- Maintaining its long-term high
single-digit EPS growth target while adjusting its net revenue
target to mid single-digit growth and replacing its operating
income metric with profit before tax (All long-term growth
targets are on a comparable currency neutral basis)
- Streamlining and simplifying its
operating model to drive the speed and agility of the organization
and provide line of sight to aligned compensation targets
- Expanding productivity initiatives
with $3 billion in expected annualized savings by 2019
- Refocusing on its core business
model of building the world’s greatest beverage brands and leading
an unmatched global system of strong local bottling
partners
The Coca-Cola Company today announced actions to reinvigorate
growth. These actions support the previously announced five
strategic priorities to restore momentum and the Company’s
long-term growth target of high single-digit comparable currency
neutral EPS.
“We are taking decisive action to position The Coca-Cola Company
to continue delivering long-term value for our shareowners,” said
Muhtar Kent, Chairman and Chief Executive Officer of The Coca-Cola
Company. “We have taken a hard look at our progress to date and
realize that while the strategies we laid out at the beginning of
the year are on the right track, the scope and pace of our actions
must increase. In addition to announcing an expanded productivity
program, we are streamlining our operations and further aligning
our incentive plans to deliver against our growth objectives. We
are also evolving our 2020 Vision to reflect these changes. Within
this context, we are maintaining our long-term high single-digit
EPS growth target, while changing our operating income metric to
profit before tax and adjusting our net revenue target to mid
single-digit growth.
“While we expect the macroeconomic environment to remain
challenging through 2015, we are confident in our ability to return
to sustainable growth over the long term. This confidence is
supported by the attractive long-term dynamics of our industry and
the unparalleled reach of our brands and our global system. We are
fully dedicated to strengthening our position as the world’s
leading beverage company.”
KEY INITIATIVES
The Company introduced the following initiatives to reinvigorate
growth:
Streamlining and simplifying its operating model to speed
decision making and enhance local market focus. These
organizational changes, along with the previously announced changes
being made to long-term incentive metrics, will empower employees
and link line-of-sight accountability to business results.
Expanding its current successful productivity program by
targeting annualized savings of $3 billion per year by 2019.
This productivity program will focus on four key areas:
- Restructuring the Company’s global
supply chain, including manufacturing in North America;
- Implementing zero-based budgeting
across the organization;
- Streamlining and simplifying its
operating model; and
- Driving increased discipline and
efficiency in direct marketing investments.
As a result of these productivity initiatives, the Company
expects to fund the marketing initiatives and innovation required
to deliver sustainable net revenue growth. These savings will also
support margin expansion and increased returns on invested capital
over time.
Refocusing on its core business model of building the world’s
greatest beverage brands and leading an unmatched global system of
strong local bottling partners. This will include refranchising
the majority of Company-owned North American bottling territories
by the end of 2017 and a substantial portion of the remaining
territories no later than 2020.
Strategically targeting brand and growth investments that
leverage its global strengths. This includes previously
announced plans to improve the quantity and quality of marketing,
as well as making future investments that will target markets and
categories where brands remain underfunded relative to the
opportunity. The Company has a disciplined strategy for incremental
investments, prioritizing spending in markets where the Coca-Cola
system has the right price/package architecture and execution
capabilities in place. We will also continue to grow investments in
our still beverages while leveraging our new partnership model.
Focusing on driving revenue and profit growth across markets
while providing local operations with a clear line of sight and
aligned compensation targets. Beginning in 2015, revenue growth
will be added as a metric in the Company’s incentive plans. The
Company will adjust the relative importance of volume and price/mix
in each market in order to drive the right behavior for each market
type.
LONG-TERM GROWTH TARGETS AND FINANCIAL IMPLICATIONS
As described above, the Company is maintaining its long-term
high single-digit EPS growth target, adjusting its net revenue
target to mid single-digit growth, and targeting profit before tax
in place of operating income to account for increased equity income
growth from its new partnership model. Going forward, the Company
will have a profit before tax target of 6% to 8%.
“While investments made in recent months are yielding early
signs of progress, we recognize that our five strategic priorities
and the initiatives announced today will take time to produce
results,” Kent added. “We remain confident in the vibrancy of the
nonalcoholic ready-to-drink beverage industry and are determined to
make the necessary changes to sustainably meet or exceed our
long-term growth targets. At the same time, we are cautious in our
near-term outlook given challenging macroeconomic conditions. In
this context, our 2020 Vision will remain focused on delivering
value growth ahead of the industry for our system.”
