At this time, I'd like to welcome everyone to the Coca-Cola Company's 4th Quarter 2025 Earnings Results Conference Call. Today's call is being recorded. If you have any objections, please disconnect at this time. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, press star 1 on your telephone keypad. I would now 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 Quincy, our Chairman and Chief Executive Officer, Enrique Braun, our CEO-elect and Chief Operating 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 result 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 reports following prepared remarks we will take your questions please limit yourself to one question re-enter the queue to ask follow

ups now i will turn the call over to james thanks robin and good morning everyone before i get started i'd like to thank all of you for your support and collaboration over the years from the analysts on the call to the investors who are listening to the many employees and other stakeholders who are joining us as well. Today will be my last earnings call. It's been a tremendous honor to be the CEO of this remarkable company. Coca-Cola gave me the opportunity to serve consumers, customers, and communities around the world and work alongside incredibly talented and dedicated colleagues and friends. Our company has achieved a lot over the last decade. Looking back to Cagney 2017, we set four strategic priorities, accelerating our consumer-centric brand portfolio, strengthening our system, digitizing the enterprise, and unlocking the power of our people. And I think we've done a good job meeting those priorities. We've added $12 billion brands to our total beverage portfolio, bringing our total to $32 billion brands, 75% of our billion-dollar brands are outside our sparkling soft drinks. And while we've expanded our portfolio to offer consumers more choice, we've also reinvigorated growth of our legacy sparkling soft drink brands. Trademark Coca-Cola retail sales grew by over $60 billion, and the brand is the highest-valued food and beverage brand in the world, according to Kantar, with a long runway ahead. Alignment with our bonding partners is better than ever, and we have a clear line of sight into completing our re-franchising strategy. This work created a virtuous circle for our system with higher returns, additional investment, and further value creation. We've also taken foundational steps to digitize our system. We've made good progress connecting with consumers and customers on a more granular and personalized level. And lastly, we've built a culture that prioritized our willingness to take risks, learn through iteration, push each other, and scale successes. Our people and our growth mindset remain two of our biggest advantages. As a result of delivering on these four strategic priorities, we've had a 7% average organic revenue growth since 2017, above our long-term growth algorithm. After years of being stuck at around $2 comparable earnings per share, we inflicted our earnings, overcame ongoing currency headwinds, and have achieved a $3 comparable earnings per share in 2025. We also created more than $150 billion of market value for our share owners and outperformed the consumer staples industry. Our foundation today is as strong as it's ever been. No matter how you slice it, by category, by consumer, by channel, we have immense growth opportunities ahead of us. Enrique will bring new energy to usher in our next chapter of growth, and he's particularly passionate about our brands, franchise operating model, digital engagement, and our people. We both started at the Coca-Cola company in the same year over 30 years ago, and he's been an invaluable partner to me over the past decade. He's worked across many functions and has created value for our system on every continent where we do business. The best days for our system continue to be ahead of us, and I'm confident we'll capture these opportunities under Enrique's leadership. So, without further ado, I'll pass the call off to Enrique Braun, the next Chief Executive Officer of the Coca-Cola Company.

