Global Unit Case Volume Declined 16%

Net Revenues Declined 28%;

Organic Revenues (Non-GAAP) Declined 26%

Operating Income Declined 34%;

Comparable Currency Neutral Operating Income (Non-GAAP) Declined 25%

Operating Margin Was 27.7% Versus 29.9% in the Prior Year;

Comparable Operating Margin (Non-GAAP) Was 30.0% Versus 30.3% in the Prior Year

EPS Declined 32% to $0.41;

Comparable EPS (Non-GAAP) Declined 33% to $0.42

ATLANTA--(BUSINESS WIRE)-- The Coca-Cola Company today reported second quarter 2020 results and provided an update on strategic actions that are positioning the system to emerge stronger from the ongoing coronavirus pandemic. The Coca-Cola system remained agile in the second quarter, with a focus on maintaining a safe environment for employees while also providing necessary products and services to consumers, customers and communities during this unprecedented time.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20200721005461/en/

"I'm proud of the people of the Coca-Cola system as we continue to adjust and accelerate our strategies in this fast-changing landscape," said James Quincey, chairman and CEO of The Coca-Cola Company. "We believe the second quarter will prove to be the most challenging of the year; however, we still have work to do as we drive our pursuit of 'Beverages for Life' and meet evolving consumer needs."

Highlights

Quarterly Performance

• Revenues: Net revenues declined 28% to $7.2 billion. Organic revenues (non-GAAP) declined 26%. Revenue performance included a 22% decline in concentrate sales and a 4% decline in price/mix. The revenue declines were primarily driven by pressure in away-from-home channels, which represent approximately half of the company’s revenues.
• Margin: Operating margin, which included items impacting comparability, was 27.7% versus 29.9% in the prior year, while comparable operating margin (non-GAAP) was 30.0% versus 30.3% in the prior year. Operating margin contraction was primarily driven by top-line pressure and currency headwinds, partially offset by effective cost management.
• Earnings per share: EPS declined 32% to $0.41, and comparable EPS (non-GAAP) declined 33% to $0.42.
• Market share: The company lost value share in total nonalcoholic ready-to-drink (NARTD) beverages as an underlying share gain was more than offset by negative channel mix due to pressure in away-from-home channels, where the company has a strong share position.
• Cash flow: Year-to-date cash from operations was $2.8 billion, down 38%. Free cash flow (non-GAAP) was $2.3 billion, down 40%.

Business Environment and Strategic Actions Update

Since the company's last earnings update in April, global unit case volume trends have improved sequentially, from a decline of approximately 25% in April to a decline of approximately 10% in June. Unit case volume for July month-to-date was down mid single digits globally. Performance has been driven by improving trends in away-from-home channels, along with sustained, elevated sales in at-home channels.

The improvement in away-from-home trends during the quarter closely correlated with the easing of lockdowns, and the company expects this correlation to continue in the second half of 2020. While the company believes the second quarter will be the most severely impacted quarter of the year, given the ongoing uncertainty surrounding the coronavirus pandemic and levels of lockdown, the ultimate impact on full year 2020 results is unknown. The company's balance sheet remains strong, and the company is confident in its liquidity position as it continues to navigate through the crisis.

Despite the high degree of uncertainty, the company is committed to emerging stronger by gaining share and consumers, maintaining strong system economics, strengthening its reputation with stakeholders and positioning the organization to win in the new reality.

The company is accelerating its strategy to accomplish these goals. This includes focusing investments against a defined growth portfolio by prioritizing brands best positioned for consumer reach and share advantage. The company will also streamline the innovation pipeline against initiatives that are scalable regionally or globally as well as maintain a disciplined approach to local experimentation in order to further strengthen the company's leader, challenger and explorer framework. The portfolio will be supported by a refreshed marketing approach, with a step-change in marketing investment effectiveness and efficiency. The company will also lead the Coca-Cola system in driving system-wide efficiencies to support these investments, and will invest in new capabilities to capitalize on emerging, lasting shifts in consumer behaviors.

