The Coca-Cola Company (KO) - Informe de resultados del segundo trimestre de 2023

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Operadora:
At this time, I’d like to welcome everyone to The Coca-Cola Company’s Second Quarter 2023 Earnings Results Conference Call. Today’s call is being recorded. If you have any objections, please disconnect at this time. [Operator Instructions] 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 Coca-Cola’s Media Relations department if they have any questions.

Me gustaría presentarles a Robin Halpern, Vicepresidenta y Directora de Relaciones con los Inversores. Sra. Halpern, puede comenzar.

Robin Halpern:
Good morning, and thank you for joining us. I’m here with James Quincey, our Chairman and Chief Executive 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 at coca-colacompany.com. These schedules reconcile certain non-GAAP financial measures, which may be referred to by our senior executives during this morning’s discussion to our 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 growth and operating margins.

In addition, 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 turn the call over for questions. [Operator Instructions].

Now I’ll turn the call over to James.

James Robert B. Quincey:
Gracias, Robin, y buenos días a todos. Tras un fuerte comienzo de año, hemos mantenido nuestro impulso en el segundo trimestre. Nuestra combinación de marcas fuertes y queridas y un sistema de distribución omnicanal alineado nos está permitiendo ganar en muchos entornos operativos diferentes. Dados nuestros buenos resultados en el primer semestre y la resistencia de nuestro negocio, hoy elevamos nuestras previsiones tanto de beneficios como de resultados.

To give you the full picture of our results and our raised guidance, I’ll start by discussing second quarter performance and provide perspective on the current business and consumer environment. Then I’ll highlight our performance across categories, including how we are driving quality leadership throughout our portfolio. Finally, I’ll touch on why we’re confident in our ability to deliver our long-term objectives. And then John will end by discussing our results for the quarter and our revised guidance for 2023.

En el segundo trimestre, las fuerzas macroeconómicas compitieron en nuestros mercados. En el lado positivo, muchas presiones sobre la cadena de suministro se atenuaron, la inquietud en torno a la estabilidad del sector bancario disminuyó y los precios de la energía siguen retrocediendo desde máximos históricos. Sin embargo, la inflación mundial siguió siendo elevada y en algunos mercados persisten las tensiones geopolíticas. A pesar de esta confluencia de factores, hemos logrado un crecimiento orgánico de los ingresos de 11% en este trimestre.

El volumen fue plano y, tras un comienzo más lento, mejoró secuencialmente con junio como nuestro mes más fuerte del trimestre. En el primer semestre de 2023, logramos un crecimiento del volumen coherente con nuestro rendimiento subyacente desde 2019. En términos más generales, nuestra industria es fuerte, y creemos que tenemos un margen de maniobra significativo para crecer tanto en volumen como en valor. Y seguimos ganando cuota. Durante el trimestre, ganamos cuota de valor tanto en los canales en casa como fuera de casa.

As we look towards the second half, the global inflationary environment is impacting consumers and our business differently across geographies. In developed markets like North America and Western Europe, inflation is beginning to moderate, and labor markets remain strong. Our elasticities continue to be relatively low. However, we have seen some willingness to switch to private label brands in certain categories. Across the sector, consumers are increasingly cost-conscious. They’re looking for value and stocking up on items on sale. In these markets, our pricing is largely in place and is expected to moderate as we cycle pricing initiatives from the prior year.

It’s more important than ever to be consumer-centric and to partner with customers to provide affordable and premium propositions, which deliver value through basket and incidence growth. In many developing and emerging markets like Latin America, the Middle East and Africa, consumers are more accustomed to persistent inflation. However, the number of markets with intense inflation has expanded.

Five of our top 40 markets are currently experiencing over 20% annual inflation. In these markets, it’s equally important to leverage revenue growth management capabilities to balance affordability with premiumization to be able to take price with local market inflation, which helps offset the currency pressures. There are, as always, a few markets affected by specific local factors. In China, economic recovery slowed in the second quarter, and inflation has declined. Consumer confidence is below pre-pandemic levels. And we continue to monitor our leading consumer indicators and take action to win in the market.

En la India, la actividad se vio desfavorablemente afectada por las lluvias y las bajas temperaturas del trimestre. Sin embargo, las perspectivas de crecimiento se mantienen intactas. En un mundo con un amplio espectro de dinámicas de mercado, desde la inflación a la devaluación de la moneda, pasando por los cambios en las necesidades de los consumidores, nuestro negocio está demostrando ser muy resistente. Tenemos muchas palancas de las que tirar para gestionar con éxito diferentes entornos operativos. Seguimos centrados en el consumidor y en el crecimiento. Nuestra receta para el éxito no ha cambiado. Seguimos cumpliendo nuestra estrategia mediante una combinación de marketing e innovación de categoría mundial, excelencia en la gestión del crecimiento de los ingresos y una sólida ejecución. Estamos subiendo el listón y aumentando el liderazgo de calidad en toda nuestra cartera.

Empezando por Coca-Cola. Estamos aumentando nuestra base de bebedores de la Generación Z, ganando cuota y aprovechando nuestra escala para impulsar la eficiencia en todo nuestro sistema. Durante el trimestre, ganamos cuota de volumen y valor vinculando Coca-Cola a ocasiones de consumo e implicando a los consumidores a través de experiencias locales. Un gran ejemplo es Receta para la Magia, que se activó en más de 50 mercados y celebra el consumo de Coca-Cola con las comidas. La campaña se apoyó en experiencias con chefs locales, aprovechando aproximadamente 750 personas influyentes en todo el mundo, y cobró vida a través de las redes sociales y vallas publicitarias centradas en la receta.

