ATLANTA--(BUSINESS WIRE)--The Coca-Cola Company reported third quarter 2016 operating results. “I am pleased to report that we delivered results in line with our expectations,” said Muhtar Kent, Chairman and Chief Executive Officer of The Coca-Cola Company. “We continued to see solid revenue results in our developed markets with 2% unit case volume growth and a continued focus on price realization. The United States, Japan and Western Europe delivered standout performance underpinned by innovation and world-class marketing. Globally, we gained nonalcoholic ready-to-drink value share for the 37th consecutive quarter and are on track to deliver our financial commitments for the full year.”
“While our year-to-date reported net revenues declined 5%, our core business organic revenues* have grown 4% despite continued global economic and political volatility. We believe this core business reflects the ultimate destination of our transformed company – an enterprise positioned to capture sustainable growth through a laser focus on innovating across our portfolio, building strong brands, and leveraging unparalleled customer service through aligned bottlers. As we continue on our path to transform the global system, we remain committed to our strategic actions for growth that will create long-term shareowner and stakeholder value.”
Highlights
Quarterly Performance
- Net revenues were $10.6 billion, a 7% decline from prior year, impacted by a foreign currency exchange headwind of 2% and a headwind from acquisitions, divestitures and structural items of 8%. Organic revenues (non-GAAP) grew 3%, evenly split between volume and price/mix growth.
- We gained global volume and value share in total nonalcoholic ready-to-drink ("NARTD") beverages. Value share grew ahead of volume share, as a result of our focus on accelerating our revenue growth management strategies, including segmented market roles.
- Sparkling beverage unit case volume was even as growth in three of the four geographic operating segments was offset by a 2% decline in Latin America.
- Still beverage unit case volume grew 3%, primarily driven by water and sports drinks.
- Our operating margin expanded more than 50 basis points, which included items impacting comparability, the impact of changes in foreign currency exchange rates and structural impacts. Our comparable currency neutral operating margin (non-GAAP) also expanded more than 50 basis points, driven by solid pricing initiatives, a slightly favorable cost environment, continued productivity and segment mix.
Company Updates
The Company continued to make substantial progress in transforming its business to one that is strategically focused on building great brands and leading a strong global franchise system. Key developments this quarter include:
- Disciplined brand and growth investments: Year to date, we have introduced more than 500 new products across our system. For example, we successfully launched Coca-Cola Zero Sugar in Great Britain, a new and improved sugar-free product replacing Coca-Cola Zero in that market. With significant media investment behind this launch, we saw strong double-digit unit case volume growth in the quarter compared to the prior year Great Britain Coca-Cola Zero base. We continued the rollout of our new "Taste the Feeling" marketing campaign, which has now been activated in more than 200 markets. The recently announced "One Brand" strategy, which unites all four Trademark Coca-Cola brands under a common visual identity, has now been strategically rolled out in 12 of our top markets. We announced the expansion of our coffee portfolio in the United States with the anticipated launch in early 2017 of Gold Peak ready-to-drink ("RTD") cold brew coffees and a partnership with Dunkin' Brands Group to launch Dunkin' Donuts branded RTD coffee beverages.
- Revenue growth through segmented market roles: In North America, both reported net revenues and organic revenues (non-GAAP) grew 3%, reflecting ongoing pricing initiatives in our sparkling business as well as continued growth in our stills portfolio. In Japan, recent innovations such as extensions of the Ayataka tea trademark and Olympic activations behind brand Coca-Cola contributed to 4% unit case volume growth.
- Core business model focus: We continued to make progress against our refranchising plans and remain on track to meet our goal by the end of 2017. In North America, we announced today six definitive agreements and four transaction closings. In Africa, Coca-Cola Beverages Africa began operations during the quarter, and we recently laid the groundwork to acquire Anheuser-Busch InBev's majority stake in that entity in order to implement our long-term strategic plans in these territories with other partners. And in Latin America, we reached a comprehensive agreement with Arca Continental regarding concentrate prices on sparkling soft drinks in Mexico and other initiatives to keep jointly capturing value in Arca Continental's Mexican territories. This agreement follows our new understanding with Coca-Cola FEMSA regarding joint value creation in Mexico and territorial expansion opportunities through the refranchising of Company-owned bottling operations.
- Drive efficiency through productivity: We remain on track to deliver more than $600 million of productivity in 2016 by scaling initiatives and embedding zero-based work into daily routines. We continue to use productivity to prudently fund marketing while delivering operating margin expansion.
- Sustainable business practices: We reached an important milestone recently with respect to water stewardshipinitiatives. The Company and its global bottling partners announced during the quarter that we met our goal to replenish the equivalent amount of water used in global sales volume back to nature and communities. The Company is the first Fortune 500 company to publicly claim achieving such a water replenishment target.
North America
- Positive price/mix reflects the continued execution of disciplined occasion, brand, price and package strategy. Sparkling beverage price/mix grew 3%.
- Income before taxes included items impacting comparability and structural impacts. Comparable currency neutral income before taxes (non-GAAP) was favorably impacted by our productivity initiatives and the ongoing refranchising in North America.
- We gained value share in total NARTD beverages for the 26th consecutive quarter. Sparkling beverage volume growth was slightly positive, rounding to even. Growth in Sprite, Fanta and energy drinks was offset primarily by a decline in Diet Coke. Coca-Cola Zero grew low single digits. Still beverage volume grew 2%, primarily driven by water and sports drinks. Volume in the dairy category grew double digits and vitaminwater grew high single digits. Full report.
