Coca-Cola Aktie

Okay. Welcome back, everybody. Thanks for joining. For the next session, I am very happy to welcome back Coca-Cola Company and President and Chief Financial Officer, John Murphy, to the conference. Thanks, John, for joining us.

Great to be back.

Great to have you back.

Yes.

So a lot has transpired since a year ago, say the least.

Yes.

I guess let's just start and have you kind of level set where you feel like the Coca-Cola Company is and where the system is at the midway point here in '26 as we move into the balance of the year and start thinking about early days into the future.

Yes. So maybe, first of all, great to be back, one of our favorite events. Maybe go back to when we were on the stage a year ago, like there was a lot happening in the world, in the industry, in our system and maybe offer some evidence of how we feel about where we are and where we're going to. We've posted, I think, 4 more quarters of value share to make it 20 consecutive quarters.

We have, I think, been able to both deliver our numbers, but at the same time, continue to invest ahead of the curve to be able to stay on top of what we need to stay on top of to fuel growth. And some of our bottling partners are either here in the room or have been here during the week and it's great to see system performance continue to be strong.

So I say there are sort of 3 pieces of evidence of the health of the system. And yet underneath that, as you know very well, it doesn't happen by accident.

We have had I think a continuation of building strong relationships throughout our ecosystem and a capability set that allows us to bring to life the strategic thrust that we have been talking about for the last number of years, being in our mind as being a total beverage company knowing that we're never probably going to arrive there, but each year, we get closer and having an execution mindset that's broader than I think what we once thought about is end-to-end mindset that ensures that the ultimate competitive advantage that we have as a franchise system comes to life in the marketplace.

Yes, which helps you navigate...

Yes.

A lot of what we're all grappling with. I think one of the other things that happened over the past year was the leadership migration from James to Henrique...

Yes.

And just given how much of a fixture James had become, I think that was viewed as somewhat of a risk for the investment community, but it's gone relatively seamless, and it feels like Henrique has been there forever to this day. So I guess from your vantage point, I guess, do you agree with that? But second of all, where have you seen maybe an evolution in tone or priority or execution focus as Henrique has taken over?

Yes. So I think Henrique would -- he and I have joked it takes 30 years to become an overnight figure in the industry. But he's wonderful to work with. I've known him a long time.

You know, when you pass the baton, a couple of things can happen as we've seen in times gone by in many companies, somebody can drop the baton and you're in trouble or they can take it and run with it. And in the case of Henrique, I think the training that went into in the moment of the passing was such that he was able to take it and run with it.

He brings ambition, he brings new energy and he brings some sharper thinking into areas that we need to be better at. We highlighted a few of those at CAGNY and is following through on it. So for example, we -- at the enterprise level, we have the privilege of managing a portfolio of 200-plus countries, 200-plus brands. And you don't need all of them to be working at the same time to deliver. But that can lead to some complacency in a number of areas that you're not that focused on.

So the idea of demanding more for more markets is something that he's bringing loud and clear into our system. We need to get more from more of our brands. We -- as I say, we're on this journey to be a total beverage company, but the pace at which we're going in some areas is not as good as it should be. And so he's bringing a sharper focus into how -- what do we need to do now to get better.

Innovation is an area that nobody, I think, should ever be satisfied with, just the nature of the topic. And he's already made a number of structural changes to enable our system to do a better job on delivering for this year and next year, but by the same token, investing ahead of the curve smartly on new areas of opportunity and sort of ring-fencing the resources to be able to do that, but not isolating them so that they become forgotten or irrelevant.

So that's something. And then the last thing he's had a passion for a long time, I think, before many is on the whole world of digital that we could talk about for the rest of the day. And there's a lot of good momentum, good work underway. Maybe we can talk about it a little bit more during the conversation.

And again, it's a topic that you can spend a lot of time and a lot of resources and not get very far. And so part of what we're in active dialogue on as we've -- from the outset of this year is to be super clear on where the value is, where we need to over rotate resources to get that value and to bring the same performance management mindset to it as we have with other parts of the sort of the analog business.

Yes. Maybe -- just maybe go a little deeper there right now. I guess what are those areas? And I think it's -- everyone is grappling with this...

Yes.

Everyone's going to -- everyone seems to be assured they're going to get an advantage, which strikes me that potentially nobody gets the advantage. So how do you stand out in that crowd?

I see it -- and I think he would probably say the same thing. I think we see it as being an opportunity to turbocharge what's core to the advantage that we have, which I think is our franchise model. Historically, we have not necessarily leveraged the assets that we both own data, particularly and nor have we had the capability to do so even if we wanted to.

So today, one of our core area, how do we take the, let's say, first-party data that we own, it's proprietary as ours. How do we marry that with the customer data that is proprietary to our bottlers given the amount of engagement they have with millions of customers every day. And then how do we work with some of our partners, whether it's in the United States, Publicis or WPP in other parts of the world, how do we work then to bring that together and then to create a sort of a new intelligence system that allows us to do better what we do today.

Yes. Do better what you already do...

Revenue growth management, you have asked me, I think, since 2019 when I first came here, what innings -- either you or somebody has asked me what innings are we in? And I think it's not a finite game. It's a game of layers. You've got layers that keep compounding to continue to allow us to create value.

And this latest layer is, I would argue, is the AI layer, and it allows us to think very differently and with greater precision and discipline on how we ultimately drive a greater revenue per transaction model. I see it more as a growth enabler than a cost reducer. Not to say that the second is not doable, but I don't think over time, it's going to make the difference in value creation as getting the growth piece right.

Interesting. Okay. To avoid spending the next 30 minutes on this topic, I'm going to move on, but very interesting. You talked about balance for a long time...

Yes.

And I think it's getting increasingly difficult to maintain balance amidst so much volatility. So price versus volume, balance across geographies. You talked a little bit about balance across categories and brands. I guess what does good balance look like in this environment? And what are you doing to strive to achieve and maintain such balance?

Yes. I think it's been a very interesting few years in which we've seen the pendulum swing, let's say, on the top line from a world many, many years ago when it was very much a volume-driven, volume share mindset that drove the equation. We've seen that move to being much more of a value equation. And value is a function of volume and price mix. It's not complicated. It's very easy for a system to pivot to one over time versus the other.

The 2 to 3 years post COVID that saw inflationary pressures across the landscape, we took some deliberate decisions as a system to manage that through pricing. And the elasticity models at the time, we learned were conservative, and we were, I think, reasonably successful at being able to take pricing through our markets without it having an impairment on our ability to stay relevant with our consumer base.

Doing it for a couple of years does not mean it's the right thing to do for many years. And so there's been, I think -- and you continue to learn from what you see and what you hear and what happens in the marketplace. I think the narrative on the consumer being resilient is a nuanced narrative because they're not all the same. We have segments of our consumer base around the world that are under pressure. And we have a choice to stay relevant with them or not.

Longer term, the equation to have a more active and large consumer base, in our view, is the one that is going to create the most value longer term, which brings us back to the balanced conversation. I think it's -- the value creation over time, we believe, is around getting that optimal equation on volume, price and mix.

Relative to our own algorithm, is it a 3 in a 3 or 4 in a 2 or 2 in a 4? When you get into the nitty-gritty of it, I'm not sure I care too much, but what I care most about is the input process is designed to stay relevant with a large consumer base, and the input process allows us to extract the most value from that through a combination of initiatives that can both drive affordability as well as premiumization at the same time.

And so when we get the question on balance and is it -- does that mean you're over rotating to volume or you're over rotating the price? The answer is no. I think the answer is all around making sure that the input process that we have to stay relevant with our consumer base so that over time, we create the most value is where the balance needs to be.

Yes. And I think that has -- in some way, you've meant -- I think this dovetails into what you've described the company and the system aspiring to be on an all-weather system, being able to kind of pull those levers and maintain relative balance through turbulence. I guess what are the system levers? What are you most focused on to -- I was going to use an airplane analogy, but I don't know how to do it. So I guess, what are you most focused on to keep that performance on track, that all-weather performance?

I think personally, there's a few things I'm very focused on. And a lot of this is we've learned. We've learned by experience over the last number of years, for the Spain, as you know, a lot of turbulence. One is, I start with relationships. We orchestrate an incredibly interesting ecosystem of partners, suppliers, bottling partners, customers, other stakeholders, our own people.

And it's been instructive over the last few years to appreciate the power of enduring long-term sustained relationships because they're the ones that when you need help, they're the phone calls you can make. And so staying very aware of that and invested in that is a big area of focus in -- not only in times like this because I think in times like this are the times that we are going to be living in for a long time.

I think the second area that we have a lot of -- I spend a lot of time on then is the resources that are available. If you remember the first year of COVID, one of the imperatives for companies was to actually turn the tap off on resources. And it was instructive going through that to appreciate how easy or hard it was to pivot. And we learned a lot from being able to set up your resource programs so that when you need to pivot, you can. There's no point in wanting to and not being able to.

And so a second big area of focus for me is being comfortable that whatever happens that -- we're not immune, but that whatever happens, we feel good about our ability to pivot and adapt. The most -- like we did not have this latest version of the Middle East crisis on our radar screen in December. And yet to date, our system is navigating through it not perfectly well, but without fear, without trepidation. And when you have that mindset going into these types of environments, I think the chances that you come out with better are much higher. So relationships, resources, talent to be able to make it all happen. There would be the 3 areas, I think I would highlight.

Good. A topic this week in the hallways just because so many of your bottling partners are here is the Coke relative to the bottlers dealing with this environment. And because the burden of most of the frontline cost pressures are first born and most felt by the bottlers. I guess how are you working across the system to manage through those pressures while keeping the demand agenda intact? And I'm just -- I'm also curious, you've talked about digital capabilities at CAGNY, like Fuel Light 360...

Yes.

Does that play into some of the mechanisms to help manage through?

I think it's important to be able to then kind of deconstruct not just the cost side of the equation, but also the revenue side of the equation and how we work -- how do we work together to invest side of the equation because it's not one component that's going to allow us to prevail. It's the interaction among all of them.

When I think about cost pressures, there's a temptation to go to pricing as your answer. Going back to our first part of the conversation, it's not always the answer. And so having a more nuanced and a more complete approach to driving a quality top line that has that balance is one of the reasons it's center of the equation at the moment because it's a big help for both of us.

Cost pressures, we have other ways to work through them. Our cross-enterprise procurement team that services over 90% of the bottling system has been doing a phenomenal job for the last 25 years to create advantage for us. It doesn't make the pressure go away at 100%, but it's one of those component parts to be able to manage through it.

The economic models that we share with our bottling partners provide ways in which we both share the gains of the marketplace as well as help each other to deal with the pains that come from it. And so there's many components to the equation. And I think what's differential today versus perhaps times gone by is not that any one of them was neglected in the past. But I think the way in which our relationship model, go back to what I was saying earlier, is -- has evolved, is we're able to get the compound effect of them working in a much more interactive and effective way than we've had before.

And do digital capabilities and things like Fuel Light 360 help with that? Or is that more of a medium to longer term?

It's more medium to longer term. There's still -- there are some capabilities that are helping at the moment. I would point to our marketing efficiency, for example, we're getting more bang for the buck there using some of our digital capabilities than before. The RGM world, there's some interesting stuff happening there that's been executed as we speak in many of our markets. So it's a -- as I say, it's an enabler to allow us to go better.

The other piece you mentioned all weather, which is something that we've coined internally as well as externally is that I think the mindset of not feeling that you don't have control over things is it's a very limiting -- has a very limiting factor. And so all weather in my mind, is continue to look for ways to expand what you can control. And again, that's a big part, I think, of the -- of this relationship model that we have with our ecosystem partners is to not allow external to totally dominate how you think about growing and operating going forward.

Okay. What about Coke's own margins, not necessarily in the immediate term, but as you think about the medium to longer term, I guess, what are the structural margin drivers that you're most confident and you feel most durable?

We've had an average of, I think, 60 basis points of improvement since 2017, 2018. And I believe that many of the levers that we have can continue to offer that going forward. But it goes back to my last point. I think there's 3 -- for me, there's 3 layers to think about on margins. We've talked many times in the past. And I've been reflecting on this that sometimes the levers that we come across as a list. It's a list, you tick the box and it will deliver or not. But I think it's this power of interaction.

So on the top line -- quality of top line, the working as a system on getting better, as Henrique would say, getting a little better every day, RGM, for example, working on premiumization of the existing portfolio through packaging offerings like this, working on expansion into new categories that offer higher margin per transaction, core power being a good example of that. So that's one area that we look at.

Secondly, is the concentrate model, we are advantaged in the cost side of the equation to an extent. But we also have our homework to do to keep discipline in the cost structure. And I think we're -- we've demonstrated over the last few years that we can do that. And then the third area is this system partnership whereby we can both benefit from the likes of the cross-enterprise procurement team, the likes of co-investing in digital capabilities, co-investing in programs that can help drive the top line over time. So when those work in harmony, they create the compound effect. And I think that architecture managed well is what gives us advantage.