Good morning, everyone, and thank you, James. I'd like to take a moment to thank you for your leadership during your tenure as CEO and for your incredible contribution to our system. You live a legacy of returning our business to growth. It's a privilege to be the next Chief Executive Officer and I look forward to partnering with you in your ongoing role as a chairman. Now I'd like to discuss our 2025 performance. Despite a complex external environment in 2025, we delivered on our initial top-line and bottom-line guidance set last February. We also continued our streak of gaining value share for the last 19 quarters. Organic revenue growth was in line with our long-term growth algorithm. While unit case volume was flat in 2025, we ended the year with better momentum as volume improved each month during the fourth quarter. If you take a step back, we have a long track record of navigating complex external dynamics to hold or grow volume each year. Over the past 50 years, annual volume declined only once, and that was during the pandemic. Rounding out the P&L, ongoing efficiency and effectiveness initiatives drove strong comparable operating margin expansion in 2025, which contributed to 4% comparable earnings per share growth despite five points of currency headwinds and a two-point increase in our comparable effective tax rate. During the fourth quarter, we grew volume despite cycling a tougher comparison versus the prior year. We continued to invest to build our system for the year ahead as well as for the long term, starting with North America. We delivered strong results despite continued macroeconomic pressure on lower-income consumers. We gained both volume and value share and grew volume, revenue, and comparable operating income. We had broad-based strength across our total beverage portfolio, as trademark of a call Sprite Zero, Fresca, Dasani, Fairlife, Body Armor, Trademark, and PowerAid each group on it. Innovation contributed to our growth as Sprite Chill and Coco Holiday Creamy Vanilla had strong performance. Across our portfolio, our system focused on accelerating cold drink equipment placement, expanding availability of value offerings, and winning share of visible inventory. In Latin America, we are lifting and shifting learning from across our markets and leveraging our system's capability to navigate a challenging external environment. During the fourth quarter, we managed to gain value share and growth volume, revenue, and comparable currency-neutral operating income. Both Coca-Cola Zero Sugar and Sprite Zero Sugar had strong performance, and Santa Clara, our value-added dairy brand in Mexico, became another addition to our stable billion-dollar To drive consumer demand, we tapped into deep passion points by linking Santa with Halloween. We also continue to focus on refillable packaging, value offerings, and attractive absolute price points across our portfolio. In EMEA, we gained value share and grew volume in revenue. In Europe, volume declined as the quarter started slowly before recovery. To drive transactions, we activated several campaigns focused on the holiday and the upcoming Winter Olympics. In the UK, we leveraged our English Premier League partnership to engage consumers with customized product offerings. In Italy, to kick off the Winter Olympics Touch Relay, we launched a music festival in Rome. And our Coca-Cola truck followed the Olympic flame across key towns and cities ahead of the game. In Eurasia and the Middle East and in Africa, we grew volume in both operating units. We tapped into key innovations grounded in local consumers' insights like Sprite Lemon Mint in the Middle East and had impactful marketing campaigns like Schweppes, Born Social 2.0, and Share a Coke in Nigeria. Our efforts to highlight the localness of our system and sharpen our revenue growth management capabilities led to volume growth in both operating units in 2025. Lastly, in Asia-Pacific, we gained value share and had flat volume. However, revenue and profit declined during the quarter. Volume growth in Japan was offset by declines elsewhere, driven primarily by softer consumer spending, weaker industry performance, and cycling strong growth in the prior year. We are continuing to invest in long-term growth opportunities across Asia Pacific, and we are implementing granular channel execution plans and tailoring our brand price back architecture with a focus on attractive absolute price points and value offerings. In summary, we are responding to differing dynamics across our markets by adapting faster, leveraging our portfolio power, and investing for growth. As I prepare to step into the CEO role and think about what's next, there will be a balance between continuing what's working and evolving where we can to become more effective and efficient. While we are proud of what we have accomplished, future success is never guaranteed. We must remain discontented. Every day, our system needs to focus on being a little bit better and sharper everywhere to drive transformation and impact. We have enduring strength, which includes an incredible foundation of 32 billion dollar brands and unmatched system reach. Our mission is both to increase this number of billion dollar brands and to turn today's billion dollar brands into tomorrow's multi-billion dollar brands. To drive further quality leadership, I'm excited about three key areas. First, we'll aim to step change recruitment. especially with young adult consumers by better integrating our marketing campaigns with commercial execution at the point of sale. We already have a good starting point. In the U.S., for example, we have 10 of the top 20 beverage brands for young adult drinkers, including Coca-Cola, which is the number one beverage brand. Second, we need to get closer to the consumer, and improve our speed to market. While we have made some progress with our overall success rates over the past several years, our innovation today is not where it needs to be. We're striving to better anticipate the next growth of opportunity in beverages and shape what comes next, driven by our deep consumer insights. Third, I am energized about steering our future RAD system. We must be intentional about putting digital at the core of every connection with consumers, customers and across the system. The better than ever alignment that we have today with our bottling partners is simply the starting point. Putting it all together, we look to continue expanding our horizons and shape our future. We have a durable strategy and our runway is long. I'm confident we will deliver on our 2026 guidance and capture the vast opportunities available. I look forward to sharing more details on how we are thinking about evolving our culture and our enterprise to fuel a new decade of growth next week at CAGR. With that, I will turn the call over to John to discuss 2025 performance and guidance for 2026.

