Speaker 1: Sorry.
Speaker 2: We're keeping an eye on Coca Cola this morning because
Speaker 2: the soft beverage giant raised its outlook thanks to continued
Speaker 2: strong sales. Stop a little bit lower right now because
Speaker 2: that boost overshadowed by an unexpected decline in unit case
Speaker 2: volume in the third quarter. Joining us now to unpack
Speaker 2: is John Murphy. He is the CFO of Coca Cola,
Speaker 2: and I'm so excited to talk about this. Of course,
Speaker 2: we have such a focus on the economy right now,
Speaker 2: and I think this is a really interesting sign of
Speaker 2: the time. So we're going to talk about price, We're
Speaker 2: going to talk about volume. Let's start with volume. Because
Speaker 2: your total unit case volume down about one percent in
Speaker 2: the quarter. What levers do you have to pull? How
Speaker 2: do you boost volume at this juncture.
Speaker 3: So we did have a decline in the quarter, but
Speaker 3: i'd highlight the decline was primarily driven by some anomalous
Speaker 3: factors in July. Sequentially, we improved through the quarter, and
Speaker 3: in this particular quarter, thanks to our developed economies, we
Speaker 3: come out towards the end of the quarter in pretty
Speaker 3: good shape. And as we go forward, the name of
Speaker 3: the game is to get back to the more balanced
Speaker 3: growth equation that we've enjoyed in the last few years,
Speaker 3: and that is getting the developing emerging economies back to
Speaker 3: where they had been. And we expect to see that
Speaker 3: happening throughout the next six to nine months and definitely want.
Speaker 2: To get to the international view. But let's talk a
Speaker 2: little bit about pricing here. Because your price mix, this
Speaker 2: is the prices that you charge across a range of
Speaker 2: your products. It increased ten percent in the quarter, and
Speaker 2: I found that really interesting because not a lot of
Speaker 2: companies have pricing power left at this point, but how
Speaker 2: much more can your consumers handle when it comes to
Speaker 2: raising prices again.
Speaker 3: So that price mix number is, for sure, it's an
Speaker 3: interesting headline number. When you get underneath it, there's three factors.
Speaker 3: You've got your normal pricing, but three to four percent
Speaker 3: we have pricing that comes from some of our hyperinflationary
Speaker 3: environments and other four percent or so. And then in
Speaker 3: this particular quarter, we've got the benefits from the mixed
Speaker 3: impact of our more profitable markets performing better. So as
Speaker 3: we look to the next phase of the of the
Speaker 3: journey ahead, you know, we see pricing moderating more in
Speaker 3: line with the CPI headlines Here in the United States
Speaker 3: and typically around the world. That's our approach. Also, we're
Speaker 3: also investing heavily in our brands to sustain their their
Speaker 3: relevance and through our various revenue growth strategies, offering both
Speaker 3: affordability and premium options to consumers for the occasions that
Speaker 3: they are seeking.
Speaker 1: I wonder about your calorie less drinks and how much
Speaker 1: the impact of we go v and ozepik has had
Speaker 1: on the product mix. Are you selling more, you know,
Speaker 1: just playing water or flavored selters and less of the
Speaker 1: more sugary drinks.
Speaker 3: Well, we've had a for the last number of years,
Speaker 3: We've seen trends towards lower zero calorie products across the
Speaker 3: portfolio here in the US and elsewhere. We're not seeing
Speaker 3: a material impact yet in our data on ozepic and
Speaker 3: similar types of medications. So our goal is to follow
Speaker 3: the consumer. We have a terrific innovation pipeline. We continue
Speaker 3: to invest. I think ahead of the curve on the
Speaker 3: lower zero calorie because around the world that's what consumers
Speaker 3: are looking more forum We're going to be there to
Speaker 3: provide them.
Speaker 4: John, I want to double down on Katie's earlier question
Speaker 4: a little bit here because it looks like that's what
Speaker 4: investors are really latching onto because on first plush for
Speaker 4: a company, you would think that being able to raise
Speaker 4: prices as you have despite everyone else not being able
Speaker 4: to that, that would be a good thing. But the
Speaker 4: worries here rely around and customers buying more ultimately, So
Speaker 4: if you project out through the next year, how do
Speaker 4: you expect consumers to behave under this higher price scenario.