Great. Okay. There are 2 topics that have been an elevated focus this week. I'll take them each in turn. The first one is just the U.S.

Yes.

Because that seems to be the epicenter of most of the consumer demand questions. And the second one was energy in part because it's a category that is booming, and we've got Monster here...

Yes.

Last week, and that's not. So we take those each in turn. So for North America or the U.S., I guess, how are you -- first, just high level kind of your assessment of kind of consumer demand from your perspective. But then for you and your system, there's large occasions to execute behind like the World Cup, fairlife capacity coming online for the support of Power. I guess when you balance those puts and takes, how are you feeling about North American progression?

Underlying the North American, I feel very, very good about what we have as a portfolio, as a system and as a consumer base, I feel good. We have spoken -- it's not just in this conference this week, we have spoken for a couple of years now under the general headline of the consumer is resilient, that seems to pop up every quarter, that some of them are not as resilient as you think.

And so segmenting populations, whether it's in the United States or whether it's in China is a very important capability to build so that you have the opportunity to evolve your portfolio to stay relevant with those segments that are under the most pressure. I think other companies have talked about and some of our partners have talked about if for people earning less than $50,000, $60,000 a year, when you look at -- take a step back and look at the cumulative impact of cost pressures on their typical basket of goods and services, the math is pretty obvious. It doesn't work.

They can't -- they just don't have the purchasing power to be able to -- and so something's got to go. And I think, therefore, the challenge is to figure out how do you become the last guy to go. And the way to do that, I think, is through some of these capabilities that we have alluded to earlier on price pack architectures, channel segmentation, a different kind of engagement model with them, et cetera, et cetera.

So I feel that we will continue to have that in the U.S. And the outlook on the back of this -- of the Middle East situation is still not clear. And so I think it's going to be a topic on all of our agenda as we go into 2027. Beyond that, though, for me, the North America portfolio of brands, our different business models, whether it's the fountain model, our more classic franchise model, some of the finished goods companies present us with this unique portfolio.

And while one has -- I have been asked about in the past about, gosh, does that not create an incredible amount of complexity. But sometimes complexity means that nobody else can do it. and certainly can't do it easily. And in its own way, I think, offers us an advantage in the United States that others do not have -- certainly don't have yet.

I may have been one of those people asking about complexity. A follow-up on that is, is the focus on North America correct? As you think -- as you look around the world, are there other kind of hotspots that you're either more concerned about, I guess, or more excited about?

Like the correct answer is the, and in the question. The North America consumer base is arguably the most attractive consumer base we have, given their propensity to consume and the cumulative purchasing power that exists there. I was in India and China in the first part of this year, and I come away with the same level of excitement about what's happening there.

So part of our job is to figure out the and, and to make it work. We've seen in the developing world more volatility in performance over the last few years. And I'm not sure that I can sit here today and say that's going to stop. But I think the opportunity we have when I look at our global portfolio is to continue to do what's right for these markets longer term.

And I've talked about Asia, particularly in the last 6 to 12 months on priority #1 is to stay as relevant as we can be with the consumer base. with a view that over time, that investment will pay off, it may have, in the short term, a margin impact, but we think it's manageable overall. So I think the -- it is right to continue to ask about North America because it is -- it represents an enormous source of the value creation available to us. But our advantage as a global system, whether it's in Asia, in Europe, in Africa and LatAm is -- and the fact that it's a model that we have partners to help us with is that it allows us to have North America and Asia, and Latin America and Europe.

Okay. So on Eenergy, it's -- just given your relationship with Monster, it's a distinctive -- obviously, growing, but a very distinctive profit pool for the system. I guess from your perspective, CFO of Coca-Cola Company, how does Energy and the Energy segment in Monster contribute both economically and strategically to both Coke and the broader system?

Very important. It's a very, very important piece of the ecosystem. We have a great partner. And I say that not just to say it. I say it because we've had times gone by where we've had our differences. Where we've worked -- we're doing a much better job. And so I'm not sure Hilton and the guy were here earlier, we've got a lot of really good dialogue underway to address some of the legacy challenges of the past, I feel that we're doing.

They do an amazing job with our ecosystem that we actually learn from. And the opportunity available to the entire system is one -- it's part of that compounding loop I was talking about earlier. It creates value for all of us. So the Energy category, as we call it, is a subset of a broader -- this broader sort of fuel need state, so to speak.

And I think the challenge we have is to be very explicit in our own minds as to how to best optimize value creation from this sort of fuel state with these categories, Energy, Sports, Sparkling working in tandem with each other. And that is not something you sort out over breakfast. It's a -- that's a topic that needs constant attention and performance management.

Okay. A couple of minutes left. I want to hit on the requisite question on capital allocation because you're the CFO, so we always have to have one.

Sure.

When you talked about capital allocation recently, you've used the word optionality a lot. And maybe in part because you've got this unresolved tax case.

Correct.

Which creates an increased need of optionality. I guess what does it mean in practice as you think about it? And I guess, are there outcomes that remain nonnegotiable? Are there parts of...

Sure.

The philosophy remain nonnegotiable?

Yes. The word -- I think the word -- I'd like to maybe put a little bit of more definition on the word. It's -- essentially, from my perspective is that whatever the outcome of the tax case that we are best positioned to deal with it. It's not to say that I have a view as to what that outcome will be because we don't. We believe we have a very strong case, but that doesn't mean that the outcome will be what I think it should be.

So my job, our job is to be ready to deal with -- in the best possible way with whatever comes. Now that is not -- that's with a couple of constraints to throw into the pot. The first one is we will continue to invest in the business as it needs. And then the second thing is we appreciate and respect the importance of the dividend growth.

So if you take those two as, let's say, factors that are, to use your language, are not that negotiable, then you're left with 3 options. You can -- with the available capital, you can buy stuff, you can buy more shares or we can reduce our debt over time until we have this outcome. The one that gives us the most optionality in the short term is the third one. And so when I think about optionality, and we've been, I think, consistent on moving in that direction, that's what I mean.

Okay. Great. Probably in closing because we're up against time. So I was going to squeeze one more in, but I'm going to respect the agenda. I guess what would be the 1, 2 or 1, 2, 3 things that you would leave investors with in terms of the most important criteria by which to judge Coca-Cola's success amidst all of the volatility that we're all focused on.

I'd probably go back to where we started actually even from a year ago. I don't know what's going to happen in the next year. I know that something is going to happen that we happen on our radar screen. And so when you're operating in that kind of a world, your objective is to -- and especially in our industry, I think, is to be able to navigate through that steadily. So if in a year's time, we have 4 more quarters of value share, we have a balanced top line and our system is a stronger system. I'd be pretty happy.

Okay. I like it. simple. And we have a minute left, which I will give back to the conference.

Wonderful. Thank you.

Thank you very much, John.

Thank you. Appreciate it.

Hello, and welcome to our 2026 Annual Meeting of Shareowners. I'm James Quincey, Executive Chair of The Coca-Cola Company. On behalf of the Board of Directors and Coca-Cola associates around the world, thank you for your continued investment and trust in our company.

I want to note that today's session is being recorded and may contain forward-looking statements about our business. This year marks an important transition in leadership for the company. I stepped down as CEO at the end of March, and The Coca-Cola Company is now led by CEO, Henrique Braun, and I will continue to serve as executive chair.

I want to begin by saying thank you. Thank you for your confidence in this business and for the privilege of serving as its steward for 9 years.

Looking ahead, I'm confident in the company's future, and that is in no small part because of this leadership transition. The Board started thinking about CEO succession shortly after I started as CEO, and that's because strong management succession planning is one of the most important foundational jobs of the Board of Directors.

Henrique is the right person to lead The Coca-Cola company into its next chapter. He joined the company 30 years ago and has led businesses across multiple continents, build great teams, navigated complexities and earn the trust of our people and our partners. He knows the many facets and important perspectives central to this business from our shareowners and investors to our consumers and stakeholders to the Board. Henrique is also deeply committed to the strategies and values that brought us to where we are today, while focusing on the future. I offer him my congratulations and best wishes.

And I'm pleased to now pass the meeting over to him.

Good morning, everyone, and thank you, James. I'd like to take a moment to recognize James' leadership as CEO and his contribution to our system, making it stronger than it's ever been. James leaves a phenomenal legacy that it's impossible to sum up in just a few words. I would simply say that he has renewed our company's growth and our sense of pride in this incredible enterprise. My congratulations to James on an amazing career as a leader. It's my privilege to continue working with him in his ongoing role as Executive Chairman.

Now let's turn our attention to our business. 2025 was another year that tested the resilience of our system and our system delivered. We navigated a complex global environment marked by geopolitical conflict economic uncertainty and challenges for many consumers. Through it all, we stayed focused on what within our control: our strategy, our brands and our execution.

The result was another year of solid growth and sustained momentum. We delivered 2.2 billion servings of our beverages a day to consumers around the world. The strength of our system and our unrivaled scale is the product of decades of investment in our brands, the partnership of our bottlers and the power of our people.

Our portfolio of great drinks continue to win with consumers across categories and geographies. We have 32 billion-dollar brands, and our marketing, innovation, revenue growth management and execution capabilities continue to improve. The digital future is a big focus, and we are building on a great foundational work.

Our ambition is to embed digital into the core of every connection with consumers, customers and across our system. We also continue to focus on our sustainability aspirations from water stewardship in the most of at-risk areas of the world to packaging circularity to emissions reduction. These aspirations are integrated into how we operate and they matter to the communities we serve around the world.

As we approach Coca-Cola's 140th birthday in just a few days, I'm reminded that the company has prospered because it has never been satisfied with the status quo. A relentless ambition paired with curiosity and agility and deep respect for our history, is what positions The Coca-Cola Company to win for decades to come.

Thank you again for believing in this business. Thank you once again to James for stewarding this great enterprise so well for the past 9 years. And thank you to the Board for entrusting me to lead the company next.

Now let's move to the business portion of today's meeting.

Great. Thank you, Henrique. So back to the business part. As the Chairman of the Board of Directors of The Coca-Cola Company. I'd like to formally open the business meeting of this Annual General Meeting.

Today, we will address 8 business items, which were detailed in your proxy statements. Following that, I will conduct a question-and-answer session in which we will address questions about any of the items in the proxy statement or other business issues you may wish to raise.

For our shareowners logged into the live webcast today, you can submit questions at any time. You do not have to wait until the Q&A has started to submit a question. [Operator Instructions]

Now let me welcome the members of the management team joining me here for this morning's meeting. Of course, we have Henrique Braun, our new Chief Executive Officer; John Murphy, our President and Chief Financial Officer; Monica Howard Douglas, Executive Vice President and Global General Counsel; and Jennifer Manning, Corporate Secretary, Senior Vice President and Associate General Counsel. And I extend a warm welcome to our Board of Directors, who have joined us this morning.

Today, we are also joined by representatives from our independent auditing firm, Ernst & Young LLP. And finally, many of our shareowners as well as employees and alumni have joined the meeting virtually today. I extend a very warm welcome to all of you.

Now on to today's voting matters. The agenda for the meeting and our proxy statement are available on the virtual meeting platform. These will serve as your road map to the business items we'll be discussing today. Also, our rules of procedure can be found on the meeting platform as well. We want to ensure that this meeting is productive and that we foster a constructive dialogue. So please, I ask you to follow the rules of procedure.

Here's how the meeting will flow today. Our Corporate Secretary, Jennifer Manning, will present each of the 3 management proposals. There are also 5 shareowner proposals, which will then be presented by the proponents of each or their representative. The presentation of each shareowner proposal will be limited to 3 minutes. Right after each management and shareowner proposal is presented, I will present the company's response and voting recommendation. Then after all 8 business items have been presented and the preliminary vote is announced, I will conduct a question-and-answer session during which I'll take questions on any of the 8 business items we are voting on today or any other appropriate business topics.

Jennifer, would you please present the secretary's report?

Notice for this annual meeting was furnished to shareowners on March 16, 2026. The proxy statement for this meeting was mailed beginning March 16, 2026, to all shareowners of record as of March 2, 2026. Our inspectors of election from Computershare Trust Company N.A., advised that we have a quorum represented by 85% of the total shares eligible to vote. The polls are now open.

There are 8 matters being voted on. The notice of 2026 Annual Meeting was in the proxy statement lists all voting matters. If you sent in your proxy or have already voted by telephone or Internet, you do not need to take any further action, unless you wish to change your vote. Any shareowners who have not yet voted or who wish to change their vote, may do so by clicking on the voting button on the webcast page and following the instructions.

At the end of the Q&A session, the ballots will be tabulated by our inspectors of election. That concludes the secretary's report, Mr. Chairman.

