Global Unit Case Volume Declined 3% for the
Quarter and 6% for the Full Year
Net Revenues Declined 5% for the Quarter and
11% for the Full Year; Organic Revenues (Non-GAAP) Declined 3% for
the Quarter and 9% for the Full Year
Operating Income Grew 8% for the Quarter and
Declined 11% for the Full Year; Comparable Currency Neutral
Operating Income (Non-GAAP) Grew 14% for the Quarter and Was Even
for the Full Year
Fourth Quarter EPS Declined 29% to $0.34, and
Comparable EPS (Non-GAAP) Grew 6% to $0.47; Full Year EPS Declined
13% to $1.79, and Comparable EPS (Non-GAAP) Declined 8% to
$1.95
Cash from Operations Was $9.8 Billion for the
Full Year, Down 6%; Full Year Free Cash Flow (Non-GAAP) Was $8.7
Billion, Up 3%
Company Provides 2021 Financial Outlook
The Coca-Cola Company today reported fourth quarter and full
year 2020 results, including sequential improvement in volume
trends. The company also provided an update on its strategic
transformation initiatives. Together with its bottling partners,
the company continues to focus on moving swiftly to execute against
system priorities and to win in the marketplace.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20210210005485/en/
"In 2020, employees from across The Coca-Cola Company and its
bottling system worked tirelessly to learn and adapt amidst a
global crisis," said James Quincey, chairman and CEO of The
Coca-Cola Company. "The progress we made in 2020, including the
actions taken to accelerate the transformation of our company,
gives us confidence in returning to growth in the year ahead. While
near-term uncertainty remains, we are well-positioned to emerge
stronger from the crisis, driven by our purpose and our beverages
for life ambition."
Highlights
Quarterly / Full Year
Performance
- Revenues: For the quarter, net revenues declined 5% to
$8.6 billion and organic revenues (non-GAAP) declined 3%. This was
driven by a 3% decline in price/mix while concentrate sales were
even. The quarter included two additional days, which resulted in
an approximate 2-point benefit to revenue growth. The company
continued to see improvement in trends compared to prior quarters.
For the year, net revenues declined 11% to $33.0 billion and
organic revenues (non-GAAP) declined 9%. This was driven by a 7%
decline in concentrate sales and a 2% decline in price/mix.
- Margin: For the quarter, operating margin, which
included items impacting comparability, was 27.2% versus 23.9% in
the prior year, while comparable operating margin (non-GAAP) was
27.3% versus 24.8% in the prior year. For the full year, operating
margin, which included items impacting comparability, was 27.3%
versus 27.1% in the prior year, while comparable operating margin
(non-GAAP) was 29.6% versus 27.9% in the prior year. For both the
quarter and the full year, operating margin expansion was primarily
driven by effective cost management, partially offset by top-line
pressure and currency headwinds.
- Earnings per share: For the quarter, EPS declined 29% to
$0.34, and comparable EPS (non-GAAP) grew 6% to $0.47. For the full
year, EPS declined 13% to $1.79, and comparable EPS (non-GAAP)
declined 8% to $1.95. Fourth quarter and full year comparable EPS
(non-GAAP) performance included the impact of 9-point and 6-point
currency headwinds, respectively.
- Market share: For the quarter, the company's value share
in total nonalcoholic ready-to-drink (NARTD) beverages was even,
while for the full year, the company lost NARTD value share. For
both the quarter and the full year, the company gained underlying
share in both at-home and away-from-home channels, which was offset
by negative channel mix due to continued pressure in away-from-home
channels, where the company has a strong share position.
- Cash flow: Cash from operations was $9.8 billion for the
year, down 6%, largely driven by pressure on the business due to
the coronavirus pandemic and a currency headwind. Full year free
cash flow (non-GAAP) was $8.7 billion, up 3%, primarily driven by
lower capital expenditures versus the prior year.
Business Environment and Strategic
Actions Update
Global unit case volume trends remain closely linked to consumer
mobility and the health of away-from-home channels. While volume
trends have broadly remained resilient amidst the continuing
uncertainty surrounding the coronavirus pandemic, the company
experienced incremental pressure in December and into the early
part of this year due to a resurgence of the coronavirus in many
parts of the world. Through early February 2021, the company has
experienced a volume decline of mid single digits globally, with
continued elevated levels of sales in at-home channels being more
than offset by pressure in away-from-home channels.
