparable Currency Neutral Operating Income (Non-GAAP) Grew 15%
- Operating Margin Was 30.7% Versus 32.5% in the Prior Year;
- Comparable Operating Margin (Non-GAAP) Was 31.8% Versus 31.4% in the Prior Year
- EPS Grew 12% to $0.72; Comparable EPS (Non-GAAP) Grew 5% to $0.68
According to the company’s website press release on April 24, 2023, the Coca-Cola Company reported first quarter 2023 results, demonstrating resilience in the marketplace despite an operating environment that remains dynamic. “We are encouraged by our first quarter 2023 results,” said James Quincey, Chairman and CEO of The Coca-Cola Company. “Our system alignment is stronger than ever, and our networked organization is allowing us to adapt as needed. We continue to invest for the long term, strengthening our capabilities to drive sustainable value for our stakeholders. We have the right portfolio, the right strategy and the right execution to deliver in the marketplace. We are confident in our ability to deliver on our 2023 objectives.”
Highlights
Quarterly Performance
- Revenues: Net revenues grew 5% to $11.0 billion, and organic revenues (non-GAAP) grew 12%. Revenue performance included 11% growth in price/mix and 1% growth in concentrate sales. Concentrate sales were 2 points behind unit case volume, largely due to the timing of concentrate shipments and the impact of one less day in the quarter.
- Operating margin: Operating margin was 30.7% versus 32.5% in the prior year, while comparable operating margin (non-GAAP) was 31.8% versus 31.4% in the prior year. Operating margin decline was primarily driven by items impacting comparability and currency headwinds. Comparable operating margin (non-GAAP) expansion was primarily driven by strong topline growth and the impact of refranchising bottling operations, partially offset by an increase in marketing investments and higher operating costs versus the prior year as well as currency headwinds.
- Earnings per share: EPS grew 12% to $0.72, and comparable EPS (non-GAAP) grew 5% to $0.68. Comparable EPS (non-GAAP) performance included the impact of a 7-point currency headwind.
- Market share: The company gained value share in total nonalcoholic ready-to-drink (NARTD) beverages.
- Cash flow: Cash flow from operations was $160 million, a decline of approximately $460 million versus the prior year, largely due to the timing of working capital initiatives and payments related to acquisitions and divestitures. Free cash flow (non-GAAP) declined approximately $520 million versus the prior year, resulting in negative free cash flow of approximately $120 million.
Company Updates
- Growing loved brands through consumer-centric innovation and occasion-based marketing: smartwater®, a billion-dollar brand that is available in 28 markets, grew volume 8% in the first quarter. The company continues to innovate with the brand, recently launching smartwater alkaline with antioxidant to offer premium hydration for consumers with active lifestyles. The innovation features a higher pH level, the antioxidant selenium and a unique electrolyte blend for a crisp, pure taste. The launch was supported by the “Elevate How You Hydrate” marketing campaign, which was promoted through digital platforms such as Spotify, Meta and TikTok, as well as through partnerships with comedian Pete Davidson, Peloton instructor Alex Toussaint and others. The campaign used geolocation apps to drive incremental occasions with on-the-go consumers and segmented experiential sampling in gyms and fitness centers in select U.S. cities.
- Driving value through continued excellence in integrated execution in India: The company, in close alignment with its bottling partners, continues to raise the bar in India in integrated execution to deliver value for its customers and consumers. The company grew its business in the first quarter in India by adding retailers, investing in cold-drink equipment and offering the right products at the right price points to recruit consumers. During the first quarter, the company and its bottling partners increased availability by more than 300,000 stores and approximately 40,000 coolers ahead of the summer season and drove approximately 3 billion transactions at affordable price points through single-serve packages and at-home entry packs. The company also increased household penetration via targeted promotions on large packages for the at-home channel. This integrated execution yielded strong results, as the company grew revenue ahead of transactions and grew transactions ahead of volume, while also growing value share in the sparkling soft drinks and juice categories.
- Collaborating with cutting-edge technology platforms to experiment, learn and drive results: The company is adopting emerging technologies to drive new approaches, more experimentation and improved speed to market. Coca-Cola is the first company to collaborate with OpenAI and Bain & Company to harness the power of ChatGPT and DALL-E to enhance marketing capabilities and business operations and to build capabilities through cutting-edge artificial intelligence (AI). Within one month of announcing this collaboration, the company launched the “Create Real Magic” platform, which allowed consumers to become digital marketeers by leveraging AI to generate original artwork with iconic creative assets from the Coca-Cola archives. The company is also exploring ways to leverage AI to improve customer service and ordering as well as point-of-sale material creation in collaboration with its bottling partners.