La campaña Coca-Cola of Meals también permitió a Coca-Cola reforzar su relevancia local. Por ejemplo, en el canal fuera del hogar en Italia, Coca-Cola ha crecido en incidencia con la pizza, la comida consumida #1 con aproximadamente 3.000 millones de pizzas cada año, de 10% a 20% en los últimos 4 años. Aunque la marca Coca-Cola es omnipresente, adaptamos nuestra arquitectura de precios a las ocasiones de consumo y seguimos impulsando tanto la asequibilidad como la premiumización. Durante el segundo trimestre, aumentamos los incidentes en la cesta de la compra y el volumen por viaje en dos dígitos, al tiempo que incrementamos el precio por litro.

Pasemos a los sabores con gas. Estamos observando un fuerte compromiso de los consumidores con nuestra gama de marcas, que incluye Sprite, Fanta, FRESCA y Thums Up. Al mismo tiempo, tenemos un importante margen de maniobra para seguir liderando la calidad en los mercados desarrollados y en desarrollo.

With Sprite, we are driving brand awareness by connecting consumers to passion points and personalized experience at a more granular and locally relevant levels through our global Heat Happens platform. In North America, Sprite celebrated hiphop’s 50th anniversary with the launch of Sprite Lymonade Legacy and sponsorship of concert tours, exclusive experiences and collaborations with prominent artists.

Nos asociamos con estrellas locales del pop y con un productor de Grammy en China utilizando nuestro Programa Global de Música Sprite Limelight para los bebedores de la Generación Z en 1.500 centros universitarios. En Corea del Sur, el Sprite WaterBomb Festival también generó buenos resultados.

En la India, la promoción Joke in a Bottle permitió a los consumidores escanear envases y recibir chistes personalizados y localizados a través de WhatsApp para combatir el calor. En junio, Sprite fue galardonada por Kantar como la marca más resistente por incorporar el mayor número de nuevos hogares en 2022 que cualquier otra marca de gran consumo.

Volcándonos en el agua, los deportes, el café y el té. Estamos segmentando las oportunidades más amplias y utilizando nuestras renovadas capacidades de asignación de recursos, priorizando los mercados y subcategorías que ofrecen el mayor rendimiento de nuestra inversión. Aceleramos la velocidad de comercialización de nuestras innovaciones, medimos los resultados en tiempo real y ampliamos la escala de nuestros éxitos.

Seguimos despertando el interés por Fuze Tea con el lanzamiento del té verde en México, la edición limitada de verano en Turquía y la ampliación de la oferta sin azúcar en Europa. Los primeros resultados muestran velocidades prometedoras y Fuze Tea creció en volumen dos dígitos durante el trimestre. vitaminwater es otro ejemplo. Durante el trimestre, relanzamos vitaminwater zero en Norteamérica con un nuevo sistema de dulzor de fruta de monje y estevia, que generó ganancias de cuota de valor. Estamos aprovechando las necesidades de los consumidores de hidratación rápida, un subsegmento de rápido crecimiento dentro de las bebidas deportivas, con el lanzamiento de BODYARMOR FLASH I.V. en EE.UU. y Flashlyte en México. Aunque todavía son incipientes, ambos productos han despertado un gran interés entre los consumidores durante el trimestre y han mostrado unos resultados iniciales prometedores.

Nuestros zumos, productos lácteos de valor añadido y bebidas vegetales han registrado 9 trimestres consecutivos de crecimiento de dos dígitos en las ventas y han ganado cuota de volumen y valor durante el trimestre. Seguimos innovando e impulsando la premiumización con la marca Simply. Simply Mixology, que ofrece a los consumidores mezclas de gran sabor y mocktails listos para beber, inició una campaña experiencial para celebrar el comienzo del verano y su lanzamiento nacional.

Además, fairlife tuvo otro trimestre excepcional, ya que tanto Core Power como fairlife nutrition plan continuaron su fuerte impulso. En mayo, anunciamos una inversión de $650 millones para construir una planta de producción de vanguardia que contribuya a impulsar la próxima oleada de crecimiento. Por último, nos anima lo que estamos viendo en las bebidas alcohólicas listas para beber. Seguimos adoptando un enfoque mesurado, explorando y aplicando lo aprendido. Aunque todavía es pronto, Jack y Coca-Cola ha dado resultados prometedores. En Filipinas, la combinación de Jack y Coca-Cola y Lemon-Dou produjo fuertes ganancias de cuota.

El lanzamiento del Mojito de Schweppes en la India también ha empezado con buen pie. Y estos ejemplos ilustran cómo nuestra transformación de marketing está cobrando vida. La fortaleza de nuestra cartera total de bebidas nos da más confianza en que podemos seguir ofreciendo a los consumidores opciones de bebidas para cada ocasión.

Nuestro propósito es refrescar el mundo y marcar la diferencia. Y mantenemos nuestro compromiso de construir un futuro más sostenible para nuestra empresa y el planeta mientras nos esforzamos por hacer crecer nuestro negocio. Seguimos avanzando hacia nuestra visión de una economía circular para los envases a través de la innovación y las asociaciones. Por ejemplo, en Estados Unidos nos hemos asociado recientemente con Republic Services para garantizar un suministro adecuado de plástico reciclado para nuestros envases. Al mismo tiempo, estamos adoptando los envases rellenables. Recientemente hemos puesto en marcha un programa con clientes en cuatro ciudades de EE.UU. para probar vasos rellenables, con planes de ampliarlo a otros lugares.

