The Coca-Cola Management Discusses Q2 2012 Results - Earnings Call Transcript

The Coca-Cola (KO)

Q2 2012 Earnings Call

July 17, 2012 9:30 am ET


Jackson Kelly - Vice President

Muhtar Kent - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Gary P. Fayard - Chief Financial Officer and Executive Vice President


William Pecoriello - Consumer Edge Research, LLC

John A. Faucher - JP Morgan Chase & Co, Research Division

Bryan D. Spillane - BofA Merrill Lynch, Research Division

Bonnie Herzog - Wells Fargo Securities, LLC, Research Division

Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division

Alice Beebe Longley - The Buckingham Research Group Incorporated

Judy E. Hong - Goldman Sachs Group Inc., Research Division



At this time, I would like to welcome everyone to The Coca-Cola Company Second Quarter 2012 Earnings Results Conference Call. Today's call is being recorded. If you have any objection, you may disconnect at this time. [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 now like to introduce Jackson Kelly, Vice President and Investor Relations Officer. 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'll 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, 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 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 at our website for this information.

Now I'll 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 second quarter and year-to-date results. We're delivering consistent top line performance in line with our 2020 Vision and long-term growth targets despite an increasingly unpredictable global economy. Our business realized solid top line results this past quarter, growing worldwide volume by 4% in the quarter and 5% year-to-date. Our second quarter comparable currency neutral net revenue was up 7% in the quarter, driven by solid price mix of 3%. Year-to-date, comparable currency neutral net revenue was also up 7% and our comparable currency neutral operating income also grew 7% in the quarter, raising our year-to-date operating income growth to 6%.

We once again led industry growth, extending our volume and value share gains globally in nonalcoholic ready-to-drink beverages. We gained global share in the sparkling beverage category, where our portfolio is now up 3% year-to-date. This was driven by the global growth of brand Coca-Cola, which is also up a healthy 3% year-to-date. We gained global share in the still beverages category, where our portfolio grew a solid 9% in both the quarter as well as year-to-date.

Importantly, we delivered these results while further enhancing the well-being of the communities and customers we proudly serve and the consumers whose lives we touch each and every day. During today's call as we discuss our performance, I'll also share a few of the meaningful ways we are serving our communities across our geographic operations, as these efforts are an integral part of realizing and sustaining our 2020 Vision.

We recognize that consumers across the globe continue to feel the effects and impacts of prolonged uncertainty in Europe, the further cooling of the economy in China and a protracted recovery here in the United States. Despite this, our consistent quality performance results, as well as our systems commitment to invest in the business for long-term growth, give us confidence that we have the right strategies and the right plans in place to deliver full year 2012 results that meet our long-term growth targets, for in times like these, there is no better industry to be in than the nonalcoholic ready-to-drink beverage industry. We're proud to be part of a strong and growing industry that passionately serves millions of outlets and refreshes billions of consumers every single day.

Now let us review our performance results across our global markets in more detail, beginning with our flagship market, North America, where this past quarter, our business delivered its ninth consecutive quarter of growth, up 1% for both the quarter as well as year-to-date. Importantly, we achieved this growth in North America while sustaining a positive 3% price mix for our total beverage business. And in the process, we once again captured value share in nonalcoholic ready-to-drink beverages this quarter, consistent with our focus on driving profitable growth in North America. This growth was led by our still beverage portfolio, which was up 8% this quarter, gaining both volume and value share across nearly all of the categories in which we compete.

In sports drinks, POWERADE once again grew double-digits this quarter, while also capturing volume and value share. This marks the third consecutive quarter in which POWERADE has led the North America sports drink category in absolute unit case volume growth.

Our glacéau brands, up 5% this quarter, also captured share, driven by the further momentum of vitaminwater zero, up high single-digits, as well as by another quarter of double-digit growth for smartwater. In addition, smartwater began using PlantBottle packaging this past May, as we further leverage this proprietary, innovative and sustainable packaging that we launched nationally with our DASANI water brand last year. Speaking of DASANI, this brand provided yet another quarter of double-digit growth in North America, delivering both volume and value share gains.

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