Coca-cola Company (the) · NYSE:KO
Coca-cola Company (the) — The Coca-Cola Company — CAGNY 2016
48 slides from Coca-cola Company (the)'s conference presentation, 2016
Slide 1: The Coca-Cola Company CAGNY 2016
The Coca-Cola Company CAGNY 2016 James Quincey, President and Chief Operating Officer Kathy Waller, EVP and Chief Financial Officer CAGNY 2016
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation may contain statements, estimates or projections that constitute “forward-looking statements” as defined under U.S. federal securities laws. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar expres
Slide 3: Topics for Discussion
Topics for Discussion Setting the Stage Accelerating Our Actions Evolving Our Growth Reviewing the Financials
Slide 4: Setting the Stage
Setting the Stage CAGNY 2016 4
Slide 5: We Have a Set of Strong Assets to Build Off
We Have a Set of Strong Assets to Build Off DYNAMIC GREAT SUPERIOR BRAND MARKETING EXECUTION PORTFOLIO • 20 Billion-Dollar • Quality • 24 million Brands customer outlets • Quantity • #1 in NARTD, • ~250 bottling • Strategy partners Sparkling & Still • 500+ Brands • 16 million cold drink assets CAGNY
Slide 6: We Are Building a Growth Model that Can Deliver Across Economic Cycles
We Are Building a Growth Model that Can Deliver Across Economic Cycles Strategic Actions GDP and KO Growth Drive revenue growth through 4-5% segmented market roles 4% 3.3% 3.4% 3-3.5% Make disciplined brand 3% 3% 3.1% and growth investments Drive productivity and continuous improvement Streamline an
Slide 7: We Made Significant Progress Reshaping Our Company in 2015
We Made Significant Progress Reshaping Our Company in 2015 Strategic Actions Achievements Drive revenue growth through • Segmented revenue growth strategies segmented market roles embedded in planning process • Aligned incentives to market roles Make disciplined brand • Media investments +$250M and
Slide 8: We Delivered Our Plan in Our Transition Year
We Delivered Our Plan in Our Transition Year Value Share Revenue* Profit** Returned to Shareowners +4% +6% $8B Dividends and Net Share Repurchases CAGNY 2016 *Organic revenue 8 **Comparable currency neutral income before taxes (structurally adjusted)
Slide 9: Accelerating Our Actions
Accelerating Our Actions CAGNY 2016 9
Slide 10: We Are Transforming the Company to Focus on Our Core Value Creation Model
We Are Transforming the Company to Focus on Our Core Value Creation Model: • Building Strong Brands • Driving Customer Value • Leading Our Franchise System Lower Risk, Higher Return Business with Greater Confidence to Achieve Our Long-Term Growth Targets CAGNY 2016 10
Slide 11: Accelerating Refranchising Will Transform Our Company
Accelerating Refranchising Will Transform Our Company 21st Century Coca-Cola Coca-Cola 2-Bottler NORTH Beverage EUROPE European AFRICA Beverages CHINA CHINA Strategy for AMERICA Partnership Partners Africa Mainland Model China Expected By End of Q2’16 Q2’16 Close 2017 2017 ~40% of Our Business In Mo
Slide 12: Post Transformation, We Will Look Very Different than We Do Today
Post Transformation, We Will Look Very Different than We Do Today Illustrative example using 2015 performance and adjusting to remove previously announced bottler transactions* Independent Bottlers Getting Bigger… …as We Transfer Employees KO Independent Bottlers KO Independent Bottlers 84K Transfer
Slide 13: Re-Architecting the North America System for Growth
Re-Architecting the North America System for Growth Customer Product Supply Contiguous Aligned Governance System Territories IT Platform Contract Economic Interests CAGNY 2016 13
Slide 14: New Ways of Working to Drive Efficiency and Effectiveness
This Focus Will Also Enable New Ways of Working to Drive Efficiency and Effectiveness Greater savings Simplifying process and technology Faster & End-to-End Application + Technology better results Process Process Platforms Simplification Elevated associate experience Business Service (engagement) Ma
Slide 15: Driving Efficiency and Effectiveness in Our IT Space
Driving Efficiency and Effectiveness in Our IT Space IT Applications 40% sunset, 50% of remainder Sunset (600) moved to cloud 1,450 Cloud (425) 425 2014 2016 Destination CAGNY 2016 15
Slide 16: Evolving Our Growth
Evolving Our Growth CAGNY 2016 16
Slide 17: We Compete in an Attractive Industry with Opportunity for Growth