The company has made progress on its strategic transformation
through the pandemic, including rewiring to become a more networked
organization. The company is confident in its ability to gain share
and consumers, maintain strong system economics, strengthen its
reputation with key stakeholders and position the organization to
win. The organization is on a path to emerge stronger and is
positioned for long-term success.
While there are still uncertainties related to the pandemic, the
company has greater visibility into its future recovery and is
confident that its actions will continue to mitigate the effects of
the crisis. As a result, the company has reinstated guidance and is
providing its 2021 outlook.
Company Updates
- Update on ongoing tax litigation with the IRS: In
November 2020, the U.S. Tax Court issued an opinion in the
company's 2015 litigation with the Internal Revenue Service (IRS)
involving transfer pricing tax adjustments. The court predominantly
sided with the IRS. The company believes that it will ultimately
prevail in the litigation based on the technical and legal merits
of the company's position, its consultation with outside advisors,
and the company's belief that the IRS' retroactive imposition of
tax liability is unconstitutional. Accordingly, the company is not
recording a provision for the full amount of the potential
liability. However, in consideration of the tax consequences
resulting from the application of alternative transfer pricing
methodologies that could be applied by the courts in resolving the
litigated matters, the company recorded a tax reserve of $438
million for the year ended Dec. 31, 2020. While the company
disagrees with the IRS' position and intends to vigorously defend
its position, it is possible that some portion or all of the
adjustment sustained by the U.S. Tax Court could ultimately be
upheld. The company has therefore calculated the potential
liability of approximately $12 billion that could result from the
application of the IRS' proposed transfer pricing methodology to
relevant foreign licensees, including taxes and interest accrued
through Dec. 31, 2020. The company would also have an incremental
annual tax liability for future years that would increase its
underlying effective tax rate (non-GAAP) by approximately 3.5%. For
more details, refer to Exhibit 99.2 to the company's Form 8-K filed
with the Securities and Exchange Commission on Feb. 10, 2021.
- Building loved brands and continuing to step up
execution: During the year, the company prioritized core
brands, which resulted in Trademark Coca-Cola volume growing 1% for
the quarter, led by Coca-Cola® Zero Sugar with volume growth of 3%
for the quarter and 4% for the full year. In away-from-home
channels, the company took action to capture available
opportunities. In the United States, the company developed new,
multi-serve takeout bundles for drive-through channels and
innovated with touchless Freestyle equipment. In digital channels,
the company continued to invest in omnichannel opportunities. For
example, the company capitalized on the booming trend of retail
online-to-offline (O2O) in China. By focusing on digital execution
excellence and core SKU availability, the company gained 3 points
of value share during the year across these platforms, which are
leading overall digital commerce growth in China.
- Networked organization model to improve agility and maximize
scale: The company continued to make progress in establishing
its networked organizational model, which is enabling the company's
strategic transformation. The networked design includes a drive
toward greater standardization and simplification, with technology
and data at the forefront. Comprised of operating units, category
teams, Platform Services and center functions, the company's new
organizational structure combines the power of scale with local
execution. The new structure has resulted in an approximate 11% net
reduction in roles, excluding the Bottling Investments and Global
Ventures operating segments. The structure became effective Jan. 1,
2021, with ongoing work to stand up Platform Services continuing
through the first half of 2021.
- Progress toward a better shared future: The company
continues to remain focused on its long-term sustainability goals,
creating value for a broad spectrum of stakeholders. Building on
our World Without Waste strategy of creating a circular economy for
our packaging materials, the Coca-Cola system has set a goal to
reduce virgin PET plastic usage by a cumulative 3 million metric
tons by 2025, based on the projected growth of the system's virgin
PET use. With respect to water, the company joined several
multi-stakeholder initiatives during 2020, including the Water
Resilience Coalition, a CEO-led initiative to reduce water stress
by 2050, and WASH4WORK, which is addressing water, sanitation and
hygiene challenges in the workplace. During 2020, the company also
launched a racial equity plan in the United States to address
inequities in local markets and empower people to take action. More
information is available at
https://coca-colacompany.com/shared-future/diversity-and-inclusion/racial-equality.