Thank you, Henrique, and good morning, everyone. First, I'd like to recognize James and congratulate him for his tremendous career and amazing leadership as our CEO. It's been an absolute honor working alongside you. I'm also confident in the company's future as Enrique steps into the CEO role. Looking back at 2025, we remained agile and focused on improving execution of our strategy to deliver on our guidance. During the fourth quarter, we grew organic revenues 5%. Unit case growth was 1%. Concentrate sales grew three points ahead of unit cases, driven primarily by the timing of concentrate shipments and an extra day in the quarter. A price mix growth of 1% was primarily driven by approximately four points of pricing actions, offset by three points of unfavorable mix, which was driven by an unusual combination of business mix, category mix, and timing of a number of items. Comparable gross margin and comparable operating margin both increased approximately 50 basis points. Both were driven by underlying expansion, partially offset by currency headwinds, Putting it all together, fourth quarter comparable EPS of 58 cents was up 6% year over year despite 5% currency headwinds and an increase in our comparable effective tax rate. Free cash flow, excluding the Fairlife contingent consideration payment, was $11.4 billion in 2025, which is an increase of approximately $600 million versus the prior year's free cash flow, excluding the IRS tax deposit. Growth was driven by underlying business performance and lower tax payments versus the prior year. Adjusted free cash flow conversion in 2025 was 93% in line with our long-term targeted range for the third consecutive year. Our balance sheet remains strong with our net debt leverage of 1.6 times the Vita, which is below our targeted range of two to two and a half times. We'll continue to judiciously manage our balance sheet as we await a court decision related to our ongoing dispute with the IRS. Enabled by our all-weather strategy, we have demonstrated our ability to navigate local market dynamics to deliver on our global objectives. Our 2026 guidance builds on the results we've achieved over the past several years. We expect organic revenue growth of four to five percent, which is in line with our long-term growth algorithm. We also expect growth in comparable currency-neutral earnings per share, excluding acquisitions in divestitures of five to six percent we continue to focus on investing behind our brands to drive balanced top line growth with volume as a key priority notwithstanding volatility in certain commodities and evolving global trade dynamics we expect the overall impact on our cost basket to be manageable divestitures are expected to be an approximate four point headwind to comparable net revenues and an approximate one-point headwind to comparable earnings per share. This assumes the pending sale of Coca-Cola beverages Africa clauses subject to regulatory approvals during the second half of 2026 and includes the impact of divesting chi, which was our juice and value-added dairy finished product operations in Nigeria. Based on current rates and In our hedged positions, we anticipate an approximate one-point currency tailwind to comparable net revenues and an approximate three-point currency tailwind to comparable earnings per share for full year 2026. Our underlying effective tax rate for 2026 is expected to be 20.9%. All in, we expect comparable earnings per share growth of 7% to 8% versus $3 in 2025. We also expect to generate approximately $12.2 billion of free cash flow in 2026 through approximately $14.4 billion in cash from operations, less approximately $2.2 billion in capital investments. Driven by our free cash flow generation, we have an unwavering commitment to reinvest in our business and grow our dividend. Approximately 25% of our expected 2026 capital investment relates to company-owned barters. And the remaining capital investment is primarily growth oriented, it, which includes building capacity for our concentrate and finished goods businesses. For the past 63 years, we've grown our dividend. In 2025, dividends paid as a percentage of adjusted free cash flow was 73%, which is relatively in line with our long-term payout ratio of 75%. With respect to acquisitions and share repurchases, we'll stay both flexible and opportunistic. On acquisitions, while our track record has not been perfect, we have created a lot of value in aggregate. Just over half of our portfolio of $32 billion brands was created inorganically. Most of these were both on acquisitions that we later scaled ourselves. On share repurchases, we continue to repurchase shares to offset any dilution from the exercise of stock options by employees in the given year. Putting it all together, our capital allocation policy prioritizes both discipline and agility to drive the long-term health of our business and create value for our stakeholders. Finally, there are some considerations to keep in mind for 2026. Due to a calendar shift in the first quarter, while we'll have six additional days, we expect approximately half of the benefit to be offset by concentrate shipment cycling and timing. Also, the fourth quarter will have six fewer days. Additionally, we will have lost equity income due to divesting our interest in Coca-Cola Consolidated in November 2025. Lastly, assuming the pending sale of Coca-Cola beverages applicant closes during the second half of 2026, subject to registry approvals, we expect the impact from acquisitions and divestitures to be back half-weighted. To sum it all up, we're focused on continuing what's working and transforming where needed to deliver on our 2026 guidance and create enduring value for our share owners. We believe we're well positioned to drive top line growth, margin expansion, cash generation, and returns over the long term. Next week at Cagney, I'll elaborate further on how we will do this. With that operator, we are ready to take questions.

Ladies and gentlemen, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press star 1 again. In the interest of time, we ask that you please limit yourself to one question. If you have any additional questions, you may rejoin the queue. Our first question comes from Dara Mosenian with Morgan Stanley. Your line is open.

Hey, good morning. First, best wishes, James, after a remarkable run under your stewardship, and congratulations to Enrique. I just wanted to get into the nitty-gritty of the 4% to 5% organic sales growth outlook for 2026. was just hoping to get some perspective on the balance between price mix and volume in 2026. You know, first, obviously, the Q4 price mix result was dragged down by geographic mix and timing, as you mentioned. What's a more normalized price mix run rate as you build up the geographies and look forward to 2026, particularly in a tough consumer environment and, you know, relative to what you'd view as a more underlying run rate on price mix coming out of Q4. And then just on the volume side, impressive 1% result in the quarter against a tough 2% comparison, but you do have the Mexico drag on volume from taxes in 26, perhaps some concentrate timing, still difficult consumer environments. So just wanted to get perspective on volume prospects also for 26 and just, again, the the balance between volume and price mix that's implied in the organic sales growth guidance.