We Compete in an Attractive Industry with Opportunity for Growth Growing Industry… …with Headroom for Growth 5% CAGR ~1/3 $250B CAGNY 2016 Note: Expected NARTD Industry growth from 2016 to 2020 Note: KO’s Global Value Share of NARTD 17 Source: Internal estimates Source: Internal estimates
Slide 18: We Have Confidence in Our Growth Strategy
We Have Confidence in Our Growth Strategy Consumer Great Excellence Demand Marketing in Sales Execution GROWTH Revenue Profit Before Tax Economic DISCIPLINED PORTFOLIO CHOICES Profit CAGNY 2016 18
Slide 19: Our Strategy Starts with Executing the Basics
Our Strategy Starts with Executing the Basics… and We Are Seeing Results Consistency 2015 Net Revenue in Marketing Growth,& by Execution BusinessisUnit the Objective Improving Marketing Improving Execution CAGNY 2016 19 Note: Arrow size reflective of relative growth rate
Slide 20: Macroeconomic and Socioeconomic Forces Are Driving Change
Macroeconomic and Socioeconomic Forces Are Driving Change Emerging Market Pressures Shifting Consumer Purchasing Power 20% NARTD Value Growth 15% Continuing Urbanization YOY Increase 10% 5% 0% 2010 2011 2012 2013 2014 2015 Polarizing Consumer Wealth Developed Markets Developing Markets Emerging Mark
Slide 21: Segmented Revenue Growth Strategies Are Critical to Sustainable Growth
Segmented Revenue Growth Strategies Are Critical to Delivering Sustainable Growth Developed Markets and Premium Products Segmented Affordability North America – Price/Pack Architecture India Returnable Glass Bottle Splash Bar Dispenser Entry Pack PET Bottle Source: Nielsen, FY2015 Value Growth Value
Slide 22: Consumer Preferences and Trends Are Shifting
We Also Recognize that Consumer Preferences and Trends Are Shifting… Personalization Control Sugar Natural Choice Artificiality 90 calories per can CAGNY 2016 22
Slide 23: So We Are Adjusting Our Approach
So We Are Adjusting Our Approach Shape Choice Innovate Promote Clear Facts Market Responsibly Lead Engagement CAGNY 2016 23
Slide 24: Supported by a More Effective and Efficient One Brand Strategy
Supported by a More Effective and Efficient “One Brand” Strategy Coca-Cola Core Features = One Brand STRATEGY One Brand & IDENTITY + Several VARIANTS Shared Product Shared Classic Diet Zero Benefits Iconography Zero No Zero Life Caffeine Shared Brand Values CAGNY 2016 24
Slide 25: Taste the Feeling – Integral Part of One Brand Strategy
Taste the Feeling – Integral Part of “One Brand” Strategy CAGNY 2016 25
Slide 26: We Are Reshaping Our Sparkling Strategy
We Are Reshaping Our Sparkling Strategy to Continue to Deliver Sustainable Growth FROM TO Offering Choice Shaping Choice Volume Value Multiple One Brand Brands Extrinsics OR Extrinsics AND Intrinsics Intrinsics LEADERSHIP • TRANSPARENCY • INNOVATIONCAGNY 2016 26
Slide 27: We Have the World's Most Valuable Portfolio of Beverage Brands
We Have the World’s Most Valuable Portfolio of Beverage Brands Value Share Position Juice RTD & JD Sparkling Coffee #1 #1 #1 Sports #2 Energy* #2 Water RTD Tea #2 #2 CAGNY 2016 27 Source: Euromonitor and Canadean *Energy brands owned by Monster Beverage Corporation, in which we have a minority inves
Slide 28: The Growth Potential Is Significant
The Growth Potential Is Significant 2015 Value Share #1 Sparkling #1 Stills #1 Juice & JD >50% ~15% <20% Headroom for Value Growth CAGNY 2016 28 Source: Internal estimates
Slide 29: We Have Success that Shapes Our Thinking
We Have Success that Shapes Our Thinking “Fit for Purpose” Capabilities Research & Strong Brands + Supply Chain Development Global Presence Flexible Business Model Global Scale Innovation Over $1 Billion Value “KO Owned” Cutrale Partnerships Global Juice Center World’s #1 Juice and Juice Supplier Pa
Slide 30: We Are Focused on Profitable Growth
We Are Focused on Profitable Growth… It’s About Choices and Leadership Profitability HIGHER HIGHER Sparkling Immediate Consumption Water LOWER LOWER CAGNY 2016 30
Slide 31: We Are Building a Culture of Speed and Agility
We Are Building a Culture of Speed and Agility Think Start Scale Big Small Fast CAGNY 2016 31
Slide 32: We Are Clear on Our Role and Path Forward
We Are Clear on Our Role and Path Forward Focused Role • Building brands • Driving customer value • Leading the system System Well Positioned for the Future • Long-term outlook is positive • Right strategies to navigate near-term volatility CAGNY 2016 32
Slide 33: Reviewing the Financials
REVIEWING THE FINANCIALS CAGNY 2016 33