Company Updates

• Refresh the world, make a difference: In the midst of unprecedented challenges, the company remains grounded in its purpose. For example, The Coca-Cola Foundation has partnered with the world’s largest humanitarian network, the International Red Cross and Red Crescent Movement, to help provide hospitals with critical medical equipment and supplies; to support community relief programs; and to fund public coronavirus education and awareness campaigns. The partnership has supported programs in more than 60 countries, reaching an estimated 7.5 million people impacted by the pandemic.
• Driving relevance with loved brands: In the first original ad during the pandemic for brand Coca-Cola, the company celebrates the rediscovered joy in sharing a meal with loved ones. "The Great Meal" features 13 real households in eight countries preparing and sharing home-cooked meals over an ice-cold Coca-Cola, bringing to life the comfort and authenticity of the brand's connection to food. "The Great Meal" kicks off a global campaign for brand Coca-Cola, "Together Tastes Better," which is rolling out this month. This modular, digital-first campaign was created for Coca-Cola teams around the world to tailor and localize for their markets and platforms. "Together Tastes Better" is the latest example of how the company is leveraging marketing investments for the highest impact and largest reach.
• Innovating quickly to address consumer needs: The company recently announced plans to roll out a new pouring option to meet consumer needs with its latest Coca-Cola Freestyle technology innovation – contactless, mobile pouring using a smartphone. As the coronavirus pandemic continues to reshape consumer behaviors, the contactless Coca-Cola Freestyle solution allows consumers to choose and pour drinks in just a few seconds, without creating an account or downloading an app. The mobile experience is rolling out to Coca-Cola Freestyle dispensers across the United States by the end of the year.
• Addressing social justice concerns: The company is taking a multi-faceted approach to social justice, focusing on listening, leading, investing and advocating. This includes meeting with stakeholders, employees and other business leaders. The company has paused social media activity for July to review policies, including its own, and to hold partners to a higher level of accountability and transparency. The company has committed to spend an incremental $500 million with Black-owned suppliers over the next five years in the United States. In support of social justice, The Coca-Cola Foundation has contributed $4 million to several initiatives and, to date, the company has contributed an additional $1.3 million through brands Coca-Cola and Sprite.

Operating Review – Three Months Ended June 26, 2020

Revenues and Volume
Percent Change		Concentrate Sales1		Price/Mix		Currency Impact		Acquisitions, Divestitures and Structural Changes, Net		Reported Net Revenues		Organic Revenues2		Unit Case Volume
Consolidated		(22)		(4)		(3)		0		(28)		(26)		(16)
Europe, Middle East & Africa		(26)		(9)		(3)		0		(37)		(35)		(17)
Latin America		(18)		5		(11)		0		(25)		(13)		(9)
North America		(18)		0		0		1		(16)		(18)		(16)
Asia Pacific		(21)		(1)		(1)		0		(23)		(22)		(18)
Global Ventures3		(34)		(17)		(2)		0		(53)		(52)		(31)
Bottling Investments		(33)		3		(5)		(3)		(38)		(30)		(36)

Operating Income and EPS
Percent Change	Reported Operating Income	Items Impacting Comparability	Currency Impact	Comparable Currency Neutral2
Consolidated	(34)	(5)	(4)	(25)
Europe, Middle East & Africa	(31)	0	(4)	(27)
Latin America	(14)	(2)	(18)	6
North America	(31)	(11)	0	(21)
Asia Pacific	(11)	0	(2)	(9)
Global Ventures	—4	—	—	—
Bottling Investments	(89)	(12)	21	(98)

Percent Change	Reported EPS	Items Impacting Comparability	Currency Impact	Comparable Currency Neutral2
Consolidated EPS	(32)	1	(5)	(28)

Note: Certain rows may not add due to rounding.
1	For Bottling Investments, this represents the percent change in net revenues attributable to the increase (decrease) in unit case volume computed based on total sales (rather than average daily sales) in each of the corresponding periods after considering the impact of structural changes.
2	Organic revenues, comparable currency neutral operating income and comparable currency neutral EPS are non-GAAP financial measures. Refer to the Reconciliation of GAAP and Non-GAAP Financial Measures section.
3	Due to the combination of multiple business models in the Global Ventures segment, the composition of concentrate sales and price/mix may fluctuate materially on a periodic basis. Therefore, the company places greater focus on revenue growth as the best indicator of underlying performance of the segment.
4	Reported operating loss for Global Ventures for the three months ended June 26, 2020 was $102 million. Reported operating income for Global Ventures for the three months ended June 28, 2019 was $73 million. Therefore, the percent change is not meaningful.