Well, thanks, Dara, and I was slightly worried that you were gonna try and cram in all the questions for the next few years in your last opportunity to ask me one. Let me unpack a little, particularly, as you mentioned, the 2025 price mix and then roll into 26. And again, I'll take this opportunity on my last call to make an exhortation to people, particularly as it relates to price mix and inventory, given our position in the supply chain, to always try and take a four-quarter view. What do I mean by that? In the fourth quarter, pricing came in at 1%, but actually it was really four. Underlying pricing, as John mentioned, was really 4%. It was this 3% negative mix, partly with the IG, partly with some geographies and categories. You know, in previous quarters, it's been plus two or plus three if you look across the last four quarters that mixed number is even so it's always useful to take a four quarter view on the mixed components if you if you take that you what you see is four percent underlying price and one percent volume so you see the fourth quarter in simple terms as a five percent revenue uh growth uh quarter which is very much what we've been delivering through 25 and back into the previous year. So I think that's super important to bear in mind. And then if we thought historically, as inflation has moderated, as we have stabilized, seeing that some of the economies around the world stabilized, we have been expecting our goal forward guidance to see a more balanced mix of volume and price. And so I think that's what you kind of see for 2026, is a view that we still are going to be top-line driven. We see strength in everything we're doing, and I know Enrique and John will unpack that in Cagney, but we are just being a little more realistic, as we always are, on where we need to improve to get that volume in 2026, and being a degree of prudence, some of the weaknesses would need to resolve themselves and bounce back, India, China, some of ASEAN, a few countries in Europe, and then we've got the kind of the Mexican tax headwind starting We have just been what we believe to be realistic and prudent, but still super important. We are leaning into growth. We believe we have all the strategies and execution to drive top line growth well into the future.

Our next question comes from Steve Powers of Deutsche Bank. Your line is open.

Great and good morning. Congrats again both to you, James, on your past accomplishments and Enrique on the accomplishments to come. I guess following up on Zara's question related to, you know, the 4% to 5% haul for 26. You know, James, a few months ago you talked about some study that you framed as light drizzle in the macro environment that seems to be trending worse for consumers. I guess, how have you assumed those general operating conditions trend in the year ahead? And as we think about the balance of that 4% to 5% growth in 26, from a different perspective, you talked about volume versus price. I guess the contributions that you're expecting from emerging versus developed markets in the year ahead would be helpful as well.

Sure. Yes, I think line drizzle was the December phrase, which I still think is true relative to what people were expecting then. Look, and I think this mix between volume and price also, look, we believe we will get back to balance. I'll call it 50-50. What is important this year is to know that the places that need to get better are the contributors of long-term volume growth, but India is a long-term contributor of volume growth, so that needs to build back, and we would expect that to ramp up during the year. Similarly, China was a little weaker in the fourth quarter than it had been during the year, and we're looking to see that build back up through the year. And a couple of other, ASEAN and European markets. So the bid that will, and obviously the Mexican tax headwind is more likely to be impactful at the beginning of the year in the first quarter, and then to some extent mitigate as we execute the actions to try and offset the impact. All of that would lead you to conclude that we need to see the actions executed and see that volume start to build back in some of the volume-driving countries through the year. So, therefore, you might see a little more price at the beginning of the year and a little more balance towards the end of the year, if that makes sense. But in the end, we're looking, and the guys will talk about it in Cagney next week, to get more growth, more brands, and more markets.

Our next question comes from Lauren Lieberman with Barclays. Your line is open.

Great, thanks. Good morning, everyone. I wanted to talk a little bit about profitability. North America operating margin expansion, another strong year, and now at 30% margins for the first time in this operating unit. And I think when I've asked, John, when I've asked you about it in the past, you're always like, oh, it's a one-off. You know, don't get too excited about profitability in North America. But it does look like there's been structural change. So just wanted to talk about now maybe long-term view of that. Is this, you know, an appropriate level of margin? Is there more incremental reinvestment you need to do? Do you feel like you're kind of over-earning in some way profitability-wise, or is there more work to do and more expansion that can happen?

Thanks, Lauren. I'd answer it in two parts, take the opportunity to talk about it at the total company level. We have, I think in the last eight years, have averaged about 60 basis points a year operating margin expansion. We have talked frequently about the fact that it's not a fluke, there's lots of levers that we have in the supply chain, marketing investment, we run the business. And North America has been, I guess, our star performer over the last few years in tapping into all three sources, and they expect and we expect, there are folks running North America, we expect them to continue to sort of lead the way because there's still tremendous opportunity to, as Enrique said earlier, just get a little bit better every day.

We'll talk again next week on sort of a deeper dive into some of these levers and how they

have been and will continue to help us deliver on our long-term algorithm, which, as you know, implies modest expansion on a going-forward basis.

Our next question comes from Chris Carey with Wells Fargo. Your line is open.