Thank you, Jennifer. So would you now then please present the first matter to be voted on?

The first matter is the election of directors. The company's bylaws require that directors stand for election each year. Therefore, all of the director nominees listed in your proxy statement are nominated for election for a 1-year term expiring in 2027. Profiles for each of the director candidates begin on Page 13 of the proxy statement.

Thank you, Jennifer. Our Board is composed of a highly capable group of directors who are well equipped to oversee the success of the business and effectively represent the interest of shareowners. The individuals standing for election at this meeting have deep and varied experiences related to matters that are key to our business' success. These include experience in finance, risk oversight, executive leadership, marketing, innovation and emerging markets. The Board of Directors recommends a vote for each nominee.

With that, Jennifer, now let's go to the second item.

The second item is an advisory vote to approve executive compensation. As required, the company seeks a nonbinding advisory vote from shareowners to approve the compensation of the company's named executive officers as described in the compensation discussion and analysis and in the compensation tables of the proxy statement.

Thanks, Jennifer. We take the say-on-pay vote seriously, and we consider the outcome of the advisory vote when making compensation decisions. In deciding how to vote on this proposal, we encourage you to read the compensation discussion and analysis and the compensation tables beginning on Page 48 of the proxy statement. The Talent and Compensation Committee seeks to ensure that our compensation programs continue to align our executives and employees' interest with those of our shareowners. The Board of Directors recommends a vote for the advisory vote on executive compensation.

With that, Jennifer, would you please present the third item?

Our Audit Committee has appointed Ernst & Young LLP to serve as the company's independent auditor for the 2026 fiscal year, and this item seeks ratification of this appointment. The Audit Matters section of our proxy statement, which includes this proposal, begins on Page 83.

Thanks, Jennifer. The Audit Committee and the Board believe audit quality is enhanced by Ernst & Young's significant institutional knowledge and deep expertise of the company's global business. Ernst & Young has consistently served the company and its shareowners well over time, and therefore, the Board recommends a vote for the ratification of their appointment.

Jennifer, would you please now present the next item?

Thank you, Mr. Chairman. The next 5 business items are shareowner proposal. Each shareowner proposal will be presented by the proponent or the representative. The presentation of a share proposal will be limited to 3 minutes, right after each proposal is presented, James will present the company's response and voting recommendations.

The shareowner proposal process is intended to provide shareowners one way in which to constructively engage management and the Board. Our company takes this process seriously. And so we always request the proponents remember that this is not the appropriate part of the meeting to advocate for issues that are not related to the actual voting matter being considered in the shareowner proposal.

We remind our presenters that unrelated issues raised during the presentation of a shareowner proposal will not be addressed by the Chair during this part of the meeting. Following the presentation of these voting matters, we will conduct a question-and-answer session during which these unrelated issues can be raised.

Four of our shareholder proponents have chosen to prerecord the presentation of their proposals. I will note that, at the beginning of these proposals, because there will be a pause for a few seconds while we connect to the recording. So our fourth business item is a shareowner proposal requesting a Sustainability Committee bylaw amendment. The proposal and the company's response begin on Page 89 of the proxy statement.

Steve Milloy, representing the National Center for Public Policy Research, will present the proposal. The proponent has chosen to prerecord their remarks. I will now ask Computershare to play the recording.

Good morning. My name is Steve Milloy. I am the Executive Director of the Free Enterprise Project at the National Center for Public Policy Research. I'm asking you to vote yes on Item 4 on establishing a Corporate Governance and Sustainability Committee to oversee Coca-Cola's foray into environmental sustainability. Coca-Cola sells bottled beverages. It makes sense to be concerned with water, consumer waste and recycling issues, but there are other issues where the company appears clueless. It has, for example, fallen hook, line and sinker for the climate hoax. Coca-Cola aims to reduce corporate emissions in line with a 1.5 degree Celsius trajectory by 2035.

I've worked on climate for 30-plus years. I have no idea what that goal means and neither does anyone in management. The 1.5 degree Celsius goal is arbitrary and not scientific. There is no evidence that emissions are having any effect on global climate and no one is cutting emissions anyway. Emissions are, in fact, increasing with no end in sight as United Nations. Even if we pretend that emissions affect global climate, Coca-Colas are so few that it could shut down today and forever, and it would make no difference.

In fact, the entire United States could stop emitting greenhouse gases today and forever, and the hypothetical climate effect would be unmeasurable. A large part of the ongoing energy and affordability crisis has been caused by undue concern for emissions. Coca-Cola and its customers would, in fact, benefit from lower energy costs, meaning we need more, not fewer emissions. There is not the least reason for Coca-Cola to be concerned with or to be spending corporate resources spreading and virtues signaling about emissions.

Sustainability issue that Coca-Cola is not paying enough attention to is the junk science-based scare about microplastics. Microplastics are a bit of plastics that are ubiquitous in our air, food and water. We've been using plastic for more than 100 years, as plastics degrade in the environment, exposure to microparticles is unavoidable. The good news is microplastics are inert, ingestion and inhalation of them is harmless. Our bodies just excrete them, yet politicized actives groups are trying to scare people. Given that much Coca-Cola product packaging is plastic, something must be done. That is about the scare.

The threat to corporate sustainability as a management is failing to defend the company. As with climate, unchallenged activist fear mongering will lead to senseless government overregulation. Sure to follow with lawfare potentially with multibillion-dollar litigation outcomes. Coca-Cola should be educating the public and policymakers to diffuse the microplastics scare, not spreading the global climate hoax, which you can do nothing about. The solution to navigating sustainability issues is smarter management. In light of management's head in the sand, don't worry we're on it, response to our proposal, we strongly suggest a standing Sustainability Committee staffed with actual experts.

Please vote yes on Proposal #4, to push management to be smarter on sustainability. Thank you.

Thank you for presenting the proposal. Our Board believes an amendment to the company's bylaws is not necessary. We think our current governance framework already provides effective oversight and an additional prescriptive bylaw requirements would add administrative burden without improving decision-making or outcomes. Financial considerations are already embedded in the company's oversight of sustainability programs and goals. Our sustainability initiatives are not discretionary or stand-alone but fully integrated into the company's all-weather strategy. As such, they are evaluated through the normal business planning and capital allocation processes that consider investments, risks, opportunities and long-term value.

And because our work in this space is embedded across the business, it seeks to support short-term actions while setting up the business for long-term sustainable growth. We seek to grow our business by staying close to the consumer across all parts of our strategy. For example, our work on water stewardship in high-risk locations is intended to ensure that we protect the natural resources on which our business depends for continued growth, while driving continuous improvement in the efficiency of our usage.

Similarly, our work on packaging sustainability helps reduce costs through lightweighting, driving efficiency and gives the company a voice with government and stakeholders as new regulations are being developed.

We believe our sustainability strategy helps create value for shareowners by contributing top-line growth, delivering cost savings and strengthening resilience as we adapt to changing consumer expectations and regulatory requirements. Investments in areas such as packaging innovation, water stewardship and energy efficiency support consumer demand, supply chain resilience, brand strength and long-term business constituency. For these reasons, we recommend a vote against this proposal.

Jennifer, please could you present the next item?

Our fifth business item is a shareowner proposal requesting a report evaluating the company's plastics packaging policy. This proposal and the company's response begin on Page 91 of your proxy statement. Paul Chesser, representing the National Legal and Policy Center will present the proposal. The proponent has chosen to prerecord their remarks. I will now ask Computershare to play the recording.

Good morning. I'm Paul Chesser, and I'm presenting this proposal on behalf of the National Legal and Policy Center. We're not here to argue that Coca-Cola should ignore the environment, we're here because we believe the company's plastics packaging policies are not grounded in objective science or rigorous economics and that shareholders are bearing the cost of that gap.

In 2018, Coca-Cola launched its World Without Waste initiative, committing to 100% recyclable packaging by 2025, a reduction of 3 million metric tons of virgin plastic use and collection of the equivalent of every bottle itself. None of those targets has been met. In December 2024, the company quietly rolled back all of its goals pushing every deadline to 2035, eliminating the virgin plastic reduction target entirely and abandoning its reusable packaging commitment. That revision came on the same day that United Nations plastics treaty negotiations concluded without an agreement, raising a reasonable question about whether these voluntary commitments were ever grounded in genuine operational analysis.

The peer-reviewed science does not support to the assumptions underlying this strategy. A 2024 study in environmental science and technology found that plastic products produce fewer life cycle polluting emissions than their alternatives in 15 of 16 categories studied. PET plastic bottles have substantially lower emissions than glass or aluminum, the very alternatives of the circular economy agenda favors. Yet Coca-Cola has committed to increasing the recycled content of its packaging even as recycled PET commands a significant price premium over virgin material and even as the U.S. bottle collection rate slipped to just 30% in 2024. The Board argues that its packaging strategy already incorporates life cycle assessment and economic analysis. But the company's opposition to our proposal cites a single industry source, while our exempt solicitation report draws on 46 end notes from peer-reviewed journals, respected trade publications and the company's own disclosures.

Shareholders deserve better than that in balance. Our proposal asks the Board to commission and publish at reasonable cost an independent valuation of these policies based on non-biased, verifiable and economically thorough research by March 2027. That's not a radical request. It is exactly the kind of analysis a Board of Directors should conduct before committing billions in capital to a packaging strategy derived from advocacy organizations rather than independent science. We ask shareholders to vote for Item 5. Thank you.

Thank you for presenting the proposal. The Board believes the report requested in this proposal is unnecessary because the company's packaging strategy is already grounded in scientific research, life cycle assessment and economic analysis, while also providing consumers with choice in how they consume our beverages. Very similar to the point I made in my last response, our packaging decisions are evaluated similar to other strategic investments, and are designed to advance both our sustainability objectives and long-term business value.

Our packaging strategy also considers affordability, premiumization and demand. These criteria are embedded in the company's regular business planning and capital allocation processes. Consistent with the proponents emphasis on waste management, the company is focused on increasing recycled content in primary packaging and supporting collection rates, which depend on enabling policies and expanded collection infrastructure. As a consumer-centric company, we also use targeted sustainability marketing to reach consumers to support our collection efforts recognizing that behavior and interest differ by market.

So ultimately, we believe that the requested report will largely duplicate existing analysis and could require the company to produce prescriptive or static assessments in an area that is dynamic and rapidly evolving. With this in mind, we recommend a vote against this proposal.

Jennifer, would you please present the next item?

Our sixth business item is the shareholder proposal requesting a report on the extent of the company's diversity, equity and inclusion efforts. This proposal and the Board's response begin on Page 93 of your proxy statement. Rachel Lowy from As You Sow, who is representing a shareowner, Elizabeth Juda will present the proposal. The presentation of the proposal is limited to 3 minutes. The phone line for the presentation will be opened only for these 3 minutes. For the convenience of the presenter, I will signal when they have 20 seconds remaining. I now ask the operator to open the line.

Ms. Lowy, your line is live.

Thank you, and good morning, Chairman Quincey and members of the Board. My name is Rachel Lowy, and I'm presenting this proposal on behalf of As You Sow. This proposal addresses the need for increased transparency in Coca-Cola's diversity, equity and inclusion, or DEI efforts. Numerous studies have shown that equity-based policies and programs that promote a diverse and inclusive workforce strengthen workforce effectiveness and corporate performance.

Our company describes the long-term ambition for its DEI program yet offers limited disclosure of its specific policies and actions to achieve this goal or any measurable outcomes beyond its EEO-1 reporting. This lack of transparent metrics and specific policies limit investors' ability to assess the company's commitment to achieving a diverse and inclusive workplace.

Coca-Cola lags its peers on diversity and inclusion disclosure. According to As You Sow's Racial Justice Scorecard report, Coca-Cola scored just 13% compared with PepsiCo's 21% and Starbucks' 27%. The company's low score reflects its minimal disclosures. As a result of this minimal reporting, investors do not know whether the company maintains key practices why we considered part of a robust corporate DEI program. Increased transparency around its diversity and inclusion policies and practices, including employee retention data would allow investors to better evaluate Coca-Cola's performance.

Employee retention, in particular, reflects successful workforce policies by reducing the financial cost of employee turnover and reducing risk to brand value. The financial consequences of employee turnover are material. According to Gallup, the cost of replacing an individual employee ranges from 40% of annual salary for frontline workers to 80% for professionals in technical roles and up to 200% for leaders and managers. On an aggregate basis, annual employee turnover is estimated to cost to U.S. businesses approximately $1 trillion per year. These are not marginal operational costs. These are enterprise-level risk exposures.

To build investor trust, shareholders urge Coca-Cola to provide a report on the company's current DEI efforts and a level of success in creating a diverse and inclusive workplace that retains its employees. Thank you.

