At this time, I would like to welcome everyone to The Coca-Cola Company's First Quarter 2025 Earnings Results Conference Call. Today's call is being recorded. If you have any objections, please disconnect at this time. All participants will be on listen-only mode until the formal question-and-answer portion of the call. 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 Ms. 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 gross 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 report. Following prepared remarks, we will take your questions. Please limit yourself to one question. Reenter the queue to ask any follow-ups. Now, I will turn the call over to James.

Thanks, Robin, and good morning, everyone. Our results in this first quarter reflect the continued execution of our all-weather strategy and demonstrate the resilience of our business as we navigate a dynamic external environment. We delivered 2% volume growth and organic revenue growth at the high end of our long-term growth algorithm. We also delivered comparable gross and operating margin expansion. With this as context, we're grounded in our starting point of human centricity. Our first quarter results would not have been possible without the actions of our people around the world. I'd like to express my gratitude to our system associates, who are adapting quickly and creating enduring value. And as we look to the remainder of the year, we will continue to be consumer and customer centric. Based on what we know today, we believe we can achieve our 2025 guidance. This morning, I'll provide further detail on our first quarter business performance, and we'll discuss the current operating environment. Then, I'll explain how we're improving execution and investing to strengthen our system. John will also discuss our financial results and provide further commentary on the outlook for the rest of the year. During the quarter, some markets improved sequentially while other markets faced macroeconomic uncertainty and geopolitical tensions that impacted consumer confidence and consumption behaviors. Despite this backdrop, we delivered robust organic revenue growth through our stepped-up capabilities and better than ever system alignment. We're getting more granular and tailoring our execution to win locally in key geographies, categories, and channels. During the quarter, we grew volume across all global beverage categories. We won value share by three key metrics, overall share, at home and away from home. However, as we look across our top country category combinations, we still have opportunities to further improve our performance. Across our markets, we leveraged our global scale and local expertise to respond to complex dynamics in the quarter. In North America, we grew revenue and profit and won value share, but we were not satisfied with our volume performance. In addition to challenges with severe weather and calendar shift, volume was impacted by weakening consumer sentiment as the quarter progressed, particularly among Hispanic consumers. Bright spots include continued volume growth for Coca-Cola Zero Sugar, another good quarter for fairlife and Topo Chico Sabores, and continued traction with food service customer renewals and new accounts. Our system has quickly pivoted to prioritize the most impactful investment opportunities and is emphasizing faster decision making and greater agility to accelerate volume growth. In Latin America, while volume was flat, we grew both organic revenue and comparable currency neutral operating income. Brazil and Argentina had strong volume performance, while momentum in Mexico was weaker due to cycling strong volume growth in the prior year, calendar shifts, and diminished consumer sentiment, partly stemming from geopolitical tensions. Our system has taken swift action in Mexico. We've learned from best practices in other markets by messaging affordability with value packages in key channels and by launching the Hecho en Mexico campaign to further build trust with consumers. Across Latin America, our system is leveraging connected packaging and digital customer platforms to drive long-term growth. In EMEA, we grew volume, organic revenue, and comparable currency neutral operating income. In Europe, volume declined with mixed performance in both Western and Eastern markets due to a range of factors. To drive demand for our brands, we're focused on affordability and launching impactful integrated marketing activations. For example, with Trademark Coca-Cola, we launched the Everyday Tasty Celebrations campaign for the meal occasions in over 20 markets leveraging local influencers. For Fanta, we launched a partnership with Xbox to recruit Gen-Z drinkers. In Eurasia and Middle East, we drove strong volume growth and won value share. In Turkey, despite continued external challenges, our business performance improved. We're leveraging our learnings from the past year to better understand consumer motivations and pivot during shifts in demand. Our efforts across the region to emphasize the localness of our system while driving affordability and partnering closely with customers are taking hold. Lastly, in Africa, we grew volume despite cycling strong growth in the prior year and dealing with double-digit inflation. We're driving affordability with refillable offerings and value packages, and we're engaging consumers by scaling global integrated marketing campaigns at a local level, including Wanta Fanta, Sprite Spicy Meals, and Schweppes Born Social 2.0. Finally, in Asia-Pacific, we delivered volume, organic revenue, and comparable currency neutral operating income growth. In ASEAN and South Pacific, volume declined as strong performance in the Philippines was more than offset by weaker performance in Thailand and Indonesia. However, we won value share in the region. We're focused on driving affordability with refillable offerings and attractive absolute price points, increasing outlet coverage, and accelerating placement of cold drink equipment. In China, our system focus on improving execution is paying off and led to volume growth. We delivered impactful integrated marketing activations around the Lunar New Year and invested to drive growth in away from home channels. Trademark Coca-Cola had strong volume performance, while Sprite is getting back on track. In India, we had strong volume growth across our portfolio of global and local brands. Our system added nearly 350,000 outlets and increased household penetration. Also, our system increased cooler placement and added approximately 100,000 customers to its digital customer platforms. In Japan and South Korea, we drove volume growth and won value share with strong performance from Ayataka Tea. Our system is benefiting from stepped-up execution across key channels. Putting it all together, our business proved to be resilient during the quarter and we are prepared to respond to changing consumer dynamics as our external environment continues to evolve. While we're navigating near-term market dynamics, we're focused on capturing the boundless opportunities we discussed at CAGNY and we're building capabilities to further our strategic edge. Starting with our portfolio of love brands. Our total beverage portfolio offers consumers choice, whether it be by brand, package size, or package type. We have 30 global and local billion dollar brands that address a broad range of consumer need states and drinking occasions. A 30% of our volume is from low calorie or no calorie beverages, and 68% of our products in our portfolio have less than 100 calories per 12 ounce serving. We also have a diversified mix of affordable and premium offerings. By staying consumer centric and offering choice, we're seeing growth across multiple elements of our portfolio. Moving on to our marketing and innovation agenda. Our ongoing transformation continues to fuel our top line growth. With Studio X, we're producing tailored digital marketing at scale and with speed, and we're measuring the impact in real time. For example, during Lunar New Year, we scaled an integrated campaign with Trademark Coca-Cola across China, Japan, Vietnam, and other Asia-Pacific markets. Consumers access personalized digital experiences through our system's connected packaging. The campaign leveraged social media, live events, and increased displays in customer outlets, contributing to Trademark Coca-Cola volume growth in Asia-Pacific during the quarter. We're also excited about the global return of our iconic Share a Coke campaign. The 2025 iteration of this campaign offers digital experiences and increased shareability and customization. The return of Share a Coke is the first chance for Gen-Z to experience this much-loved campaign. We're investing in multi-year innovations and prioritizing fewer bold launches to drive greater impact and improve our success rates. For example, we're continuing to invest in Fuze Tea, which contributed to value share gains in the category during the quarter. We expanded Fuze Tea, Sabor Original to Spain and Fuze iced tea to Canada. In the U.S., Coca-Cola Orange Cream is off to a good start with approximately $50 million in retail sales during the quarter. At the end of February, we launched Simply Pop, our first prebiotic soda in select locations and channels across the country. We're excited about our ability to test and learn and scale successes over time. Lastly, we're striving to optimize our broader ecosystem. This extends far beyond the company and our bottling partners. If you include our suppliers, approximately 6 million people service our ecosystem. Coca-Cola is for everyone and we strive to contribute to each of the communities we serve. We believe our franchise model, which leverages global scale but prioritizes localness is an advantage in today's environment. Our system primarily produces and distributes our brands locally. We also aim to procure locally where possible. Much of the value we create in terms of jobs and retail sales stays in the local markets. For example, according to a recent economic impact study by Steward Redqueen in the U.S., our ecosystem contributes approximately 860,000 jobs and approximately $58 billion to annual gross domestic product. In Brazil, our ecosystem contributes approximately 575,000 jobs and over $15 billion annually to the gross domestic product. While it is reasonable to assume global trade tensions and broader macro uncertainty may persist in the near term and could impact consumer sentiment, the building blocks behind our long-term growth opportunities are unchanged. We continue to benefit from three primary factors. Firstly, we operate in a resilient industry with predictable growth. Second, while barriers to entry in our industry are low, barriers to scale in our industry are high. Lastly, we have significant headroom to develop our industry and gain share, and we believe we're primed to capture these opportunities. Our portfolio power as demonstrated by our $30 billion brands and pervasive yet local distribution are key differentiators. Our system continues to prioritize agility, consumer centricity, and close partnership across our ecosystem to drive long-term growth. In summary, it's early in the year, and we know that the external environment is dynamic. Enabled by our all-weather strategy, we'll continue to expand our toolkit to respond to the opportunities and challenges ahead. Thanks to the unwavering dedication of our system employees, we are confident we can achieve our objectives. With that, I'll turn the call over to John.