In addition to the data in the preceding tables, second quarter operating results included the following:

Consolidated

• Price/mix declined 4% for the quarter driven by negative channel and package mix due to the impact of the coronavirus. Price/mix was also impacted by negative segment mix from Global Ventures and Bottling Investments. Concentrate sales were 6 points behind unit case volume due to cycling the timing of shipments from the prior year along with rationalization of stock levels after safety stock building in the first quarter of the year. Year-to-date concentrate sales were 3 points behind unit case volume, impacted by one less day and cycling the timing of certain shipments from the prior year related to the Brexit bottler inventory build.
• Unit case volume declined 16%, as all operating groups experienced coronavirus-related pressure, particularly in away-from-home channels. Category cluster performance was as follows:
  • Sparkling soft drinks declined 12%, led by a decline in India, Western Europe and the fountain business in North America due to pressure in away-from-home channels. Trademark Coca-Cola declined 7%. Coca-Cola® Zero Sugar declined 4% in the quarter while growing 2% year to date.
  • Juice, dairy and plant-based beverages declined 20%, driven by pressure in the Asia Pacific and Europe, Middle East & Africa operating groups.
  • Water, enhanced water and sports drinks declined 24%, led by Asia Pacific, primarily due to a decline in lower margin water brands.
  • Tea and coffee declined 31%, driven by the impact of the temporary closures of nearly all of the Costa retail stores in Western Europe.
• Operating income declined 34%, which included a headwind from items impacting comparability in addition to currency headwinds. Comparable currency neutral operating income (non-GAAP) declined 25%, driven by top-line pressure due to the coronavirus pandemic, partially offset by effective cost management across operating groups along with timing of expenses.

Europe, Middle East & Africa

• Price/mix declined 9% for the quarter driven by negative channel and package mix in Europe. Price/mix was also impacted by negative geographic mix due to better performance in emerging and developing markets versus developed markets. Concentrate sales ran 9 points behind unit case volume, largely due to cycling the timing of shipments from the prior year along with rationalization of stock levels after safety stock building in the first quarter.
• Unit case volume declined 17%, primarily related to lockdown restrictions across the majority of markets.
• Operating income declined 31%, impacted by a 4-point currency headwind. Comparable currency neutral operating income (non-GAAP) was down 27% driven by top-line pressure due to the coronavirus, partially offset by effective cost management along with timing of expenses.
• The company lost value share in total NARTD beverages largely driven by negative channel mix due to pressure in away-from-home channels, where the company has a strong share position.

Latin America

• Price/mix grew 5%, led by price realization and package initiatives in Mexico. Concentrate sales trailed unit case volume by 9 points, largely due to cycling the timing of shipments from the prior year along with rationalization of stock levels after safety stock building in the first quarter.
• Unit case volume declined 9% led by declines in Argentina, Mexico and Brazil primarily due to the impact of the coronavirus.
• Operating income declined 14%, which included a headwind from items impacting comparability and an 18-point currency headwind. Comparable currency neutral operating income (non-GAAP) grew 6%, primarily due to effective cost management across all business units along with timing of expenses.
• The company gained value share in total NARTD beverages, driven by share gains in sparkling soft drinks, the juice, dairy and plant-based beverages category cluster in addition to the water, enhanced water and sports drinks category cluster.

North America

• Price/mix was even for the quarter as solid growth in the juice and dairy finished goods businesses was entirely offset by pressure in the fountain business and away-from-home channels.
• Unit case volume declined 16%, largely driven by pressure in the fountain business and away-from-home channels. The decline was partially offset by solid growth in fairlife® and Simply®.
• Operating income declined 31%, which included a headwind from items impacting comparability. Comparable currency neutral operating income (non-GAAP) declined 21% driven by top-line pressure due to the coronavirus.
• The company lost value share in total NARTD beverages due to coronavirus-related lockdown restrictions in away-from-home channels, where the company has a strong share position.

Asia Pacific

• Price/mix declined 1% due to negative channel mix in key markets, partially offset by positive geographic mix. Concentrate sales ran 3 points behind unit case volume, largely due to rationalization of stock levels after safety stock building in the first quarter.
• Unit case volume declined 18%, primarily due to strict lockdowns in India to help prevent the spread of the coronavirus. The unit case volume decline was partially offset by positive performance in China.
• Operating income declined 11%, impacted by a 2-point currency headwind. Comparable currency neutral operating income (non-GAAP) declined 9%, driven by top-line pressure due to the coronavirus across most markets, partially offset by effective cost management.
• The company gained value share in total NARTD beverages, driven by a solid share gain in sparkling soft drinks.

Global Ventures

• Net revenues declined 53%, impacted by a 2-point currency headwind. Organic revenues (non-GAAP) declined 52%. The revenue declines were primarily driven by the impact of the temporary closures of nearly all of the Costa retail stores in Western Europe.
• The operating loss was primarily driven by the impact of the temporary closures of nearly all of the Costa retail stores in Western Europe.