Operating Review – Three
Months Ended December 31, 2020
Revenues
and Volume
Percent Change
Concentrate
Sales1
Price/Mix
Currency
Impact
Acquisitions,
Divestitures and
Structural
Changes, Net
Reported
Net
Revenues
Organic
Revenues2
Unit Case
Volume
Consolidated
0
(3)
(2)
0
(5)
(3)
(3)
Europe, Middle East & Africa
(1)
(5)
(1)
1
(7)
(6)
(4)
Latin America
6
(4)
(16)
0
(14)
2
2
North America
(6)
3
0
1
(1)
(3)
(7)
Asia Pacific
(7)
(1)
3
0
(5)
(8)
(4)
Global Ventures3
(2)
(14)
2
0
(14)
(17)
(9)
Bottling Investments
(4)
6
(3)
(1)
(3)
2
(7)
Operating Income and EPS
Percent Change
Reported
Operating
Income
Items
Impacting
Comparability
Currency
Impact
Comparable
Currency
Neutral2
Consolidated
8
4
(9)
14
Europe, Middle East & Africa
13
(5)
(5)
23
Latin America
(14)
1
(25)
10
North America
32
9
0
23
Asia Pacific
(2)
0
3
(6)
Global Ventures
—4
—
—
—
Bottling Investments
35
22
(12)
25
Percent Change
Reported EPS
Items
Impacting
Comparability
Currency
Impact
Comparable
Currency
Neutral2
Consolidated EPS
(29)
(35)
(9)
14
Note: Certain rows may not add due to rounding.
1 For Bottling Investments, this represents the percent change
in net revenues attributable to the increase (decrease) in unit
case volume computed based on total sales (rather than average
daily sales) in each of the corresponding periods after considering
the impact of structural changes.
2 Organic revenues, comparable currency neutral operating income
and comparable currency neutral EPS are non-GAAP financial
measures. Refer to the Reconciliation of GAAP and Non-GAAP
Financial Measures section.
3 Due to the combination of multiple business models in the
Global Ventures segment, the composition of concentrate sales and
price/mix may fluctuate materially on a periodic basis. Therefore,
the company places greater focus on revenue growth as the best
indicator of underlying performance of the segment.
4 Reported operating loss for Global Ventures for the three
months ended December 31, 2020 was $9 million. Reported operating
income for Global Ventures for the three months ended December 31,
2019 was $118 million. Therefore, the percent change is not
meaningful.
Operating Review – Year Ended
December 31, 2020
Revenues
and Volume
Percent Change
Concentrate
Sales1
Price/Mix
Currency
Impact
Acquisitions,
Divestitures and
Structural
Changes, Net
Reported
Net
Revenues
Organic
Revenues2
Unit Case
Volume
Consolidated
(7)
(2)
(2)
0
(11)
(9)
(6)
Europe, Middle East & Africa
(8)
(5)
(2)
0
(14)
(13)
(6)
Latin America
(2)
2
(14)
0
(15)
(1)
(2)
North America
(7)
2
0
2
(4)
(5)
(7)
Asia Pacific
(10)
(2)
0
0
(11)
(12)
(9)
Global Ventures3
(13)
(9)
1
0
(22)
(23)
(13)
Bottling Investments
(13)
2
(4)
(2)
(16)
(10)
(15)
Operating Income and EPS
Percent Change
Reported
Operating
Income
Items
Impacting
Comparability
Currency
Impact
Comparable
Currency
Neutral2
Consolidated
(11)
(5)
(6)
0
Europe, Middle East & Africa
(7)
(2)
(4)
(1)
Latin America
(11)
(1)
(21)
12
North America
(5)
(10)
0
6
Asia Pacific
(7)
0
(1)
(6)
Global Ventures
—4
—
—
—
Bottling Investments
(14)
(21)
1
6
Percent Change
Reported EPS
Items
Impacting
Comparability
Currency
Impact
Comparable
Currency
Neutral2
Consolidated EPS
(13)
(6)
(6)
(2)
Note: Certain rows may not add due to rounding.