Thank you, James, and good morning, everyone. During the quarter, we pivoted as needed to continue delivering on our objectives. We grew organic revenues 6%, which reflects performance at the high end of our long-term growth algorithm. Unit case growth was 2%, in line with our multiyear trend. Concentrate sales were one point behind unit case sales as the impact of two fewer days in the quarter was partially offset by the timing of concentrate shipments. Our price mix growth of 5% was driven primarily by pricing actions across our markets, partially offset by approximately one point of unfavorable mix. Pricing from intense inflationary markets contributed to approximately one point of price mix growth, down from approximately five points in full year 2024. Comparable gross margin increased approximately 30 basis points, and comparable operating margin increased approximately 130 basis points. Both were driven by underlying expansion and a benefit from bottler refranchising, partially offset by currency headwinds. Putting it all together, first quarter comparable EPS of $0.73 increased 1% year-over-year despite 5% currency headwinds, dilution from bottle refranchising, elevated net interest expense, and an approximate 2 point increase in our effective tax rate. Free cash flow, excluding the fairlife contingent consideration payment was approximately $560 million, an increase versus prior year. During the quarter, we made our final $6.2 billion payment related to our acquisition of fairlife, which continued to deliver strong performance. We're expecting fairlife's growth to moderate during the remainder of 2025 in advance of bringing additional capacity online. Our balance sheet remains strong with our net debt leverage of 2.1 times EBITDA, which is at the low end of our targeted range of two times to 2.5 times. We're confident in our long-term free cash flow generation and continue to have balance sheet capacity to pursue our capital allocation agenda, which prioritizes an unwavering commitment to drive growth and support our dividend while staying flexible and opportunistic. Before I discuss our guidance, I'd like to provide perspective on the current global trade environment and the actions we're taking to manage our business. While our system primarily executes locally, we're not immune to global trade dynamics. Based on what we know today, the dynamic tariff landscape could impact pockets of our systems' cost structure as well as consumer sentiment in our markets. At this time, we believe we have numerous levers to help manage the impact, which is contributing to our current 2025 guidance. Enabled by our all-weather strategy, we believe our business model has the flexibility needed to allow us to deliver on our near-term commitments. Our current 2025 guidance takes into consideration the underlying momentum of our business and what we know today about our external environment. We continue to expect organic revenue growth of 5% to 6%, but now expect comparable currency neutral earnings per share growth of 7% to 9%, both of which reflect delivery in line with our long-term growth algorithm. Bottle refranchising is still expected to be a slight headwind to comparable net revenues and comparable earnings per share. Most of the impact of bottle refranchising occurred during the first quarter of this year, as we cycled the impact of refranchising the Philippines, which closed during the first quarter of 2024. Based on current rates and our hedge positions, we now anticipate an approximate 2 point to 3 point currency headwind to comparable net revenues and an approximate 5 point to 6 point currency headwind to comparable earnings per share for full year 2025. Our underlying effective tax rate for 2025 is still expected to be 20.8%, which is over a 2 point increase versus prior year. All-in, based on what we know today, we continue to expect 2025 comparable earnings per share growth of 2% to 3% versus $2.88 in 2024. There are some considerations to keep in mind for 2025. During the second quarter, we are cycling a tougher volume comparison from the prior year, while we're taking action to address consumer dynamics across some key markets and are seeing encouraging signs, we expect recovery to take some time. We continue to expect the productivity benefits that I discussed in February to be weighted towards the latter half of 2025. Last, due to our reporting calendar, there will be one additional day in the fourth quarter. To sum it up, we remain focused on the execution of our all-weather strategy and are well positioned despite macro complexity and uncertainty in the remainder of 2025. Thanks to the power of our portfolio and the partnership of our system, we're confident we will continue to create enduring value for our stakeholders. And with that, operator, we are ready to take questions.