Good morning, everyone. I wanted to bring the discussion back to some of these markets in 2025, which caused a bit more volatility for the business. Some are getting a bit better. I think India, China still has opportunities to get better. Mexico will be implementing the excise tax, so there could be some volatility around volume. I wonder if we just take a step back, can you perhaps comment on some of the markets which have been a bit more challenging or more volatile, perhaps as usual, in 2025, and how we should be thinking about overcoming those challenges in the 2026, both because the compares get easier, but also some of the actions that you'll be driving in these markets. James, you had mentioned a few in a prior comment, but I wonder if we could just focus in on this concept and, you know, talk a bit more strategically about the sequential development and some of the actions that you're thinking through. Thank you.

Please, it's Enrique here. I'll take this one. So, first of all, I think it's important to look at the numbers on Q4 because it tells a lot about what you mentioned in terms of how we got puts and takes all over the world and strong hold markets to continue to have the momentum and others that we expected to do better and for different reasons, they were on ups and downs during the year, as James had mentioned, China, India's of the world, and Maxwell this year with a, you know, that's coming with the taxes, but I'll cover how we're going to actually leverage the whole world performance to continue to deliver towards our overall, okay? But the all-weather strategy has been working for us because we leverage not only the ones that have the momentum to offset these other markets. If you go specifically into the three that we mentioned,

in APEC, when we have China, for instance,

being one big market for us, volumetrically speaking, but it has been also a market that we have seen the consumer sentiment and expand being below pre-pandemic dates. Nevertheless, we continue to gain share in the market. We took a strategy there to build this for the long term, and we continue to have a good inroads on the quality leadership on the core, and we continue to win in that. So it's more of a long-term market, and we expect on our plans to continue to drive that next year, but with some volatility in that. With China, with India, we had, last year, different impacts from industry tax, dynamics, weather, and it was a market that we continue to invest also ahead of the curve, and we believe that we can get back on track in 2026. Finally, the Delta market, excellent. You have to look at the context of Latin America. We have had wins in the past in different markets, and the system together was able to build the right capabilities and address it through very good foundations on RGM. That's exactly what we're doing there in Mexico, and leveraging the other markets that have the right momentum to get that algorithm going. So, in a nutshell, we believe that we have plans to continue to navigate well and the all-weather strategy should put us in a good shape to deliver against the LTGEM.

Our next question comes from Filippo Falorni with Citi. Your line is open.

Hi, good morning, everyone, and congrats from me as well to both James and Enrique as you step in on your role. So maybe first just a little bit expansion on the expectation for the North America business into 2026, especially around a few points. Obviously, you have incremental fair light capacity coming in early in the year, so maybe give us a sense of how you're thinking that would play out throughout the year and the growth for the brand that you're expecting. And also, as we get into the summer, you obviously have the World Cup and a lot of activation around that event. Any expectations around potential uplift there? And then lastly, last year in Q1, you had the negative temporary issue with Hispanic consumer around the video. So anything that you can think there to potentially see some more back in the first part of the year in North America.

We'll take that one as well. Look, North America in 2005, Remember that we started the year with the challenge that you mentioned, some fake news that impacted, you know, part of the portfolio, and then we started to go on a sequential basis, improving quarter and quarter. We finished, as you see the numbers there, on Q4 on a positive note and with good momentum across the portfolio. So we continue to grow on the core, on sparkling, especially on Coca-Cola trademark, and then we look at also Fairlife continued the momentum. We have also very encouraging news on our dual strategy on sports with Powerade and body armor, not only gaining share, but volume in the market. Smart water continues to do well as well. Also, from a portfolio basis and a consumer resilience, we believe that we have the good momentum and the plans to continue to build an environment that didn't change so far in terms of the low-income consumer being pressured and also allowing us to continue to drive these across the different parts of the country to continue to grow and do better every day with our bottomers executing that strategy. So, in a nutshell, we believe that we have good plans to continue the momentum that we have. And we expect in 2025 to continue the momentum that we built in 2026 with the momentum that we built in 2025.

Our next question comes from Rob Odenstein with Evercore. Your line is open.

Great. Thank you very much. And please let me echo everyone's congratulations. So maybe moving in a slightly direction over on the FX side, could you maybe remind us, you know, your approach to currency? It's a little complicated, different than some other companies. You know, what the guidance entails and how that is, where I think I'm seeing a 1% tailwind to the top line, but 3% on the bottom line, if I read that correctly. So what is driving that? And then, you know, what is your philosophy in terms of currency benefits, whether you'll be investing that into the business or dropping it to the bottom line, perhaps making up for some of the, you know, as James mentioned before, you know, being stuck at $2 for a number of years due to currency. Is this a chance to catch up on that? And then if I may, you know, just kind of looking out, given your hedging policy multi-year, based on where we are today, do you see currency being, you know, a similar tailwind to 27 or greater or less than