Hemos superado con éxito la primera mitad del año, lo que respalda nuestra decisión de elevar las previsiones para todo el año. Y en lugar de intentar predecir las muchas direcciones que podrían tomar las cosas, seguimos centrados en cumplir nuestros objetivos clave que esbozamos en febrero. En otras palabras, en primer lugar, perseguir la excelencia a escala mundial y ganar a escala local a través de una implacable orientación al consumidor para impulsar los beneficios; en segundo lugar, invertir para la salud a largo plazo de nuestro negocio y subir el listón en todos los elementos de nuestro volante estratégico; y en tercer lugar, generar un crecimiento del BPA en dólares estadounidenses.

Nuestro sistema nunca ha sido tan sólido, y nuestro modelo de red mundial nos permite adaptarnos rápidamente a entornos cambiantes. Creemos que estamos bien posicionados para cumplir nuestras orientaciones y objetivos actualizados, gracias a nuestro increíble sistema y a nuestros empleados en todo el mundo.

With that, I’ll turn the call over to you, John.

John Murphy:
Gracias, James, y buenos días a todos. Estamos satisfechos con el impulso de nuestro negocio y nuestros sólidos resultados del segundo trimestre. Empezando por la línea superior. Crecimos en ingresos orgánicos 11%. Las cajas unitarias se mantuvieron estables. Como dijo James, el volumen del segundo trimestre tuvo un comienzo más lento, pero terminó con una nota positiva. Las ventas de concentrados superaron en un punto a las de cajas unitarias en el trimestre, debido sobre todo al calendario de los envíos de concentrados. El crecimiento de la relación precio/mezcla fue de 10% en el trimestre, impulsado por los precios arrastrados del año pasado, junto con algunas nuevas medidas de precios en los distintos segmentos operativos, incluido el impacto de los mercados hiperinflacionistas.

El margen bruto comparable del trimestre aumentó aproximadamente 40 puntos básicos gracias a la expansión subyacente y a un ligero beneficio de la recontratación de botellas, parcialmente compensado por el impacto de la divisa. El margen operativo comparable aumentó aproximadamente 90 puntos básicos en el trimestre. Esto se debió principalmente al fuerte crecimiento de los ingresos y al impacto de la redistribución de las operaciones de embotellado, parcialmente compensado por un aumento de las inversiones en marketing y mayores costes operativos en comparación con el año anterior, así como por los efectos negativos de las divisas.

En conjunto, el BPA comparable del segundo trimestre, de $0,78, subió 11% interanual, a pesar de un efecto divisa de 6% más de lo previsto. El flujo de caja libre fue de aproximadamente 1.400 millones de PTU en lo que va de año. Esto se debió en gran medida al buen rendimiento operativo subyacente y a los beneficios del capital circulante, parcialmente compensados por un pago de $720 millones en concepto de impuestos de transición efectuado durante el segundo trimestre, así como por pagos relacionados con fusiones y adquisiciones.

Nuestro balance es sólido, y nuestro apalancamiento de deuda neta de 1,6 veces el EBITDA está por debajo de nuestro rango objetivo de 2 a 2,5 veces. Nuestras prioridades de asignación de capital siguen siendo las mismas, y continuamos invirtiendo para impulsar el crecimiento a largo plazo. Como mencionó James, nos anima lo que estamos viendo en el mercado. Aunque seguimos acelerando nuestro volante estratégico para generar un crecimiento impulsado por las líneas de producción, también hemos progresado en nuestra agenda de márgenes, como demuestra nuestro historial constante de compensar los vientos en contra de los costes para mantener unos márgenes brutos estables.

Disponemos de numerosas palancas para impulsar el crecimiento de los ingresos y mejorar la eficacia y eficiencia de nuestro gasto a largo plazo. Nuestra estrategia a toda prueba, unida a los grandes planes que tenemos en marcha para seguir creando liderazgo de calidad en toda nuestra cartera, nos da una buena visibilidad para cumplir nuestras elevadas previsiones para 2023.

Esto se debe a un crecimiento orgánico de los ingresos de 8% a 9%, que incluye un crecimiento positivo del volumen, mientras que sigue liderado por el precio/mezcla. Hay que tener en cuenta algunas consideraciones. Esperamos que los precios en los mercados desarrollados se moderen a lo largo del año, a medida que avancemos en las iniciativas de fijación de precios del año anterior. En los mercados emergentes y en desarrollo, nuestro objetivo es ajustar los precios a la inflación del mercado local.

En la medida en que la intensa inflación de los mercados eleva el precio/mezcla, el impacto suele verse compensado por las divisas, ya que a menudo es difícil cubrir nuestra exposición. Debido a nuestro calendario de presentación de informes, habrá 1 día adicional en el cuarto trimestre. Ahora esperamos un cómodo crecimiento del beneficio por acción neutro en divisas de 9% a 11%. Basándonos en los tipos actuales y en nuestras posiciones de cobertura, actualizamos nuestra previsión de divisas de un efecto negativo de entre 3 y 4 puntos en los ingresos netos comparables y de entre 4 y 5 puntos en los beneficios por acción comparables para todo el año 2023.

Inflationary pressures are beginning to moderate in some ways, including freight rates that are favorable compared to last year. That said, several commodities that are prevalent in our baskets like sugar and juice remain elevated. And we have some hedges that we’ll be rolling off to less favorable rates. Based on current rates and hedge positions, we continue to expect per case commodity price inflation in the range of a mid-single-digit impact on comparable cost of goods sold in 2023. Our updated underlying effective tax rate for 2023 is now 19.3%.

