So very happy to have the Coca-Cola Company here, again this year. We're lucky to have the company CEO, James Quincey, and the head of North America, Jennifer Mann. Great to have you both here. So, James, we're gonna kick off with you. It felt to me like the biggest takeaway from our conversation here last year was the company's unequivocal commitment to growth. And the past year has only reaffirmed both the validity of that top-line-led strategy and also Coke's ability to execute against it. So what would you say has been the most instrumental in helping to build and maintain the momentum that you've had?
Yeah, I mean, just winding the clock back this time last year, I think there was a lot of questions as to whether we would grow EPS this year, and then when we put our guidance, whether we were being too aggressive. And so in a way, we have tried to underline the point over the last year that we have an all-weather strategy. It seems to be that we're in the mode of the world where every year we turn up and something new and crazy has happened, and they'll be, "Well, okay, this weird thing is happening this year. Can Coke grow this year?" And so we wanted to make the point, you know, we can't tell what the weather's gonna be like next year, or any particular year, but we have an all-weather strategy.
We focused a lot on getting ourselves back to a long-term top line-driven equation, whether it be with the transformation of the marketing, whether it be through the upgrading of the innovation, the focus on the RGM and the continued investment by the modeling system in all the aspects of bringing that to life, marketplace. And I think, you know, it truly is the sum of lots of different pieces that has been able to generate that momentum. And we put it up in the CAGNY slide, the sort of retrospective since 2017. You know, revenue, yes, with a little help by inflation. The last few years, the revenue growing at the CAGR of 7%. U.S. total EPS, leaving behind the benighted $2 a share and growing 6% a year.
And so really, it's kind of that steady building of momentum and putting in place all the key elements that allowed us to deliver this year, whether it be from the growth in Coke all the way through the portfolio, and what sets us up to really believe in our strategy going forward.
Okay, great. And Jennifer, it's also roughly this time last year that we learned you'd be taking over as president of North America at the start of 2023. So could you share with us some of the key priorities and learnings since you've taken on this role?
Sure. Well, I started the role with a tremendous amount of listening, both internally and externally, so our leadership team, our employees, our bottling partners, our customers. And I was looking for areas of opportunity around how can we grow faster. And the feedback I got from everybody was very consistent, which is our org structure was very complex.
We were spreading ourselves across way too many priorities. And so I really focused in a few areas this year since I've taken over the role. One is to simplify the org structure. So we've reorganized by route to market. So I think our food service business, our nutrition businesses, our bottler delivered businesses, and we've recognized the needs of each of those lines of business and are resourcing those appropriately. We've also looked at reallocating resources, so more frontline marketing, more frontline customer and sales teams.
We've also reinvested into capabilities, both into people in terms of their development, but also into some of our commercial capabilities around revenue growth management and digital. I'm happy to say that the results, you know, first half of the year have been good. We've had revenue growing at 9%, we have expanded our margins, and we've grown both value and volume share.
Okay, great. We'll dig in more a bit on North America specifics, but I first wanted to go back to kind of a higher level topic, James, on the global recap, global resource allocation. So, you know, the whole system, right, is so enthusiastic around growth, right, and around this top-line-led strategy. Back since CAGNY, I've been intrigued by this more, this data-driven country category model. So can you talk a bit more maybe about the process of identifying global profit pools or sizing them, right? And then, focusing in on what the key ones are to pursue and what really shapes your approach to sparkling the RTD alcohol and coffee in particular, and with the other categories?
Yeah, let me perhaps address a few points there. I mean, clearly, as we've been able to pursue the Beverages for Life or the total beverage strategy, we've got clearer and clearer where and how is money made around the world in different categories, different country combinations. And I think what's important to understand is the intersection of insight and culture in the context of the Coke Company. Because it is a marketing machine, but it's an execution machine, whether that be the marketing innovation or in the marketplace. And if we said we want to be total beverages, the country managers take that as the instruction to be in every beverage in every country. And that's just a cultural aspect of the system is like, we wanna win and succeed.