Thank you. Let me start by saying we continue to aspire to develop a global workforce with a broad range of perspectives, skills, experiences and backgrounds because our business depends on it. Our success relies on having a wide array of associates who reflect the consumers and markets we serve, enabling us to understand their needs, make better decisions and deliver products that are relevant and meaning to them. And to help us achieve this, we will continue to foster an inclusive culture where every employee can thrive and have equal access to opportunity.

This proposal requests a report based on the proponent's claim that the company lags peers on certain disclosures. However, given our current policies and disclosures, we believe there is no basis for this claim and that additional reporting is unnecessary.

Where required, we report on representation metrics, including the submission of our EEO-1 report to the U.S. Equal Employment Opportunity Commission. We comply with applicable local regulations by reporting on gender pay gaps and human rights matters as required by jurisdiction. Some of these reports are publicly accessible on local market websites.

Furthermore, in our 2024 People & Communities Update, we voluntarily provide workplace representation numbers and include a copy of our EEO-1 report. Previous versions of our EEO-1 report can also be found on the company's website. Therefore, we recommend a vote against this proposal for these reasons.

Jennifer, would you please present the seventh item.

Our seventh business item is a shareowner proposal requesting a report on risks related to ingredients. This proposal and the Board's response begin on Page 95 of your proxy statement. Laura Krausa, representing CommonSpirit Health, will present the proposal. The proponent has chosen to prerecord their remarks. I will now ask Computershare to play their recording.

Hello. I'm Laura Krausa, presenting Item 7 on behalf of CommonSpirit Health and co-filers, a proposal asking the company to report on practices in place to assess and manage risks regarding chemicals and additives in its products. Companies will prepare to address emerging concerns expose themselves to financial, legal and reputational harms. Now these ingredients are used for many reasons, including through color, flavor, sweeteners, preserves or even processed foods and beverages. But often, they serve very little purpose and are not widely present in unprocessed or minimally processed products, and many of these chemicals pose risks to health.

Given the current regulatory legislative and legal landscape, the proposal is timely. Last May, a federal government report directly tied these additives and chemicals to chronic illnesses in children. And recently, the U.S. Department of Health and Human Services moved to revoke authorization for 2 synthetic petroleum-based food dyes, and it urged the entire food and beverage sector to voluntarily eliminate the 6 remaining dyes still in use. Now many companies complied, but Coca-Cola was not among them.

Additionally, the Food and Drug Administration is exploring revision of the rule that currently allows companies to self-affirm the safety of food ingredients that generally recognized as safe or gross loophole has relied more than 100 chemicals of unknown safety to bypass FDA review and enter the U.S. food and beverage supply chain. State and local governments are also taking action. Legislation has been introduced in 43 states with 20 bills enacted and another 155 introduced. And lawsuits are being filed, including 1 by the City of San Francisco, accusing 10 food and beverage companies, including Coca-Cola, of creating a public health crisis with their ultra-processed foods and prioritizing profit over people.

It's clear that government is quite serious about addressing chemicals and additives in consumable products. And consumer awareness is also growing substantially. A recent Pew research poll found that more than 70% of U.S. adults are concerned about exposure to harmful chemicals in food and water and 5 out of 6 respondents said they want government and businesses to do more to ensure safety and improve transparency.

Companies who are not prepared to adapt to this rapidly changing landscape may struggle to respond quickly, particularly when recipe reformulation is required, ingredient changes take substantial time in order to maintain brand name product consistency, and companies with inadequate practices in place risk finding themselves in the crosshairs of a consumer base that expects better and the government willing to take steps to demand safer products.

This report will serve to inform risk mitigation and position the company to respond quickly. Investors urge you to vote for Proposal 7. Thank you.

Thank you for presenting the proposal. Regarding the issues being raised here, let me begin by saying that our company produces beverages of choice around the world with brands reaching billions of consumers supported by a long history of using ingredients that meet rigorous quality and safety standards. We strive to ensure that information about our ingredients is easily accessible on our packaging and digital platforms, allowing consumers to make informed decisions.

We also maintain policies and governance processes designed to identify, assess and manage potential risks related to product safety and quality. We continually assess ingredient safety through scientific evaluation, regulatory horizon scanning, engagement with independent experts and regulatory authorities and investments in robust studies and clinical research. And we continuously monitor the emerging science and regulatory developments worldwide to inform decision-making and guide proactive risk management.

The company's products are sold globally and are subject to oversight by various regulatory authorities. The ingredients used in the company's products are authorized for use by leading food safety authorities in the markets where they're sold. We recognize that science evolves and that there may be differing interpretations of scientific data. We base our decisions on thorough peer-reviewed scientific research as well as evaluations by global health and food safety bodies.

For all these reasons, the Board believes the proposal is unnecessary and duplicative of our existing processes, we recommend a vote against this proposal.

Jennifer, would you please begin the eighth item.

Our eighth business item is a shareowner proposal requesting a report on the company's plans to increase sustainability disclosure. This proposal and the Board's response begin on Page 97 of your proxy statement. Frances Fairhead-Stanova from Green Century Equity Fund, will present the proposal. The proponent has chosen to prerecord their remarks. I will now ask Computershare to play the recording.

This is Frances Fairhead-Stanova. On behalf of Green Century Capital Management, I am presenting Proposal #8, asking Coca-Cola to resume its previous practice of providing investors with disclosures that detail, which environmental issues are priority to its business, what the company is doing to manage them and its progress against goals set.

Comprehensive sustainability information is valuable to investors and results in company-wide benefit. The information is particularly important for so-called universal owners whose portfolios are long term and so diversified that they essentially own a stake in the whole economy. For these investors, in particular, the negative externalities of 1 portfolio company will be borne by the other portfolio companies. This makes it important for these investors to have comprehensive information on the sustainability impact of their portfolio companies and how the companies are managing these impacts.

As the largest beverage company in the world, Coca-Cola's operations both significantly impact and rely on the environment and ecosystem services. The company previously released sustainability reports in accordance with the GRI standards. But since Coca-Cola's 2022 sustainability report, it has only released sparse environmental updates. These updates lack decision-useful information on initiatives and outcomes related to its priority environmental topics the company previously identified.

For example, Coca-Cola's current sustainability disclosures do not help investors understand whether the company is on track to achieve its new climate goal or what the company is doing to address its contribution to plastic pollution. Additionally, Coca-Cola does not disclose when it last conducted a materiality assessment, making it unclear whether the company sustainability disclosures cover all the topics that are material to its business. By failing to achieve a bare minimum of sustainability disclosures, Coca-Cola makes it nearly impossible for investors to get a full picture of how it is managing its ESG risk. Not providing this information could also impact Coca-Cola's reputation as a sustainable company.

Studies show that inadequate sustainability disclosures could also impact the company's stock price if investors cannot accurately assess its exposure to risk.

In conclusion, sustainability disclosures prepared according to a recognized standard provides valuable information to shareholders and benefits to issuers. Failure to provide this information exposes Coca-Cola to reputational risks and fails to meet investor expectations. We, therefore, urge a vote for on Proposal #8.

Thank you. Our company takes a deliberate and evolving approach to sustainability reporting, adapting our disclosures to support business strategy, stakeholder expectations and compliance within an increasingly complex environment. Since announcing our updated goals in December 2024, the company has refined the data included in its voluntary sustainability disclosures to focus on performance indicators that relate to these goals, which the company believes are important for the resilience of our business and the communities in which we operate. This data is published in the company's 2024 Environmental Update, 2024 Portfolio Update and 2024 People & Communities Update, all of which I encourage you to read on our website.

Our company seeks to provide disclosures that are accurate, credible and comparable. And therefore, we engage an external auditor to perform limited assurance on select environmental metrics prior to publication. In fact, additional data points were included in the scope of external assurance for the 2024 Environmental Update.

While the environmental update focuses primarily on certain key data related to water, packaging and emissions, sustainability-related information is also embedded within the Coca-Cola system's broader reporting framework, including public reports issued by our bottling partners. We and the broader Coca-Cola system also share our progress via communications channels such as company website, press releases, social media and communications led by our partners.

For example, over the course of 2025, we've continued to communicate about projects that support our water security strategy on our corporate website and social media channels. Similarly, our bottling partners communicate about sustainability in their annual reports and corporate channels, including investment in packaging collection, expansion of refillable packaging production lines and innovative climate solutions in Europe, Latin America and Africa. The company and its partners have also communicated about reusable packaging pilots in other countries.

We remain committed to sustainable practices, and we expect our related disclosures will continue to evolve alongside our business strategy and the rapidly changing landscape. For these reasons, we recommend a vote against this proposal.

Thank you. And that concludes the voting matter on the 8 items. Jennifer, would you please draw this portion of Annual General Meeting to a close, and then I'll do the Q&A.

Since all voting matters have been presented, that concludes the business portion of our meeting. The polls will close at the end of the Q&A session. Any shareowner who has not yet voted or who wishes to change their vote may do so by clicking on the Vote tab on the right side of your screen. Shareowners who have already submitted a proxy or have voted by telephone or Internet and do not wish to change their votes do not need to vote again.

The following results are preliminary. If you voted today, your vote will be tallied after the meeting and included in our final vote.

The inspectors of election report that each nominee for election as director has received at least a majority of the votes cast in favor of their election. Therefore, all of the director candidates have been elected to serve as a director until 2027.

The advisory vote to approve executive compensation has received an affirmative vote of 91% and, therefore, has passed.

The management proposal on the ratification of Ernst & Young LLP as auditors for the 2026 fiscal year has received an affirmative vote of 93% and, therefore, has passed.

The shareowner proposal requesting a Sustainability Committee bylaw amendment received an affirmative vote of only 0.87% and, therefore, did not pass.

The shareowner proposal requesting a report evaluating the company's plastics packaging policies received an affirmative vote of only 0.81% and, therefore, did not pass.

The shareowner proposal requesting a report on the extent of the company's diversity, equity and inclusion efforts received an affirmative vote of 11.02% and, therefore, did not pass.

The shareowner proposal requesting a report on risks related to ingredients received an affirmative vote of 11.12% and, therefore, did not pass.

The shareowner proposal requesting a report on the company's plans to increase sustainability disclosure received an affirmative vote of 22.11% and, therefore, did not pass.

That concludes the preliminary vote report.

Thank you, Jennifer. We will now turn to the question-and-answer session. We will take questions from those who are attending virtually today, and we have also several questions to address that were submitted in advance. [Operator Instructions]

We would like to answer as many of your questions as we can during the meeting. So to help us please keep your questions succinct and to the point. We welcome questions or comments on any of the voting matters we just covered or the general business affairs of the company. Questions regarding personal matters, employment matters, product issues, suggestions for product innovation and, importantly, questions that personally disparage someone will not be presented.

Jennifer, could you please present the first question?

Our first question is from Ms. [ Waters ]. Prices keep going up, including what we pay for Coke. What is your strategy for staying competitive on price and retaining consumers despite competition from store brand service?

Thank you for the question, Ms. [ Waters ]. Absolutely, our ability to price our beverages is critical to the ongoing success of the enterprise. And so we really focus on earning the right to the price levels that we feel are appropriate for the brands and the packages through the disciplined and ongoing investments in our brands, underpinned by the marketing and innovation that the company does. And we do this also by leveraging revenue growth management capabilities to meet the consumers where they are in conjunction with our bottling partners.

In -- if you take -- if you look around the world, in the international markets, we tend to see prices rising to keep up with more inflationary environments. But as inflation -- well, until recently been broadly normalizing, we expect the pricing to broadly normalize. But there's clearly a piece in a number of markets where we have to price with inflation as that affects the input costs.

In the U.S., where we just announced, Henrique just talked yesterday about the quarter, we've been investing to create value for our brands and most importantly, also creating value for our retail customers by providing choice and meeting consumers where they are with all sorts of options, whether it be affordable options by keeping the price points down with different packaging sizes or different numbers of bottles or cans in the multipacks or even looking for premium options at different price points.

The more we can offer choice through different package sizes from mini cans all the way through to big bottles, the more we can meet the consumers where they are, which will help us as an overall business continue to keep consumers in our franchise and drive transactions, which is the lifeblood of our business. And this -- as I said, this approach is working.

Yesterday, in our Q1 earnings, we reported strong results in North America with 4% volume growth, driven primarily by Trademark Coca-Cola, water, sports, coffee and tea. And the good news is, ultimately, beverages, given what we do to earn the price through the full spectrum of activities remains a very resilient category, and we continue to expect to see steady volume growth and balanced algorithm of price and volume despite the macro headwinds.

Next question, please.

Our next question is from Mr. [ Jordan ]. The company is consistently named the world's top plastic polluter. You say you'll do refillable bottles only where infrastructure exists. Why aren't you willing to spend the money to build that infrastructure to actually solve the pollution problem?