1 For Bottling Investments, this represents the percent change
in net revenues attributable to the increase (decrease) in unit
case volume after considering the impact of structural changes.
2 Organic revenues, comparable currency neutral operating income
and comparable currency neutral EPS are non-GAAP financial
measures. Refer to the Reconciliation of GAAP and Non-GAAP
Financial Measures section.
3 Due to the combination of multiple business models in the
Global Ventures segment, the composition of concentrate sales and
price/mix may fluctuate materially on a periodic basis. Therefore,
the company places greater focus on revenue growth as the best
indicator of underlying performance of the segment.
4 Reported operating loss for Global Ventures for the year ended
December 31, 2020 was $123 million. Reported operating income for
Global Ventures for the year ended December 31, 2019 was $334
million. Therefore, the percent change is not meaningful.
In addition to the data in the preceding tables, operating
results included the following:
Consolidated
- Price/mix declined 3% for the quarter, driven by negative
channel and package mix due to the impact of the coronavirus
pandemic. Concentrate sales were 3 points ahead of unit case
volume, primarily due to two additional days in the quarter (a
2-point benefit) and cycling the Brexit-related inventory reduction
in the prior year. For the full year, concentrate sales were 1
point behind unit case volume, primarily due to the timing of
shipments across operating groups.
- Unit case volume declined 3% for the quarter and 6% for the
year, as continued strength in at-home channels was more than
offset by coronavirus-related pressure in away-from-home channels.
While developing and emerging markets remained resilient in the
quarter, developed markets continued to be under pressure. Category
cluster performance was as follows:
- Sparkling soft drinks declined 1% for the quarter and 4% for
the year. For both the quarter and the full year, the decline was
primarily due to pressure in the fountain business in North America
and away-from-home channels in Western Europe due to the
coronavirus pandemic. This was partially offset by growth in China,
Brazil and Nigeria. Trademark Coca-Cola grew 1% for the quarter and
declined 1% for the year. Trademark Coca-Cola growth in the quarter
was driven by positive performance in most operating groups.
Coca-Cola® Zero Sugar grew 3% for the quarter and 4% for the
year.
- Juice, dairy and plant-based beverages declined 2% for the
quarter and 9% for the year, as solid performance by Simply® and
fairlife® in North America was more than offset by a decline in
Minute Maid® in the fountain business. Volume was further impacted
by pressure in the Asia Pacific and Europe, Middle East &
Africa operating groups.
- Water, enhanced water and sports drinks declined 9% for the
quarter and 11% for the year, led by a broad-based decline across
operating groups, primarily due to a decline in lower-margin water
brands.
- Tea and coffee declined 15% for the quarter and 17% for the
year, primarily driven by coronavirus-related pressure on Costa®
retail stores, along with pressure on the doğadan® tea business in
Turkey.
- Operating income grew 8% for the quarter and declined 11% for
the year, which included items impacting comparability in addition
to currency headwinds. Comparable currency neutral operating income
(non-GAAP) grew 14% for the quarter and was even for the year,
driven by effective cost management across operating groups offset
by top-line pressure due to the coronavirus pandemic.
Europe, Middle East &
Africa
- Price/mix declined 5% for the quarter driven by negative
channel and package mix in Europe. Concentrate sales were 3 points
ahead of unit case volume, largely due to two additional days in
the quarter and cycling the Brexit-related inventory reduction in
the prior year.
- Unit case volume declined 4% for the quarter, primarily due to
coronavirus-related pressure in away-from-home channels in Europe
and South Africa, partially offset by growth in Western Africa and
Turkey.
- Operating income grew 13% in the quarter, impacted by headwinds
from comparability items and currency. Comparable currency neutral
operating income (non-GAAP) grew 23% driven by effective cost
management.
- For the year, the company lost value share in total NARTD
beverages, primarily due to share losses across most category
clusters, partially offset by a share gain in sparkling soft
drinks.
Latin America
- Price/mix declined 4% for the quarter driven by negative
package mix along with cycling solid pricing in the prior year.