The risk in that is that we are too diffuse in our efforts in some countries, where we might be great in two categories, and instead of being good in three or four next year, we try to get to eight. And so the leveraging of the data has allowed us not only to focus on understanding where and how the money is made, but as much as anything, be explicit on what not to prioritize. So no, don't do this yet. We can get to it later. That allows the resources to be concentrated, not just on the best opportunities, but the most winnable opportunities, in the short term. That's a very important piece of how the Coke system operates.
The other important set of insights at Coke is, obviously, we're long-term experts in the sparkling beverage industry. And while in some parts of the world we have created in different categories, strong stills businesses, big stills businesses, we are not always best in class in margins. And the work from moving from understanding the business from a pool of, you know, 10, 20 years, we understood it in volume terms. 10 years ago, we understood it in revenue terms. Now we understand it in profit terms. We can see places where we don't, we haven't created large businesses with best-in-class margins. We still have large businesses with average margins. So there's more focusing on the prioritization, not just in where to play, but in whether the success factor is growth and/or margins.
And the last piece of the real source allocation puzzle, which I think is very important, which is cultural, too. You know, the Coke system went global before globalization, and the nature of that cultural development is 50 years ago, you had a whole load of people out there who you could only communicate by Telex, and they were super empowered to build the business in the country, which creates, in a way, an island culture. When you want to allocate resources in a much more dynamic mode, you need to have a much more enterprise-led overlay to that culture. You still want to have deep passion for winning in the countries. You need an enterprise overlay, so you can move resources from a category or a country to somewhere else.
And so whether it be the incentives, structuring, and incentive systems or the cultural systems, we want to dial up our ability to act on those insights of the country category combination so that we can move resources, and optimize the plan, in any given year, which is what we've been doing over the last few years.
Okay. Jennifer, so can we just go back and revisit in this context, right, your top priorities from a category perspective, right? So what are the sort of things to do, the things we can, we can wait on, within North America? And in particular, if both of you could touch on how much headroom exists to continue to grow sparkling in North America and sort of the key areas of focus for how to do that.
Sure. So my priorities in the category perspective are really sparkling, still, in our sports category. So let me kind of take each one of those. From a sparkling perspective, we absolutely believe there's humongous upside for growth. But I think it's building off of a strong base as well. Between our better marketing and better execution in the marketplace with our bottling partners, we've grown Coke high single digits.
We've grown Diet Coke, Fanta, and Coke Zero Sugar, double digits. And so we've got a good, strong base to grow from, and it's just gonna continue to take that focused execution in the marketplace to get there. Along with some of the capabilities that I already mentioned. From a premium still perspective, we've had a lot of positive things happening. We've got smartwater that's growing.
We've got Topo Chico, which is now the number one premium sparkling water from a value share perspective. And we've got fairlife, which is on fire. You know, eight years of double-digit consecutive volume growth. So very excited about these categories. And then when we get to sports, what I would say is that, you know, look, I'm not happy with where we are on BODYARMOR. There is a lot of work to do, but we've got a very focused action plan with better marketing, more innovation and better execution in the marketplace. We're starting to see some progress against that action plan. So we just recently launched BODYARMOR Flash I.V., which is out now. We did that development in record time. We also just announced yesterday that we're gonna be expanding BODYARMOR into both Canada and Mexico in 2024.
And now we've put both the BODYARMOR and the Powerade brands under one leadership team. They're working on what the 2024 business plans are gonna be for both brands together. And we really believe in the power of that and what that can do from a growth perspective.
Okay. And just sticking with sparkling for a moment, since you called out this very strong growth rates you've had across the brand franchises, how much of that has still been driven by pricing? So key theme across the conference has been, you know, as pricing wanes, what happens to volumes? So maybe if you could just offer some perspective on the volume trajectory in sparkling, and again, when we talk about the runway for growth and headroom, how much volume potential is there in these brands?