than the 26 guidance thank you uh thanks robert indeed it's been a while since we've talked about fx and even longer simply talk about fx tailwind so um good to just anchor any conversation on fx to our broader our broader growth equation and you know at the root of that equation is a focus for us to win in each of our markets over time. And for that to happen, we have got to be able to invest in a consistent manner, which, among other things, allows us to price appropriately against both the local macros and the competitive backdrop. So that's part one, and sort of finding that part two is at the total enterprise level, we are committed to growing our USR earnings as we've demonstrated over the last few years. And so our hedging program is an enabler to manage loss of these tensions. So, on the one hand, it removes the burden of sort of non-market-driven fluctuations at the local level so that local markets kind of focus on winning, and secondly, it provides clarity to us at the enterprise level to the task at hand to grow U.S. operations. So, that's sort of the strategic rationale as to why we hedge, and the question of any given year is, okay, how are we going to execute optimally against that? And for 2026, we've taken advantage today of some uncertainty regarding the U.S. dollar to lock in benefits. The tailwind that we reflected in our guidance today is driven largely by a weaker dollar in somewhere larger emerging markets, most notably in Latin America and South Africa. And the point about how far we go, while we're well hedged against the G10 currencies, decisions on emerging market currencies are very much linked to the economics of doing it. As you well know, the further out you go, the more challenging the economics become. So we're well hedged through 26 on the G10, and we're as hedged as it makes sense economically on the emerging markets. So all of that is incorporated into the guidance, you know, 1% NSR, 3% net income, and we feel good about that being our going-in position for the year. As I say, it helps local markets focus on what they need to focus on, and it certainly gives us our homework here at the enterprise level to deliver a U.S. dollar earnings growth.

Our next question comes from Andrea Teixeira with J.P. Morgan. Your line is open.

Thank you. Good morning, everyone. So, James, congrats on your amazing run as CEO and now as Chairman and wishing Enrique continued success now as CEO. My question is on the impact of SNAP changes in the U.S. and then a clarification regarding the Mexican tax, any initial read from the trade, and did that inform your conservative stance for organic sales growth in 2026?

Sure. Thanks, Andrea. I'll do SNAP, and then Enrique can talk about the strategy in Mexico. Look, overall SNAP, I think, is going to end up being manageable. It's a relatively small number seen from a global basis, and we think it's manageable at the U.S. level. Clearly, we think that consumers should be allowed to choose, but regulation is regulation. What we think will happen is people will choose to spend the cash they've got on certain things and they'll use the SNAP credits where they're applicable, and at the end of the day, what that all boils down to is we have to make them the brands and the beverages that they want to have and want to be able to spend their disposable income on, and that just puts the challenge on us to give them the category, the beverage, the brand, the pack size, the price point, the mugs works for them, and net-net, we see it as a manageable impact in the U.S. and overall globally. So, I'll let him make a comment on how he's approaching the Mexican tax situation.

Yeah, on the Mexican one, yes, clearly it is a headwind that came to us in the beginning of the year already implemented, but this is a market that's known as well that the We have a system that has been for years working tremendously aligned building the foundations of RGM and allowing us to play that impact of the taxes across the different packages, prices, and channels in a way that optimizes how we actually go and try to be in front of our consumers and our customers with an impact that continues to be acceptable by the customer and the customers moving forward. That is another point that helped us as well in 2026 is the fact that Mexico will host the World Cup event, the biggest event on earth in terms of engagement with consumers and customers as well. And we are diving up our campaigns there from day one, from Gen 1, we already had the campaign in place. On top of that, we celebrate 100 years of the system in Maxwell as well. all of that helps us to go and navigate through what is a headwind, but with all the tools that we have in place as a very focused system to navigate that throughout the year. Remember that as well, we have other tax increases, you know, in the past, which we learned from the mistakes and the right movements that we made in 2014 moving forward. And we apply those learnings this time as well, you know, to navigate these in the best way.

Our next question comes from Peter Galpo with Bank of America. Your line is open.

Hey, guys. Thanks for the question. John, I was hoping just from your prepared remarks to dig in on a couple of topics. I know we've talked about the mix impact, but maybe you could just give a little bit more detail. I think you specifically called out some timing of investments, and there was a bit of commentary more focused on EMEA and AsiaPAC, so just any additional detail there. And then just the second part, John, in your remarks, I think you talked about maybe a headwind at the equity income line, not only related to some of the refranchising, but some other initiatives, just how much of a hit that is to the EPS for the year would be helpful as we try to think about bridging operating income down to EPS. Thanks very much.

Thank you. On the first question, yeah, maybe just a little bit more detail. There were three primary drivers and each of them roughly works about the same, about a point each. So we've had the impact of some of the emerging markets growing faster than the developed

markets, and typically the emerging markets are slightly lower margin.