Our first question comes from Dara Mohsenian from Morgan Stanley. Please go ahead. Your line is open.

Hey, good morning. Another strong quarter clearly in Q1, but you did maintain the all-in full year 2025 earnings guidance, which implies constant currency earnings growth is now lower by 100 basis points with FX improving. So, is that just because it's early in the year and in a difficult environment, it doesn't make sense to raise overall earnings, particularly with volatile currency or are there discrete factors that are incremental as we think about full year currency neutral earnings? And maybe I can just extend that question also to unit cases, 2%, great result in the quarter. Comps do get tougher going forward. There's some geopolitical risk in theory. So, just any thoughts around your ability to drive continued corporate unit case growth going forward in this more difficult environment that you referenced. Thanks.

Thank you, Dara. Regarding currency, as mentioned, our guidance is based on current exchange rates and our hedge positions, and it's still early in the year. Most of our G10 exposures are well hedged, but we still face significant volatility in emerging markets. Therefore, we are being cautious about projecting flow-through, and we anticipate further developments in the coming months, especially in those regions. As for unit case volume, we've had a strong start globally, thanks to the strength of our portfolio. I mentioned in my earlier comments that we are comparing against a robust second quarter. We've implemented several actions to tackle some challenges from the first quarter, and while we expect these actions to make an impact, it won't be immediate. Overall, we feel comfortable and confident about our full-year guidance. As we've seen over the past 12 to 13 quarters, each quarter has its distinct factors, so I would recommend focusing on the full year rather than just one quarter's dynamics.

Our next question comes from…

Great. Thanks.

Our next question comes from Bryan Spillane from Bank of America. Please go ahead. Your line is open.

