Coca-cola Company (the) · NYSE:KO
Coca-cola Company (the) — The Coca-Cola Company — Investor Presentation (April 2017)
49 slides from Coca-cola Company (the)'s investor presentation, April 2017
Slide 1: Investor Overview
Investor Overview April 2017
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: We Are Transforming Our Company
We Are Transforming Our Company • Accelerating a consumer-centric brand portfolio • Reducing sugar footprint • Driving top-line growth and operating margin expansion Segmented revenue growth strategies Delivering productivity Implementing a new operating model • Leading a system of strong alig
Slide 4: Laying the Foundation
Laying the Foundation Looking Forward Financial Performance 4
Slide 5: We Are the World's Leading Nonalcoholic Beverage Company
We Are the World’s Leading Nonalcoholic Beverage Company $42B 2016 net revenue 200+ markets 500+ brands 5
Slide 6: We Compete in an Attractive Industry
We Compete in an Attractive Industry Industry Retail Value Growth Expected Value Growth by Category Incremental Value Growth through 2019 ($B) CAGR SSD $31 3-4% Water +0.1 5-7% Value-Added Dairy +$100B +$110B Energy 4-6% 6-8% 4% 4% CAGR Juice & Juice Drinks 2-3% CAGR Other NARTD 4-5% RTD Tea 3-5% Sp
Slide 7: We Have a Set of Strong Assets
We Have a Set of Strong Assets DYNAMIC GREAT SUPERIOR BRAND PORTFOLIO MARKETING EXECUTION • 21 Billion-Dollar Brands • Quality • 24 Million Customer Outlets • #1 Share Position in: • Quantity • Total NARTD • ̴250 Bottling Partners • Strategy • Sparkling Soft Drinks • 16 Million Cold • Juice & Dairy
Slide 8: Beginning in 2014, We Aligned Around Focused Actions
Beginning in 2014, We Aligned Around a Set of Focused Actions to Drive Our Transformation Strategic Actions Revitalized Focus on core business model • Organizational Capability and Streamline and simplify Leadership Structure • Brands Drive efficiency through aggressive productivity • Portfolio • Bo
Slide 9: Our Actions Drove Accelerated Top-Line Growth in Core Business
Our Actions Drove Accelerated Top-Line Growth in Our Core Business… Incremental investments & focus 5% on revenue began in 4% mid 2014 3.2% 3.1% 3% 2.6% 2014 2015 2016 PCE Core Business Organic Revenues* …Even During a Slower Economic Environment Source for Personal Consumption Expenditure (“PCE”):
Slide 10: In 2016, We Delivered Growth and Operating Margin Improvement
In 2016, We Delivered Growth and Operating Margin Improvement… Value Share Consolidated Revenues* +3% Core Business Revenues* +4% Profit** +8% * Organic revenues (non-GAAP) ** Comparable currency neutral income before income taxes (structurally adjusted) (non-GAAP) 10
Slide 11: Underlying Performance Offset by Currency and Structural Headwinds
…But Accelerated Underlying Performance Has Been Offset by Currency and Structural Headwinds 2014 2015 2016 Comparable Currency Neutral Income Before Underlying 5% 6% 8% Profit Growth Income Taxes (Structurally Adjusted) Growth Accelerating • Foreign Currency Impact* (7)% (8)% (9)% Currency & Struct
Slide 12: Looking Forward
Laying the Foundation Looking Forward Financial Performance 12
Slide 13: We Have a Clear Value Creation Model
We Have a Clear Value Creation Model… Success in the other Consumer- Build brands that three attracts more Centric money into the cycle people love Brands System Pervasive GROWTH Distribution Investment Shared Value Company, bottlers, Get those brands customers, everywhere that is community appropri
Slide 14: But the Landscape Is Changing Around Us
…But the Landscape Is Changing Around Us Consumer- Centric Brands System Pervasive GROWTH Distribution Investment Shared Value 14
Slide 15: Therefore, We Are Adapting to the Changing Landscape