Yeah, I think we're really focused on sparkling and from a recruitment standpoint, and we have already proven that we're adding weekly plus drinkers to the brands that I mentioned. So the possibility is there, and there's a huge amount of upside, and that's continuing to get weekly plus drinkers into the franchise. So that work is underway, and I feel really positive about that. We're also staying very focused on our algorithm, which is to continue to drive revenue ahead of transactions, ahead of volume. And we've got a lot of new packages that are underway as well with the 1.25-liter, our 16-ounce can, that are really meeting the consumer where they are in terms of some of the lower price points and more affordable options.
So we have a lot of those initiatives underway to continue to grow and recruit more drinkers into the category.
Okay, great. Let's move to capabilities. You know, James, you've talked for a while now about raising the bar in marketing to this refreshed global marketing model. It does seem like every quarter on the call, right, that you highlight a new example around the world. Can you just talk a bit more about in market? And what are the key measures of this path to success as we go?
Well, the success of the new approach is weekly drinkers. Historically, sometimes success of different aspects of the business has been measured in narrow functional terms. But in the end, you're doing marketing to support, sustain, and grow the business, which is most easily expressed as the number of weekly plus consumers. So Manolo is very clear. We're very clear on success of the marketing transformation is more weekly plus consumers for our beverages. Of course, layered under that is a whole set of other metrics on what leads to that being true. But in the end, it's about more consumers. The marketing transformation is making great progress.
The reformation of the way we're organized, the way that we aspire to do marketing, the way we see our ecosystem of partners, from many agencies to a global alliance with WPP. And I think that, you know, after putting that in place, that's gaining a lot of traction.
As you say, we've been calling out the successes, not just in terms of the weekly pluses, but in terms of some of the programs. Obviously, that's intimately linked to the bottlers. You know, some things obviously go straight from the company marketing teams into the marketplace through the media channels. But in the end, the system works best and works optimally when it is highly synchronized. So you know, there's clearly a tremendous amount of process to make sure that the plans.
We develop our system plans. We you know, in each country, we're working with our bottling partners, to make sure the thinking that's behind the brands and the thinking that comes up, in terms of what do the retailers and what does the marketplace need, is brought together and harmonized into a plan, that goes forward. So it's, it's, it's, in its nature, has to be done, intimately and, hand in hand with the bottling system.
Okay. You both have mentioned weekly plus drinkers a couple of times, and at least for me, it's the first time I feel like I've heard that phrase. Is that—I'm guessing it may be old news internally, but I, Is weekly plus a new way for you guys to be thinking about recruitment? Yeah, it's notable that you both mentioned it.
I don't know if it's the first time we've used it, but Robin will tell me. But it is a novel way of saying we want to keep our consumer franchise. We have over the course of this year and last year, in the face of inflation, it has been, we've said in many different ways, yes, there's going to be more pricing because of inflation, but we do not want to trade in our consumer franchise. Whether you want to call that as a weekly plus, volume, transactions, consumer franchise, it is all ways of saying, I have a set of relationship with consumers out there on a weekly or daily basis, but I do not want to see go backwards. I actually want to see go forwards in a positive growth sense.
We for sure, internally think about weekly plus consumers, but that's just one way of measuring the same conceptual idea of, I want to build a consumer franchise. Or said another way, you know, one person can't keep drinking more. You need more people in the franchise if you want to keep growing.
Yeah.
So it's all proxies for the same basic idea, which is the long-term idea of growing the Coke system is about bringing more people in to be able to enjoy our beverages.
Okay. So Jennifer, you mentioned route to market and the different business models in North America. So, just curious if you could touch on why North America is unique versus the rest of the Coke world in terms of route to market. And I guess also, it seems like some of the dialogue across the system is shifting from complexity and cost-cutting to reinvestment. So where specifically have you been looking to build capabilities in North America, and kind of what reaction are you seeing from customers and consumers?