Secondly, in a couple of the developed markets, we've had some categories that in the fourth quarter of a lower margin nature, not dramatically, but still lower, performing better than the higher ones. So that was another point. And then the third point relates primarily to just some of the timing of marketing investments primarily to both factor in the end of the year and the fast start programs that we have have in place around the world. So it's the first time that I can remember going back about how many quarters to have three of those types of effects hitting us in the same quarter. So it's a one-off more than something to think of as a trend going forward. And as James said earlier, you take a step back and look at the full year and the way we built our guidance for 2025 I think reflects more full year view and that being a good benchmark in which to glide for next year, sorry, for this year. I'm sorry, in a second, you had a second question. Yes. Yes, so the primary driver that I alluded to is the sale of the consolidated shares towards the end of the year. And there's a lot of puts and takes that go into the equity income line, so I won't get into all of that detail, but the primary driver is the lost equity income on consolidators.

Our next question comes from Peter Grom of UBS. Your line is open.

Great. Thank you, and good morning, everyone, and congratulations to you both as well. I have a cash flow question. So just maybe with a much stronger year expected on the cash flow front in 26, we'd love an update on your capital allocation strategy, and specifically whether you would consider leaning further into any of your four strategic priorities in the year ahead.

Great. Great topic, you know, I think the starting point here is to look at the underlying drivers over the last few years. We've had some unusual items, the IRS tax deposit and the Fairlife contingent consideration, which I know on a year-to-year basis has been a little confusing perhaps. But for me, what I look at is the underlying momentum coming from the business and and we see that having had a positive impact on a steady basis um as i mentioned in my prepared remarks there's you know there's a very clear picture as to how we want to best utilize the cash that is coming in um when you go when you go to the the top two line items we are investing something in the business as the business needs. About a quarter of our capital investment this year and last year goes towards the franchises that we still own in Africa and India. We have highlighted investments we're making in our finished goods businesses elsewhere in the world, notably with Fairlife. and we also have the opportunity in a number of parts of the world to shore up capacity for a concentrate business as it continues to be challenged in some areas to supply market needs. So that's been a priority, will continue to be, and there's not a lot of controversy about it. Secondly, with regards to the dividend, we continue to be very proud of the 63-year track record of growing the dividend, and we are supportive of that trend continuing. And then what's left longer term is the idea of being both flexible and opportunistic when it comes to any inorganic opportunities and share repurchasing. For 2026 in particular, the idea of going into 2026 is to have as much optionality as possible to manage some specific variables, one of which is the outcome of the tax case that we have had with the IRS for many years, which we expect to certainly have a significant and milestone towards the end of this year early next year and and it's important for us to to feel good about whatever outcome happens either in that or in other areas that we have what we need to to deal with it so 26 very clear on on the flexibility needed and in the meantime we'll continue to to focus the rest of the company on the core business driving cash so that those longer term priorities, as I just outlined, can get the attention that they deserve.

Our next question comes from Kamil Gajrawala with Jeffries. Your line is open.

Hi, I'd like to maybe step back to maybe we started on the questions of the call, which is just sort of understanding the direction of travel for 2026. You know, it looks like from an EPS perspective, you grew 4% with a 5% hit from FX. This year you're expecting 7% to 8% with a three-point benefit. So making adjustments there, it looks like quite a slowdown. So just curious what you're – you know, what's underneath that? Is it investment? Are you just being conservative because it's the beginning of the year? Or is there something else in there?

Yeah, let me take that and complement the comments already made. You know, the starting point is what do we think the top line can deliver? And when you look at the guidance we provided, the 45%, it reflects the sum of many parts around the world. We have momentum in some markets, and we've had challenges in other markets coming out of 25. And we expect to be able to continue in the markets going well and over the course of the year to have the kind of recovery that this guidance deserves. So that's part one, really important. Secondly, we've had a longstanding conversation on staying ahead of the curve when it comes to investing in our brands, in our markets, with our bossing partners, and also in how we run the company. You know, Enrique will talk next week about some of the priorities we have to continue to build capabilities. And so there is a bias going into next year to invest somewhat ahead of the curve. And then the third area is just to keep in mind is that we have – we've called it out, but it's important that some structural cycling as well as some of the below the line items that I mentioned earlier regarding Coke. So, you know, we're being, I think we're being prudent going into 26 given the dynamics at the top line level and given the work that's underway in a number of key markets to get get momentum and particularly to get volume momentum to where it needs to be.

Our next question comes from Charlie Hicks of Redburn. Your line is open.

Thank you. And yeah, just echoing, congrats, James, Enrique, and Robin on your new roles. All the best for future. And yeah, great innings, James. I just wanted to ask about your move into the role of executive chairman. It sounds slightly more involved than the traditional chairman role. Is that interpretation correct? And could you maybe just outline what your key priorities are in the role? And then I was just curious, Enrique, on your comments on more to do regarding innovation, I'm sure we'll hear more next week, so I don't want to jump the gun too much, but could you perhaps just give some high-level views of where you see the most opportunity and how to execute on those in the context of a slightly weaker global consumer environment? Thank you.

