Coca-Cola records Q3 2024 results, leverages tech tools to drive innovation
By Ralph Tathagata
The Coca-Cola Company has reported third quarter 2024 results while scaling digital capabilities to enhance strategic growth. The global consumer goods giant’s net revenues declined 1% to $11.9 billion, and its organic revenues grew 9%.
Its revenue performance included 10% growth in price/mix and a 2% decline in concentrate sales. Concentrate sales were 1 point behind unit case volume, primarily due to the timing of concentrate shipments.
In a statement, James Quincey, Chairman and CEO of The Coca-Cola Company, said, “Our business continues to demonstrate resilience in the face of a dynamic external environment.
“We are encouraged by our year-to-date performance and our system’s ability to manage near-term challenges while also remaining focused on long-term growth opportunities.”
The company’s operating margin, which includes items impacting comparability, was 21.2% versus 27.4% in the prior year, while comparable operating margin (non-GAAP) was 30.7% versus 29.7% in the prior year. The operating margin decline was driven by items impacting comparability, including a charge of $919 million related to the remeasurement of the contingent consideration liability to fair value in conjunction with the acquisition of fairlife, LLC (“fairlife”) in 2020, as well as currency headwinds. Comparable operating margin (non-GAAP) expansion was primarily driven by strong organic revenue (non-GAAP) growth and the impact of refranchising bottling operations, partially offset by currency headwinds.
However, its Earnings per share (EPS) declined 7% to $0.66, while comparable EPS (non-GAAP) grew 5% to $0.77. EPS performance included the impact of a 13-point currency headwind, while comparable EPS (non-GAAP) performance included the impact of a 9-point currency headwind.
The company gained value share in total nonalcoholic ready-to-drink (NARTD) beverages, while its cash flow from operations and free cash flow (non-GAAP) were $2.9 billion and $1.6 billion, respectively. Both decreased versus the prior year, primarily due to a $6.0 billion payment made to the IRS related to ongoing tax litigation (“IRS tax litigation deposit”). Free cash flow excluding the IRS tax litigation deposit (non-GAAP) was $7.6 billion, a decrease of $294 million versus the prior year, largely due to higher other tax payments, higher capital expenditures and cycling working capital benefits, partially offset by strong business performance.
In addition to clear leadership within the sparkling portfolio, The Coca-Cola Company is using its refreshed resource allocation capabilities to prioritize growing brands across categories that add incremental system profit over the long term. The company’s water, sports and tea offerings consist of 12 billion-dollar brands and have added nearly $9 billion in incremental brand value since 2020.
This year’s Olympic and Paralympic Games demonstrated how the Coca-Cola system can leverage partnerships to drive business growth across its non-sparkling portfolio to create connections and drive recruitment. During the opening and closing ceremonies in Paris, a special-edition smartwater gold bottle for athletes quickly garnered 42 million impressions and contributed to smartwater gaining both volume and value share during the quarter.
The company continued to advance Powerade’s global “Pause is Power” platform, which is yielding positive results. Outside of the United States, Powerade is the leading sports beverage brand and, year-to-date, has expanded distribution and grown value share through global system activations. Across markets such as Europe and Eurasia and Middle East, Fuze Tea’s “Made of Fusion” platform has led to year-to-date retail value growth three times faster than the industry.
Finally, in North America, Topo Chico leads the premium sparkling water category in both volume and value share. Successful innovations like Topo Chico Sabores are attracting new consumers to the brand, leading to an over 20% increase in household penetration so far this year. The company remains relentlessly consumer centric and continues to position its total beverage portfolio to meet evolving consumer needs.
While scaling digital capabilities to enhance the strategic growth flywheel, the company is leveraging leading digital technologies, including generative AI, analytical AI, machine learning and other tools, to drive agility, productivity and innovation. In partnership with WPP, the company is an early adopter of innovative generative AI technology from NVIDIA, which provides AI-powered capabilities to create customizable, on-demand advertisements and point-of-sale imagery.
This globally scalable platform offers customers instant access to locally relevant marketing materials that reflect personalized food preferences and passion points, resulting in more effective consumer messaging, faster speed to market and lower costs. To elevate the company’s revenue growth management capabilities, the company is piloting an AI-based price-pack-channel optimization tool to drive increased volume and retail sales.
Additionally, AI is being used in the research and development process to enhance product innovation success rates and speed to launch by more accurately gauging consumer reactions through multi-sensorial facial coding during product testing. This data helps the company identify and incorporate unique flavors and aromas into new product developments, including the successful reformulations of Sprite and Fanta. Together, these initiatives demonstrate the company’s commitment to harnessing the power of digital technology as a capability, a medium and a disruptor to drive sustainable growth and deliver exceptional value to consumers and customers.
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