Therefore, We Are Adapting to the Changing Landscape Growth Driver Challenge Imperative Accelerate growth of our consumer-centric Consumer-Centric Changing preferences on naturalness, sugar, brand portfolio Brands and functionality Reshape growth equation to drive revenue Strengthen our system for e
Slide 16: Our Strategic Priorities in 2017
Our Strategic Priorities in 2017 Accelerate Digitize Growth of Drive Strengthen the Enterprise – Unlock Consumer-Centric Revenue Our ‘Click’s Reach the Power Brand Portfolio Growth System of Desire’ of Our People Making the Right Choices and Investing for Growth 16
Slide 17: Accelerate Growth of Consumer-Centric Brand Portfolio
Accelerate Growth of Consumer-Centric Brand Portfolio Drive Revenue Growth Strengthen Our System Digitize the Enterprise Unlock the Power of Our People 17
Slide 18: Shifting to a Category Cluster Model
Consumer- We Are Shifting to a Category Cluster Model to Centric Brand Portfolio Drive Growth Across Our Total Portfolio EXAMPLES FROM OUR PORTFOLIO CATEGORY Plant Enhanced RTD RTD SSD Energy* Juice** Dairy Based Water Water Sports Tea Coffee *** PREMIUM AFFORDABLE KO VALUE SHARE >50% ~15% <10% ~15%
Slide 19: We Grow Our Portfolio in Multiple Ways
Consumer- We Grow Our Portfolio in Multiple Ways Centric Brand Portfolio Innovate Locally Scale Globally Drive M&A 500+ new products Expanding VEB* launched in 2016… Expanding smartwater globally… …500+ more planned to 20 markets in 2017 starting in Asia in 2017 * VEB stands for Venturing & Emerging
Slide 20: Strong Sparkling Marketing Plans and Investments in 2017
Consumer- We Have Strong Sparkling Marketing Plans Centric Brand Portfolio and Investments in 2017 ‘Taste the Feeling’ New Campaign, New Visual Identity Reformulation New Bottle Premium SSDs Small Single- Coca-Cola Flavor Serve Packs Zero / No Sugar Innovation (Mini PET bottle Relaunch & Mini Can) R
Slide 21: Our Approach for Added Sugar Has Evolved
Consumer- Our Approach for Added Sugar Has Evolved Centric Brand Portfolio • Reduce sugar INSIDE • Evolve recipes Drive sustainable, profitable THE BOTTLE • New and different drinks growth of our brands Encourage and enable • Smaller packages consumers to control their intake of added sugar OUTSIDE
Slide 22: Bolder Action in 2017 to Reduce Sugar Footprint
Consumer- Drive Taking More and Bolder Action in 2017 Centric Brand Revenue Portfolio Growth to Reduce Sugar Footprint Key Business Actions Global Rollout of 1 Focus on Zeros Coca-Cola Zero Sugar 500+ now in pipeline 2 Reformulate to Reduce Sugar 2X previous number Affordable 3 Drive Small Packs Sma
Slide 23: Building Out a Portfolio for Every Moment
Consumer- Drive Building Out a Portfolio Centric Brand Revenue Portfolio Growth for Every Moment We support the WHO added sugar A day… guidelines of 10% limit of total calorie intake per day Exponential Growth Opportunity Within WHO Guidelines 23
Slide 24: We Drive Revenue Growth of Our Consumer-Centric Brands
We Drive Revenue of Our Consumer-Centric Drive Revenue Brands Through Revenue Growth Strategies Growth • The ultimate objective is to grow Revenue Growth the franchise: Incidence Transactions Volume Transactions* Price/Mix Value share Growth • Segmentation of markets matters: Developed = mor
Slide 25: Building Segmented Opportunities Across and Within Markets
Building Segmented Opportunities Drive Across and Within Markets Revenue Growth Emerging Markets Developed Markets China North America PREMIUM RELATIVE AFFORDABILITY, MARGIN AFFORDABLE Balancing Relative Price Points With Profitable Growth Across the Portfolio 25
Slide 26: Sparkling Soft Drinks Continue to Grow, Composition Has Changed