Thank you, operator. Good morning, everyone. John, I'm curious about your description of quarters having personality. I'm trying to understand what personality this quarter had. Can we discuss Mexico a bit? I feel this quarter was somewhat softer. You mentioned market share gains or losses. Can we go over the current conditions there? Last year, there was some consumer uncertainty due to the election. What is the current situation with consumers, and what actions are you planning to take moving forward to restart volume growth?

Latin America had a decent quarter, with strong growth in Brazil and especially Argentina. However, it was somewhat softer in Mexico. This softness can be attributed to a few factors, including a strong first half last year and the timing of Easter, which shifted to the end of April this year, affecting our results. Additionally, there was some macroeconomic uncertainty following the local elections and ongoing geopolitical tensions. We observed a similar pullback in Hispanic consumers in the U.S., which also impacted Mexico, particularly in the border regions due to their close ties to the U.S. Despite these challenges, we saw positive performance with products like Coke Zero, Del Valle, Santa Clara, and Fuze. Looking ahead to Q2, we are prioritizing affordability through refillable options and value, and reinforcing our local campaign, Hecho en Mexico, which highlights the significance of our local operations and job creation. We are optimistic about recovery in Mexico, and while each quarter may present its own challenges, we remain confident in our strategy and the execution of our all-weather plan. We believe that we will see improvement in Mexico moving forward.

Our next question comes from Lauren Lieberman from Barclays. Please go ahead. Your line is open.

Great. Thanks so much. So, I want to talk a little bit more perhaps about the actions you're taking in the U.S. you called out, consumer softness, particular demographics, but there was also some pretty pointed anti-Coke, brand Coke sentiment out there. So, I was just curious, anything you could share or articulate on what the system is doing to kind of manage through that? So, yeah, that's the key question. Thanks.

Yeah. Sure. I mean, clearly, the key is agility and reprioritization, refocusing on some of the issues, within the context of a strategy that has been working for us in the U.S. marketplace. I mean, we have been very focused on driving the portfolio and upping the execution with our bottling partners and that's been a multi-quarter, multi-year successful strategy. So, within the context of continuing that, we're going to make some adjustments to what's happened in the first quarter. Just standing back a second and saying what happened, there were a whole set of things came together. There's a shift in Easter, which I mentioned the Mexico and the weakness in some of the consumer traffic, particularly Hispanics in traffic and there was some very unfortunate video circulating around, completely false, but they impact the business. That kind of hit us particularly Coke Original in the Southern states that is a basic, but there were other things like cold weather and some of the calendar shifts. So, there were some known factors. There were some unfortunate factors and there's some stuff that we got to focus on, so that we can build on what went well. Coke Zero is still growing. Fairlife was still the number one brand to add retail dollars in the first quarter. Topo Chico is going well, Fuze it. So we have a lot to build on. We're focused on coming back on Coke Original. We're focusing in on winning back some of the Hispanic consumers, both from a consumer and a channel point of view and reinforcing some of our affordability options. So, I think we're going to again come back, might be choppy again going into Q2, but we feel we have a handle on the controllables and can get ourselves back on track to our winning strategy.

Our next question comes from Steve Powers from Deutsche Bank. Please go ahead. Your line is open.

Hey, great. Thanks. So James, as you emphasized in the prepared remarks, the company's portfolio is made up of a broad mix of both global and local brands. Given some of the shifts you've seen in demand since we were all together at CAGNY in February, could you talk maybe about how you're leaning more into some of those local brands in the current environment to the extent that you are or perhaps how you're executing or positioning differently some of your global brands to emphasize their local relevance?

Sure. I want to highlight the global nature of the Coke system. While we are widely recognized for Coca-Cola, our most global brand, we actually operate as a very local business. Beverages in each country are primarily produced locally by local employees using local resources. In the U.S., for instance, our system directly employs about 860,000 people and contributes $58 billion to GDP. In Brazil, we have 575,000 employees and generate $15 billion in GDP. This shows that while we appear to be a global business, we are very much rooted in local operations. The challenge we manage is how to make global brands relevant in local markets. We are not shifting our focus from global brands to local ones; rather, we are committed to making our global brands resonate on a local level. During times of geopolitical tension, a key strategy is to emphasize that products are made locally, with local factories and workers. Highlighting local production and affordability is especially crucial for Brand Coca-Cola in these situations. I do not anticipate any major changes in our brand portfolio as we move forward; the focus will be on local engagement that underscores the global essence of the brand while maintaining a local presence. This approach has proven effective in various contexts, and our business model is resilient enough to handle some disturbances.

Our next question comes from Filippo Falorni from Citi. Please go ahead. Your line is open.

