Atlanta / GA. (ccc) The Coca-Cola Company reported strong operating results in the second quarter of 2019, driven by consumer-centric innovation, solid core brand performance and improved execution in the marketplace. Reported net revenues and organic revenues (non-GAAP) both grew 6 percent through balanced volume and price/mix, with all operating segments contributing to organic revenue (non-GAAP) growth. The company continued to gain global value share. The company’s performance year-to-date led to an update in full year guidance.
«Our strategy to transform as a total beverage company has allowed us to continue to win in a growing and vibrant industry,» said James Quincey, chairman and CEO of The Coca-Cola Company. «Our progress is positioning the company to create more value for all of our stakeholders, including our shareowners.»
Quarterly Performance
- Revenues: Net revenues grew 6 percent to USD 10.0 billion. Organic revenues (non-GAAP) grew 6 percent. Revenue growth was driven by concentrate sales growth of 4 percent and price/mix growth of 2 percent.
- Margin: Operating margin, which included items impacting comparability, was 29.9 percent versus 29.4 percent in the prior year. Comparable operating margin (non-GAAP) was 30.3 percent versus 30.6 percent in the prior year. Strong underlying operating margin (non-GAAP) expansion was offset by an approximate 185 basis point negative impact from currency headwinds and net acquisitions.
- Earnings per share: EPS grew 12 percent to USD 0.61. Comparable EPS (non-GAAP) grew 4 percent to USD 0.63. Comparable EPS growth included the impact from a 9-point currency headwind.
- Market share: The company continued to gain value share in total nonalcoholic ready-to-drink (NARTD) beverages.
- Cash flow: Year-to-date cash from operations was USD 4.5 billion, up 68 percent largely due to strong underlying growth, working capital initiatives and the timing of tax payments. Year-to-date free cash flow (non-GAAP) was USD 3.7 billion, up 87 percent.
Company Updates
- Driving sparkling: Strong performance for the quarter was driven by sparkling soft drinks, led by 4 percent volume and transaction growth in trademark Coca-Cola. Coca-Cola Zero Sugar continues to perform well, with a seventh consecutive quarter of double-digit volume growth globally. Quarterly performance was further driven by innovation, such as Coca-Cola Plus Coffee, and a modernized marketing strategy for today’s consumers. The company reached a first-of-its-kind partnership with Netflix to temporarily bring back 1985’s New Coke for the July 4 debut of season 3 of the hit series “Stranger Things.”
- Growing coffee: During the quarter, the company launched the first-ever Costa Coffee ready-to-drink (RTD) chilled product in Great Britain, marking the first major introduction since Coca-Cola acquired Costa earlier this year. The company plans to roll out the product in additional markets in the second half of the year. The brand delivers an authentic coffee taste experience with 30 percent less sugar than most RTD coffees in Costa’s core market of Great Britain. The Costa Coffee brand is also expanding through a new agreement with Coca-Cola HBC AG. The agreement will address a broad range of consumer and customer needs across multiple channels and occasions, including roast and ground coffee, RTD offerings and vending. The bottler plans to introduce Costa Coffee in at least 10 markets in 2020.
- Expanding energy: The first energy drink under the Coca-Cola brand launched in select European countries during the quarter. Coca-Cola Energy features caffeine from naturally derived sources, guarana extracts, B vitamins and no taurine, all with the great Coca-Cola taste and feeling that people know and love. The product has shown early signs of success. Coca-Cola Energy is now available in 14 countries, including recent launches in Japan, Australia and South Africa. The company expects to offer Coca-Cola Energy in 20 markets by the end of 2019, including Mexico and Brazil.
- Lifting, shifting and scaling: Since the company’s initial investment in the innocent business in 2009, the innocent team has taken the business from the #1 smoothie brand in the U.K. to the #1 chilled juice brand across Europe. The brand is now expanding into Asia for the first time through a targeted rollout, starting in Tokyo. Innocent is loved by consumers who want more functional and nutritional benefits in their daily diet, in addition to those who enjoy natural, delicious and healthy juices and smoothies.
- Making progress in packaging: The company continues to make progress on its World Without Waste goals for recycling, recyclable packaging and the use of recycled materials, including these recent milestones:
- Bottlers worldwide continue to introduce more brands in 100 percent recycled PET (rPET) packaging. Recent launches include the green tea brand Hajime Ichinichi Ippon in Japan; the Romerquelle and Valser water brands in Austria and Switzerland, respectively; Viva water in the Philippines; and San Luis water in Peru. In Western Europe, 100 percent rPET bottles will be launched for smartwater, Chaudfontaine and Honest by the end of 2019.
- Coca-Cola Amatil and Coca-Cola Australia announced that 70 percent of all PET bottles in the market will be made from 100 percent rPET by the end of 2019.
- Coca-Cola European Partners and Coca-Cola Great Britain announced a switch from green to clear bottles for Sprite in their markets as a way to improve recycling. Other markets are making this change as well.
- Coca-Cola Beverages Philippines, the bottling arm of Coca-Cola in the Philippines, announced that it will lead the investment in a USD 19 million state-of-the-art, food-grade recycling facility that will collect, sort, clean and wash post-consumer recyclable plastic bottles and turn them into new bottles using advanced technology. It is Coca-Cola’s first major investment in a recycling facility in Southeast Asia.
- Coca-Cola Vietnam led the launch of an industry-backed packaging recovery organization alongside other companies. The organization will initially focus on increasing recovery and recycling rates for three materials: PET, aluminum and «Tetra Pak».