Drive Sparkling Soft Drinks Continue to Grow, But the Revenue Growth Composition of Growth Has Changed Global Sparkling Industry Value Growth 2016 Value Growth by Market Type 5% 3-4% 4% 3% 2% Average for 2016 Developed Developing Emerging 2012-2015 Volume Price/Mix Total Volume Price/Mix Total Volum
Slide 27: Strengthen Our System
Accelerate Growth of Consumer-Centric Brand Portfolio Drive Revenue Growth Strengthen Our System Digitize the Enterprise Unlock the Power of Our People
Slide 28: Refranchising Will Drive Local Market Performance
Refranchising Will Drive Local Market Performance Strengthen Our System Better System Alignment, Synergies, Improved Customer and Consumer Attention EUROPE CHINA JAPAN AFRICA NORTH AMERICA Coca-Cola European 2-Bottler Strategy for Coca-Cola Coca-Cola Beverages 21st Century Beverage Partners Mainland
Slide 29: Post Transformation, We Will Look Very Different
Post Transformation, We Will Look Very Different Strengthen Our System than We Do Today Independent Bottlers Getting Bigger… …As We Transfer Employees KO KO Independent Independent Bottlers 61K Bottlers 85% Transfer to Independent 97% 100K Bottling Partners Approx. Equal Split 39K Between Core and 3
Slide 30: Focusing on Productivity as a System
Focusing on Productivity as a System Strengthen Our System Design To Cost Route To Market Collaborative Procurement Marketing Productivity INVESTING + BUILDING CAPABILITY 30
Slide 31: Digitizing the Enterprise
Digitizing the Enterprise Digitize the Enterprise Digitizing TO GROW with Digitizing INTERNALLY to Be Consumers & Customers Faster & More Engaging Common Enablers DIGITAL AS A CRITICAL ENABLER OF GROWTH AND PRODUCTIVITY 31
Slide 32: Leaner, More Agile Operating Model
Driving Change Through a New Leaner, More Agile Operating Model to Enable the Growth Strategy Our Operating Model Our Growth Culture • Local business units drive growth • Externally focused ‒ Business models designed to win in each category • Empowered ‒ Performance enablement system • Focused, lean
Slide 33: Growth Model Balances Top-Line Growth and Margin Expansion
Looking Forward, Our Growth Model Balances Top-Line Growth and Margin Expansion Revenue Gross Margin Operating Margin • Grow faster than industry • Smart choices • Leverage scale in marketing • Benefit from category mix • Manage category mix • Drive OpEx leverage • Leverage category scale longer ter
Slide 34: Financial Performance
Laying the Foundation Looking Forward Financial Performance
Slide 35: Simplifying Our Business and Returning to Our Core Through Refranchising
We Are Simplifying Our Business and Returning to Our Core Through Refranchising Reducing complexity… …as core becomes more than 90% of net revenue BIG 2016 Adjusted* $41.9B $28.4B Core BIG 80K 8% BIG 48% 19K Core** 52% Core** 20K 20K 92% 2016 Adjusted* Employees Net Revenue * Illustrative example us
Slide 36: We Have Made Progress Returning to Our Core
We Have Made Progress Returning to Our Core 2016 vs. 2015 Net Revenues* $41.9B $(2.4)B Key Drivers Operating Margin* • Refranchising activities reduced 23.8% +0.4% revenue and operating capital: – North America Intangible Assets** $21.1B $(3.0)B – Germany Net PP&E $10.6B $(1.9)B – Africa • Underlyin
Slide 37: In 2017, EPS Will Be Impacted as We Sell Profitable Businesses
In 2017, EPS Will Be Impacted as We Sell Profitable Businesses Full Year First Quarter 2017 Outlook 2017 Outlook • 2 fewer days vs 1Q16 Underlying • Easter shift into 2Q17 +7% to +8% Performance* • Year-over-year increase in interest expense will skew heavily to 1H17 Structural -5% to -6% -1% to -2%
Slide 38: 2017 EPS Impacted by Currency and Underlying Tax Rate