Hi. Good morning, everyone. I wanted to ask you about your comment about the global trade dynamics. You mentioned that your operations are primarily local, but what are the portion of your business where you're actually seeing the tariff implication impacting your business? Any sense if you can give us a sense of quantifying the potential impact? I know aluminum is a component, but just any broader comment on the implication from the global trade environment? And then, a follow-up to that in the sense of the responses to just a general anti-American brand sentiment around the world from the global trade disputes. Are there any countries other than Mexico, which you call now where you're seeing a little bit more of a, I guess, some negative sentiment towards American brands? Thank you.

Yeah. I'll take the second piece first, because it's very much linked to my previous answer, which is about reinforcing localness and really making sure we're on affordability and getting that really working and focused on driving the execution of that strategy. I'm not sure I would call out many other places. Obviously, there have been countries that have cycled through this problem over the last number of years. I'm sure there'll be more. I think the predominant issues have been, as we've seen this quarter so far in the U.S. and in Mexico, a little bit perhaps in Europe, and some of the other countries, but one has to pass apart sentiment from behavior. And therefore, it's very important that we're not responding to sentiment, we're responding to behavior. Turning back to the tariff dynamic, as we called out in our release, we see it as manageable. Obviously, we're not immune to global trade dynamics and we're talking now, knowing what we know today, and we're mindful the environment can change around us. Again, as I said before, I think our local franchise structure is an advantage. Our exposure to trade, import-export, is not massive in the major countries relative to our cost structure. So, if we were to take the U.S. for example, we are exposed on a couple of inputs like orange juice or some of the dispensing equipment we buy, our bottling system is a bit exposed to some of the resin and aluminum. But these are small pieces relative to the total size. And even if you focus just in on those elements exclusively and think about what impact they may have on marketplace pricing, you don't just have to take into account the tariff, you got to take into account, well, what's happened to the price of the underlying commodity? What's happened to the exchange rate from where you're buying it? What's happened to our hedging positions because we have long-term hedging positions. So, when you put all those things together and all the other levers across the cost elements of the business, that's how we and the bottling partners locally make the decisions on pricing. So, as it comes to the U.S., given all the things I talked about, both we in the bits where we operate directly and the bottlers locally, we're sticking to our current pricing plans for the year and knowing what we know today.

Our next question comes from Chris Carey from Wells Fargo. Please go ahead. Your line is open.

Hi, everybody. I wanted to ask a question about margins and specifically operating margins. I think this is the best operating margin delivery going back in our model, I suppose, the modern era. I don't know, if they were 100 years ago, but let's say these are very, very strong operating margins. To what level are such margins sustainable? And do you envision any caveats in the quarter? I know you talked about marketing timing. And then just, connected to that, as you think about reigniting trends in some of your developed markets, North America, Europe, is there a scenario whereby you would need to use some of this margin strength to drive that or is the price pack and RGM strategy strong enough that you can still offer affordability without sacrificing the margin strength? Thank you.

Thank you, Chris. I'm pleased with how we emerged from the first quarter regarding operating margins, noting that timing has played a beneficial role. I want to highlight that when considering our long-term strategy, we believe we can continue to expand margins over time. Over the last five to six years, we have successfully moved past the 30 to 31 margin range as we look ahead, and we expect to maintain this through the resources we have. These resources include not only cost management but also our ability to sustain a strong top-line performance. For our investment strategy, it's essential that we grow both revenue and margins in line with our goals. Over the past few years, we've made significant investments into our portfolio and see opportunities for improved productivity in the coming years. We feel confident in our capacity to pursue growth, invest in our brands, and adapt as necessary. This quarter exemplifies the adjustments we've made to achieve our current results. We are confident in our ability to continue doing so in the coming quarters, even as we anticipate needing to make further adjustments in various regions.

Our next question comes from Rob Ottenstein from Evercore. Please go ahead. Your line is open.

Great. Thank you very much. You mentioned in the opening comments that, fairlife growth may moderate, and Fairlife and Core Power have been phenomenal successes. So wondering, if you can kind of one talk about the trajectory of that business starting now with kind of the service levels you have? When the capacity will come on? A sense of how much capacity is coming on? And where you see that brand going forward in terms of how big it could get? And then, also how you're going to protect that brand from an intellectual property perspective? Thank you.

Thank you, Rob. When discussing the growth moderation at fairlife, we are focusing on percentage growth rather than total business size. You’re noticing significant numbers as the business has experienced very high double-digit growth rates over the past several years. In the first quarter of this year, fairlife again contributed the most retail dollars to the beverage industry, continuing its success from last year. The business is growing substantially in terms of dollars, but the percentage growth is moderating slightly. We have been increasing capacity in various locations, and a major capacity boost will occur at the end of the year, which will support our growth for many years to come. The long-term potential for fairlife remains strong due to the quality of the product, its taste, shelf-life, and lower lactose content, which all contribute to its competitive advantage. This success does not rely solely on one aspect such as intellectual property or the technology used in filtration. The business’s strength will enable us to increase marketing and innovation, further expanding our reach. Currently, we are focusing on core products since it’s the most effective approach while managing substantial growth rates and preventing capacity issues. We have been able to maintain growth in the first quarter and are looking forward to unlocking more opportunities to advance this master brand further.

