At this time, I'd like to welcome everyone to the Coca-Cola Company's Fourth Quarter and Full Year 2024 Earnings Results Conference Call. Today's call is being recorded. If you have any objections, please disconnect at this time. I would like to remind everyone that the purpose of this conference is to talk with investors, and therefore, questions from the media will not be addressed. Media participants should contact Coca-Cola's Media Relations department if they have any questions. I would now like to introduce Mr. Robin Halpern, Vice President and Head of Investor Relations. Ms. Halpern, you may now begin.

Good morning, and thank you for joining us. I'm here with James Quincey, our Chairman and Chief Executive Officer; and John Murphy, our President and Chief Financial Officer. We've posted schedules under financial information in the Investors section of our company website. These reconcile certain non-GAAP financial measures that may be referred to this morning to results as reported under generally accepted accounting principles. You can also find schedules in the same section of our website that provide an analysis of our growth and operating margins. This call may contain forward-looking statements, including statements concerning long-term earnings objectives which should be considered in conjunction with cautionary statements contained in our earnings release and in the company's periodic SEC reports. Now I will turn the call over to James.

Thanks, Robin, and good morning, everyone. We are pleased with our 2024 results, which include volume growth, robust organic revenue growth, and comparable gross and operating margin expansion. This led to a 7% comparable earnings per share growth despite nearly double-digit currency headwinds and the impact of bottler refranchising. These results reflect the continuation of delivering on our long-term commitment through our all-weather strategy. We've demonstrated agility to navigate what comes at us and continue to grow comparable earnings. Given the strong momentum, we are confident we can deliver on our 2025 guidance and longer-term objectives. With that as context, I'll provide perspective on our industry and review our business performance across our segments in the fourth quarter. Then I'll explain how we're executing our strategy by amplifying what is working and fine-tuning where needed. John will end by discussing our financial results in more detail and providing an overview of our 2025 guidance. One of our fundamental strengths is that we operate in a great industry with steady growth, and we have vast opportunities ahead of us. During the quarter, we leveraged the power of our portfolio and the local expertise of our franchise system to capitalize on these opportunities. We gained broad-based share across our global beverage categories. We're making progress in sparkling soft drinks as well as categories like value-added dairy and tea, which are reaching global scale while remaining tailored to local consumer needs. We believe our global franchise model, which operates locally, is an advantage to drive long-term balanced growth. During the quarter, while our operating environment remained dynamic, consumer demand held up well and our industry remains strong. Starting in Asia Pacific, we grew volume during the quarter and benefited from successful integrated marketing campaigns. Our system also drove affordability by increasing refillable offerings and focusing on attractive price points. In China, despite continued macro headwinds, we grew volumes during the quarter and, while early, we're seeing improved trends across our business. Trademark Coca-Cola continues to gain share, and we improved volume performance across brands. Our system is stepping up integrated execution by accelerating placement of cold drink equipment and activating marketing campaigns in key channels. In Japan and South Korea, we grew volume during the quarter. Innovation was a strong contributor to growth. In India, our business rebounded nicely during the quarter, growing volume. We recruited consumers with innovative marketing campaigns linking Coca-Cola with music and movies. In 2024, our system added approximately 440,000 outlets to our digital customer platforms in India, providing more opportunities to better tailor our offerings. Moving to EMEA, in Europe, while volume declined, we grew both revenue and profit through marketing campaigns and innovation. In Africa, we faced volume declines due to pressures in North Africa and Nigeria, partially offset by growth in South Africa. Our system is investing for the long term by adding refillable offerings and increasing manufacturing capacity. In Latin America, despite macroeconomic pressures, we grew volume, revenue, and profit during the quarter. Lastly, in North America, we grew transactions and volume and had robust top line and profit growth during the quarter. To sum everything up, we have good momentum in our business. Our network marketing model integrates product, digital, live, and retail experiences. The power of emerging technologies like generative AI is at an early stage, and we will continue to lead and iterate our approach. We're excited about our innovation pipeline for 2025. As we transition to 2025, we anticipate the year will bring both opportunities and challenges. We operate in a great industry, we have many opportunities available to us, and we are primed to capture these and deliver sustained performance. Next Tuesday, at CAGNY, I look forward to sharing more about how we're leading to deliver results in all types of backdrops. With that, I'll turn the call over to John.