En conjunto, estamos actualizando el crecimiento de los beneficios por acción comparables de 5% a 6% frente a $2,48 en 2022. Seguimos esperando generar aproximadamente $9.500 millones de flujo de caja libre en 2023 a través de aproximadamente $11.400 millones en efectivo de operaciones menos aproximadamente $1.900 millones en inversiones de capital. Si se excluyen los pagos fiscales de transición efectuados en el segundo trimestre y diversos pagos asociados a operaciones de fusiones y adquisiciones, nuestra conversión implícita de flujo de caja libre estaría dentro de nuestras previsiones a largo plazo. Estas previsiones no incluyen ningún pago relacionado con nuestro litigio en curso con el IRS sobre el impuesto de sociedades estadounidense.

Al entrar en la segunda mitad del año, seguimos construyendo una cultura que hace hincapié en elevar el listón en todos los aspectos de nuestra forma de hacer negocios. Gracias al enorme compromiso constante de nuestros empleados del sistema en todo el mundo, confiamos en nuestra capacidad para cumplir nuestras previsiones para 2023 y generar valor para nuestros grupos de interés a largo plazo.

Con eso, operador, estamos listos para aceptar preguntas.

Operadora:
Nuestra primera pregunta viene de Bryan Spillane de Bank of America.

Bryan Douglass Spillane:
Supongo que tengo una pregunta sobre cómo miramos a la segunda mitad del año y a las ventas orgánicas, la orientación implícita de las ventas orgánicas, que, supongo, está en el rango de 5% a 6% en la segunda mitad del año. James y John, ¿podríais hablar un poco sobre cómo está el entorno macroeconómico o las condiciones operativas en comparación con lo que pensabais a principios de año?

And given that there’s more of these markets where — or countries where hyperinflation is an issue, is price a little bit more of a driver in terms of the organic sales comp in the back half of the year relative to volume again versus kind of what you were thinking at the start of the year?

James Robert B. Quincey:
Yes. Well, let me try and unpack that a little bit. I think the headline part of the answer is there’s a little more pricing in Q2 and in the downhill than we had expected at the beginning of the year, principally around that basket of countries where inflation is high, above 20% and a little more persistent. That’s the short answer.

The longer version of the answer is, look, we’re executing the strategy we’ve talked about consistently over time and again, in CAGNY, the real focus on upping the bar on marketing, upping the bar on RGM, the commercial strategies and the execution of the marketplace. All with the intent about delivering a good, strong top line-led growth algorithms. And obviously that — we’ve talked historically that in normal times, that 5% to 6% would be split between volume and price on a roughly equal basis. And so what you’re seeing in the back half of the year, which I think is important to note, is we’re expecting volume to be consistent in the second half with the way it was in the first half, which in the end is running our trend, if you like, a CAGR versus 2019, similar to what we did last year.

So we see sustained positive volume growth coming out of ’22. And we’re looking for volume growth in the second half in a very similar way to the first half whether you’re comparing to prior year or to 2019. So we want a business that is growing consumer base for all the right, appropriate strategic reasons. Then what’s going to happen to revenue in the second half is we’re going to see the impact of 3 buckets of price/mix.

The first bucket is the carryover of pricing from prior year. Obviously, there was more cost inflation last year. But logically, that is a set of numbers that is going to tend to 0 by the end of December. And so that is going to step down as we go through Q3 and Q4. So bucket one, carryover. That’s going to step down.

Bucket two is price increases we’ve made so far this year that are leaving aside the large inflation countries, look much more like a normal year in terms of what we’ve taken this year, both in terms of timing, number of price increases and relative level of price increases. So we…

Operadora:
Señoras y señores, estamos experimentando dificultades técnicas. Por favor, permanezcan en línea.

James Robert B. Quincey:
¿Cuándo he parado? Operadora, ¿sabe cuándo se corta la línea con mi respuesta?

Operadora:
Desafortunadamente no, señor. Nuestra siguiente pregunta vendrá de Lauren Lieberman de Barclays.

James Robert B. Quincey:
Operator, let me just finish the other question. I was going to back up. Apologies to everyone for the technical trickiness. I’m just going to back up and if I’m repeating something I said apologies. And if there’s a gap in the logic, apologies again. I think we talked about volume second half similar to first half, whether you talk in prior year or 2019. Pricing, 3 buckets. The bigger piece of the pricing of the 3 factors, which is the carryover, is obviously stepping down through the year towards 0 by the end of the fourth quarter.

The new pricing that’s come in, in ’23 being very consistent with the kind of a normal level of pricing that we would see, and it’s kind of in place already for the year. And that obviously then continues at the same rate through the rest of the second half. And the third piece, which is about 1/4 of what’s happening on PMO at the moment, this bucket of higher inflationary countries and as I said earlier, there was a little more inflation from those countries in the second quarter than we had previously expected. Obviously, that then comes back around in a little more ForEx headwind.

We are assuming that some of those inflation rates will moderate in the balance of the year in the second half and likewise moderate in the ForEx, although it’s very uncertain. So we’ll have to see what happens, but that’s basically the composition of how to think about the effect of our strategy delivering good top line growth in the second half.

Operadora:
Nuestra siguiente pregunta viene de Lauren Lieberman de Barclays.

Lauren Rae Lieberman:
Can you hear me okay because like my line’s got crackly now. That’s okay. Great.

James Robert B. Quincey:
Sí, te tenemos, Lauren.

Lauren Rae Lieberman:
Bien. Bien. Quería preguntarte algo sobre Costa y el café en general, a la luz del modelo de asignación de recursos y la identificación de los principales grupos de beneficios, etc., que no se mencionan en los comentarios preparados, pero que sin duda se mencionan en el comunicado de prensa de esta mañana, con especial fuerza en el Reino Unido.