Concentrate sales were 4 points ahead of unit case volume, driven
by two additional days in the quarter and cycling the timing of
shipments in Brazil in the prior year.
- Unit case volume grew 2% for the quarter, led by solid
performance in sparkling soft drinks in Brazil, partially offset by
a decline in away-from-home channels in Mexico.
- Operating income declined 14% in the quarter, which included
items impacting comparability and a 25-point currency headwind.
Comparable currency neutral operating income (non-GAAP) grew 10%,
primarily due to effective cost management across all business
units.
- For the year, the company gained value share in total NARTD
beverages in addition to all category clusters.
North America
- Price/mix grew 3% for the quarter, as solid growth in juice and
dairy finished-goods brands was partially offset by pressure in the
fountain business and away-from-home channels. Concentrate sales
were 1 point ahead of unit case volume, driven by two additional
days in the quarter partially offset by the timing of
shipments.
- Unit case volume declined 7% for the quarter, as strong growth
in sparkling soft drinks in at-home channels along with growth in
AHA®, fairlife® and Powerade Zero® was more than offset by a
decline in the fountain business.
- Operating income grew 32% in the quarter, which included a
tailwind from items impacting comparability. Comparable currency
neutral operating income (non-GAAP) grew 23% driven by pricing and
effective cost management.
- For the year, the company lost value share in total NARTD
beverages due to coronavirus-related restrictions in away-from-home
channels, where the company has a strong share position.
Asia Pacific
- Price/mix declined 1% for the quarter, primarily due to
negative channel mix in key markets. Concentrate sales were 3
points behind unit case volume due to cycling the timing of
shipments in China in the prior year, partially offset by two
additional days in the quarter.
- Unit case volume declined 4% for the quarter, primarily due to
adverse weather in Southeast Asia along with coronavirus-related
pressure in away-from-home channels in most markets in the region.
Volume performance included solid growth in sparkling soft drinks
in China and India.
- Operating income declined 2% in the quarter, which included a
3-point currency tailwind. Comparable currency neutral operating
income (non-GAAP) declined 6%, driven by pressure in away-from-home
channels in Japan and Australia, partially offset by effective cost
management.
- For the year, the company's value share in total NARTD
beverages was even as a share gain in the tea and coffee category
cluster was offset by share losses in the other category
clusters.
Global Ventures
- Net revenues declined 14% in the quarter, which included a
2-point currency tailwind. Organic revenues (non-GAAP) declined
17%. The revenue declines were primarily driven by
coronavirus-related pressure on Costa® retail stores, partially
offset by strong performance in Costa® Express machines in the
United Kingdom.
- The operating loss in the quarter was primarily driven by
coronavirus-related pressure on Costa® retail stores.
Bottling Investments
- Price/mix grew 6% for the quarter driven by pricing and trade
promotion optimization in most markets.
- Unit case volume declined 7% for the quarter, primarily due to
the impact of the coronavirus pandemic across key markets and
adverse weather in Southeast Asia.
- Operating income growth of 35% in the quarter included a
tailwind from items impacting comparability and a headwind from
currency. Comparable currency neutral operating income (non-GAAP)
grew 25% driven by solid pricing and effective operating expense
management.
Outlook
The 2021 outlook information provided below includes
forward-looking non-GAAP financial measures, which management uses
in measuring performance. The company is not able to reconcile full
year 2021 projected organic revenues (non-GAAP) to full year 2021
projected reported net revenues, full year 2021 projected
comparable net revenues (non-GAAP) to full year 2021 projected
reported net revenues, full year 2021 projected underlying
effective tax rate (non-GAAP) to full year 2021 projected reported
effective tax rate or full year 2021 projected comparable EPS
(non-GAAP) to full year 2021 projected reported EPS without
unreasonable efforts because it is not possible to predict with a
reasonable degree of certainty the actual impact of changes in
foreign currency exchange rates; the exact timing and amount of
acquisitions, divestitures and/or structural changes; and the exact
timing and amount of comparability items throughout 2021. The
unavailable information could have a significant impact on our full
year 2021 reported financial results.
Full Year 2021
The company expects to deliver organic revenue (non-GAAP)
percentage growth of high single digits.
