Coca-Cola continued its evolution into a total beverage company in 2017, beating expectations in a year of transformation and paving the way for an even stronger 2018, CEO James Quincey told analysts today during a conference call.
Full year organic revenue was up 3 percent, and underlying profit before tax was up 9 percent. The company gained global value share in both the fourth quarter and full year as it expanded its consumer-centric drinks portfolio, scaling successes from market to market, acquiring new brands and embracing more of an experimental, test-and-learn approach to product launches.
“But while we did what we said we’d do, it’s still not as much as we aspired to,” Quincey said, citing the need to speed revenue and earnings per share (EPS) growth.
Here are six 2017 highlights Quincey shared during today’s call:
‘Lift and Shift’: Two of Coke’s leading U.S. brands, Honest Tea and smartwater, rolled out in multiple international markets in 2017. The company also acquired AdeS, Latin America’s leading plant-based beverage brand, and is expanding it into Europe.
Zero = Hero:
A Stronger System and Culture: Quincey said the company accelerated its return to an asset-light organization by completing a nearly decade-long process to return ownership of its U.S. bottling operations to local partners, and refranchising two previously owned bottlers in China. Additionally, the two largest Coke bottlers in Japan merged. “Ultimately, all of these strategic and tactical changes mean something very important,” Quincey said. “We’re assertively shifting our culture… the way we operate, the way we look at growth opportunities, and the way we engage with our bottling system.”
Entrepreneurial Focus: The company is complementing its major brand launches by identifying products and categories aligned with changing consumer tastes. “We adjusted our price/pack offering to adapt to the explosion of online ordering in China,” Quincey said. The company also is applying its Venturing & Emerging Brands (VEB) model of investing in, nurturing and growing up-and-coming brands in select European markets.
U.S. Tax Changes ‘Encouraging’ for Coke’s Global Business: “Clearly, tax reform will make investing in the U.S. more attractive and should spur economic growth,” Quincey said. “Tax reform also eliminates a longstanding distortion due to the former U.S. worldwide tax system, which will make it easier for our company to manage its cash and debt balances.” Quincey noted that, over the next eight years, the lower effective tax rate will be mostly offset by the required annual cash payments on the $4.6 billion tax charge Coke recorded in Q4 2017.
Growth with Conscience: Coca-Cola recently announced an industry-first goal to collect and recycle the equivalent of every bottle or can it sells globally by 2030. The company also is increasing the amount of recycled content in its packaging, and working to make all of its packaging fully recyclable. The ambitious sustainable packaging goal follows Coke’s 2016 announcement that it was the first Fortune 500 beverage company to give back to nature and communities more than 100 percent of the water used to make its drinks.
“We must grow with conscience,” Quincey said. “And therefore, become a total beverage company that grows the right way, because it is the correct thing to do for both consumers and our business.”