So I guess broad question would be how coffee overall is kind of fitting in on this thought process and resource allocation models if they are getting their particular differences by geography or is it for different emphasis on the category by different bottlers. And then specific to the numbers called out in the release and Costa U.K., should we think about that as recovery with mobility, COVID or tweaks or adjustments to the strategy you’ve made that are beginning to come through in performance?

James Robert B. Quincey:
Yes. Sure, Lauren. Let me do it in reverse order. The Q2, I think, is more recovery than new stages of growth. Having said that, the Express machines have continued to expand numerically in terms of numbers of placements all the way through COVID and including so far this year. So the Express business, the B2B business, the U.K. is — has been strong, remains strong and still growing, still gaining share. The retail — the store numbers are much more about a recovery kind of completing the play on mobility perhaps and gain share a little bit. And obviously, we’re focused on how to drive growth going forward, and we see plenty of headroom in the U.K. market.

But I would characterize year-to-date more on — more of a biased recovery on stores than new and the bias on Express on new. Internationally speaking, in — if you just break it down into — there’s a couple of different buckets, the ready-to-drink bucket, we’ve made some good progress in China. We made some good progress in Japan with launches of ready-to-drink Costa in the case of Japan complementing Georgia. And actually Japan had a pretty good start to the year growing both Georgia and Costa. So kind of a full coffee strategy in the ready-to-drink looking good, and that’s still the most important ready-to-drink coffee market for us.

And then the B2B, which is a mix of Express along with kind of we’re serving to providing machines and beans, starting to see that getting some traction in Europe with the bottling partners there and starting to kind of find its feet in the U.S., too. And those are the ones I’ve called out as the most — as at the front of the program in terms of geographic expansion.

Operadora:
Nuestra siguiente pregunta es de Dara Mohsenian, de Morgan Stanley.

Dara Warren Mohsenian:
So I just wanted to follow up on Bryan’s back half question. You did mention a weaker start in April post the Q1 call and then the stronger June volume performance, obviously, on this call. Is that engendering additional confidence internally around top line? And the reason I’m asking is it sounds like conceptually, you’re not necessarily guiding to the June volume strength continuing in the second half. I’m just trying to understand that. Is that more just prudence, given the inflationary environment you mentioned and consumer volatility? Or are there other factors there?

Y cuando pensamos en el crecimiento orgánico de las ventas para todo el año, como parte de esa pregunta, ¿fue sólo la subida del segundo trimestre? ¿Quizás parte de ese aumento se produjo en el primer trimestre? ¿Cambiaron en algo las expectativas para la segunda mitad del año dentro de esa previsión de crecimiento de las ventas orgánicas para todo el año?

James Robert B. Quincey:
Creo Dara, que podrías conseguir el precio en esas preguntas en una sola pregunta. Mira, el - claramente, en el segundo trimestre, como habíamos anticipado en la llamada anterior, abril había comenzado suave. Pero luego las cosas se normalizaron hacia el final del trimestre, y junio fue un buen mes de crecimiento sólido.

But I think the easier way to think about it is take the whole of the first half because you’re always going to have some good months and some bad months. April happened to concentrate some price increases in developed countries and bad rains in India. Look, that will always happen on any given month. I think what is a question of what gives us confidence in the back half of the year by just saying January to June with its combination of good, middling and bad months, the growth rate in the first half, what we’re expecting is a similar sort of growth rate in the second half, whether you compare to 2022 or to 2019.

And so we think the momentum is there. We think in the developed markets, we’ve got through the pricing that needed to be taken in ’23. We don’t foresee substantive new pricing in the downhill. But we think this is going to be a well set up run through in the second half.

And as I called out on that other answer with Bryan that the uncertainty factor is really around a concentrated in a few of these more inflationary marketplaces. Guidance going up, I guess there’s obviously some flow through. We had a good first quarter, obviously, versus consensus. About a second quarter — we clearly feel confident in our outlook for the full year, which is why we’re taking it up. So there’s some flow through.

Obviously, there’s some timing factors in the relative performance in Q2. And as we’ve talked on previous calls, given the nature of our business and where we sit in the supply chain relative to final sales, I think it’s always good to take a multi-quarter average to the way of thinking about volume or pricing or even the flow-through to EPS. And I think that’s kind of something that we always think about. Otherwise, you can get too distracted by the ups or downs on any given quarter. So we’re going up. In the guidance, we feel confident about the second half. There’ll always be some puts and takes, but we think we have a great strategy and a great plan to execute for the rest of the year.

Operadora:
Nuestra siguiente pregunta viene de Bonnie Herzog de Goldman Sachs.

Bonnie Lee Herzog:
De acuerdo. Supongo que tenía una pregunta sobre sus márgenes operativos en Asia-Pacífico, que se vieron presionados de nuevo este trimestre. James, has mencionado un par de mercados que siguen sufriendo presiones, pero espero que puedas darnos más detalles sobre estos vientos en contra en la región. ¿Y alguna iniciativa clave que hayáis implementado para mitigar algunas de estas presiones? Y como resultado, ¿cómo deberíamos pensar en la tendencia de sus márgenes operativos durante el resto del año en la región?

