The Coca-Cola Company reported second quarter 2022 results that demonstrate resilience in the marketplace amid ongoing global challenges.
Summary
- Global unit case volume grew 8%.
- Net revenues grew 12%; Organic revenues (non-GAAP) grew 16%.
- Operating income declined 22%; Comparable currency neutral operating income (non-GAAP) grew 15%.
- Operating margin was 20.7% versus 29.8% in the prior year; Comparable operating margin (non-GAAP) was 30.7% versus 31.7% in the prior year.
- EPS declined 28% to $0.44; Comparable EPS (non-GAAP) grew 4% to $0.70.
“Our results this quarter reflect the agility of our business, the strength of our streamlined portfolio of brands, and the actions we’ve taken to execute for growth in the face of challenges in the operating and macroeconomic environment,” James Quincey, chairman and CEO of The Coca-Cola Company, stated in the announcement. “We are staying true to our purpose, executing on our strategy and delivering value for our stakeholders.”
Quarterly performance
Revenues: Net revenues grew 12% to $11.3 billion, and organic revenues (non-GAAP) grew 16%. Organic revenue (non-GAAP) performance was strong across operating segments and included 12% growth in price/mix and 4% growth in concentrate sales. Concentrate sales were 4 points behind unit case volume, largely due to the timing of concentrate shipments.
Margin: Operating margin, which included items impacting comparability, was 20.7% versus 29.8% in the prior year, while comparable operating margin (non-GAAP) was 30.7% versus 31.7% in the prior year. Comparable operating margin (non-GAAP) compression was primarily driven by strong topline growth, more than offset by the impact of the BODYARMOR acquisition, higher operating costs and an increase in marketing investments versus the prior year, and currency headwinds.
Earnings per share: EPS declined 28% to $0.44, and comparable EPS (non-GAAP) grew 4% to $0.70. Comparable EPS (non-GAAP) performance included the impact of a 9-point currency headwind.
Market share: The company gained value share in total nonalcoholic ready-to-drink (NARTD) beverages.
Consolidated
Unit case volume grew 8%, with broad-based growth across all operating segments. Volume performance was driven by continued recovery in away-from-home channels and ongoing investments in the marketplace. Developed markets, as well as developing and emerging markets, grew high single digits. Growth in developed markets was led by Mexico, Western Europe and the United States, while growth in developing and emerging markets was led by India and Brazil.
Category performance
Sparkling soft drinks grew 8%, driven by growth across all geographic operating segments, primarily led by India, Mexico and Brazil. Trademark Coca-Cola grew 7%, driven by growth across all geographic operating segments and operating units. Coca-Cola Zero Sugar grew 12%, driven by double-digit growth across developed, developing and emerging markets. Sparkling flavors grew 11%, led by Asia Pacific and Europe, Middle East and Africa.
Nutrition, juice, dairy and plant-based beverages grew 6%, led by Maaza in India, Del Valle in Latin America and fairlife in the United States.
Hydration, sports, coffee and tea grew 7%. Hydration grew 7%, led by strong growth in Latin America and Europe, Middle East and Africa. Sports drinks grew 7%, primarily driven by strong growth of BODYARMOR and Powerade. Tea grew 4%, led by growth in Brazil, Western Europe and Japan. Coffee grew 15%, primarily driven by cycling the impact of Costa retail store closures in the United Kingdom in the prior year and continued expansion of Costa coffee across markets.
Price/mix grew 12%, driven by pricing actions in the marketplace across operating segments along with favorable channel and package mix primarily due to cycling the impact of the pandemic in the prior year. Price/mix also benefited from positive segment mix. Concentrate sales were 4 points behind unit case volume, largely due to the timing of concentrate shipments.
Operating income declined 22%, which included items impacting comparability and a 7-point currency headwind. Comparable currency neutral operating income (non-GAAP) grew 15%, driven by strong organic revenue (non-GAAP) growth across all operating segments, partially offset by higher operating costs and an increase in marketing investments versus the prior year.
North America
Unit case volume grew 2%. Growth was driven by solid performance in away-from-home channels. Sparkling soft drinks and dairy beverages led growth during the quarter.
Price/mix grew 10%, primarily driven by pricing actions in the marketplace, continued recovery in the fountain business and away-from-home channels, and strong growth in premium offerings. Price/mix growth included a benefit resulting from the timing of price increases in the prior year.
Operating income declined 12%, which included items impacting comparability. Comparable currency neutral operating income (non-GAAP) grew 19%, driven by strong organic revenue (non-GAAP) growth, partially offset by higher operating costs and an increase in marketing investments versus the prior year.
The company gained value share in total NARTD beverages, driven by strong performance in at-home channels in sparkling soft drinks, juice and juice drinks, and dairy beverages
Bottling investments
Unit case volume grew 26%, driven by growth in all markets, led by India and the Philippines.
Price/mix grew 3%, driven by pricing actions across most markets, partially offset by negative geographic mix.
Operating income grew 22%, which included items impacting comparability and a 13-point headwind from currency. Comparable currency neutral operating income (non-GAAP) grew 86%, driven by strong organic revenue (non-GAAP) growth.
Full year 2022
The company expects to deliver organic revenue (non-GAAP) growth of 12% to 13%.
For comparable net revenues (non-GAAP), the company expects a 6% currency headwind based on the current rates and including the impact of hedged positions, in addition to a 2% tailwind from acquisitions and divestitures.
The company expects commodity price inflation to be a high single-digit percentage headwind on comparable cost of goods sold (non-GAAP), based on the current rates and including the impact of hedged positions.
Given the above considerations, the company expects to deliver comparable currency neutral EPS (non-GAAP) growth of 14% to 15% and comparable EPS (non-GAAP) growth of 5% to 6%, versus $2.32 in 2021.
Comparable EPS (non-GAAP) percentage growth is expected to include a 9% currency headwind based on the current rates and including the impact of hedged positions, in addition to a 1% headwind from acquisitions and divestitures.
Third-quarter 2022 considerations
Comparable net revenues (non-GAAP) are expected to include an approximate 7% to 8% currency headwind based on the current rates and including the impact of hedged positions, in addition to a 3% tailwind from acquisitions.
Comparable EPS (non-GAAP) percentage growth is expected to include an approximate 9% to 10% currency headwind based on the current rates and including the impact of hedged positions.