The Company expects to be below its long-term EPS growth target
in 2014 and, based on the current outlook, does not expect
comparable currency neutral EPS growth in 2015 to be significantly
different from 2014. Further, the Company expects fluctuations in
foreign currency exchange rates to have an unfavorable impact on
its results in 2015. Based on current spot rates, existing hedge
positions, and the cycling of 2014 rates, the Company expects a mid
single-digit headwind on profit before tax in 2015. Longer term,
the Company intends to return to delivering against its stated
growth targets.
Supplemental materials that support the prepared remarks for the
Company’s conference call with investors and analysts today, Oct.
21, 2014 at 9:30 a.m. EDT, will be available for download on the
Company’s website, http://www.coca-colacompany.com in the
“Investors” section.
About The Coca-Cola Company
The Coca-Cola Company (NYSE: KO) is the world's largest beverage
company, refreshing consumers with more than 500 sparkling and
still brands. Led by Coca-Cola, one of the world's most valuable
and recognizable brands, our Company's portfolio features 17
billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola
Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del
Valle. Globally, we are the No. 1 provider of sparkling beverages,
ready-to-drink coffees, and juices and juice drinks. Through the
world's largest beverage distribution system, consumers in more
than 200 countries enjoy our beverages at a rate of 1.9 billion
servings a day. With an enduring commitment to building sustainable
communities, our Company is focused on initiatives that reduce our
environmental footprint, support active, healthy living, create a
safe, inclusive work environment for our associates, and enhance
the economic development of the communities where we operate.
Together with our bottling partners, we rank among the world's top
10 private employers with more than 700,000 system associates. For
more information, visit Coca-Cola Journey at
www.coca-colacompany.com, follow us on Twitter at
twitter.com/CocaColaCo, visit our blog, Coca-Cola Unbottled, at
www.coca-colablog.com or find us on LinkedIn at
www.linkedin.com/company/the-coca-cola-company.
Forward-Looking Statements
This press release may contain statements, estimates or
projections that constitute “forward-looking statements” as defined
under U.S. federal securities laws. Generally, the words “believe,”
“expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and
similar expressions identify forward-looking statements, which
generally are not historical in nature. Forward-looking statements
are subject to certain risks and uncertainties that could cause
actual results to differ materially from The Coca-Cola Company’s
historical experience and our present expectations or projections.
These risks include, but are not limited to, obesity concerns;
water scarcity and poor quality; evolving consumer preferences;
increased competition and capabilities in the market place; product
safety and quality concerns; increased demand for food products and
decreased agricultural productivity; changes in the retail
landscape or the loss of key retail or foodservice customers; an
inability to expand operations in emerging and developing markets;
fluctuations in foreign currency exchange rates; interest rate
increases; an inability to maintain good relationships with our
bottling partners; a deterioration in our bottling partners'
financial condition; increases in income tax rates, changes in
income tax laws or unfavorable resolution of tax matters; increased
or new indirect taxes in the United States or in other major
markets; increased cost, disruption of supply or shortage of energy
or fuels; increased cost, disruption of supply or shortage of
ingredients, other raw materials or packaging materials; changes in
laws and regulations relating to beverage containers and packaging;
significant additional labeling or warning requirements or
limitations on the availability of our products; an inability to
protect our information systems against service interruption,
misappropriation of data or breaches of security; unfavorable
general economic conditions in the United States; unfavorable
economic and political conditions in international markets;
litigation or legal proceedings; adverse weather conditions;
climate change; damage to our brand image and corporate reputation
from negative publicity, even if unwarranted, related to product
safety or quality, human and workplace rights, obesity or other
issues, even if unwarranted; changes in, or failure to comply with,
the laws and regulations applicable to our products or our business
operations; changes in accounting standards; an inability to
achieve our overall long-term growth objectives; deterioration of
global credit market conditions; one or more of our counterparty
financial institutions default on their obligations to us or fail;
an inability to realize additional benefits targeted by our
productivity and reinvestment program; an inability to renew
collective bargaining agreements on satisfactory terms, or we or
our bottling partners experience strikes, work stoppages or labor
unrest; future impairment charges; multiemployer plan withdrawal
liabilities in the future; an inability to successfully integrate
and manage our Company-owned or -controlled bottling operations;
global or regional catastrophic events; and other risks discussed
in our Company’s filings with the Securities and Exchange
Commission (SEC), including our Annual Report on Form 10-K for the
year ended December 31, 2013 and our subsequently filed Quarterly
Reports on Form 10-Q, which filings are available from the SEC. You
should not place undue reliance on forward-looking statements,
which speak only as of the date they are made. The Coca-Cola
Company undertakes no obligation to publicly update or revise any
forward-looking statements.
The Coca-Cola CompanyInvestors and Analysts:Tim
Leveridge, +01 404-676-7563orMedia:Petro Kacur,
+01 404-676-2683
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