Our next question comes from Andrea Teixeira from J.P. Morgan. Please go ahead. Your line is open.

Thank you, operator, and good morning, everyone. I'll start with James and then address a clarification for John. James, can you discuss the performance in Europe, the Middle East, and Africa? You experienced a 3% growth in unit volume, but given the region's size, there are likely many dynamic factors at play. Specifically, can you shed light on how Western Europe is performing, as it makes up a significant portion of your profits as we wrap up the quarter? Some consumer packaged goods companies have noted a slowdown in consumer activity there. For John, regarding the underlying results, it seems the foreign exchange outlook improved by 100 basis points, yet it appears the underlying profit has declined by 100 basis points, keeping the all-in comparable earnings per share the same. Can you explain what deteriorated sequentially, or is this a reflection of caution despite the strong start to the year? Thank you.

Yeah. Let me get the clarification out of the way, Andrea. Thanks for the question. It's early in the year. Currency is a function of what we know today and our hedge positions, and there's still a long way to go. And so, we feel it's prudent at this juncture to guide as we have done so, and we'll continue to update on the currency front as we go through the year.

In the EMEA segment, the volume growth was largely driven by the Eurasia markets, including some from North Africa, demonstrating strong performance, particularly in the Eurasian market. The European business continues to be a solid profit area, with volume performance aligning with previous quarters. There were mixed performances between the East and West, with the West being somewhat softer. Similar to the U.S. and Mexico, Europe faced factors like the timing of Easter, macro uncertainties, and political tensions. Overall, the volume performance was comparable to last year, with notable successes in products like Coke Zero, Sprite Zero, Fuze Tea, and Powerade, alongside effective marketing efforts, including campaigns for Everyday Tasty Celebrations and partnerships with Xbox and Fanta. Moving forward, we will maintain our focus on revenue growth management, affordability, and ensuring the availability of cold drink equipment as we approach the summer season, which is the most important period for Europe.

Thank you.

Our next question comes from Bonnie Herzog from Goldman Sachs. Please go ahead. Your line is open.

All right. Thank you. Good morning, everyone. I just had a quick question on the away from home channel and consumer. Curious to hear how your away from home business trended in the quarter, I guess, versus even Q4? And then what's your outlook for the channel this year, given the consumer, I guess? And then, with that in mind, how should we think about the impact on your top line and margins if the away from home channel slows? And I guess is that factored in your guidance? Thanks.

Okay. Are you talking just U.S. or globally?

Honestly globally, but if you want to give some color on the U.S. as well, that would be helpful. Thank you.

Yeah. Sure. Look, I think let's start with the U.S. I mean, in the U.S. actually, immediate consumption actually held up better than future consumption. Some of the issues, particularly some of the pullbacks from consumers was more concentrated in the take-home channel. So, if we were to look at the North American business, iced tea business actually did reasonably well and the future consumption business is where the impact was most felt. Similarly, in Europe, the impact was more on the future consumption. The iced tea was actually growing in Europe. I think that calls out the importance of affordability in the retail channels, and I think that's what it's kind of reflecting, and that's notwithstanding some of the geopolitics, that's what it's reflecting and that's what it's calling for in the months going forward. And then, if you kind of extract that to a global basis, both at home and away for home were both growing globally speaking, with away from home growing slightly faster than at home. So, on a global basis looking good, strong activations across a number of places, particularly Asia-Pacific, where away from home grew really strongly. And the bit that was a little bit more of the drag is the developed markets, particularly U.S. and Europe, it was in the future consumption where there was the bit of weakness, which as I said, calls for working with the retail customers on some affordability to really drive solutions there.

Our next question comes from Kaumil Gajrawala from Jefferies. Please go ahead. Your line is open.

Hey, everybody. Good morning. If I could ask a question on currency, maybe slightly differently is, since John and James your arrival, it's been about dollar based growth and worked very hard to be able to grow earnings in dollar terms. We may be coming towards the end of a strong dollar super cycle. And I'm curious to what degree are you contemplating that and does it change how you're sort of thinking about future investments, capital returns, things like that?

What do you tell us?

We're not ready to celebrate the decline of the dollar just yet, but our main goal remains to grow U.S. dollar earnings per share. If we encounter a situation where the dollar weakens significantly and affects our entire currency portfolio, we would incorporate that into our strategy, and we are preparing for that possibility. However, it is not our primary scenario at this time, as much of the current focus on dollar weakness is related to the U.S. dollar index, which only includes six currencies, primarily weighted towards the euro. In fact, four of our top five market currencies are not represented in that index. Therefore, we are currently assessing the U.S. dollar in relation to our overall currency basket, as reflected in our guidance, and if there is a major shift in this area over the year, we will make the necessary adjustments.