For comparable net revenues (non-GAAP), the company expects a 2%
to 3% currency tailwind based on the current rates and including
the impact of hedged positions.
The company's underlying effective tax rate (non-GAAP) is
estimated to be 19.5%.
Given the above considerations, the company expects to deliver
comparable EPS (non-GAAP) percentage growth of high single digits
to low double digits versus $1.95 in 2020. This includes a 3% to 4%
currency tailwind based on the current rates and including the
impact of hedged positions.
The company expects to deliver free cash flow (non-GAAP) of at
least $8.5 billion through cash flow from operations of at least
$10.0 billion and capital expenditures of approximately $1.5
billion. This does not include any potential payments related to
the ongoing tax litigation with the IRS.
First Quarter 2021
Considerations
Comparable net revenues (non-GAAP) are expected to include a
minimal currency impact based on the current rates and including
the impact of hedged positions.
Comparable EPS (non-GAAP) is expected to include an approximate
2% currency headwind based on the current rates and including the
impact of hedged positions.
The first quarter has five additional days compared to first
quarter 2020.
Notes
- All references to growth rate percentages and share compare the
results of the period to those of the prior year comparable
period.
- All references to volume and volume percentage changes indicate
unit case volume, unless otherwise noted. All volume percentage
changes are computed based on average daily sales for the fourth
quarter, unless otherwise noted, and are computed on a reported
basis for the full year. "Unit case" means a unit of measurement
equal to 192 U.S. fluid ounces of finished beverage (24 eight-ounce
servings), with the exception of unit case equivalents for Costa®
non-ready-to-drink beverage products which are primarily measured
in number of transactions. "Unit case volume" means the number of
unit cases (or unit case equivalents) of company beverages directly
or indirectly sold by the company and its bottling partners to
customers or consumers.
- "Concentrate sales" represents the amount of concentrates,
syrups, beverage bases, source waters and powders/minerals (in all
instances expressed in equivalent unit cases) sold by, or used in
finished beverages sold by, the company to its bottling partners or
other customers. For Costa® non-ready-to-drink beverage products,
"concentrate sales" represents the amount of coffee beans and
finished beverages (in all instances expressed in equivalent unit
cases) sold by the company to customers or consumers. In the
reconciliation of reported net revenues, "concentrate sales"
represents the percent change in net revenues attributable to the
increase (decrease) in concentrate sales volume for the geographic
operating segments and the Global Ventures operating segment after
considering the impact of structural changes. For the Bottling
Investments operating segment for the fourth quarter, this
represents the percent change in net revenues attributable to the
increase (decrease) in unit case volume computed based on total
sales (rather than average daily sales) in each of the
corresponding periods after considering the impact of structural
changes. For the Bottling Investments operating segment for the
full year, this represents the percent change in net revenues
attributable to the increase (decrease) in unit case volume after
considering the impact of structural changes. The Bottling
Investments operating segment reflects unit case volume growth for
consolidated bottlers only.
- "Price/mix" represents the change in net operating revenues
caused by factors such as price changes, the mix of products and
packages sold, and the mix of channels and geographic territories
where the sales occurred.
- First quarter 2020 financial results were impacted by one less
day as compared to the same period in 2019, and fourth quarter 2020
financial results were impacted by two additional days as compared
to the same period in 2019. Unit case volume results for the
quarters are not impacted by the variances in days due to the
average daily sales computation referenced above.
Conference Call
The company is hosting a conference call with investors and
analysts to discuss fourth quarter and full year 2020 operating
results today, Feb. 10, 2021, at 8:30 a.m. ET. The company invites
participants to listen to a live webcast of the conference call on
the company’s website, http://www.coca-colacompany.com, in the
"Investors" section. An audio replay in downloadable digital format
and a transcript of the call will be available on the website
within 24 hours following the call. Further, the "Investors"
section of the website includes certain supplemental information
and a reconciliation of non-GAAP financial measures to the
company’s results as reported under GAAP, which may be used during
the call when discussing financial results.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210210005485/en/
Investors and Analysts: Tim
Leveridge, koinvestorrelations@coca-cola.com
Media: Scott Leith,
sleith@coca-cola.com
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