- Laying out a roadmap to 2030 Water Security Strategy and driving collective action: Water is a priority for the company because it is essential for beverages and the communities the company serves. Sustainable access to water is critical for the company’s success and the resilience of its agricultural supply chain. During the UN 2023 Water Conference in March, the company announced three goals to accelerate action by investing more in its Leadership Locations, which are basins designated based on needs for the company, its supply chain and impacted communities. In addition, the company is working with other partners and stakeholders to improve watershed health and communities’ access to clean water and sanitation as part of the Business Leaders’ Open Call to Accelerate Action on Water – a partnership to achieve collective positive water impact in at least 100 vulnerable water basins by 2030.
Conference Call
The company is hosting a conference call with investors and analysts to discuss first quarter 2023 operating results, April 24, 2023, at 8:30 a.m. ET. The company invites participants to listen to a live webcast of the conference call on the company’s website, http://www.coca-colacompany.com, in the “Investors” section. An audio replay in downloadable digital format and a transcript of the call will be available on the website within 24 hours following the call. Further, the “Investors” section of the website includes certain supplemental information and a reconciliation of non-GAAP financial measures to the company’s results as reported under GAAP, which may be used during the call when discussing financial results.
Forward-Looking Statements
This press release may contain statements, estimates or projections that constitute “forward-looking statements” as defined under U.S. federal securities laws. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties that could cause The Coca-Cola Company’s actual results to differ materially from its historical experience and our present expectations or projections. These risks include, but are not limited to, unfavorable economic and geopolitical conditions, including the direct or indirect negative impacts of the conflict between Russia and Ukraine; increased competition; an inability to be successful in our innovation activities; changes in the retail landscape or the loss of key retail or foodservice customers; an inability to expand our business in emerging and developing markets; an inability to successfully manage the potential negative consequences of our productivity initiatives; an inability to attract or retain a highly skilled and diverse workforce; disruption of our supply chain, including increased commodity, raw material, packaging, energy, transportation and other input costs; the negative impacts of, and continuing uncertainties associated with the scope, severity and duration of the global COVID-19 pandemic and the substance and pace of the post-pandemic economic recovery; an inability to successfully integrate and manage our acquired businesses, brands or bottling operations or an inability to realize a significant portion of the anticipated benefits of our joint ventures or strategic relationships; failure by our third-party service providers and business partners to satisfactorily fulfill their commitments and responsibilities; an inability to renew collective bargaining agreements on satisfactory terms, or we or our bottling partners experience strikes, work stoppages, labor shortages or labor unrest; obesity and other health-related concerns; evolving consumer product and shopping preferences; product safety and quality concerns; perceived negative health consequences of certain ingredients, such as non-nutritive sweeteners and biotechnology-derived substances, and of other substances present in our beverage products or packaging materials; failure to digitalize the Coca-Cola system; damage to our brand image, corporate reputation and social license to operate from negative publicity, whether or not warranted, concerning product safety or quality, workplace and human rights, obesity or other issues; an inability to successfully manage new product launches; an inability to maintain good relationships with our bottling partners; deterioration in our bottling partners’ financial condition; an inability to successfully manage our refranchising activities; increases in income tax rates, changes in income tax laws or the unfavorable resolution of tax matters, including the outcome of our ongoing tax dispute or any related disputes with the U.S. Internal Revenue Service (“IRS”); the possibility that the assumptions used to calculate our estimated aggregate incremental tax and interest liability related to the potential unfavorable outcome of the ongoing tax dispute with the IRS could significantly change; increased or new indirect taxes; changes in laws and regulations relating to beverage containers and packaging; significant additional labeling or warning requirements or limitations on the marketing or sale of our products; litigation or legal proceedings; conducting business in markets with high-risk legal compliance environments; failure to adequately protect, or disputes relating to, trademarks, formulas and other intellectual property rights; changes in, or failure to comply with, the laws and regulations applicable to our products or our business operations; fluctuations in foreign currency exchange rates; interest rate increases; an inability to achieve our overall long-term growth objectives; default by or failure of one or more of our counterparty financial institutions; impairment charges; an inability to protect our information systems against service interruption, misappropriation of data or cybersecurity incidents; failure to comply with privacy and data protection laws; failure to achieve our sustainability goals and targets or accurately report our progress due to operational, financial, legal and other risks, many of which are outside our control and are dependent on the actions of our bottling partners and other third parties; increasing concerns about the environmental impact of plastic bottles and other packaging materials; water scarcity and poor quality; increased demand for food products, decreased agricultural productivity and increased regulation of ingredient sourcing due diligence; climate change and legal or regulatory responses thereto; adverse weather conditions; and other risks discussed in our filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the year ended December 31, 2022, which filings are available from the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statements.