Our next question comes from Nik Modi from RBC Capital Markets. Please go ahead. Your line is open.

Yeah. Thank you. Good morning, everyone. So James, I just wanted to get your thoughts on innovation in the wellness and functional space. There's a growing popularity of ingredients like ashwagandha, and Lion's mane and turmeric among others in the U.S. Many of these ingredients have some kind of science backing on health and other functional benefits. So, just wanted to get an understanding how you're thinking about using these products or ingredients in terms of your innovation in the U.S.? Like, do you need clinical studies to support some of the health claims? A lot of these ingredients are used a lot overseas. And so given your global exposure, just curious on how you're thinking about this in terms of the U.S., especially as the population is aging? Thanks.

We're going to prioritize following consumer preferences. This involves understanding what they truly desire and how they choose to spend their money. Additionally, we need to consider if they prefer combinations of products. Ultimately, consumers generally want their beverages to taste good, and the inclusion of specific ingredients can impact flavor. While taste remains paramount, there are certainly consumers willing to compromise on taste for certain ingredients, and we will adapt to that trend. Historically, we introduced a product in France that combined a tablet for a cosmetic effect with a beverage. Although the idea was to streamline purchasing by integrating both, consumers preferred to use the pill and beverage separately. This illustrates the uncertainty of whether everything will merge into a single product. Some segments of consumers are interested in niche ingredients, and they may be willing to incorporate these into their drinks. However, we expect that broader, more popular ingredients like protein will see greater interest. Lastly, while we prioritize product safety and quality, we do not engage in clinical studies for the ingredients we choose. We are open to sourcing safe ingredients from other providers. We will continue to align with consumer trends.

Our next question comes from Peter Grom from UBS. Please go ahead. Your line is open.

Thank you, operator. Good morning, everyone. I wanted to ask a follow-up on the 2Q commentary. It was flagged back in February and I know the world is clearly quite different today versus when you provided that outlook. But have your expectations for the second quarter shifted? James, you mentioned the word choppy a couple of times. So, I just wasn't sure if the 2Q comment was based on some of the performance you've seen thus far in April or kind of what you're expecting looking ahead or whether it's simply just kind of a reminder on the comparison? Thanks.

Sure. Firstly, it's important to note that we are comparing to a very strong quarter last year, which complicates things. We still aim to perform well in Q2, as it is one of the four quarters that contribute to our overall annual guidance. It plays a significant role in our overall performance. In regard to Q2, there's some short-term disruption in supply chains likely occurring in the U.S. The simplest way to illustrate this is by looking at container shipping bookings for late May and early June. However, I want to emphasize that this disruption shouldn't directly impact our business, as we do not expect supply chain issues to affect us in Q2. Nevertheless, other industries and categories around us may experience disruptions which will influence consumer behavior. While consumer sentiment has been affected, spending still appears to be strong. I want to point out that there are more uncertainties as we head into Q2, which could lead to greater fluctuations that we will need to address. But I want to reemphasize our earlier points: we believe we can manage these challenges due to our business systems, our strategy, and our capacity to adapt throughout the quarter and the year.

Our next question comes from Charlie Higgs from Redburn. Please go ahead. Your line is open.

Yeah. Hi, James, John. Hope you're both well. I've got a question on Asia-Pacific volumes. I'm just wondering if you could unpack the plus 6% a bit more, but perhaps with a focus on China and how you're feeling about the consumer environment there, I know a lot of other consumer staples companies have spoken of a deflationary environment. So, how do you feel about the consumer, but also your now rationalized portfolio in China and the execution by the local bottles there? Thank you.

Yeah. Sure. Thanks, Charlie. Look, we had good momentum in Asia-Pacific this quarter with the 6% volume growth, that was very strongly driven by a good quarter in India, in particular, also with China growing. As you called out, I think the China growth is a function of a number of the actions we were taking last year to focus the portfolio and restage some of the brands. We cope doing better, good Lunar New Year, Sprite a little more of a work in progress. So, good recovery there, perhaps still early to call, but with continued focus on the soft drink portfolio in China and the good growth right there. As I said, India, really good start to the year as we brought to activated a number of things in the marketplace there and grew customers and cold drink equipment. Our long-term thesis remains intact. Obviously, it's not necessarily always going to be a straight line. A decent result in Japan and South Korea, Japan continuing to grow, some softness in ASEAN, but we're focused on working through that. So hopefully, that unpacks it a little bit for you.

Our next question comes from Kevin Grundy from BNP Paribas. Please go ahead. Your line is open.

