The Coca-Cola Co. 4Q23: Organic Rev +12%, Global Unit Case +2%, Price/Mix +9%

Mar 19, 2024 | Corporate Insights, No Bull Economics

Coke reported that North American consumer spending in aggregate is holding up well although its unit case volume declined -1% as growth in juice, value-added dairy, plant-based beverages & legacy Coca-Cola was more than offset by a decline in water, sports, coffee, and tea. While inflationary pressures are moderating or stabilizing across most of Coke’s markets, the cumulative impact of inflation is pressuring certain consumer segments who are seeking value. Resultantly, Coke increased its affordability offerings throughout 2023 sufficient to win volume & value share.

Consumer/Macro

  • While aggregate US consumer spending power has held up well compared to some other developed markets, a section of the population has suffered a real spending power squeeze from the inflationary effect, driving them to purchase more affordable individual packs & multipacks for at-home consumption.
  • In contrast, Coke is marketing premium products to consumers with higher incomes & plenty of spending power.
  • Net/net, management reported a fractional volume softening through 2023 which is expected to reverse during 2024 as income starts to exceed inflation and consumer confidence improves.
  • Management reported a “renormalization” of channel mix such that the post-covid rebound in away-from-home is starting to moderate while at-home regains ground.

Sales & Marketing

  • +12% organic revenue growth during the quarter (including +2% of global volume growth) was attributed to: marketing effectiveness; product strength with products like Coca-Cola Zero Sugar, its Sparkling portfolio & Sprite which was named as the number one beverage brand for Gen Z drinkers; and evolving packaging options across more distribution points which is driving both affordability & premiumization (for instance 15-pack mini cans were recently launched in grocery & club channels).
  • Coke’s marketing has shifted from a TV-centric to a digital-first model that balances local intimacy, scale, & flexibility. The company’s digital ad spend mix has increased from less than 30% in 2019 to 60% currently.
  • While it previously took several months to create a TV ad, now the brand can produce thousands of pieces of digital content that are contextually relevant with results able to be measured in real-time.
  • Coke Studio, which taps into the consumer’s passion for music, has been scaled to its top 40 markets. The creation of digital portals to access real music experiences generated 1.2B+ YouTube views & 100MM streams during 2023, resulting in the strong recruitment of Gen Z drinkers.
  • In 2023, Kantar ranked Coca-Cola as the tenth most valuable brand in the world, up seven spots y/y.
  • 2024 organic revenue growth guidance: +6% to +7%.
  • 4Q23 operating income increased +10% y/y & +4% for the full year.

Coke 4Q23 Financials

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