Coca-Cola Beats Earnings Estimates, Says Demand In Q1 Hit Pre-Pandemic Levels

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The Coca-Cola Company today reported first-quarter 2021 results and provided an update on progress against its strategic initiatives.

Highlights – Quarterly Performance

  • Revenues: Net revenues grew 5% to $9.0 billion, and organic revenues (non-GAAP) grew 6%. This was driven by a 5% growth in concentrate sales, while price/mix grew 1%. The quarter included five additional days, which resulted in an approximate 6-point benefit to revenue growth.
  • Margin: Operating margin, which included items impacting comparability, was 30.2% versus 27.7% in the prior year, while comparable operating margin (non-GAAP) was 31.0% versus 30.7% in the prior year. Operating margin expansion was primarily driven by effective cost management, partially offset by currency headwinds.
  • Earnings per share: EPS declined 19% to $0.52, and comparable EPS (non-GAAP) grew 8% to $0.55. Comparable EPS (non-GAAP) growth included the impact of a 2-point currency headwind.
  • Market share: The company lost value share in total nonalcoholic ready-to-drink (NARTD) beverages as an underlying share gain in both at-home and away-from-home channels was more than offset by negative channel mix due to continued pressure in away-from-home channels, where the company has a strong share position.
  • Cash flow: Cash from operations was $1.6 billion, up $1.1 billion versus the prior year, driven by positive business performance, five additional days in the quarter and working capital initiatives. Free cash flow (non-GAAP) was $1.4 billion, up $1.2 billion versus the prior year, primarily driven by cash from operations along with lower capital expenditures versus the prior year.

James Quincey, Chairman and CEO of The Coca-Cola Company said,

“We remain focused on emerging stronger and executing against our growth accelerators during the recovery phase. We are pleased with the progress we are making, we are encouraged by improvements in our business, especially in markets where vaccine availability is increasing and economies are opening up, and we remain confident in our full-year guidance.”

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Company Updates

  • Business environment update: Global unit case volume trends remain closely linked to consumer mobility, driven by vaccination rates in different markets and related improvements in away-from-home channels. Through the first quarter, volume trends steadily improved each month, driven by a recovery in markets where coronavirus-related uncertainty has abated. The path to recovery, however, remains asynchronous around the world. March volume was back to 2019 levels, with growth in at-home channels being offset by pressure in away-from-home channels. Solid growth in Trademark Coca-Cola, sparkling flavours and the nutrition, juice, dairy and plant-based beverages category was offset by pressure in the hydration category during the quarter.
  • Driving consumer-centric innovation through scaled brands: The company launched new products across several categories, leveraging loved brands to drive scale and impact. In the United States, the company launched smartwater®+, a lineup of infused hydration options featuring unique ingredient pairings and flavour extracts tailored for specific wellness occasions. Three smartwater®+ variants – smartwater®+ clarity, smartwater®+ tranquility and smartwater®+ renew – deliver unique hydration experiences and will be supported by a 360-degree marketing campaign. This rollout is the latest addition to the company’s portfolio of premium beverages across key markets. After initial success in international markets, the company launched Coca-Cola® with Coffee and Coca-Cola® with Coffee Zero Sugar in the United States to give consumers a refreshing and reinvigorating reset to their daily routine. This innovation exemplifies the company’s lift-and-shift strategy to scale successful beverage innovations to new markets, with the United States becoming the 50th market to launch the product. Additionally, Topo Chico™ Hard Seltzer continued its expansion in Latin America and Europe and was recently launched in key markets in the United States under an agreement with Molson Coors Beverage Co.
  • Aligned bottling system investing for growth: The company continues to focus on strengthening bottling partnerships and bottler alignment as the system enters the recovery phase. Seamless system connectivity is helping the company maintain local relevance while benefiting from a global scale. In line with its objective of focusing its resources on building consumer-loved brands and on innovation, the company announced in a separate Form 8-K filing with the Securities and Exchange Commission today that it plans to list Coca-Cola Beverages Africa (CCBA) as a publicly-traded bottler and intends to sell a portion of its holdings in CCBA via an initial public offering. This demonstrates a commitment by the company for CCBA to remain Africa-focused and South Africa-headquartered. For more information, please refer to the press release section of the company’s website.
  • Progress against long-term sustainability goals and creating business value: Environmental, social and governance (ESG) goals remain core to the company’s business and are embedded in its operations. The company delivered on its decade-long drive to enable the economic empowerment of 5 million women entrepreneurs through the 5by20 initiative. The program has reached more than 6 million women entrepreneurs, providing business-skills training, financial services, peer networks, mentoring and other resources. In addition, building on its water stewardship leadership, the company recently announced a holistic strategy to achieve water security where the company operates by 2030. The strategic framework focuses on three priorities: reducing shared water challenges around the world; enhancing community water and sanitation access with a focus on women and girls; and improving the health of priority watersheds. A full update of the company’s ESG priorities will be published April 20 in the 2020 Business & ESG Report, reflecting a continued journey toward driving sustainable business practices.