2017 EPS Will Also Be Impacted by Currency and a Change in Our Underlying Tax Rate 7% to 8% (3%) to (4%) (5%) to (6%) Approx. 3% Growth in Organic Revenues* Rate Change: 22.5% 24% Approx. $2B (1%) to (4%) $1.91 Start - 2016 EPS Underlying PBT Growth Underlying PBT Currency Currency PBTStructural S
Slide 39: Refranchising Will Result in Higher Margins
Refranchising Will Result in Higher Margins… Illustrative example using 2016 performance and adjusting to remove certain bottler transactions* 2016 ADJUSTED Net Revenues** $41.9B $28.4B Gross Margin** 60% 68% Operating Margin** 24% 33% CapEx*** $2.3B $1.3B FCF Margin**** 16% ~+700bps * Includes tran
Slide 40: And Higher Returns
…And Higher Returns Updates Considerations 2015 During 2016 2016 Going Forward 2017 • CCR asset base • CCR asset base Invested Down $50B • CCEP $47B • Transaction with Capital** Arca Continental $7 to $8B*** • CCBA • China transaction Cash $0.3B $0.9B ̴$5B*** Proceeds ROIC* 17% 17% * ROIC = comparab
Slide 41: Post Refranchising, We Expect Accelerated Financial Performance
Post Refranchising, We Expect Accelerated Financial Performance • Greater confidence to deliver our long-term growth objectives • Scaled bottlers in Western Europe, Japan, China, and Africa • North America set up for long-term growth 41
Slide 42: Strong Record of Returning Cash to Shareowners
Strong Record of Returning Cash to Shareowners Over $40B 3.5% of Value Dividend Returned to Yield** Shareowners* 55 Consecutive Years of Annual Dividend Increases * Cumulative dividends and net share repurchases 2012 to 2016 ** Calculated using annual dividend of $1.48 and closing stock price of $42
Slide 43: Operating Segment Overviews
Operating Segment Overviews 43
Slide 44: Operating Segment Overview
Operating Segment Overview Unit Case Volume – 29.3MM UCs Net Revenue – $41.9B Operating Income – $8.6B -1% 16% 23% 2016 21% 29% 36% 43% 8% 20% 22% 25% 28% 19% 11% Unit Case Volume – 29.3MM UCs Net Revenue – $28.4B Operating Income – $8.7B Adjusted* 0% (BIG) 8% 23% 21% 29% 25% 19% 35% 20% 13% 25% 28%
Slide 45: North America
North America OVERVIEW PORTFOLIO (2016 unit case volume) • Oldest, “flagship” market Value Share Position* 6% SSD #1 • Solid KO leadership across majority of NARTD 16% Energy #1 category clusters 12% Juice / Dairy / Plant-Based #1 • In addition to the “traditional” concentrate business, 63% Water /
Slide 46: Latin America
Latin America OVERVIEW PORTFOLIO (2016 unit case volume) • Large, dynamic and multicultural consumer base with over 2% Value Share Position* half of consumers under 30 years old SSD #1 17% • Highest operating margin of the segments; 2016 comparable Energy #2 <1% operating margin was 53% 6% Juice / D
Slide 47: Europe, Middle East and Africa (EMEA)
Europe, Middle East and Africa (EMEA) OVERVIEW PORTFOLIO (2016 unit case volume) • Operating segment encompasses a range of markets, from 3% Value Share Position* developed (e.g. Germany) to emerging (e.g. Nigeria) 13% SSD #1 • Largest dollar profit segment; accounted for roughly 35% of 6% Energy #2
Slide 48: Asia Pacific
Asia Pacific OVERVIEW PORTFOLIO (2016 unit case volume) • Operating segment encompasses a range of markets, from Value Share Position* 8% developed (e.g. Japan) to emerging (e.g. India) SSD #1 • Segment with the lowest % of volume that is sparkling 25% Energy #4 (~60%), largely due to the diversity
Slide 49: Bottling Investments Group (BIG)
Bottling Investments Group (BIG) OVERVIEW ADJUSTED 2016 PERFORMANCE* • Operating segment includes all Company-owned bottling 2016 BIG Comparable 2016 Comparable Net Revenue operations; became a separate operating segment in 2006 Net Revenue ($B) 48% • Refranchising of bottling operations in North Am
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