James Robert B. Quincey:
Sure. As it relates to Asia Pacific, what we — there’s obviously a set of things that happened in Q2 that were specific to Q2. There were some destocking in the China operating unit that was kind of a significant piece there. And there was some strong demand for some of the juice businesses in China and India. And those are 2 kind of atypical factors that happened that depressed on a timing basis the margin in Asia Pacific. It is worth noting that there is a sort of structural headwind when seen specifically just at the Asia Pacific region level. And what I mean by that is that we have a very big business in Japan, which is an excellent business and has a good operating margin.

But then Asia Pacific concentrates a set of fast-growing emerging and developing markets, India, China, some of the Southeast Asian countries. And given the nature of how fast they grow and their emerging profile, i.e., they have price points that are lower than Japan, they create a negative geographic mix effect to the Asia Pacific reporting segment. And that’s been a feature for an extended period of time. In other words, you have to sell 1-point-something cases in India and China to make up — to kind of compensate the mix effect relative to Japan. So that kind of structural headwind is always slightly there.

Obviously, our objective is through our strategies, our marketing, RGM execution and the way we invest to try and offset that headwind. So if you look back over time, you’ll see that the — whilst the margin fluctuates up and down, it has kind of had a certain stability when you look, for example, 2019 versus 2022. And so I close by saying don’t over-rotate to 1 quarter in the case of Asia Pacific, given some of the issues. But I would also point out that this is not a region seen on its own where operating margin is likely to grow all the time because of the structural mix effect.

But when seen at the company level, we obviously manage it as part of the overall portfolio so that it is a piece of the puzzle in looking at our total strategy of, as we’ve talked about, using the levers to hit that top end of the revenue 5 to 6 with a little bit of aggregate operating income margin expansion for the total enterprise. And we understand the role of each segment within that equation.

Operadora:
Nuestra siguiente pregunta es de Steve Powers, del Deutsche Bank.

Stephen Robert R. Powers:
En realidad, quiero tratar dos temas, pero primero quiero retomar, James, lo que acabas de decir en el contexto más amplio de toda la empresa. En el trimestre, la línea superior fue obviamente fuerte. Pero creo que en relación con las expectativas externas, vimos un poco más de flujo de margen a través de los gastos de venta, generales y administrativos y el apalancamiento de lo esperado, especialmente en regiones como América del Norte, donde el margen fue excepcionalmente fuerte en relación con la historia.

So I’m curious in terms of how to think about the balance of managing top line growth versus continued margin expansion as you think about the back half. But then also more broadly, just in the context of your top line-led algo, is there maybe more cost efficiency opportunities that we should be thinking about longer term? Or is what we see in the quarter maybe more just a matter of timing?

I also, John, if I could, I just want to loop back to a question I asked last quarter on below-the-line dynamics. You came into the year talking about below-the-line deleverage, interest expense and so on. We haven’t seen that again this quarter, especially with the lower tax rate. So I’m just curious if that has changed in the full year and if that factored in to the full year guidance raise?

John Murphy:
Steve, let me take the second piece first. It’s fairly straightforward. In the quarter, we benefited from higher equity income and from interest that we earned on our overseas cash, which was in both cases ahead of what we had soon when we guided at the start of the year. And from the second half of the year, I don’t expect either of those 2 to be as strong. So I do think we’ll have a little bit of deleverage in the second half of the year but modest, not a significant variable for your consideration in the second half of the year.

James Robert B. Quincey:
Sí. Volviendo al elemento de margen de la pregunta. Norteamérica, en cierto modo, es un lado fluido de lo que acabamos de hablar en Asia-Pacífico. Obviamente, los resultados fueron muy fuertes en Norteamérica en la línea superior y en el margen. De nuevo, hay una serie de factores temporales que hacen que la estructura de márgenes del segundo trimestre sea más plana en el caso de Norteamérica, incluyendo, por ejemplo, el - un poco como en el caso de Costa U.K., ya que hubo una tasa de crecimiento mucho más rápida en el mercado norteamericano de fuera de casa que en el de dentro de casa.

And obviously, that’s margin accretive. That should be seen as, in a way, more completing the play of the recovery versus COVID. So the completion of the reopening of restaurants, cafes, theme parks, et cetera, et cetera. And so that channel mix, if you like, flatters the operating income in the short term. There’s a number of timings of other things that impact that, BODYARMOR integration, et cetera. I think the way to think about margin going forward by segment and most importantly for the company overall is, firstly, not to over-rotate on any 1 quarter.

Remember that there are a number of expense items and deduction items that we accrue on the basis of sales curve, not just what actually happened in the quarter. So timing is a feature. And that’s why I’m very strong on let’s take 4 quarters in a row and look at that relative to history.

And when you do that, whether in North America or Asia Pacific or more importantly, the company in the overall, what you’re going to see is us sticking to our strategy, which is to drive the growth from the top line and then to look for modest or moderate increments of the operating margin, which we deliver not just by effective strategies to allocate resources, whether they be marketing or operating expenses so that we are efficient and get a little bit of leverage there.

But the design of the portfolio itself and the RGM strategies also is a component in creating sales that inherently have a little more gross margin. So we use all the levers to try and deliver. And so don’t take these segments over or under deliveries as a sign of something new and radical happening. If they are features of our business model and the big overall idea is top line growth with small income and operating margin expansion.

Operadora:
Nuestra siguiente pregunta viene de Rob Ottenstein de Evercore.

Robert Edward Ottenstein:
James, I’d like to talk about the global system. Recently, there’s been a lot of interesting developments from some of the bottlers. You had CCH buy Finlandia. You’ve had a lot of your bottlers, particularly in Latin America and elsewhere, talk about B2B platforms that they’re developing. And so my question is, how are you thinking about these developments? Are there new models, revenue, earnings sharing models? And how do you make sure that the bottlers stay focused on those products that drive the most value for The Coca-Cola Company?