Speaker 3: So at the highest level, we see continued consumer spending
Speaker 3: at the levels that we're seeing at the moment and
Speaker 3: growing pretty much in line with GDP expectations, which low
Speaker 3: single digit at the global level. I think what's really important, though,
Speaker 3: is to get underneath that, to understand your consumer customer
Speaker 3: base at a much more granular level, and then to
Speaker 3: be able to apply the appropriate solutions that we have
Speaker 3: in our portfolio, offering affordability in whe where that's important.
Speaker 3: There's a lower income segment in the United States, for example,
Speaker 3: we're offering at one and a quarter liter packages growing
Speaker 3: at double digit rates. We have premium solutions to for
Speaker 3: the occasions for that work. So I think the name
Speaker 3: of the game is going to be adapting to those
Speaker 3: more granular segments. But at the highest level. We see
Speaker 3: continued resilience and continued growth in consumer spending around the world.
Speaker 2: And John, I want to talk about the competitive landscape
Speaker 2: and potential m and A coming from Coca Cola because
Speaker 2: you think about this craze around healthier sodas, you think
Speaker 2: of poppy, you think of Ollipop for example. Would Coca
Speaker 2: Cola be open to buying one of those brands, partnering
Speaker 2: with one of those brands? What might that look like.
Speaker 3: Yeah, we're always We're always open to new opportunities that
Speaker 3: are out there. But right now, we have a portfolio
Speaker 3: of twenty eight billion dollar brands that we think represents
Speaker 3: a tremendous amount of headroom for us over the next
Speaker 3: couple of years. So our primary focus today is to
Speaker 3: continue to invest and grow the brands that we own.
Speaker 3: And you you always have to stay opportunistic. You always
Speaker 3: have to keep your eyes open, and if something more
Speaker 3: attractive than what we currently have comes along, we'll be
Speaker 3: open to look at it.
Speaker 1: I wonder about the geopolitical risks out there, John, You know,
Speaker 1: we focus so much on interest rates and inflation, the
Speaker 1: labor market, and we cover you know, the war in
Speaker 1: Ukraine and the war in the Middle East as general news,
Speaker 1: but we don't hear much about them from business leaders.
Speaker 1: Until last night we heard from a private equity company
Speaker 1: that they are concerned more about geopolitics than anything else.
Speaker 1: Do you see any effect of that on your business?
Speaker 1: Is it significant?
Speaker 3: Well, you know, operating in over two hundred countries around
Speaker 3: the world, it would be hard to not have an
Speaker 3: implied effect from what's happening in the geopolitical world. And
Speaker 3: I think, as you know, as James and I have highled,
Speaker 3: you know, we have an old weather approach to not
Speaker 3: just the geopolitical pieces, but the macro economics as well,
Speaker 3: and I think the name of the game is to
Speaker 3: is to stay very close to what's coming and to
Speaker 3: be in a position with our bottling partners around the
Speaker 3: world to adapt. So yes, you know, if you look
Speaker 3: at the situation the Ukraine, yes, it had an impact
Speaker 3: on the way we go to market and the markets
Speaker 3: we're in. But with our partners, we adapt and we
Speaker 3: continue to see the global portfolio being the best one
Speaker 3: for us to be in. And John quickly before.
Speaker 2: We let you go, I am really curious about how
Speaker 2: you're thinking about marketing at this juncture of course we
Speaker 2: have that long discussion about price to volume, how much
Speaker 2: when it comes to your resources are you dedicating to
Speaker 2: marketing spend.
Speaker 3: So marketing is at the core of our ability to
Speaker 3: create value for both our consumers and for ourselves. And
Speaker 3: one of the lessons we've learned through COVID, post COVID
Speaker 3: and as we go into next year is to is
Speaker 3: to stay consistent, say, investing behind your brands. I think
Speaker 3: what's important though, is to understand the mix of the
Speaker 3: investments that you make. We're particularly keen to ensure on
Speaker 3: the marketing front that we're leveraging new technologies, we're levering
Speaker 3: new capabilities to stay close to consumers in the digital world,
Speaker 3: for example, and so it's a hugely important piece of
Speaker 3: our growth equation and will be for I think forever. Actually, John,
Speaker 3: great to get some time with you.
Speaker 1: Really appreciated John Murphy, their CFO at Coca Cola.