Thank you, James, and good morning, everyone. We closed the year with strong fourth quarter results. As James mentioned, we delivered 7% comparable earnings per share growth in 2024. During the fourth quarter, we grew organic revenues 14%. Unit case growth was 2%, which is in line with our multiyear trend. Our price/mix growth of 9% was driven by pricing actions across our markets. Excluding the impact of intense inflationary pricing, organic revenue growth was above our long-term growth algorithm. Fourth quarter comparable EPS of $0.55 was up 12% year-over-year despite currency headwinds. We will continue to focus on driving balanced volume and price/mix and anticipate intense inflationary pricing will moderate throughout the year. Based on current rates and our hedge positions, we anticipate an approximate 3- to 4-point currency headwind to comparable net revenues and an approximate 6- to 7-point currency headwind for comparable earnings per share for full year 2025. We expect comparable earnings per share growth of 2% to 3% versus last year's $2.88. In 2024, adjusted free cash flow conversion was 93%. Our capital allocation policy prioritizes agility and we're committed to driving the health of our business and creating value for our stakeholders.

Our first question comes from Lauren Lieberman from Barclays.

The business seemed to buck the trend that we've seen from many other staples companies between strong 4Q results and the conviction in the upper end of the sales algorithm for 2025. So I'd just be curious to hear more from you about your perspective about the consumer environment globally, particularly in developed markets where U.S. sentiment has been mixed.

Sure, Lauren. I think the overall consumer environment is pretty stable in the sense that there's good economic growth around the world. In developed markets, while the lower income segments are under disposable income pressure, the rest of the consumer base is gaining disposable income and spending. In the emerging markets, there is volatility, but in aggregate, you see pretty robust consumer demand. In the quarter, we saw India rebound, China improve, and the Middle East performing well. We see continued robustness and growth across consumers that we need to respond to with all the strategies that we have.

Our next question comes from Dara Mohsenian from Morgan Stanley.

So just on that 5% organic revenue growth forecast for 2025, can you just give us a bit more granularity on the balance volume that you see as well as price and mix? How does that impact how you manage pricing in 2025?

Look, I think let's start at a high level for 2025. Our long-term growth algorithm aims for a balance between volume and price - something like 2% to 3% of each. It seems more likely in '25 that there will be a little more price and a little less volume but we anticipate still solid volume momentum. So if you take 2024, where you had a headline price mix of about 10%, half of that was due to high-inflation countries, which we expect to moderate in 2025. We feel we've got reasonable pricing in the market that is proportionate to inflation.

Our next question comes from Bryan Spillane from Bank of America.

Can you give us just two perspectives on the organic sales growth for 2025 and how that stands against industry growth? And also clarify your thoughts on the phasing of volume growth.

On the guidance for the organic sales growth, we have two less days coming out of '24 and decent momentum going into it. On the pricing front, we expect some inflation from intense markets, which we see moderating throughout the year. On volume phasing, Q2 is probably the more challenging quarter ahead. As James said, we see moderation in the intense inflationary markets affecting the headline numbers.

Yes, on the industry growth, we expect to gain share, so if we end up growing 5% to 6%, that is assuming industry growth normalizes. The underlying rate in Q4, taking out high-inflation countries, was about 6% or 7%, and we were gaining share, consistent with our goal to be the long-term winner in the industry with ongoing robust growth.

Our next question comes from Steve Powers from Deutsche Bank.

Your outlook seems to imply some strong underlying margin and profitability progress despite FX pressures. Can you talk about some of the key drivers there?

Yes, the implied margin expansion in 2025 comes from the marketing expenditure and our SG&A efforts. This is the result of many programs we've been implementing over the last few years to enhance both effectiveness and efficiency. Our marketing transformation is just one example that contributes to our productivity in 2025, allowing us to produce results at lower costs. We believe this will help us lean into growth while maintaining our investments.

We do expect some underlying expansion in gross margin, but not significantly, as we have various moving parts impacting our overall guidance. Commodities are expected to have low single digits overall, but we're anticipating pressures in agricultural pricing. We will be using our typical levers to manage these costs while still supporting growth.

Our next question comes from Filippo Falorni from Citi.

Can you discuss some exposures in terms of import versus export and your thoughts on the recent tariffs on aluminum and steel?