Thank you. An important question. The reality is that refillables aren't a simple plug-and-play solution. They require strategic investment, not just by the company and its bottlers, but also retailers so that the right operational capabilities in the marketplace to manage a broad collection system, and that takes time and investment to scale effectively. And so where we see the opportunity both with ourselves, with the retailers and with consumer acceptance.

We invest and we look to see if we can expand the use of refillables. It does take time, and we're always patient, and we move the learnings around. So for example, in 2024, while refillables represent only 14% of our overall beverage volume, in places like ASEAN, so Southeast Asia, it represents 1/3 of our beverage volume in 2024. Similarly, in 2025, we started to expand refillables in Thailand and other parts of EMEA and our Europe, Indian business and Africa.

But it is important to understand that refillables are only one of the ways of meeting our objectives on having our packages available at the price points we want, but also driving a sustainable use of the packaging through collection and recycling. And given the nature of the differences around the world, it's often the case that it's more effective to collect bottles and to then recycle them and reuse them in new packaging bottles rather than refilling them.

So the way we look at it is refillables are one of the ways we can seek to both collect back and maximize the economic efficiency across the full portfolio of packaging we use in the marketplace. And if we do that in collaboration, not just with our bottlers, but with retailers and governments, we believe we can have the most effective long-term business strategy to put our beverages in consumers' hands while doing it in an economically efficient and sustainable way.

Next question, Jennifer.

This next topic was raised by multiple shareowners, including Ms. [ Hamilton ]. Weight loss drugs like GLP-1s are making people eat and drink less, while other consumers are demanding functional drinks with proteins. Does the company actually have the right products to compete and win?

Thank you. Another good question. We believe we are well positioned because we operate as a total beverage company. Based on what we see in the marketplace and our own research, GLP-1s are having a limited overall impact on total nonalcoholic beverage spending. Yes, they show some differences in preferences, and we certainly see that beverages that are low or no calorie that deliver hydration or particularly in the U.S. deliver protein tend to go up when people are using GLP-1s. So we believe we are able to meet this demand because we've got a diverse portfolio of drinks from dairy products like fairlife and Core Power; through juices, Simply and Minute Maid; water, smartwater and Topo Chico, all the way through to low calorie to emblematically, Diet Coke and Coke Zero.

So we think we have the portfolio that can cater to the various lifestyle and dietary choices, including for people on GLP-1. And we continue to invest behind those products and have made significant multibillion-dollar investments, for example, in our dairy business to support fairlife and Core Power. And because we continue to invest in them, we have the portfolio.

Henrique talked about our full portfolio in CAGNY and that we have added 2 more billion-dollar brands to bring it to a full stable of 32 billion-dollar brand. Interestingly, most recently, Santa Clara in Mexico, which is a value-added dairy brand; and Innocent, which is a juice and smoothie company in the U.K. and Europe. Both were acquired, but we have grown them and we've seen them respond to consumer demand.

So whether it's GLP-1s or anything else, we have to keep pace with the evolving needs and takes of consumers and remain relentlessly consumer-centric. And that will mean offering different beverages in different package sizes, in different channels at different points of the day to make sure people have options, and of course, giving them the information so they can make an informed choice.

And because of that, for example, how that's coming to be a reality, if you look at our 2024 global volume, 30% of it was low or no calorie beverages. 47% of our sparkling soft drinks are available in packages of 250 milliliters or 8.5 ounces or less. 69% of our products have less than 100 calories per 12-ounce serving. And 18 of our top 20 brands are reduced or zero sugar products or have a 0 or reduced sugar option. So we believe by focusing on these actions and innovation by being committed to providing consumers with choice, while maintaining the flavors and experiences they love, we will continue to thrive going forward in this environment.

Next question please, Jennifer.

The next question is from Ms. [ O'Connor ]. You're spending a lot of money on AI, but this is a beverage company, not a tech firm. Is this spending actually going to cut costs and boost profits for this year? Or is it just trendy hype?

Thank you for that question. Actually, this is something that Henrique has been discussing extensively with stakeholders. So I'm going to ask him to take this question.

Sure. Thanks, James. Look, I will start by saying that this whole AI, tech and the digital agenda for us has been always about doing better at what we do best. By doing this, we'll continue to expand our competitive advantage, and it has been working for us in the last few years, clear objectives around that as well for every dollar that we invest behind tech, AI, data, the whole digital agenda, moving faster as an enterprise, operating more effectively and more efficiently with our customers and within our ecosystem is our goal. And by doing that, we're going to deliver a real finance results and returns and everything that we're doing in the digital agenda.

You can see also, like the impact, and I always like to give this example of the digital technology coming to life on concrete examples of things that are close to all of us. The Christmas campaign, it's always one of the biggest moments for the brand Coca-Cola. And in the last couple of years, we have been using AI and gen AI in the creation of that ad. And we're doing that actually with a fraction of the cost and way faster than we used to do. So we're going to continue to dive into that because not only we're getting the effectiveness, but becoming even a higher return on the connectivity with consumers when we do that. So we continue to do our agenda, building on what we have been doing so far.

Also, it's important to say that we continue to learn and adapt as the technology evolve, right? We are equally avid of using AI in a safe and responsible way with the governance that requires internally, and we do that across the system as well. So at the end of the day, it's not about chasing trends. It's definitely not -- we are not a tech company, but we use the technology to reduce complexity, improve our execution and support our results moving forward.

Our next question was also raised by multiple shareowners, including Ms. [ Pierce ] and Ms. [ Therese ]. I don't think that the Coca-Cola Company realizes how many long-time TaBoholics there are across the United States. Given the decades-long loyalty of TaB drinkers, would Coca-Cola consider a limited seasonal return of tab to improve the demand?

Given Henrique is now managing the business and closely evaluating brand and portfolio choices, I think it would be great for him to address this question. So Henrique?

Look, thanks. This really comes up frequently because a lot of people at the end of the day love TaB and love all our brands. Look, from time to time, what we do, we always explore ways to reintroduce brands that there is a strong consumer interest and business rationale. So with TaB, we won't be different. While I can't say whether there is anything planned right now for TaBs, we are taking this perspective into account as we look ahead, and I will leave it there.

Perfect. Jennifer?

As we are approaching the end of this meeting, Mr. Chairman, this will be the last question. This question is from Mr. [ Winsberg ]. As a shareowner, I appreciate 64 years of dividend increases, but does raising it for so long cause pressure to keep raising it and perhaps there may be better uses for the cash to grow the business?

Thank you, Mr. [ Winsberg ]. I know this is a very important question to many investors. And let me reassure you that the Board and the management, we have a very disciplined approach to capital allocation, which balances reinvesting in our business and returning capital to shareowners. Yes. And with respect to our dividend, it is importantly well supported by our long-term free cash flow. And we always start by focusing on what do we need to reinvest in the business first. That's the starting point with the capital allocation is doing all the things we think are necessary and appropriate to drive the long-term growth of the business through capital investment. Then with the remaining money, we evaluate dividends, share buybacks, opportunistic opportunities for bolt-on M&A and our overall debt level.

And we feel confident in the approach we've taken, and that's allowed us to increase our dividend for the last 64 consecutive years, including, for example, now we are below our target net debt leverage range, and we remain an investment-grade rating from the credit rating agencies. So again, moving forward, we remain absolutely committed to prioritizing business investment to drive long-term growth, and then focusing on supporting both dividend growth and a strong balance sheet.

Okay. That concludes our question-and-answer session. The polls are now closed. I would like to thank everyone who took the time to participate today. And that concludes our shareowner meeting for this year. Thank you very much, and have a great rest of your day.

This concludes the meeting. You may now disconnect.

At this time, I'd like to welcome everyone to the Coca-Cola Company's First Quarter 2026 Earnings Results Conference Call. Today's call is being recorded. [Operator Instructions] I would like to remind everyone that the purpose of this conference is to talk with investors, and therefore, questions from the media will not be addressed. Media participants should contact Coca-Cola's Media Relations department if they have any questions.

I would now like to introduce Todd Beige, Vice President and Head of Investor Relations. Mr. Beiger, you may now begin.

Good morning, and thank you for joining us. I'm here with Henrique Braun, our Chief Executive Officer; and John Murphy, our President and Chief Financial Officer. We've posted schedules under financial information, in the Investors section of our company website. These reconcile certain non-GAAP financial measures that may be referred to this morning to the results as reported under generally accepted accounting principles. You can also find schedules in the same section of our website to provide an analysis ofour gross and operating margins.

This call may contain forward-looking statements, including statements concerning long-term earnings objectives, which should be considered in conjunction with cautionary statements contained in our earnings release and the company's periodic SEC reports. Following prepared remarks, we will take your questions. Please limit yourself to 1 question, reenter the queue to ask follow-ups. Now I will turn the call over to Henrique.

Thanks, Todd, and good morning, everyone. We are off to a good start this year. We delivered strong first quarter results despite a complex external environment. I'd like to thank our system associates for their continued commitment. We are focusing on becoming more consumer-centric, remaining constructively discontent, and leveraging our digital capabilities to create enduring value. I'm confident we are well positioned to deliver on our updated 2026 guidance.

This morning, I will provide the perspective on the global operating landscape before diving into our business performance. Then I will share how we are getting closer to consumers by operating with both granularity and scale. Finally, John will discuss our financial results and 2026 guidance.

During the quarter, the external environment differed greatly across our market. While many consumers remain resilient, others are under pressure due to persistent inflation, greater macroeconomic uncertainty and volatility driven by the conflict in the Middle East. Against this backdrop, we are operating in an expanding industry. We harness the power of our brands and our unmatched system reached to deliver 3% volume growth, and we grew volume across all segments. We also extended our streak of gaining overall value share for the past 20 consecutive quarters. Excluding the impact from 6 extra days in the quarter and the timing of concentrate shipments, organic revenue growth is on track with our full year guidance.

We also expanded comparable operating margin, which contributed to double-digit comparable earnings per share growth. We are always pushing ourselves to do even better and focusing on getting more for more markets and more from our brands to drive balanced growth. Starting with North America. While we benefited from cycling an easier comparison versus the prior year we delivered solid performance. We gained both volume and value share and grew volume, revenue and profit. The softness in price/mix can be attributed to Easter timing, coupled with unfavorable category mix from packaged water and constrained production capacity for Topo Chico and Felli. We had broad-based strength across our total beverage portfolio. a straight mark Coca-Cola, Fanta, Prescot Body Arbor Powerade the sunny smartwater and Minuteman each grew volume. Trademark Coca-Cola also led the industry in retail sales growth.

Innovation contributed strongly to revenue growth. For example, we are tapping into the consumer insight favoring all things Cherry, with Coca-Cola Cherry flow, Diet Coke Cherry and Mr. Peak, also powered power water and the expansion of Minicans into the convenience retail channel, both had strong performance.

In Latin America, we gained value share and grew volume, revenue and profit by focusing on fewer but more impactful initiatives. -- volume growth in Brazil and Central America more than offset declines in Mexico and Argentina. Across the region, to drive resilience, we are balancing relevance with scale and more closely integrating our marketing and commercial plan. For example, we activated Coca-Cola with the CFO World Cup trophy. -- and offered fans interactive experiences, music, games and product sampling. Consumers assess ticket giveaways by scanning our connected packaging which allows us to gather insights to customize future offerings and content.

In EMEA, we gained value share and grew volume across all operating units. We also grew both revenue and profit.

In Europe, despite a cautious consumer environment, we gained better share. We are better linking our brands to key drink and occasions including the Coke and mills campaign and passion points like the FIFA World Cup profit and the English Previ League. Also, we are more granularly focusing on value offerings at attractive absolute price point.

In Eurasia and the Middle East, we gained better share. While we grew volume for the quarter, our volume declined in March after the onset of the conflict. Our top priority is supporting the safety and well-being of our system associates and partnering closely with customers across the region.

Lastly, in Africa, we are highlighting the localness of our system and sharpening our revenue management capabilities. For example, in Egypt and Nigeria, our Ramadan campaign linked our brands to the mills occasion and emphasized reputable package.

In Asia Pacific, we grew volume across all operating units despite cycling a strong comparison versus the prior year. We also grew revenue, but profit declined driven by commodities, headwinds in tea and coffee and phasing of inventory costs.

In ASEAN and South Pacific, despite a continued challenging external environment, we leaned into impactful marketing campaigns like the FIFA World Cup of tour and innovations like the Fanta Pineapple. We also focused on refillable packaging and driving availability.

In China, we activated our broad portfolio and stepped up execution in targeted channels during the Chinese New Year. In India, we drove affordability and linked to our brands to consumer passion points, for instance, by connecting terms up with the T20 Cricket World Cup. We also expanded strike into more rural regions with content tailored to local languages.

Lastly, in Japan, we gained value share by doubling down on consumer needs. We grew volume across our key brands with Georgia Coffee, we refined our package options to address different drinking occasions.