Slide 34: We Are Becoming a Lower Risk, Higher Return Business
We Are Becoming a Lower Risk, Higher Return Business with Greater Confidence to Achieve Our Long-Term Growth Targets CAGNY 2016 34
Slide 35: Accelerating Refranchising Will Transform Our Company
Accelerating Refranchising Will Transform Our Company 21st Century Coca-Cola Coca-Cola 2-Bottler NORTH Beverage EUROPE European AFRICA Beverages CHINA CHINA Strategy for AMERICA Partnership Partners Africa Mainland Model China Expected By End of Q2’16 Q2’16 Close 2017 2017 CAGNY 2016 35
Slide 36: Post Refranchising, We Will Be Centered on Our Core Value Drivers
Post Refranchising, We Will Be Centered on Our Core Value Drivers Illustrative example using 2015 performance and adjusting to remove previously announced bottler transactions*** 2015 Adjusted Net Revenues* $44.3B $28.5B Gross Margin* 61% 68% Operating Income* $10.4B $9.6B Operating Margin* 23% 34%
Slide 37: Our Enhanced Focus Will Result in Higher Returns
Our Enhanced Focus Will Result in Higher Returns Illustrative example using 2015 performance and adjusting to remove previously announced bottler transactions**** 2015 Impact Equity Income* $0.6B Sub-bottling Payment ** Cash Proceeds ** -$12B Associated with CCR asset base +/- TBD Dependent on final
Slide 38: Refranchising Will Reshape Our Spend Base
Refranchising Will Reshape Our Spend Base Illustrative example using 2015 performance and adjusting to remove previously announced bottler transactions** 2015 Spend Base Adjusted Spend Base SG&A $16B SG&A $10B COGS $17B COGS $9B Total $34B* Does not add due to rounding Total $19B CAGNY 2016 *Compara
Slide 39: Our Commodity Risk Will Also Decrease Going Forward
Our Commodity Risk Will Also Decrease Going Forward Illustrative example using 2015 performance and adjusting to remove previously announced bottler transactions* 2015 Adjusted 15% 40% COGS Split Commodity 60% All Other 85% ~$7B Commodity Spend ~$1B CAGNY 2016 39 *Includes pending bottler transactio
Slide 40: Refranchising Also Reshapes Our Productivity Allocation
Refranchising Also Reshapes Our Productivity Allocation $3B Target $3B Target Initial Allocation Current DME +$100M Bottler DME Refranchising OPEX +$200M DME ($500M) $0.6B COGS +$200M $0.7B OPEX $1.0B OPEX Moves to $500M of Incremental Other Bottlers Productivity Identified $1.2B COGS COGS $1.4B $1.
Slide 41: Productivity Targets Represent a Sizable Reduction to Adjusted Spend Base
Productivity Targets Represent a Sizable Reduction to Adjusted Spend Base Illustrative example using 2015 performance and adjusting to remove previously announced bottler transactions* COGS SG&A Total 2015 Adjusted $10B Spend Base $9B $19B Opex Marketing Total Savings ~$1.1B ~$1.2B ~$0.7B ~$3B Perce
Slide 42: Productivity Metrics Reflect True Scale of Program
Productivity Metrics Reflect True Scale of Program When Compared Against Our Adjusted Business Illustrative example using 2015 performance and adjusting to remove previously announced bottler transactions** OI per Employee SG&A Less Advertising as % Revenue 28% ~$250K 3x 21% ~$85K 2015* Adjusted 201
Slide 43: Our 2016 Outlook Is Clear
Our 2016 Outlook Is Clear Topline • 4 to 5% Organic Revenue Growth • 4 to 5% Net Headwind from Acquisitions & Divestitures • 4% Currency Headwind Profit* • 6 to 8% Income Before Tax Growth • 3 to 4% Structural Headwind • 9% Currency Headwind EPS** • 4 to 6% Growth Other • Net Interest Expense • Effe
Slide 44: 2017 Outlook Is Dependent on Timing of Transactions
2017 Outlook Is Dependent on Timing of Transactions CCR Temporary Residual Timing of Territory Transfers Cost Elimination • Timing impacts dilution in 2017 • Expect to remove majority in 2017 • Plans are being finalized • Portion could remain in early 2018 • All territories expected to transition by
Slide 45: We Return Significant Cash to Shareowners
We Return Significant Cash to Shareowners Over Billion of Value Returned to Shareowners Free Cash Flow $3.5 $2.6 $2.3 54 $8B $2.8 $3.1 Consecutive Years of Annual Dividend 2015 $5.0 $5.4 $5.7 Increases $4.3 $4.6 2011 2012 2013 2014 2015 Dividends Net Share Repurchases CAGNY 2016 45
Slide 46: Clear Path to Transform the Company
Clear Path to Transform the Company Post transformation, we will look very different Returning to lower risk and higher return business Greater confidence to achieve long-term growth targets CAGNY 2016 46
Slide 47: CAGNY 2016
CAGNY 2016
Slide 48: Q&A
Q&A