Thanks, Charlie. So I'll share a few thoughts and then pass the baton figuratively and literally to Enrique to talk about the innovation question. I think executive chair is clearly more than just a full-on independent non-executive chair. The easiest way to understand it is that there are two buckets, one which is things that the executive chair can do basically at the asking of the CEO to help him operate the business. So there's a whole load of stakeholders and people and things. He has a very full agenda, the CEO has a very full agenda at the Coca-Cola Company. We're standing there's a large team of help, and so there's an opportunity to help bridge that transition by continuing to carry the can on a set of things. But let's be clear, the person running the company is the CEO, the executive chair is there to help on certain issues where the CEO needs it, and that's part of the transition. The other piece of the puzzle is the chair is involved because the board's involved. I mean, the chair is also the representative in a way of the board, that are a set of issues around capital allocation, risk, long-term talent, where the board is obviously interested, and there I can help work with Enrique and the team on making sure that we have the best possible dialogue at the board level on those issues that's the simple equation

jack and uh charlie and soon and you're spot on we're going to share more next week at scogging i'm very excited about it but let me give you a hint to hear about what what i meant by that on the early remarks look we we're definitely making great progress on innovation uh over the years You know, you remember that we went from 400 brands to about 170, bruning those brands to continue to accelerate the pace on bigger and better brands, you know, connected to consumers. And part of that was to improve our, you know, batting ratio there out of the park on innovation, which we have been doing. We've been very disciplined about getting that success ratio better than the past. And we believe that now, just looking at the insights from the different markets, that the world continues to be really open and the consumers looking for more innovation at the local level as well. And that's where we believe that we can make a bigger difference. When I say that we want to be closer to the consumer is to understand them from a local point of view and not give that opportunity to start in a local market, something that can turn into a billion-dollar brand later and then scale. I think we've put a lot of effort and discipline on how to prune the brands, learn how to grow them, and leverage scale. Now it's about bringing more of those localness opportunities into the family and then accelerate. So that's the extent you know that we announced today as well two more billion dollar brands to the family, so Innocence and Santa Clara from Mexico. That's a great example of something that started locally. and then we invested behind it. Now there are bigger brands, and a lot of the learnings from that can be turned into other places to bring more brands to that family. So more next week, but that's the idea. It's an evolution for where we are with an acceleration of innovation being more creative to the LTGN.

Our next question comes from Carlos Leboy with HSBC. Your line is open.

Yes, thank you. Good morning, James, John, Enrique, and thank you for the focus, clarity, and the growth. You previously said that you reinvest capital, you raise from refranchising back into those markets. Should we expect a step up in marketing and innovation investments in India? And on a related basis, can you discuss for India the extent of the digital investment that you've been able to make in B2B platforms and advanced analytics and so forth for the purpose of more granular execution by point of sale before you re-franchise it? And what's your vision for how this demand fulfillment capability is going to evolve there?

Okay. Carlos, great to hear from you. So, let me step back here because it's not only about India. I think it's a strategy that has been working for us, and John mentioned, you know, two questions before, that this idea of investing together, both lawyers and us ahead of the curve, it's number one, showing the belief that the system has on this industry, and on top of that, that we invest with that same idea in every market we operate in. That's very unique from the core core core core. Every market has one mission, and it's important. So, India, specifically speaking, we not only have been investing with our bottling partners ahead of the curve. I think we mentioned a few hours back, you know, the level of investment that we had on new lines that has been unprecedented, that's just to give an idea about that investment. And we'll continue to invest because this is a market for the future. We're still building the industry in there, and that's why we need to continue to invest ahead of the curve because it's more almost on the model that building will come, right, because really on these markets, you can actually continue to push forward. Digital, it's part of this. It continues to be an opportunity in India. Why? Number one, because digitally speaking, the country infrastructure is very high as well as being an acceleration across, you know, the whole of India in the last few years. And we also We've also invested behind it with a lot of focus on not only engaging with the consumer through data, tech, and AI, but also from a customer point of view, developing a platform that we called Coke Buddy, which is a platform that connects the bottler to the customers through a digital platform that has been growing from day one. We still have, you know, one-fourth of the entire outlet space that we can reach in India, but we think that we're already deploying digital ordering, AI, a genetic AI to determine the next best SKU, and the next phase of that growth will be an end-to-end digital platform that will connect not only the consumer, the customers, but the experiences to translate that engagement into transactions. So India for those reasons is a market that on that space, it's gonna continue to be ahead of the pack as well.

Great, thanks very much everyone. To summarize, we're well positioned, I think to achieve our objectives both in 2026 and the long term. It's a great foundation that's been set. As we've talked, this is the time for seamless leadership transition and I have every confidence Enrique is the best person to help lead the Coca-Cola company, the team, and the system on our next chapter of growth. Thank you very much for your trust, your investment in the company, and for joining us this morning. Thank you, Jess.

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