ATLANTA – The Coca-Cola Company (NYSE: KO), one of the world’s leading beverage makers, reported fourth quarter revenues of $7.1 billion, down 6%, and $31.9 billion for all of 2018, up 10% for the year.
While reported net revenues declined due to refranchising and currency headwinds, the company delivered organic revenue (non-GAAP) growth within its long-term target for the sixth consecutive quarter, while also gaining value share globally.
“I am pleased with our strong organic revenue and earnings growth in 2018. Our results demonstrate progress in our transformation as a consumer-centric, total beverage company and the power of a more strategically aligned system,” said James Quincey, CEO of The Coca-Cola Company. “Coca-Cola has established a strong foundation to capitalize on long-term growth opportunities and drive sustained shareowner value.”
Quarterly / Full Year Performance
- Revenues: Net revenues declined 6% to $7.1 billion for the quarter and declined 10% to $31.9 billion for the year. Fourth quarter and full year results were impacted by headwinds of 13% and 17%, respectively, from the combined impact of currency and the refranchising of company-owned bottling operations. Organic revenues (non-GAAP) grew 5% for the quarter, driven by concentrate sales growth of 1% and price/mix growth of 4%. The quarter included one additional day, which resulted in an approximate 1-point benefit to organic revenue (non-GAAP) growth. For the year, organic revenues (non-GAAP) grew 5% driven by concentrate sales growth of 3% and price/mix growth of 2%.
- Margin: Operating margin, which included items impacting comparability, expanded 516 and 585 basis points for the quarter and full year, respectively. Comparable operating margin (non-GAAP) expanded 13 and 385 basis points for the quarter and full year, respectively. Margin expansion was driven by divestitures of lower-margin bottling operations and the company’s ongoing productivity efforts. These drivers were partially offset by the impact of the adoption of the new revenue recognition accounting standard and currency, which resulted in an approximate 220 and 160 basis-point headwind for the quarter and full year, respectively.
- Market share: The company continued to gain value share in total nonalcoholic ready-to-drink (NARTD) beverages for the quarter and full year.
- Cash flow: Cash from operations for the full year was $7.3 billion, up 6% from the prior year. Full year free cash flow (non-GAAP) was $6.0 billion, up 14% from the prior year.
- Share repurchases: Full year purchases of stock for treasury were $1.9 billion. Full year net share repurchases (non-GAAP) totaled $442 million.
- Key leadership appointments and fostering a growth culture: In the fourth quarter, the company announced several changes in top leadership, including the election of a new president and chief operating officer, in addition to succession plans for the chief financial officer and the chairman of the board. Within the broader organization, the company made solid progress during the year in renewing its culture by implementing changes to its compensation philosophy – placing a sharper focus on performance and the potential to drive long-term growth. The company also continued to act with more speed and agility, enabled by a new operating model that has given field operations greater decision-making authority and autonomy.
- Tailoring the sparkling portfolio to today’s consumer: The company continued to strengthen its sparkling soft drinks portfolio and build consumption rituals through world-class innovation, premiumization and revenue growth management initiatives. In North America, innovation in the iconic Diet Coke brand, along with the continued success of Coca-Cola Zero Sugar, led to an 8-point acceleration in retail value growth for the no-calorie sparkling soft drinks portfolio for the year. The company’s strong performance in low- and no-calorie sparkling soft drinks demonstrates the success of its initiatives to help consumers reduce added sugar. Globally, premium innovations, such as Coke Plus Coffee, and revenue growth management initiatives helped drive transactions ahead of 2% volume growth in the sparkling soft drinks portfolio during 2018.
- Growing the total portfolio: The company’s increased speed and agility, coupled with the strength of its distribution system, helped launch approximately 500 products across multiple markets through the lift, shift and scale strategy while also accelerating the elimination of underperforming SKUs during the year. The company also announced several key acquisitions in 2018, including Costa Limited, which provides a platform to build a global coffee business, and a strategic partnership with BODYARMOR, one of the fastest-growing beverage trademarks in the United States.
- Working toward a World Without Waste: In early 2018, the company introduced its World Without Waste initiative, which includes a goal to collect and recycle one bottle or can for each one the company sells by 2030. The company’s progress during the year included establishing or joining 10 global partnerships; announcing four technology advancements, including the opening of PlantBottle technology for use across the industry; and launching water in 100% recycled plastic bottles in four markets.
- All references to growth rate percentages and share compare the results of the period to those of the prior year comparable period.
- All references to volume and volume percentage changes indicate unit case volume, unless otherwise noted. All volume percentage changes are computed based on average daily sales, unless otherwise noted. “Unit case” means a unit of measurement equal to 24 eight-ounce servings of finished beverage. “Unit case volume” means the number of unit cases (or unit case equivalents) of company beverages directly or indirectly sold by the company and its bottling partners to customers.
- “Core business” represents the combined performance from the Europe, Middle East & Africa; Latin America; North America; and Asia Pacific operating segments and Corporate offset by intersegment eliminations.
- “Concentrate sales” represents the amount of concentrates, syrups, beverage bases, source waters and powders/minerals (in all instances expressed in equivalent unit cases) sold by, or used in finished beverages sold by, the company to its bottling partners or other customers. In the reconciliation of reported net revenues, “concentrate sales” represents the percent change in net revenues attributable to the increase (decrease) in concentrate sales volume for the geographic operating segments (expressed in equivalent unit cases) after considering the impact of structural changes. For the Bottling Investments operating segment, this represents the percent change in net revenues attributable to the increase (decrease) in unit case volume after considering the impact of structural changes. The Bottling Investments operating segment reflects unit case volume growth for consolidated bottlers only.
- “Price/mix” represents the change in net operating revenues caused by factors such as price changes, the mix of products and packages sold, and the mix of channels and geographic territories where the sales occurred.
- First quarter 2018 financial results were impacted by one less day, and fourth quarter 2018 financial results were impacted by one additional day as compared to the same periods in 2017. Unit case volume results for the quarters are not impacted by the variances in days due to the average daily sales computation referenced above.