In summary, we're adapting our execution as needed and focusing on improving performance across all dimensions of our strategic growth flywheel to recruit consumers and drive balanced long-term growth.

At CAGNY, I discussed how we are becoming even more consumer and customer-centric by applying the for eyes, inside, innovation, intimacy and integrated execution. Levering data and our digital capabilities are unlocked to be much more precise in how we serve consumers and customers. Here are a few examples of the 4 eyes in action this quarter. In Europe, in select markets, approximately 60% of adult drinkers monitor Cathrin intake in the evening. To capture incremental drinker occasions, we relaunched Coca-Cola Zero-Zero, which offers 0 sugar, 0 cafe and 0 calories with a new visual identity, expanding availability and activations tied to the evening meals occasion. Coca-Cola Zero-Zero had a strong trial, positive repeat rates and contributed to the trademark of a Coca-Cola growing volume in Europe.

For Sprite, we recently launched our global campaign. It's dead fresh, which includes partnerships across music, basketball, price food and fashion. We're also scaling and launching products tailored to local need. In China, we launched Sprite prebiotic and lifted and shifted Sprite from North America. In the resin the Middle East, to refresh consumers during Ramadan, we are linking Sprite Lemon Mint to local festivities and key drinking occasion. Globally, Sprite had strong volume growth.

Finally, Fuze Tea, which is available in more than 80 markets, appeals to consumers who are looking for greater balance. While we execute Fuze Tea made of Fusion campaign globally to scale the brand, we deliver intimacy with a highly localized product portfolio tailored to taste profiles, key types and 0 sugar options.

In Turkey, for example, we accelerated growth by emphasizing peach lemon, watermelon and dragon fruit flavors, along with strong activation during Ramadan.

Globally, Fuze Tea grew volume double digit. It goes without saying that marketing and innovation do not come to life without commercial excellence. And our system is working towards mastering the fundamentals of integrated execution to drive customer value creation. In the past year, our system added more than 600,000 outlets, which increased outlet coverage. To drive basket incidents, we increased our share of visible inventory and grew off-the-shelf points of interruption by double digits to capture impose purchase.

To drive transactions our system also placed over 340,000 units of cold drink equipment. For the past 8 years, we have been the leaders in customer value creation for our industry. Overall, greater focus across each element of the fees resulted in both volume and value share gains, volume growth and more weekly plus drinkers during the quarter.

In summary, it's early in the year, and we know the external environment remains complex and it's quickly evolved. However, we continue to benefit from 3 unwavering delay. One, -- we are in great resilient industry. Two, we have a powerful portfolio as demonstrated by our $32 billion brand; three, our pervasive yet local system is a clear advantage. Moving forward, we will continue to invest in these beliefs and leverage our all-weather strategy to achieve our objectives.

With that, I will turn the call over to John.

Thank you, Henrique, and good morning, everyone. During the quarter, we navigated market dynamics locally to deliver on our global objectives. We grew organic revenues 10%. Unit case growth was 3%. Concentrate sales were 5 points ahead of unit case sales as the impact of 6 additional days in the quarter, was partially offset by the timing of concentrate shipments.

Our price/mix growth of 2% was primarily driven by approximately 4 points of pricing actions partially offset by 2 points of unfavorable mix, which was primarily driven by 3 items: one, Easter timing and category mix in North America; two, stronger growth of value offerings from revenue growth management initiatives across Asia Pacific; and three, geographic mix in Latin America.

Comparable gross margin declined approximately 30 basis points, stemming primarily from commodity pressures in our tea and coffee businesses, phasing of inventory costs and timing of trade spend. However, comparable operating margin increased approximately 70 basis points, as we've realized operating expense efficiencies while investing further behind our brands. Below the line, we benefited from a combination of higher equity income, lower net interest expense and realized security gains in our captive insurance companies, which benefited comparable other income.

Putting it all together, first quarter comparable EPS of $0.86 increased 18% year-over-year, helped by 3% currency tailwinds.

Free cash flow was approximately $1.8 billion, an increase versus prior year. Our balance sheet remains strong with our net debt leverage of 1.6x EBITDA, which is below our targeted range of 2 to 2.5x. We're continuing to judiciously manage our balance sheet as we await a court decision related to our ongoing dispute with the IRS. We're confident in our long-term free cash flow generation and are prioritizing a capital allocation agenda that creates optionality to both reinvest in our business and return capital to shareowners.

Enabled by our all-weather strategy, we're on track to deliver on our updated 2026 guidance. We continue to expect organic revenue growth of 4% to 5%. We now expect growth in comparable currency-neutral earnings per share, excluding acquisitions and divestitures of 6% to 7%. Notwithstanding volatility in certain commodities like tea and coffee, we believe the overall impact on our cost basket is manageable at this time. However, uncertainty stemming from geopolitical tensions may cause this outlook to change.

Divestitures are expected to continue to be an approximate 4-point headwind to comparable net revenues and an approximate 1 point headwind to comparable earnings per share. This assumes the pending sale of Coca-Cola Beverages Africa, which is subject to regulatory approvals, closes during the second half of 2026.

Based on current rates and our hedge positions, we now anticipate an approximate 1- to 2-point currency tailwind to comparable net revenues, up from an approximate 1 point currency tailwind in our previous estimate. We continue to expect an approximate 3-point currency tailwind to comparable earnings per share for full year 2026.

Based on the latest analysis of our global operations, our underlying effective tax rate for 2026 is now expected to be 19.9%, which is a 1 point reduction versus our previous estimate. All in, we now expect comparable earnings per share growth of 8% to 9% versus $3 in 2025, which is an increase from our prior estimate of 7% to 8% due to the lower effective tax rate.

Finally, there are some considerations to keep in mind for 2026. As a reminder, due to a calendar shift, the fourth quarter will have 6 fewer days compared to the fourth quarter of 2025. We estimate the shift of Easter into the first quarter with a 0.5 point benefit to first quarter volume. We also expect concentrate shipments to like unit cases by a couple of points during the second quarter.

Lastly, assuming the pending sale of Coca-Cola Beverages Africa closes during the second half of 2026, we see opportunity for more margin expansion in the latter half of this year. To sum it up, we remain focused on improving execution of our strategy and are well positioned despite macro complexity and uncertainty. We look to drive balanced top line growth, margin expansion, cash generation and returns over the long term and we'll do so with continued strong partnership with our bottlers across the world.

And with that, operator, we are ready to take questions.

[Operator Instructions] Our first question comes from Dara Mohsenian from Morgan Family.

Just given the strength we saw in Q1 unit cases at the corporate level, but also price mix that was more subdued than recent trends for the second straight quarter. I just was hoping to get your view on the balance between volume versus price/mix in the remainder of the year, particularly in North America and Asia, where we saw some large variances in the quarter. And on the volume front, just wondering is consistent unit case growth reasonable in the balance of the year with Easter help in Q1, some potential Ron impact?

And just on pricing, how much of the lower growth in the last couple of quarters is due to that affordability focus that you mentioned, John, which should see more ongoing versus just some quarterly mix variances that are less ongoing?

Thank you, Dara. It's great hearing for you. Look, first of all, we are really pleased with the results of the quarter. We believe it's a statement to everything that we continue to say that would be a year where we would have a top line balanced algorithm, not only the quarter but for the full year, -- more importantly, growing volume across all operating units, gaining share and also topping the EPS growth as well, gives us the confidence that we are on the right track. What we will continue to see is an algo that will be balanced as we have said in the past that we -- it's not a coincidence that we actually got this in the quarter. We planned ahead of the curve. We invested accordingly.

We started the year with a fast start as well. And what we're going to see probably in the next 2 quarters, it varies around that balanced algorithm. But at the end of the year, what you see is this balanced growth about volume and price mix playing a balance of whether it's going to be 3 to 2 like we have here in the quarter or it's going to be 2 to 3 a variable during the different quarters, we're going to see it. But we're managing all the levers to continue to deliver that.

Pricing is embedded into this equation as well. We are going where the consumer is, right? The affordability to continue to be part of the revenue growth management architecture that we have not only in the U.S. but in different parts of the world as well. The consumers that have pressure today at the low-income consumers, and we really dial up our affordability options to get closer to them. In North America, for instance, we went into bringing options not only on the single serve, but on the mood serve enter packs and helped us to continue to keep them in the franchise.

So in a nutshell, what we are. We believe we had a great start of the year. We will continue to be balanced. We'll have confidence that we're going to deliver on the updated guidance to the year, and we'll continue to play on our RGM capabilities.

Our next question comes from Steve Powers from Deutsche Bank.

Great. I wanted to give a little bit to cost, if I could. John, you mentioned that you were fairly well positioned despite the broader inflationary backdrop as you think about the year. But you also acknowledge that could change. And I guess, as I think about the system broadly, I'd expect some of the pressures that we're all thinking about to be building a bit more acutely on your borrowing partners already. So perhaps can you talk about how you're working with those bottling partners to address the burgeoning headwinds together and how the system overall is positioning to navigate what is likely going to be a net higher cost environment as you look through this year and potentially into next?

Yes, Steve, thanks. A very important topic for all of us here and with our partners. Yes, the environment you say is fluid. It's difficult at this stage to say exactly how it's going to play out. As highlighted in our script, it's -- right now, we estimate is manageable at the company level, given we have less exposure. Our bottling partners have more exposure, predicted to aluminum and PET on the back of both the oil price impact and just the overall supply disruptions that are likely to affect us as we go through the year. with the system, we have a playbook that we've had to use now for quite a few years on a range of disruptions. And it's a playbook that is working well for us. We have our RGM capabilities as Henrique just pointed out, we have our cross-enterprise procurement group that works with the vast majority of our system partners on both resiliency and productivity initiatives. We have a number of playbooks I would describe them at the cost management level. And yes, each market is different.

And so the way that we use these various levers will vary by market, and we have confidence that the decision-making at the local level will allow us to navigate as well as we can through this. As we said, the next few months are fluid, and it's important to keep agility at the center of this equation. And I guess just from the way that we've operated over the last 3, 4, 5 years on this front, gives us that confidence and it's important, I think, to be able to lead forward on the range of these topics as we look to Q2 and the rest of the year.

Our next question comes from Lauren Lieberman from Barclays.

I just have a question about trademark Coke. So Henrique, you mentioned the relaunch of Zero-Zero in Europe. And I know that historically, I guess the system kind of struggled with how to balance time and attention and resource attributed to Diet Coke and Coke Zero concurrently had a manager of -- and a decision to have more of a portfolio in no sugar options is a newer drive. So how should we think about Zero-Zero flowing into that? And maybe what are you doing from the center from the KO level to make sure that the system kind of has the right balance to have a portfolio as you make these moves. And with Zero-Zero just being the latest example?

Thank you, Lauren, and also great talking to you. Look, we -- first of all, we are very pleased also with the performance of Corporate mark overall in the quarter. We had volume growth that gives us the confidence that not only at the core of it, but all the options and variables that we bring in terms of innovation in different package sizes, playing a big role to that.

To your question regarding how we actually bringing this to life in the marketplace in an effective way. We have to go back and start the conversation from years ago when we started to step up our RGM capabilities across the world working in tandem with our bottlers. And we have been doing better every day. You remember that the CAGNY was mentioning that 1 thing that plays in our advantage is the scale. But if we can actually gain a little bit every day, scale matters and it helps us to get there. that mindset, along with the capabilities that we built over time to execute the marketplace, a broader portfolio helped us a lot. But there is one element that's key to the story. It's the connectivity to the consumer centricity approach that we have and everything that we put in the market now.

The reason by Zero-Zero is working right now in Europe because it started with the 4 eyes that was mentioning before, with a big insight that at a certain time of the day the consumers want to load down -- reduce the cafe intake, but they want to stick to the flavors and the brands that they love. And then by bringing that with the right packaging, the right price and right communication, we ended up getting a really good innovation and amplify our reach to that consumer, which then in turn and with our capabilities to execute better, you get a successful story. And that it took years.

And it's important that also on the innovation discipline that we have developed over the years. We are bringing more insights and discipline on managing innovation and the success rates over time, that gives us a better chance of success, and this was the reason why we materialize that moving forward.

So we are seeing that not only with Zero-Zero-Zero since we're talking about Coca-Cola trademark, let me bring it to North America where we had also an opportunity to amplify our portfolio with the archery space, where we have Diet Coke Cherry, we haven't tried it. It's one of my favorites. We got Coca-Cola Zero Cherry Float, which is also great. And we continue to expand that portfolio also with Mr. Piv on the Cherry space, which then connects with what I'm saying before, more connectivity to the consumer centricity on the platform and executing better because we built the right capabilities moving forward.

Our next question comes from Chris Carey from Wells Fargo.