Yeah. So maybe I'll do a quick minute on what's the same and what's different. What's the same is our bottler delivered business. It's very common to other operating units for Coca-Cola across the world. What is different, though, is that we have a significant food service and on-premise business, where we call directly on customers. We probably also, want to say, have a larger nutrition business in terms of juice and dairy than most of the other countries. So those are some things that are different and unique, and we need to recognize that, and as I said, invest in that and look to grow those businesses. But all the businesses have the same thing in common, which is we're raising the bar. We're raising the bar on marketing, on innovation, and RGM and on the execution.
That's the journey that we're on. We're reinvesting back against that. I'll give you a couple examples from the bottler delivered side. As I said, we're really focused on affordable packs. Getting 1.25 liter out in the marketplace, it's a journey, it's multi-year, but we've got over 80% distribution now, and the consumer is responding. Household penetration on that package is up. It's also part of the reason that we're recruiting people back into the Coke franchise. We're seeing good results from that perspective, but that requires constant investment back into not just taking RGM as it is, but to the next level, and then the execution focus. On the food service side, what it is, we're reinvesting in what we call our value bundle.
So what are all the tools and solutions we bring to food service customers to grow their business? And that's paying out already this year. We've won some new business. We renewed a huge piece of business last week, for example. We've had several of those this year, and to me, that's the best metric for success, is are we-
Are we keeping our existing customers as they come up, and are we getting new customers? Let's maybe shift gears a bit. I'm just curious to hear latest perspective on developed versus emerging markets. You know, the price gain coupled with volume growth that we've seen is just, it's been impressive. And while I kind of knew you could do that in emerging markets, I think it's been maybe eye-opening in the developed world. Maybe let's just start there in terms of pricing and the capability to realize price in developed versus emerging markets.
Yeah, clearly there's been a lot of pricing taken across many industries, including CPG, including by ourselves in developed markets in the last few years. I would think, I would say two things about that. One, in the context of broad economy-wide inflation, in a way, it in the end lifts all the boats because there's no real choice. The higher the inflation, the less optional price increases become. And so I think we should not over congratulate, to the extent it's a form unnecessary congrat-- I think necessary for congratulations, on pricing that is lifted by economy-wide or cost-wide inflation. And that's been done.
I think what's important about the coexist is the manner in which we have overlaid RGM to do it in an intelligent way with the retailers and for the consumers, such that you know, we are constantly trying to maintain a degree of affordability for the lower-income consumers and offer higher value and then consequently higher price offerings for those who have got more money. And I think that's been a key feature over the years of how we have leveraged RGM in traditional higher inflation markets, which are the emerging markets, which is you know, really where the capability came from.
Which is, you know, in high inflation, you're gonna have to pass on the cost increases, but the layering of the RGM capability allows you to do it in a much more intelligent way, which goes back to what we talked about earlier, which is it preserves and grows the consumer franchise. Because if you're going to use RGM well in an inflationary environment, you can not only adjust to what's happening from the economy in the cost basis, you can grow the amount of consumers, whether you call it the consumer franchise volume or weekly plus consumers. That's really what you want to have work together. If you can get the two things coming together, that is what works really well to grow the franchise.
As you said, a capability that's been developed in the emerging markets, but in the last few years has applied very broadly to the developed markets.
Okay. And Jennifer, just in terms of pricing and realizing, so we talked about maintaining affordability, but the ability to realize pricing has been dramatic, right? And it's been the case across the industry, but very much supported by industry leader Coke. So maybe you could tell us a little bit about the discussions you've had with customers and with bottling partners, right? On how much pricing, how pricing has been realized and thought on the runway forward, and why the pricing has been well beyond what we've seen in any other of the CPG categories. So you know, why? Why has that been possible?
Well, I think we've earned the price. I mean, we've taken 16.5% on our sparkling category this year, and that's good. But what's better is that we're gaining volume and value share as we do it. So we're winning in the marketplace, and I think that combination is what we have to stay focused on. We've got to meet the consumer where they are, too. Because consumer, it is certainly a mixed outlook right now, with some variables up, some variables down. So we've got to meet the consumer where they are. We've got to continue to stretch that ladder of RGM with affordable to premium options, and we've got to have balanced growth. So that's what we're focused on, and I think from a retailer standpoint, we're adding more value to them. We're growing their business faster than the category.