James Robert B. Quincey:
Sure. Let me start just by headlining actually, we’ve just come off. Last week, we had a Global Bottler Meeting in Atlanta. I think it’s in 30-plus years since we had that meeting in Atlanta, but we had it in Atlanta last week with the majority of the biggest bottlers in the Coke system. And I think it was a very clear meeting on our collective will and ability and interest in investing in this business and our overall level of alignment on what’s important and what should we drive individually and what needs to be driven collectively.

So actually, you guys all go around and talk to the bottlers as well, and I think you will get it reflected back from them that there is a very high degree, not just an alignment on what needs to be done, but enthusiasm on the opportunities ahead of us to drive the business, our collective business forward. On some of the specifics, clearly, you’ve got in that basket, there are things that happen around the world that are local and a biased set of dynamics that are important and relevant and not necessarily projectable around the world. And the case of CCH and the distribution, now the ownership of Finlandia, I think, is one of those.

The B2B platforms, which are progressed very nicely in Latin America, are a feature of the business in multiple other countries. We’ve been testing and exploring and developing individually and collectively B2B platforms with the principal objective of enhancing the system and most importantly, the bottlers’ relationships with the retailers.

To the extent that we can compliment, and here we’re largely talking the fragmented channel because the relationship with the modern trade is already set on electronic platforms anyway. We’re talking about the fragmented trade, and the majority of the almost 30 million customers we visit as a system is to enhance that relationship, to make it no longer a hostage to the visit of the Coke sales rep but to make it a 24/7 opportunity to enhance relationship, to order product, to ask for a service call, to get a new cooler, to put some umbrellas up or to add to an order that’s already about to delivered.

And that is certainly when we have evaluated how those customers where the B2B platforms are available how they’re doing versus where it’s not yet rolled out. There’s clearly an improvement, not just in the relationship however you want to measure it, but also in the sales. So there’s a lot going on in the system. And I think the last thought there is you should take it also as examples of the willingness of the system to experiment and try and be on the front edge of what drives value in the marketplace.

Operadora:
Nuestra siguiente pregunta viene de Chris Carey de Wells Fargo Securities.

Christopher Michael Carey:
You made a comment on some private label switching happening in certain markets. Can you just expand on where you’re seeing this specifically geographically and perhaps by category and the playbook that you’ll be deploying in these markets, the sorts of developments that you’d be looking for to respond to these actions ahead?

And I asked that a bit in the context of, clearly, some of your ingredients are still quite inflationary and whether you see any potential risk to being able to price against that inflation in some of these markets going forward. Obviously, you have a playbook with a lot of different levers. And I’m just curious to hear your thoughts on where these developments seem to be happening and how do you think about responding to these a bit more specifically.

James Robert B. Quincey:
Sure. So private label switching is principally a feature firstly in Europe, and then to some extent also in the U.S. If you were to include price brands or B brands, you might see some of that also in Latin America depending on how you want to define it. But very specifically on private label, that’s number one, a European effect; and number two, a U.S. effect. And it’s, in our view, highly related to the strength of the brands in any specific category.

Lo vemos más en las bebidas, con agua y zumos más que con refrescos, y menos en las colas. La estrategia, además de lo que tenemos que hacer en términos de marketing y de seguir haciendo que las marcas sean relevantes para los consumidores y que funcionen en el mercado, es, por supuesto, la estrategia RGM. Sí, la premiumización sigue siendo una oportunidad, pero tenemos que mantener un ancla y seguir evolucionando y adaptando nuestras estrategias en materia de asequibilidad, ya sean rellenables, envases pequeños asequibles o envases de consumo habitual asequibles, que se ha convertido en una estrategia probada en entornos inflacionistas, bien aprendida en Latinoamérica, por ejemplo, pero que ahora se aplica desde hace varios años en Europa y Estados Unidos.

And we have more things we can do in both marketplaces to have an anchor in both affordability and premiumization. And that’s a playbook that we’re rolling out and executing in those marketplaces. As it relates to the inflation and the COGS coming through, obviously, some of that, whether it be juice or sugar and corn syrup, affects different markets. The most of the inflation is in a set of markets where we do price for local inflation. And in a way, the higher inflation gets, the more likely it is we’re just — you’re going to follow inflation.

And so the risk not following is not really there as it goes up. The risk actually appears on the volume side. But this is a select group of markets. So if it were to err towards the more inflation in the back half of the year, we think it’s manageable. If we were to err for the less inflation, that would be good, but we think it’s in a bucket of manageable things.

And as it relates to the total company relative to some of those input costs, we have very long-term relationships with most providers and long-term hedging programs, which allow us to kind of — they don’t avoid inflation, but they smooth it that they make it much more manageable from a pricing and packaging point of view.

Operadora:
Nuestra siguiente pregunta es de Filippo Falorni, de Citi.

Filippo Falorni:
Can you guys talk a bit more about your alcohol strategy broadly, particularly with the Red Tree Beverages subsidiary? And specifically in terms of like new innovation, any other subcategories or areas where you’re looking to expand within alcohol? I know you’re experimenting, but just any color on the future plans will be great.

James Robert B. Quincey:
Yes. Thanks, Filippo. Look, the Red Tree entity that we stood up in the second quarter is more of a technicality than some new big step. It isn’t a change in strategy, and it’s not a vehicle to distribute in the U.S. It allows us a better platform to engage with the partners that we’re working with in the U.S. in terms of coordinating and influencing the marketing and allows us a better separation of the alcohol versus the non-alcohol band. So it’s more an optimization of the model and how we want to execute things rather than a different thing. And then in terms of progress, look, it’s still a small part of the business. And as I talked about, I think it was CAGNY, that’s great, and there are lots of runs on the board.

