The Coca-Cola (KO)

Q1 2011 Earnings Call

April 26, 2011 9:30 am ET

Executives

Jackson Kelly - Vice President

Gary Fayard - Chief Financial Officer, Executive Vice President and Member of North America Business Integration Team Steering Committee

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Muhtar Kent - Chairman, Chief Executive Officer, President, Chairman of Executive Committee and Chairman of North America Business Integration Team Steering Committee

Analysts

Dara Mohsenian - Morgan Stanley

John Faucher - JP Morgan Chase & Co

Mark Swartzberg - Stifel, Nicolaus & Co., Inc.

William Pecoriello - Consumer Edge Research, LLC

Carlos LaBoy - Crédit Suisse AG

Caroline Levy - Credit Agricole Securities (USA) Inc.

Presentation

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Operator

At this time, I would like to welcome everyone to the Coca-Cola Company's First Quarter 2011 Earnings Results Conference Call. Today's call is being recorded. [Operator Instructions] Media participants should contact Coca-Cola Media Relations department if they have questions. I would now like to introduce Mr. Jackson Kelly, Vice President and Director of Investor Relations. Mr. Kelly, you may begin.

Jackson Kelly

Good morning, and thank you for being with us today. I'm joined by Muhtar Kent, our Chairman and Chief Executive Officer; and Gary Fayard, our Chief Financial Officer. Following 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 like 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 reconcile certain non-GAAP financial measures that may be referred to by our senior executives in our discussion this morning and from time to time in discussing our financial performance to our results as reported under Generally Accepted Accounting Principles. Please look at our website for this information.

Now I will turn the call over to Muhtar.

Muhtar Kent

Thank you, Jackson, and good morning, everyone. Let me begin by saying that I'm pleased with our first quarter results. Despite ongoing global geopolitical challenges, we once again delivered consistent quality growth across all 5 of our geographic operating groups. We are winning share in the marketplace. We gained volume and value share globally in our nonalcoholic beverages as well as in both the sparkling and still ready-to-drink beverage categories. We are winning with our global sparkling beverage portfolio. Brand Coca-Cola grew 3% in the quarter. In addition, Fanta is our fourth global brand to surpass the $10 billion retail sales value threshold.

And we are winning with our global still beverage portfolio, as Del Valle, the brand we acquired in 2007 recently, achieved $1 billion dollar brand status. Del Valle is now our company's 15th $1 billion brand and our first with roots in Latin America. Importantly, we are decisively executing our 2020 Vision, together with our global bottling partners and delivering consistent, long-term sustainable growth.

Before we review this quarter's operating results, I'd like to take a moment to address recent events in Japan in light of last month's tragic earthquake and tsunami. First, I'd like to acknowledge and sincerely thank our leadership team in Japan for their tireless efforts in helping to ensure the health and safety of our associates and the people of Japan during this time of crisis. I'd also like to express our heartfelt appreciation to all of our Japan bottling partners who've been at the very forefront of our system's efforts to assist with immediate disaster relief. Our bottling partners have been diligently producing, distributing beverages to affected areas and restoring our business operations.

Last month, days following the earthquake and tsunami, I visited Tokyo to meet with our associates, customers and our bottling partners to gain first-hand insight into the initial rebuilding efforts. Given our nearly 60-year presence in Japan and our deep connection with its people, we are committed to doing everything we can to help the recovery, relief and rebuilding of this great country. To date, we have pledged $31 million to the ongoing relief efforts including donations of over $7 million bottles of product. Through our Coca-Cola Japan Reconstruction Fund, we're going to help rebuild schools and community facilities all across the country.

As for our business in Japan, we can confirm that outside of the hardest-hit regions in North and East Japan, our system's bottling operations have been only minimally impacted, and all eight bottling plants in the region most affected by the earthquake are now back up and running. We have also announced plans to reduce our power usage in the Southern and East Japan mostly in vending machines to ensure we are responsive to the needs of the community, while ensuring our machines stay on and in support of small businesses which rely on the vending channel.

With regard to this quarter's results in Japan, our volume was up 1%, gaining volume and value share in nonalcoholic ready-to-drink beverages, reflecting the strong momentum our Japan business built across our portfolio in the time prior to the earthquake and tsunami. In light of recent events, we are actively reevaluating our Japan business plan to ensure we will restore and sustain our momentum and meet evolving customer and consumer needs.

As this topic is top-of-mind for many of our shareowners, Gary will review later in our call a very early estimate of the full year impact these recent events may have on our business in Japan. And be assured that in the coming months, we will keep providing routine and ongoing updates regarding Japan. We appreciate your patience and understanding as we navigate through this evolving operating environment.

Turning now to our total company performance results. Our volume grew 6% for the quarter including the benefit of our new cross-licensed brands, primarily Dr. Pepper brands in North America. Excluding these brands, our quarterly volume grew a strong 5% ahead of our long-term growth target and fueled by organic volume growth in all 5 geographic operating groups. We are happy about these results and confident about our future as we achieve these performance results despite natural disasters, political uncertainties and a global macroeconomic environment still in recovery and pressured by rising inflation and commodity prices.

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