Bottling Investments

• Price/mix grew 3% for the quarter due to trade promotion optimization in most markets as well as positive geographic mix.
• Unit case volume declined 36% driven by India and South Africa due to the impact of the coronavirus.
• Operating income declined 89%, which included a headwind from items impacting comparability and a 21-point currency tailwind. Comparable currency neutral operating income (non-GAAP) declined 98%, driven by top-line pressure in India and South Africa due to the coronavirus.

Operating Review – Six Months Ended June 26, 2020

Revenues and Volume
Percent Change		Concentrate Sales1		Price/Mix		Currency Impact		Acquisitions, Divestitures and Structural Changes, Net		Reported Net Revenues		Organic Revenues2		Unit Case Volume
Consolidated		(12)		(2)		(2)		0		(16)		(14)		(9)
Europe, Middle East & Africa		(15)		(4)		(3)		1		(21)		(19)		(10)
Latin America		(7)		7		(11)		0		(11)		(1)		(5)
North America		(8)		1		0		2		(6)		(8)		(7)
Asia Pacific		(13)		(2)		(1)		1		(15)		(15)		(13)
Global Ventures3		(20)		(8)		(1)		0		(29)		(28)		(17)
Bottling Investments		(19)		1		(3)		(2)		(24)		(19)		(22)

Operating Income and EPS
Percent Change	Reported Operating Income	Items Impacting Comparability	Currency Impact	Comparable Currency Neutral2
Consolidated	(20)	(7)	(4)	(8)
Europe, Middle East & Africa	(17)	0	(4)	(13)
Latin America	(4)	(1)	(16)	13
North America	(32)	(23)	0	(10)
Asia Pacific	(9)	0	(1)	(7)
Global Ventures	—4	—	—	—
Bottling Investments	(66)	(53)	26	(39)

Percent Change	Reported EPS	Items Impacting Comparability	Currency Impact	Comparable Currency Neutral2
Consolidated EPS	6	22	(4)	(12)

Note: Certain rows may not add due to rounding.
1	For Bottling Investments, this represents the percent change in net revenues attributable to the increase (decrease) in unit case volume computed based on total sales (rather than average daily sales) in each of the corresponding periods after considering the impact of structural changes.
2	Organic revenues, comparable currency neutral operating income and comparable currency neutral EPS are non-GAAP financial measures. Refer to the Reconciliation of GAAP and Non-GAAP Financial Measures section.
3	Due to the combination of multiple business models in the Global Ventures segment, the composition of concentrate sales and price/mix may fluctuate materially on a periodic basis. Therefore, the company places greater focus on revenue growth as the best indicator of underlying performance of the segment.
4	Reported operating loss for Global Ventures for the six months ended June 26, 2020 was $83 million. Reported operating income for Global Ventures for the six months ended June 28, 2019 was $139 million. Therefore, the percent change is not meaningful.

Outlook

Full Year 2020 Considerations

As the coronavirus pandemic continues to evolve, there is uncertainty around its ultimate impact; therefore, the company's full year financial and operating results cannot be reasonably estimated at this time.

For comparable net revenues (non-GAAP), the company expects a 3% to 4% currency headwind based on the current rates and including the impact of hedged positions.

For comparable operating income (non-GAAP), the company expects a high single-digit currency headwind based on the current rates and including the impact of hedged positions.

The company’s underlying effective tax rate (non-GAAP) is estimated to be 19.5%.

Third Quarter 2020 Considerations

Comparable net revenues (non-GAAP) are expected to include a 3% to 4% currency headwind based on the current rates and including the impact of hedged positions.

Comparable operating income (non-GAAP) is expected to include a 7% to 8% currency headwind based on the current rates and including the impact of hedged positions.

Notes

• 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 192 U.S. fluid ounces of finished beverage (24 eight-ounce servings), with the exception of unit case equivalents for Costa non-ready-to-drink beverage products which are primarily measured in number of transactions. "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 or consumers.
• "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. For Costa non-ready-to-drink beverage products, "concentrate sales" represents the amount of coffee beans and finished beverages (in all instances expressed in equivalent unit cases) sold by the company to customers or consumers. 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 and the Global Ventures operating segment 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 computed based on total sales (rather than average daily sales) in each of the corresponding periods 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 2020 financial results were impacted by one less day as compared to the same period in 2019, and fourth quarter 2020 financial results will be impacted by two additional days as compared to the same period in 2019. Unit case volume results for the quarters are not impacted by the variances in days due to the average daily sales computation referenced above.

Conference Call

The company is hosting a conference call with investors and analysts to discuss second quarter 2020 operating results today, July 21, 2020, 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200721005461/en/

Investors and Analysts: Tim Leveridge, [email protected]

Media: Scott Leith, [email protected]

Source: The Coca-Cola Company

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