Consolidated

Unit case volume was even, as continued strength in at-home channels was offset by coronavirus-related pressure in away-from-home channels. Volume benefited from cycling the impact of the coronavirus pandemic in certain parts of the world last year. Strong growth in developing and emerging markets, led by China and India, was offset by pressure in developed markets, primarily the United States and Western Europe. Category performance was as follows:

    • Sparkling soft drinks grew 4% as solid growth in China, India and Latin America was partially offset by pressure in the fountain business in North America and away-from-home channels in Europe due to the coronavirus pandemic. Trademark Coca-Cola grew 4%, led by the Asia Pacific and Latin America, along with solid growth in Coca-Cola® Zero Sugar, which grew 8%, driven by strong performance across all geographic operating segments. Sparkling flavours grew 2%, led by growth in Trademark Sprite in the Asia Pacific.
    • Nutrition, juice, dairy and plant-based beverages grew 3% due to solid performance by Minute Maid® Pulpy in China and Maaza® in India. In North America, continued strong growth in Simply® and fairlife® was more than offset by a decline in Minute Maid®.
    • Hydration, sports, coffee and tea declined 11%. Hydration declined 12%, driven by a broad-based decline across all geographic operating segments. Sports drinks declined 1%, driven by a decline in Europe, Middle East & Africa, partially offset by continued strength in premium offerings and the zeros/lights portfolio in North America. Tea declined 6%, driven by declines in North America and Asia Pacific. Coffee declined 21%, driven by coronavirus-related pressure on Costa® retail stores.
  • Price/mix was 1%, primarily driven by pricing in North America and Latin America, partially offset by negative channel and package mix due to the impact of the coronavirus pandemic. Concentrate sales were 5 points ahead of unit case volume, primarily due to five additional days in the quarter (an approximate 6-point benefit) partially offset by the timing of concentrate shipments.
  • Operating income grew 14%, which included items impacting comparability in addition to currency headwinds. Comparable currency neutral operating income (non-GAAP) grew 7%, driven by solid organic revenue (non-GAAP) growth along with effective cost management across most geographic operating segments and Global Ventures.
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Europe, Middle East & Africa

  • Unit case volume declined 2%, primarily due to coronavirus-related pressure in away-from-home channels in Europe, partially offset by solid growth in sparkling soft drinks in Pakistan, Nigeria and Turkey.
  • Price/mix declined 5%, driven by negative channel and package mix in Europe along with geographic mix pressure. Concentrate sales were in line with unit case volume as the benefit from five additional days in the quarter was offset by cycling the bottler inventory build in the prior year related to the uncertain environment.
  • Operating income declined 15%, impacted by comparability items. Comparable currency neutral operating income (non-GAAP) declined 10%, primarily driven by top-line pressure from the negative channel and package mix in Europe.
  • The company gained a value share in total NARTD beverages, primarily due to share gains in Europe and Eurasia & Middle East.

Latin America

  • Unit case volume was even, as growth in sparkling soft drinks led by Mexico, Brazil and Argentina was offset by a decline in the hydration category across most markets.
  • Price/mix grew 7%, driven by pricing in the marketplace including inflationary pricing in Argentina. Concentrate sales were 2 points ahead of unit case volume as the benefit from five additional days in the quarter was partially offset by cycling the bottler inventory build in the prior year related to the uncertain environment.
  • Operating income grew 2%, which included items impacting comparability and an 11-point currency headwind. Comparable currency neutral operating income (non-GAAP) grew 15%, driven by solid organic revenue (non-GAAP) growth along with effective cost management.
  • The company gained a value share in total NARTD beverages as well as in most categories.

North America

  • Unit case volume declined 6%. North America had strong growth in sparkling soft drinks in at-home channels along with growth in fairlife®, Simply® and Topo Chico®. This was more than offset by continued coronavirus-related declines in the fountain business, along with a decline in the hydration category primarily due to cycling the consumer stocking in the prior year driven by coronavirus-related uncertainty.
  • Price/mix grew 4%, as solid growth in juice and dairy finished-goods brands, along with the category mix benefit from cycling strong sales in the hydration category last year, were partially offset by pressure in the fountain business and away-from-home channels. Concentrate sales were 6 points ahead of unit case volume, primarily driven by five additional days in the quarter.
  • Operating income grew 105%, which included a tailwind from items impacting comparability. Comparable currency neutral operating income (non-GAAP) grew 24%, driven by pricing and effective cost management.
  • The company lost value share of the total NARTD beverages due to coronavirus-related restrictions in away-from-home channels, where the company has a strong share position.

Asia Pacific

  • Unit case volume grew 9%, as strong growth in China and India was partially offset by coronavirus-related pressure in Japan and Southeast Asia. Growth in China benefited from cycling the impact of coronavirus-related lockdowns last year.
  • Price/mix declined 2%, largely driven by geographic mix due to growth in emerging and developing markets outpacing developed markets. Concentrate sales were 11 points ahead of unit case volume, primarily due to five additional days in the quarter along with the timing of shipments in China.
  • Operating income grew 34%, which included an 8-point currency tailwind. Comparable currency neutral operating income (non-GAAP) grew 29%, driven by solid organic revenue (non-GAAP) growth along with effective cost management across most operating units.
  • The company lost value share in total NARTD beverages. This was driven by a share loss in Japan due to coronavirus-related restrictions in away-from-home channels, partially offset by share gains in China and Southeast Asia.

Global Ventures

  • Net revenues declined 1% in the quarter, which included a 5-point currency tailwind. Organic revenues (non-GAAP) declined 5%. The revenue declines were primarily driven by coronavirus-related pressure on Costa® retail stores, partially offset by strong performance in Costa Express® machines in the United Kingdom and the benefit from five additional days in the quarter.
  • Operating income and comparable currency neutral operating income (non-GAAP) grew 37% and 48%, respectively. This was primarily driven by effective cost management, partially offset by coronavirus-related pressure on Costa® retail stores.

Bottling Investments

  • Unit case volume grew 5%, primarily due to solid growth in sparkling soft drinks in India and South Africa.
  • Price/mix grew 5%, driven by pricing and trade promotion optimization in most markets along with a benefit from category and package mix.
  • Operating income growth of 125% included a tailwind from items impacting comparability and a headwind from currency. Comparable currency neutral operating income (non-GAAP) grew 91%, driven by solid pricing along with effective cost management.
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