The Coca-Cola Company (KO)
Q2 2010 Earnings Call
July 21, 2010 09:00 am ET
Jackson Kelly - VP and Director of IR
Muhtar Kent - Chairman and CEO
Gary Fayard - EVP and CFO
Bill Pecoriello - Consumer Edge Research
Kaumil Gajrawala - UBS
Mark Swartzberg - Stifel Nicolaus
Judy Hong - Goldman Sachs
John Faucher - JPMorgan Chase
Wendy Nicholson - Citi Investment Research
Lauren Torres - HSBC
Previous Statements by KO
» Coca-Cola Company Q1 2010 Earnings Call Transcript
» The Coca-Cola Company Q4 2009 Earnings Call Transcript
» The Coca-Cola Company Q3 2009 Earnings Call
At this time, I would like to welcome everyone to the Coca-Cola Company’s second quarter 2010 earnings results conference call. Today’s call is being recorded. If you have any objections, you may disconnect at this time. All participants will be in a listen-only mode until the formal question-and-answer portion of the call. (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 questions. I would like to now introduce Jackson Kelly, Vice President and Director of Investor Relations. Mr. Kelly, you may begin.
Good morning and thank you for being with us again today. I’m joined by Muhtar Kent, our Chairman and Chief Executive Officer and Gary Fayard, our Chief Financial Officer. Following the prepared remarks this morning, we will turn the call over for your questions. Before we begin, I would like to remind you that this conference call may contain forward-looking statements, including statements concerning long-term earnings objectives and should be considered in conjunction with cautionary statements contained in our earnings release and in the company’s most recent periodic SEC report.
In addition, I would also to note that we have posted schedules on our company website at www.thecoca-colacompany.com under the reports and financial information tab in the investors section which reconciles certain non-GAAP financial measures that maybe referred to by our senior executive in our discussions this morning, and from time-to-time in discussing our financial performance to our results as reported under generally accepted accounting principles.
Please look on our website for this information. Now, I will turn the call over to Muhtar.
Thank you Jackson and good morning everyone. Let me begin by saying that I am broadly pleased with our second quarter performance. We once again delivered a quarter of solid growth with consistent profitable results around the world. Working closely with our great bottling partners, we continue to advance our 2020 vision and road map for winning together.
The global equity of our brands is strong and growing stronger. Our worldwide FIFA World Cup activation was a tremendous success, bringing Coca-Cola to billions of consumers across cities, across towns, villages and living rooms the world over. And consumers clearly continue to prefer our brand with brand Coca-Cola growing 5% for the quarter and 4% year-to-date. Additionally, we saw extensive share gains this quarter across key beverage categories including sparkling, packaged water, ready-to-drink juice and juice drinks as well as sports drinks. As a result, we gained volume and value share in global non-alcoholic ready-to-drink beverages. We also gained global volume and value share in both the sparkling and still beverage categories.
At the same time, the global economy remains uncertain due to deficit concerns in Europe, recent downward revisions to China’s economy and continued weakness in consumer confidence in the certain pockets of the world.
This cloudy global economic picture however does not dampen the strong commitments we’ve made to invest in our global operations and our brands for long termed sustainable growth. We’re also encouraged by the real progress we’re making in our plans to integrate CCE’s North American bottling business. This transaction remains on track to be completed in the forth quarter of 2010.
Now turning to current performance results. This quarter we delivered strong 15% operating income growth on that comparable basis. Again on a comparable, currency neutral basis, our 11% operating income growth was well ahead of our long term growth target despite the lingering effects of the global recession.
We grew our quarterly volume, a strong 5%, cycling 4%, bringing our year-to-date volume to 4% at the higher end of our long term growth target. This was fueled by solid organic unit case volume growth across both North America, as well as key international markets. We increased net revenues 7% on a comparable basis in the quarter with our comparable currency neutral revenues coming in at 5% in line with our long term growth target.
And once again, we have generated significant cash from our operations with cash flow up 18% year-to-date. Now I will take a moment to share our performance in more detail across our markets and I will start by reviewing our business in North America which I’m pleased to say is continuing to gain momentum.
North America grew 2% this quarter, returning this region to positive growth. In fact, we gained both volume and value share across both sparkling and still beverages. Equally important to this growth is how it is been achieved in this critical market. First, we are focused on building strong value creating brands led by brand Coca-Cola which grew both volume and value share this quarter while increasing our favorite brand score advantage versus our primary competitive among key consumer segment. Second, we are focused on generating profitable growth by delivering a more sophisticated price, package and channel architecture in the United States.
For example, we forged strong gains in our highly profitable immediate consumption offerings. In previous calls, we have highlighted the success of our smaller single-serve packages and the role, the critical role they play in generating millions of incremental transactions. We are clearly building on this momentum. Additionally, we have seen 4% year-to-date growth of our portion control offerings in the supermarket channel. The growth of these offerings that provide consumers a choice of packages below 12 ounces with 100 or fewer calories is driven by our new 90-calorie mini can. And the recent introduction of our innovative 2 liter contour package has helped Trademark Coca-Cola enter nearly four million new households’ year-to-date.