I wanted to ask about gross margin. This is the first quarter in a few years where the underlying contribution to gross margin is a bit negative. I was wondering if you could just give us a sense of whether there are any timing elements associated with Q1, inflation impacts that you might be seeing this quarter, which is really bringing that up to you flagged, coffee and tea. And then the general progression of the underlying contribution to gross margin as you would see it sort of going forward as the costs normalize.

And then just one quick follow-up, John. I think you mentioned that the timing of CCBA could dictate margin progression in the back half. Can you just dig a bit deeper into what you were referring to with that comment?

Sure, Chris. Let me start with the overall gross margin profile. Q1 was somewhat anomalous given one particular item in APAC, the phasing of juice inventory costs, particularly in China. And that's really as a one-off in the quarter. We have had commodity pressures in the tea and coffee space, and that's going to continue somewhat through the year. But at the overall level, if I take a step back and look at the underlying drivers of gross margin for the full year, we don't see a big deviation from the playbook that we've had. We'll -- we see the revenue growth management architecture work as a very solid foundation to sustaining margins. We continue to drive a lot of efficiency throughout the P&L. But on the cost front, we'll be taking a number of measures to somewhat mitigate against some of the commodity pieces I talked about earlier, which I said are manageable.

So for the full -- I don't see it as being an area that's going backwards, the gross margin trends when I take out that inventory issue I mentioned we've got a lot of levers to work through and both as a company and as we alluded to earlier as a system. With regard to the CCBA piece, just it's a mechanical topic in terms of the impact it will have to the margin profile of the company. If we take CCBA's numbers out, lower-margin bottling business will automatically result in the overall company margin profile improving. And we've highlighted that to be a second half of the year topic. For '26, too, we can say for -- which is anomalous relative to other years FX will be a slight tailwind on the margin front, too. Thanks.

Our next question comes from Robert Ottenstein from Evercore.

Great. Congratulations on a great start to the year and your tenure. I was wondering if you could go into a little bit more detail on the underlying drivers of your performance in APAC, particularly China and India, 2 years in a row of good -- very strong results. How sustainable is this do you think throughout the rest of this year and going forward? And what are you doing differently now than in the past to produce such strong results?

Thank you, Robert. We in APAC, we're pleased with the volume growth across operating units in there. We also pleased with the fact that we gained share overall in the region. But there is still a lot of work to be done. And the reason why I'm saying that is because it's one region that we're developing definitely for the future. The big majority of the countries in there are still under development stage. If take a site like Japan, Korea, Australia, that are in a different stage. But everything else in a huge population in there, it's equally important that we not only deliver on the volume growth, but we built this industry for the future. So we're really focused China and India, as you mentioned, on developing first the industry and the foundations of our business as we've learned in other parts of the world with the right price package, architecture, playing where we believe we can win and then continue to expand that for it.

If we drill down a little bit about China, a few years ago, we took a stand and said, "We're not going to play in every category. We're going to play on a quality, volume and categories that we believe we have the rights to win." And that is now starting to pay back because we continue to lead on Sparkling. We are gaining share. And we're also building with our partners in there, a better capability on how to execute the core to then expand to more.

And then if you go to India, it's equally important to build this for the long term, a place where we are fortunate to also have local brands under the portfolio that were acquired a long time ago, composing a full portfolio that gives us the opportunity to be connected with the consumers in a very unique way in that place, but we're still far away from getting our overall architecture on RGM and our development capabilities with our bottlers to the stage that we can actually call it a mature market. So what you're going to see also and we saw across the region, is actually in this quarter, if we go down, you see that our price/mix was negative 6 points in the region. And the reason is exactly connected to what I was just saying before. We're investing for the future. We have, obviously, in this quarter, a few elements, as John pointed out, that impacted the quarter. But on the long term, the most important thing in this market is to invest for growth, build a system, health economic system that allows us to invest ahead of the curve and bring more consumers to the base. John?

Yes. Just let me -- given the previous questions on margin, I have no doubt there will be focus on the margin numbers for the Q1. So 2/3 of the margin compression in Q1 is related to the inventory item I mentioned.

We also have, in APAC, as we've discussed in previous calls, just a structural headwind given the geographic mix of the markets, Japan versus the more developing part of the equation. So while we expect us to make progress in the course of the year on overall margin profile, it is a longer-term play, as Henrique said, with the priority #1 is getting the consumer base even more closer to us. So more to comment on that as we go through the year.

Our next question comes from Bonnie Herzog from Goldman Sachs.

All right. I just had a question on your business in Asia. Your top line growth was good, but your op margins contracted almost 10 points I know, John, you touched on this a bit, but just hoping to hear a little more color on what drove this and really how we should think about profitability in that region going forward?

Yes, Bonnie, it's just what I just said in the last question, the margin profile in Q1 was impacted by an inventory item, which is unique to Q1. We do have plans in the course of the year and then lead into next year to address this. Priority #1 is the consumer franchise getting volume growth back into the range of markets that we have and investing appropriately behind them. So as Henrique said, APAC is a land of opportunity. We both lived and worked there and appreciate that it doesn't happen overnight. And we're very -- we're bullish on the way the year has started on the volume front. And we're fortunate to have a global portfolio that will allow us to invest as we need to in the short term while we get the margin profile where it needs to be longer term.

Our next question comes from Andrea Teixeira from JPMorgan.

Henrique and John, obviously, the resilience has been nothing short of impressive, both in terms of like your ability to sustain volumes and pricing. But you did call out that volumes understandably turn negative in March in the Middle East. I was just hoping to see if you can give us some sort of color for EMEA and obviously, from 2 standpoints, right, the conflict and also the fact that as you go into a situation where inflation will be more pervasive in the region and broadly in EMEA for obviously fuel for gasoline prices.

And then also for the bottlers to be able to pass through, so I was hoping to see if you can help us with that. And then in terms of the U.S., we saw fair life and again, you had explained to us. But in terms of the category and shake category deceleration, competition in the category, anything you can help us with as you have more capacity into the system this year.

Good. Thank you, Andrea, for the question. Look, in the EMEA as a whole, right, that encompasses Europe -- Eurasia and Middle East and Africa, we had a good overall performance, we grew volume and profit and continue to gain share, which was great results. If you dial up[ a little bit the conversation on Eurasia and Middle East, as you wanted to know yes, we grew volume actually in the quarter and March was the month that got more impacted by the conflict and we continue to work with our partners to support, number one, the safety of our associates and the business continuity. And it is a playbook that everyone in the region has learned from past situations similar to this and try to focus on what we can control and continue to drive and being closer to the consumer.

If you look at the outlook from the region itself, we are confident that we can manage the complexity in there. We will continue to be focused on the balanced growth, which is important for us, as we said, not only in the region, but globally, having volume being a key driver of this balanced growth, but it's going to be a composition that in the year, we will leverage the whole more than ever in a world that's going to be very dynamic. And so far, we believe that we have everything in place to continue to drive there. And we're going to continue to pivot with a playbook that has worked for us in years in the region.

Since you asked I'll give a chance to answer also the fair life here. It's a fantastic brand, as you know. We are excited that as planned, the Webster capacity is going to start to get align in the Q2, and we're going to ramp up through the year. So that's the latest on that. And we're very excited also about the fact that we're investing for the next chapter of growth there on the business itself.

Our next question comes from Filippo Falorni from Citi.

I was hoping you can touch a bit more on the North America business, solid performance on volume to start the year. You have the FIFA World Cup coming in couple of months. So just any thoughts on like potential opportunities there in terms of accelerating volumes and activation at the brand level, obviously, both for the U.S. and Canada, but also if you can touch on Mexico and the opportunity there. And maybe even give some color on like the performance of the business post the sugar tax in Mexico.

Okay, Filippo. Look, North America, we're definitely very happy with where we landed on the volume growth it indicates that the strategy and also how we're showing up as a system, it's in the right place. We had a broad-based growth across different categories and brands, which is ensuring that its equipment with the right impact, right, in the marketplace.

And FIFA World Cup, look, we actually started to execute that in Q1. It was another great decision by our operators with the bottlers in North America and Mexico that you've mentioned as well in Latin America. Both of these regions decided to go head on and start the activation of FIFA World Cup in the Q1. And now in Q2 is when we're going to realize that in there. I want to bring a point here that it's also very interesting in the execution of the World Cup for us, and you heard me at CAGNY saying as well, that we're not only getting closer to the consumer, but bringing digital at the core of everything that we do.

And if you find our packages in the market now in the U.S. and you're going to see Mexico as well, you can actually interact with that package with the right content. Actually, in the U.S., we do that for the 250 celebration as well. That interactivity, you get the content of the campaign. You also engage the consumer on a reward experience. And you have a chance to connect even with the retailer on transforming engagement of the consumers all the way down to transactions, which is what we believe we should continue to drive in our campaigns and bringing the whole digital space into doing better what we do best. So that's about North America.

Since you asked about Mexico, let me talk a little bit about what we're doing there. As you know, we had the sugar tax at the beginning of the year. That had an impact. The system has a strong resilience in the playbook on how to deal with this situation. It happened in 2014 as well. The impact is there. But with the right RGM capabilities and granularity, as I was explaining, using everything that we already had plus the personalization connections with consumers and our customers, we continue to do better than we expected, but still having Mexico playing a geo mix effect in the overall price/mix for the time. Over time, during the year, we're going to continue to dial up the campaigns, our local and global brands, which is a strength that we have also in the region to continue to engage with the consumer and to overcome the impact that we have on taxes in there. Since I was talking to Mexico, I think I should say as well that Brazil and the Central America actually offset the impact of volume declines in Mexico and Argentina.

Our next question comes from Peter Galbo from Bank of America.

I wanted to pivot to the Away-From-Home business a bit. I know that you've had maybe a more offensive minded effort there recently with the Andacoke campaign in the U.S. John, I think you mentioned the Coke in a meal in Europe campaign, obviously, a pretty big win in the hospitality space that we've heard about. So maybe you can just dig in a little bit more on kind of the double down efforts on the Away-from-Home channel, just given it's a part of the business we often don't hear a lot about.

Yes. Great, Peter. So first of all, globally, we see channel-wise, not a significant change, but the better performance on Away-From-Home than at home in the U.S. was actually the opposite in the quarter. But nevertheless, the strategy remains the same, which is connecting the consumer on every occasion and new states that we have.

And what we are doing actually very consistent in the foodservice in North America is to work together with our customers on understanding in detail and granularity, their consumer profiles and how we can actually bring not only our core offerings, but other choices that they started to innovate within that category. So what we're seeing is that there is an opportunity to continue to expand the beverage occasions and we think that being the preferred partners for the majority of the foodservice partners, we believe that we have a great runway actually to continue to develop that category and continue to drive. Our focus is always on driving more incidents on that channel. And to that element, everything that I said that we're building the right capabilities house with RGM and being closer to the consumer, helps us to continue to drive in there. So more to come.

Our next question comes from Michael Lavery from Piper Sandler.

Henrique, I wanted to just maybe zoom out a little bit and see if there's any new learnings in the first few weeks, just seeing the company through the CEO lens. And it doesn't have to be marketing specific, but I know you've talked about a step change in recruitment, especially converting younger drinkers at the point of sale. I'm just curious if you could maybe lay out a little bit of some of the changes you might anticipate to the marketing approach to improve that and how quickly it might evolve.

Thank you, Michael. Look, it has been a very smooth transition. And you heard me at CAGNY, there's so many things that we're doing right over the last few years that I would not be the one to touch that and change the trajectory because I fully believe in that. And it's very important to remind what those beliefs were. Number one, it's this belief that we are in the best industry to be in, not only ourselves here at the top of the house on the company, but our bottlers share the same belief. They continue to invest accordingly. That's very important.

The number two is what I said also at CAGNY, this unrivaled portfolio that we have, the $32 billion brands, bringing more to the family and making the billion-dollar brands become multibillion over time, that's where I believe the consumer centricity in bringing the 4 eyes can help us to actually even do better over time.

And the third one was about this unmatched system reach is with our bottlers, we know we have a very pervasive distribution system. But if we dial this up with what I mentioned before, bringing digital to do better what we are ready to best, scale will help us to actually unlock further growth and a bigger headwind -- sorry, headroom on how to bring more consumers to the base, how to bring more value to our customers and how to work as a system in a more integrated way. So that's what we're focusing on. But a lot of that continues to be very consistent of the way we have been working with our bottlers, our partners, and you can expect that, that's going to be the way moving forward as well.

Our next question comes from Kaumil Gajrawala from Jefferies.

If we can dig in a little bit on the United States and Peter's question on the Away-from-Home than specifically, there's -- for the first time this emergence of what seems like an entirely new channel with the Dutch Bros and brews of the world and these sorts of things. So McDonald's is obviously doing the same sort of thing. So I'm just curious, are you evolving your foodservice strategy to figure out how to participate better in this evolution of retail?