Great. Thanks. Good morning, everyone. Thanks for the question. I want to follow up on Chris' margin question from earlier, but more from a North America perspective and within the context of kind of striking the right balance with volume growth. So, North America margin is clearly very strong, 30%. Historically, that's quite good. Price mix has been up materially the past four years, that was the case again in 1Q. Yet volumes have been flattish the past couple of years and took a step back in the first quarter for the reasons that we talked about. So James, can you comment on striking the right balance in North America between margin delivery and perhaps higher levels of volume growth and how that may differ in terms of how the company is going to go about that tactically in the near-term, given the uneven macro and then more in the intermediate term in a more normalized environment? So, thanks for that.

Let me take this one. Yes. In North America, we've been on a journey over the past three to four years to consistently improve the overall margin profile of our business. This improvement has been driven by a stronger core business and a more effective revenue growth management strategy in that core business. The addition of fairlife to our portfolio has also contributed positively. Therefore, you should consider North America in this context: we continue to see opportunities to enhance our margin profile, aligning it more closely with what we experience in other developed regions of the world. We are focused on seizing growth opportunities and making investments to support that. Additionally, it has been a core priority for North America to play a more significant role in our overall objective of returning our operating margin to levels in the 30s that we are eager to achieve.

Our next question comes from Michael Lavery from Piper Sandler. Please go ahead. Your line is open.

Thank you. Good morning. In light of last quarter's performance, you mentioned some SG&A leverage and improved marketing productivity. One example you provided was utilizing generative AI in media and ad development, which seems relatively straightforward. However, regarding total expenditure, what outcomes do you prioritize to determine the appropriate level of spending? How do you ensure that productivity translates to efficiency without compromising effectiveness? Additionally, how do you envision this evolving as you strive for greater efficiency this year?

I can start by saying that we are very focused on the activities needed to support our portfolio. We are working backwards to identify the most efficient ways to execute those activities instead of trying to drive efficiency through cutbacks. Our approach has shifted significantly over the past few years to become activity driven. We clearly understand where opportunities exist to drive more efficiency. For instance, the balance between our spending on creative work and our engagement with creatives is a top priority, and we are actively working to optimize that. We are increasingly integrating new technology into our marketing efforts to perform activities that were previously more expensive and time-consuming. Additionally, we are planning our media using more sophisticated data sets, which provides us with another opportunity to achieve the same, if not greater, impact more efficiently. Ultimately, our focus is on the activities themselves, and we continually challenge ourselves to find ways to deliver these activities faster, cheaper, or both.

Our next question comes from Bill Chappell from Truist Securities. Please go ahead. Your line is open.

Thanks. Good morning. Just kind of a quick question. Could you remind us kind of what your business look like in both Ukraine and Russia four, five years ago, what it looks like today? And if there was peace there, what could look like down the road?

Sure. Four or five years ago, when we exited our brands, it represented about 1% to 2% of our revenue and a similar amount of profits. That's what we left behind when we made that decision a few years ago. The business in Ukraine is significantly smaller and has been affected by the war, but it was a good business and we appreciate the market, even though it's not very large. Thoughts about the future are premature at this point. There is still much to be done to make progress, and we have a long way to go.

Our last question today will come from Robert Moskow from TD Cowen. Please go ahead, your line is open.

Hi, thank you. James and John, could you be a little more specific as to where you think you are on clearing up the misconceptions about Trademark Coke that kind of impacted first quarter? And then secondly, maybe a little more detail on the state of the Hispanic consumer. You're uniquely capable of evaluating how those consumers are thinking, how they're spending in-home, away from home. Can you touch on those two things?

I believe that the issue related to the false video is mostly in the past regarding its impact on our business. This incident wasn't the first instance of misinformation related to the Coca-Cola brand, and it certainly won't be the last. We are concentrating on our recovery efforts, which include actions focused on local impact, community values, and providing affordable options through targeted promotions. Regarding the Hispanic consumer, aside from the video incident, there has been a slight decrease in purchasing and foot traffic, which isn’t limited to the U.S. There’s a significant industrial presence in Northern Mexico that affects exports, and geopolitical tensions have made consumers more cautious with their spending. Over time, this initial reaction typically lessens, which highlights the difference between consumer sentiment and actual spending. While this situation may lead to some volatility in the near term as things stabilize, our strategy remains to stay focused on our core initiatives: maintaining our all-weather approach, emphasizing our brands, executing effectively, and enhancing local connections. We are committed to reinforcing our Made in U.S. products for the U.S. market and Hecho en Mexico for Mexico, which will help us navigate the rest of the year successfully. Okay. Thanks very much, everyone. So to summarize, enabled by our all-weather strategy, we're focused on prioritizing agility, remaining consumer centric, and partnering closely across our ecosystem for the rest of the year. There'll be many types of environments and we're going to leverage our capabilities to drive the growth and the enduring value. Thank you for your interest, your investment in the company, and for joining us this morning. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.