Those are all the total picture is what we have to stay focused on.
Okay. There's definitely been concern about the risk that more promotion, the promotion comes back into the market in a more significant way, so particularly in North America. So, are you seeing much of that? Are you seeing much movement on that front? How are you thinking about promotion to drive volumes as we move forward?
So for the US, we've actually reduced our volume on promotion by 55 basis points since 2019. So I think the data is helpful. What we're doing now this year is being very surgical about our promotions. I'm going in by retailer, by pack price, where it's spent. Again, looking at the total picture, are we, are we driving, increasing units, increasing transactions, and increasing profitability and keeping all of those factors in balance.
Okay. Let's maybe switch and talk a little bit about emerging markets, which is awkward to turn into a big basket because they're not all one market. But, you know, maybe, James, if you could just touch briefly. Let's just do it as a kind of Latin America basket, you know, kind of Central and Eastern Europe and Asia. Any kind of key trends or developments you're seeing from a consumer standpoint that you think might be worth sharing?
Yeah, and we can, we can go around the emerging markets.
Yeah.
Latin America has been doing pretty well. It's been doing pretty well over the last few years. It is actually, in a strange way, been much more stable. I mean, they have higher ongoing inflation anyway, but it's been much more stable in that sense, and is not kind of as deeply into the roller coaster as the U.S. and Europe. So Latin America has been very stable, obviously, excepting Argentina, where inflation is bordering hyperinflationary. We'll see where the election nets out, in a couple of months. But really, Latin America has been in, in its own way, stable in its own terms. You then travel a little further, a little further east, and then you get into kind of much more idiosyncratic kind of dynamics.
Clearly, the African continent has had a lot of ups and downs in being impacted by interest rates, being impacted by the war in Ukraine, being impacted by their own macroeconomic policies and coming off some of the things that they've done. You've seen a bit of a roller coaster in Nigeria, Egypt, even South Africa and Zimbabwe. So there's clearly a much more economic volatility going through Africa at the moment. On the other hand, you've got the resource-rich parts of the Middle East and some of the other parts of the world where, you know, they come off some pretty big price increases in oil, and a lot of money has flowed through there.
So those economies are actually doing well. And so resource, whether you're a resource exporter or a resource importer, is a big, been a big factor of performance recently. And as you go further east, you know, clearly India is on a roll. Been on a roll for a good number of years. We've been doing very well in India. Yeah, whether the monsoon arrives a month earlier or a month later makes a difference. But then if you zoom out a little further, India is clearly doing well economically. Inflation has not been up the roller coaster and down the roller coaster, like the developed economy. And then data from China seems to be less positive in terms of economics, in terms of inflation, in terms of unemployment.
We'll have to see where that goes. And then, you know, you've got other countries that are important to us, like Australia and Japan, where actually it's been relatively positive. I'm not sure they would count those as emerging markets, but we didn't have them in the other bucket earlier, so let's pick up on them as we go around the world.
Okay, great. Jennifer, one thing I wanted to ask about was the role of scaling successful ideas from one business unit to another place. We've just gone around the world, and I'm thinking of this geographically. So are there recent examples of learnings you've had kind of in one operating unit that then you've seen or you've chosen to implement in North America and vice versa? So sort of global listening and sharing.
Yeah, and, and maybe I'll use, we just had our global system meeting with many of our talent, our leaders from around the world coming, and we hosted the meeting in Atlanta, which was terrific to be able to have that opportunity. It also gave everybody a chance to see what we're up to in North America. One of the key takeaways from that, well, there really were two. One, for example, which I think we've touched on, just the complexity of the U.S. market and number of competitors, and then again, how are we applying the RGM set of principles to the marketplace? The second is the investment that we've made in what we call myCoke, which is a B2B platform for our customers.