Jack and Coke ha obtenido unos resultados muy prometedores, incluso en EE.UU. Simply Spiked Peach está funcionando muy bien en EE.UU. Si se quiere buscar un punto realmente brillante, se puede cubrir Filipinas y Jack and Coke y Lemon-Dou, que es una bebida alcohólica de limón, obtuvo más de 30% de cuota de la categoría RTD.

All of this is very encouraging as we continue to take a measured approach to this and to kind of learn and apply our learnings. All of this needs to generate belief that it can be material for the Coke company, not just a nice business, and that we’re still in the process of driving towards. But certainly, so far, we’re pleased with what’s taken place, and we are encouraged about the next steps that we have to take.

Operadora:
Nuestra siguiente pregunta es de Andrea Teixeira, de JPMorgan.

Andrea Faria Teixeira:
And James, on your volumes commentary, and I appreciate that on your 4-year CAGR, I think if our math is correct, it’s 1.7% unit case for total company, which is obviously remarkable. That said, I think EMEA was a bit softer in the quarter. I understand your commentary about Russia. And what is actually happening in EMEA ex Russia? And how we should be thinking going forward?

Y en relación con esto, ya que ha comentado que EE.UU. fue muy fuerte fuera de casa, y Europa es - un gran porcentaje de Europa es fuera de casa, en los comentarios sobre junio, ¿cómo deberíamos estar pensando no sólo en Europa, sino en el rendimiento de on-premise frente a off-premise a nivel mundial?

James Robert B. Quincey:
I’m trying to process all the questions. I think you’ve beaten, that was Dara. I think you’ve beaten Dara. EMEA was a bit softer. Yes. I think on EMEA, we are — it was even though — so on EMEA, we’re expecting EMEA to be positive in the second half. And so there was a ramp effect from the withdrawal from Russia in the second quarter. But we — so Europe was in pretty good shape, actually, Europe ex Russia. If you take the first half, Europe ex Russia was positive. So we are feeling that now it’s dropped out of the base numbers in the second half that actually Europe and EMEA will be in good shape.

Obviously, EMEA has got a couple of the hyperinflationary countries like Turkey, like Pakistan, so EMEA could get other effects. But if you concentrate where Russia is, which is Europe, which is the biggest impact, actually, Europe had a positive volume in the first half if you take out Russia. And so we’re feeling good about Europe as we go into the second half. And I think the question really is the trade-off between pricing and volume in a couple of countries, particularly Turkey and Pakistan and for those that want to go deep down the rabbit hole, Zimbabwe as well.

Now the next part of the question, which was about our away-from-home versus at-home. Yes. It wasn’t just June, which was the strength in the U.S. basically the first half. You’ve seen the out-of-home growing ahead of the at-home and the recovery. And I think that’s the way to think about it is we’re seeing the back end of the recovery in the away-from-home.

Similarly, in Europe, in fact, globally, transactions were ahead of volume, which tends to imply smaller packages are growing faster than bigger packages from a mathematical point of view. So as a global feature, there’s a little more on-premise consumption or a little more small package consumption than large package consumption, which helps as well. But I don’t — we should see this as a new secular trend, more the kind of the last bit of renormalization post-COVID.

Operadora:
Nuestra última pregunta de hoy nos la hará Peter Grom, de UBS.

Peter K. Grom:
So James, maybe just 2 quick follow-ups. One, just on Chris’ question around trade down and improving affordability. Do you expect any changes in the promotional environment, particularly in North America? It doesn’t sound like that’s a shift you expect, but just wanted to be sure. And then just following up on your response to Andrea’s question, I would be curious how you see channel mix evolving as consumers seek more value in some of these developed markets, particularly just given the strength from away-from-home that you just alluded to?

James Robert B. Quincey:
We see the U.S. pricing and promotional environment as pretty rational. We have a set of strategies in place to try and balance our premiumization, regular and affordability strategies in the U.S., which includes a little more promotion than the first quarter. But basically, promo levels are very similar to prior years and not as a step up. And we think that we have the right balance of premiumization and affordability plays to be able to continue to gain as we did in the second quarter volume and value share in the U.S. So we think the environment is rational. We think our strategy works for us because we gain volume and value share. And we’ve got the right mix of — roughly the right mix of promo and price. And obviously, we’re going to continue to push the affordability and the premiumization play.

And then the channel mix question, do we think we’ll see in developing markets what — I think the principal feature is a renormalization post-COVID. I don’t think it’s kind of recessionary or inflationary or that. I think it’s just been — we’ve kind of seen a renormalization of the channel mix. We had talked over prior years about how big an impact on price mix and margin structure, the shift in channels were with what seems ages ago, the lockdowns. That has now largely played out, which is another way of saying, we don’t expect channel mix to be a major feature of the discussion in quarters and years to come.

Operadora:
Señoras y señores, con esto concluye nuestra sesión de preguntas y respuestas. Ahora me gustaría devolver la llamada a James Quincey para cualquier comentario final.

James Robert B. Quincey:
Yes. Thank you, operator. So just to quickly summarize. Second quarter results, I think, demonstrate the momentum we have in the marketplace. We are navigating a broad set of dynamics in the local markets while driving scale and maintaining flexibility at a global level. We’re confident in our ability to deliver on our ’23 guidance and our longer-term objectives. Thanks for your interest, your investment in our company and for joining us this morning.

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

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