Our number one objective is to manage any dynamic changes around tariffs and commodities. We have hedging programs to assure supply and pricing. Our business is predominantly localized, and while we import some ingredients, the economics are largely local, making it manageable. This allows us to continuously adjust our supply chains to maintain efficiencies.

We continue to prioritize supply chain continuity, budgeting, and enabling procurement across multiple markets to manage our costs effectively while ensuring we can meet consumer demands.

Our next question comes from Bonnie Herzog from Goldman Sachs.

Thinking about the new administration and some potential regulatory changes, what percentage of your domestic portfolio might be subject to potential changes?

We do scenario planning on regulations and will adapt as necessary. While we've seen anecdotal evidence of the impact of GLP-1s on consumption, it's not a big aggregate factor for the beverage industry.

Our next question comes from Kaumil Gajrawala from Jefferies.

John, can you talk about how you think about cash or capital allocation once you transition past these substantial cash payments?

I don't foresee a substantial change in our focus to support the underlying business and the momentum it has. We will prioritize our dividend and sustaining the health of our balance sheet. It's early to predict specific actions, but we will evaluate M&A opportunities and the share repurchase agenda.

Our next question comes from Rob Ottenstein from Evercore ISI.

What are your thoughts on category trends, specifically the modern soda shelves Walmart has created?

It's great news that retailers are innovating and dedicating shelf space to the beverage industry. We will compete in all enduring demand spaces and adapt as necessary, given our broad product portfolio.

Our next question comes from Chris Carey from Wells Fargo.

Can you provide some context on how incremental moves in aluminum might impact your cost per case outlook?

This is predominantly an impact in the North American business. If aluminum prices increase, we will adapt our packaging strategy based on the various alternatives available to maintain our affordability. We believe we can manage through these changes effectively, and it will not fundamentally undermine our 2025 volume growth.

Our next question comes from Andrea Teixeira from JPMorgan.

Can you comment on your performance in Mexico and whether you are embedding a deceleration in volumes there?

In North America, about half of our Q4 pricing was driven by mix, and that will continue to moderate in 2025. Our system in Mexico has dedicated execution in innovation and pricing options for consumers across a broad portfolio, helping us navigate economic pressures. While we expect some headwinds, we do not anticipate significant deceleration of growth.

Our next question comes from Peter Grom from UBS.

Can you clarify if you expect volume growth to fall short of the typical 2% to 3% growth in 2025?

I am implying we expect it to be in a floating range of around 2% to 3% growth, slightly weighted toward price. We're starting with decent momentum heading into 2025, but there are some dynamic factors that we are monitoring. Overall, we believe we can manage through it.

Our next question comes from Charlie Higgs from Redburn Atlantic.

Can you comment on India, particularly the recent refranchising and the potential growth it may bring?

Our refranchising program continues to move ahead. We look for ambitious partners with capital and capability. We believe our new partner in India will enhance our execution in the marketplace and we see tremendous runway ahead in a vibrant competitive environment.

Our next question comes from Bill Chappell from Truist Securities.

Can you comment on the hyperinflation environment and your pricing ability in response?

We're not taking our foot off the pedal regarding pricing in hyperinflationary countries. We will continue to pass through input costs as necessary. While inflation has shown signs of moderation in some areas, if the environment remains challenging, we will take appropriate pricing actions.

Our next question comes from Robert Moskow from TD Cowen.

Could you delineate how much of a mix shift is necessary to react to changes in aluminum costs?

It's important to note that increased aluminum prices will not dramatically impact our business model. Although costs will rise, we will manage by switching packaging where necessary to maintain competitiveness. It's manageable within the context of our overall costs.

Our next question comes from Michael Lavery from Piper Sandler.

Can you unpack Asia Pacific's performance, especially regarding market share?

In Asia Pacific, our performance is affected by various individual market factors, and it will take a multi-quarter view to get a complete picture. We saw some strong share growth in Japan and South Korea, which helped overall performance despite challenges in markets like Indonesia and Bangladesh. The variability is the nature of the business in the region.

To summarize, we are winning in the marketplace. We're going to continue to maintain our agility and focus on getting better in everything we do. We believe we are well positioned to deliver on our 2025 guidance and create value for our stakeholders over the long term. We look forward to discussing more next week at CAGNY. Thank you for your interest in our company and for joining us this morning. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.