And again, just we've gotten now about two-thirds of our primary customers on the platform, and the data that we're getting back from that and the insights and the ability for us to grow over time with that digital transaction has been really important. I think that was a learning that people are taking back as well.
Okay. And anything that you've taken or going to be taking from other markets?
We're doing a lot of work right now on Sprite, that I'll come back and talk about later, that we're working on between the global team and some of our key markets, along with North America.
Okay. I did notice that was your beverage of choice, so I got my brain turning. Okay. And then, James, just in February 2022, you had shared new ESG goal to be at least 25% of beverages sold worldwide in refillable and returnable packaging by 2030. That was, I think, 14% in 2022. We know returnables, refillables are typically first in emerging markets and especially Latin America. But with this growing focus on affordability in developed markets, too, I'm curious just if there are markets you see that could be the biggest incremental drivers of migrating toward that goal, and if it's more the, you know, developed markets can play a bigger role in that, and the peak economic environment can help?
Yeah. Clearly, the goal is part of our overall strategy, a World Without Waste. So making sure that the packaging material, one, doesn't get into places it shouldn't be, like the sea or landfills, and two, it's a circular economy, because frankly, it can be made economically advantaged, and lower carbon, if we do so. And so see refillables as a piece of that. Yes, they have traditionally been most emblematically used in the emerging markets to provide affordability, and they have an ongoing role there, and in fact, an expanding role there in the foreseeable future.
There are some developed economies where refillables also play a big role, whether that be somewhere like Spain, where most of the HoReCa, the restaurants and cafes, the bottles are returned for glass bottles, or Germany, where refillable PET is a big part of the franchise and the nature of the way the business happens there. I think we see both the intersection of the opportunity in a number of developed markets to promote refillables.
There have been some tests in the U.S., but also the intersection with ongoing regulation. The European regulation on packaging continues to be trendsetting. There are elements of looking to have targets in terms of refillables or reusability in the European marketplace.
I think we see an opportunity to link into that and continue to develop refillables, for example, in the context of the European market.
Okay, great. Last question. So Jennifer mentioned the global system meeting in July. So I think it was like 200 bottling partners, right? Your leadership team. What was different about the meeting this year versus prior years? You know, maybe what were kind of top two or three opportunities that were identified over the next 10 years that were discussed at the meeting, assuming you're going to share?
It was interesting. It was the first time we've had the global system meeting in Atlanta in 37 years. The last time it was in Atlanta was 1986, the 100th anniversary of Coca-Cola. At that time, it was held at the Georgia Dome. I think there were about 10,000 people from the bottling system.
Not because we shortened the invite list this year, but as a sign of consolidation, and the increase in scale of the bottling system, it has become totally transformed in those 37 years, into a much larger, more capable, organization, and the nature of the business has changed.
And so in a way, GSM was about being inspired by our history, inspired by the journey we've been on, and no better place for that to happen than in the hometown of Atlanta. But really to be awestruck by the opportunity ahead of us. Sometimes when you have a very successful company, you get it the wrong way around.
You get awestruck by your history and a little hamstrung thinking about being inspired about the future. And so very pointedly, it was about being inspired by history, but awestruck about our future. The second thing that I will say is, it's really a call to action for setting ourselves on the journey and starting to double down and invest in those things that create the next 10 years of growth.
I certainly see there's the risk of such a rollercoaster pandemic and years ago, up years ago down, and all sorts of weird, crazy things happen in the world, that you start to just focus on managing through the next crazy thing. And in doing so, you don't lay enough groundwork for the growth for the next 10 years, and so you shortchange your opportunity going forward. So yes, of course, we will have to manage whatever comes with us in 2024, but I think the most important feature of how the system feels is we've got a massive opportunity ahead of us. We're laying the groundwork to invest in not just for 2024, but for the next 10 and 20 years of success for the Coke system.
Okay, I think we got to wrap. So we're going to go to breakout, but thank you, everyone, for being here. More importantly, thank you, James and Jennifer. You've been great.
Thank you.