And then maybe if you want to talk a little bit more about the McDonald's relationship, of course, the news of them using red bulls, I think, surprising to many of us outsiders given the depth of your relationship over such a long period of time. So just curious how you're thinking about that as well.

Yes. Thanks, Kaumil. So first of all, I start from there. We have a fantastic and very long-standing partnership with McDonald's, and that's intact, right? We continue to be very happy with that partnership. And in terms of how they are also looking into creating this craft beverage offerings, and you alluded to also the fact that other players in that segment is working on, we totally embedded into the conversations about how to be part of that in McDonald's specifically. We have our Sprite brands being very -- doing very well with that space of the craft beverage offerings. We have 2 flavors, Sprite Berry Blast and Lunar splash with them that continue to perform really well. And that expands actually the beverage occasions and the opportunity within the outlets.

The way we see this at the end of the day, the beverage space continue to be vibrants and more opportunities to play within that. And we believe that being part of this with our customers and being the #1 value creator for them, we're going to have an advantage over time. We do respect the decisions on other choices about their relationships with other companies. But the most important thing is that we've been very consumer centric about how to bring innovation to each customer, and we continue to have an expanded footprint, not only bringing more to the to our pool of customers, but getting more out of that relationship on a daily basis.

Our next question comes from Carlos Laboy from HSBC.

Henrique, can you please expand on the fries in a slightly different direction to get all 4 of these to optimally work, you've put in a lot of effort into establishing the right incentives and the long-term clarity of what each side you and the bottlers are supposed to do and allowed to keep over the long term. Can you speak to how this is reinforcing the loops between you and the bottlers, so the trust can -- allow these insights and innovations a little more easily for better demand creation? And also related to that, how do you drive trust formation, this effort and this philosophy throughout the company as well?

Yes. Thanks, Carlos. Good to here with you, too. Look, at the end of the day, I think what we have today and all of us that have been in this business for years. I have been for 30 years. John and myself and James that have been around the same tenure. We believe that we have an unprecedented trust level of about presenting a great relationship that we don't take for granted. We nurture this every day. And the most important thing to your point about how we connect the 4 eyes to generate value on these trust level that we have with our bottlers, comes down to having those 3 beliefs that I mentioned before that if we are faithful to the consumer centricity of everything that we do from a portfolio view, how we engage with them, and we bring value to our customers, understanding what are the levers that we have and they have to make that occasion work, the pie is going to be bigger for everybody. And that's what we have been doing in the last few years.

The trust brings agility. The trust brings a bigger value for the ecosystem, but you never take for granted it takes years to build it and a second to lose it, and we nurture this every day. So on the 4 eyes, it's the same with the consumer. We need to honor the choices that they want, and we need to be there every day. And we are humble that we know we can do better every day at scale, and that's how we're focusing moving forward.

Our last question today will come from Robert Moskow from TD Cowen.

You might have touched on this, but I was wondering about the mix headwinds in the first quarter. How sustainable are those headwinds during the course of the year? Do they fade -- and what I'm trying to get at is what's the underlying price that we should expect for the company and maybe even if we can drill down to Lat Am, which was unusually low in first?

Yes. Thanks, Robert. So just the quarter was 3 volume, 2 mix -- 2 price/mix, cycling 1 and 4 and -- 1 and 5 and so the name of the game for us this year, and we're going to be very consistent in talking about it, is to have a more balanced algorithm driven from the top line throughout the year. So starting out with the 3 and 2 is pretty close to where we expect us. In the first quarter, there were a couple of points of mix related to the north -- in the area of North America. Some category mix, which was a little stronger headwind-wise than we expected. We would not necessarily expect that to repeat going forward. And Henrique talked about Mexico and been at the revenue line, offset with strong performance in Brazil and Central America. But that too has a geographical mix feature there that accounts for maybe a slightly lower PMO than people were expecting.

For the full year, our guidance -- and our guidance, we remain committed and we remain very much focused on delivering that balanced algorithm. And the outlook for the rest of the year, we're confident we can meet it. So 3, 2; 2.5, 2.5; 2, 3, we'll take any one of those.

Ladies and gentlemen, this concludes today's question-and-answer session. I would like to turn the call back to Henrique Braun for closing remarks.

Thank you, everyone, for participating. To close this out, enabled by our all-weather strategy, we are prioritizing agility, remaining consumer-centric and partnering closely with our customers. While the external environment is dynamic, we are using the capabilities to drive continued growth and create enduring value. Thank you for your interest, for your investment in our company and for joining us this morning. Thank you so much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

Great. Good morning, everyone. This is Filippo Falorni, Citi's Beverages, Household Products and Personal Care analyst. I'm very happy to kick off Citi's 2026 Global Consumer and Retail Conference with the Coca-Cola Company. We have John Murphy, President and CFO of the Coca-Cola Company. So John, thanks so much for coming.

Pleasure, Filippo. Thanks for having me.

Great. So maybe to start, I wanted to go back to some of the strategic initiatives that you talked about at CAGNY, both you and Henrique, and especially the desire to become more of a consumer-centric company by leveraging the 4 Is that you mentioned: inside, innovation, intimacy and integration.

So first, maybe can you talk about the competitive edge that your data and consumer insight give you in terms of market execution? And then on innovation, how does your operating model work in the current form? And what changes are you making to improve the speed to market?

Sure. Thanks, again, for having me. At CAGNY, I think one of our key messages is that the broader strategic framework that we've been operating against over the last few years is pretty much the one we'll use going forward. And with Henrique coming in to succeed James in the CEO role, it's an opportunity always to take a step back and kick the tires and, in the appropriate way, refresh the areas that we think need more attention on the execution front as much as on the strategy front going forward.

One of the key priorities over the last few years has been this notion of operating more as a network than as a more of a functional hierarchical organization and indeed system with our bottling partners. And I think what is -- what's been clear to us is we've made progress on that front, both in terms of our results and indeed in terms of how we work together. But as we look at areas of opportunity going forward, as highlighted under the 4 Is, they're easy to remember, easy to remind everybody, both internally and externally, that these are opportunities.

There's a lot of headroom ahead of us. And when I think about competitive edge, one of the opportunities that we have to further leverage going forward is this notion of marrying a global footprint and the cumulative benefits that a footprint like that offers with the ability to dial up at the local level the capabilities that we're building all around the world. And when it comes to the world of data, it's so much more effective to be able to leverage datasets that connect and talk to each other than when they're stand-alone and operating in silos. And so I think when it comes to the -- at the root of insights is a fundamental set of capabilities that allows you to leverage multiple datasets, and that's an area we see a lot of opportunity ahead for us as we continue to bring the whole digital era into our system.

Yes. Another topic that you talked about is the intimacy part. So can you talk about like the idea of becoming of a more intimate company and pushing resources at the local level? Obviously, you had a strong track record of market share gains. So like what more can you do in terms of that front of intimacy to really drive greater speed, agility and continue those success on market share that you've had?

Yes, it's been interesting how this word has been picked up on over the last few weeks. It's one that we've actually been using for a few years now internally. And the notion of intimacy is not -- it's not about fragmentation, it's much more about precision and being able to be precise at scale. So if you think about on one end of the spectrum, you have the whole opportunity that scale offers a system like ours. But scaling generic content is not going to give you the greatest bang for your buck.

What the digital era allows us to do is to be able to take that massive footprint that we have and the ecosystem that is the engine room behind it and become even more precise at the point of execution. I think Henrique, being a big soccer lover, was delighted to use the World Cup as an example of that. And the World Cup is probably our biggest global asset today. And we were just chatting beforehand, this particular World Cup, you've got 50% more teams playing in 3 really important markets with a media presence that will, I think, cover just about every country in the world.

So it's a phenomenal footprint against which to engage in a very relevant manner with fans and maybe new fans, existing and new fans of one of the most popular sports in the world. And so if I think about one of the first countries that comes to mind is a country like Haiti versus a country like Germany. They probably don't have a huge amount in common, but they do have soccer in common. And our ability to be able to utilize similar content adapted to be more relevant in each of those markets is at the heart of what we're talking about.

So it's not -- there's been -- I think we've had some questions on, "Oh my gosh, when you talk about intimacy, you're going to go back to the days when you've had 100 different campaigns in 200 markets." And that is not the point. The point is to be able to bring core content tailored appropriately but with efficiency to be more precise with our communication at the point of sale, whether it's in Haiti or in Germany.

And the commercial and activation that you showed at CAGNY were pretty exciting around the World Cup, so...

Yes. And we launched last week, we launched the anthem, our anthem for the World Cup, and it has received rave reviews even from my own family. They've been -- they were pretty happy with the new anthem. So yes, we're excited I think it's going to be a great moment, not only for the 3 markets, but for the world at large. We could use a little bit of fun and excitement in our lives over the course of the next few months. And I think the World Cup will be an outstanding set of events and activities for all of us to enjoy.

Great. Maybe shifting to the digital part of the strategy. Obviously, another very important part of the strategy with Henrique. Over the last few years, you've been leading Coca-Cola digital agenda. And then going forward, you'll be partnering closer with your newly appointed Chief Digital Officer. So can you talk a bit about like the initiatives that are already in place? How much more can you push towards the digital front, especially also obviously, a lot of talk on AI, you've used it already in commercials. So like help us understand what are the next steps on the digital front?

Sure. I think digital as a word is one that you can go in many different directions. In some previous conversations, I've talked about the power of this word digital, whether it's a medium, whether it's a capability, whether it's a disruptor. And we have been on -- like many companies have been on a journey for many years now, starting with James actually a number of years back when he talked about digitizing the enterprise. To be effective in this space, you've got to have foundations in place.

And it's -- for large legacy companies like ours, upgrading your foundations to be able to take advantage of new technology that's coming at us is something that we've been very focused on, and it's taken quite a few years to get there. Like to be on the cloud is kind of par for the course nowadays; 5 or 6 years ago, it wasn't. And to have your company, a company of our scale run on a core set of applications that actually connect and talk to each other is a lot easier said than done. I mentioned about data to have datasets that are in the same vein are able to integrate and connect and to allow us then to use some of this incredible technology that's now available to get much more value from them is something that we think is a huge opportunity for us.

And the more data you have, as some of the big technology companies have demonstrated, the more value you can create over time, assuming that you are putting into place the right, as I say, the right foundations. For me, over the last few years, it's been one of the big areas of opportunity linked to this idea of operating as a network is that data and technology does not understand silos, does not pay heed to functions. It cuts across horizontally end-to-end all facets of our business.

And in the last 3 or 4 years, we've worked hard to establish an agenda that does exactly that. And we've had 3 very distinctive areas of focus. One is how do we become better at engaging with our consumer base? How do we work with our bottling partners to be a better partner to the millions of customers that we have around the world? And then how do we run our own shop better? And within in the third one, there's multiple different priorities that we have. But the top priority continues to be developing and investing in those capabilities that allow us to drive the top line.

You can and should, the companies need to become more efficient, need to invest in programs that will drive productivity. But they're not going to create the kind of value that I believe our investors or share-owners are looking for. I think the top priority needs to be to invest in our brands, in our innovation, in how we ultimately take those brands through our packages to different channels and how we execute.

And I think being able to spin that faster and faster using technology is the core area of focus that we have going forward. And Sedef, who has got tremendous experience in all 4 of those areas, is bringing a business focus and sharpness into what makes the most sense for us to be investing in to drive that and spin that flywheel faster.

Great. Maybe just shifting to just your outlook across several of your key markets. One of your goal this year is to get a more balanced top line growth between volume, price and mix. So maybe we can start with North America. Clearly, it's been an area of strength in your business. Can you just discuss like, first of all, like just the consumer environment, what you're seeing? And then as you think about volume, specifically for North America, obviously, we mentioned the World Cup before, big event, big activation opportunity, you also have more capacity with fairlife, and you have America250 anniversary. So like clearly, there's a lot of events in North America that could drive volume acceleration. Maybe help us understand how you're seeing it?

Sure. Starting with the consumer, no major change to what we've discussed in recent times. There's a stronger overall consumer base in North America than we have elsewhere in the world. But within that, you've got segments that are doing better than others. So it's important -- going back to the first couple of questions, it's important for us to be able to deaverage that consumer base and to really bring the kind of insights that we are -- our operators need to stay as relevant as we need to be with all of these segments. So that's part one.

And that's happening actually more and more at scale around the world, that whole notion of start with the consumer, deaverage the consumer base that you have today and that's evolving in your market and just become better and better at offering solutions that will be attractive and engaging to those distinctive segments. Within North America, we've had the benefit of a terrific step-up over the last 10 years of a revamped bottling system. We have, in North America, a unique actually set of business models that allow us to engage with consumers through multiple channels in a very effective way.

It may not be the easiest way to understand for those on the outside, but it's a very effective way. We have a foodservice business that's best-in-class at partnering with a myriad of different types of customers to be as relevant as we need to be in that set of channels that they operate. We have a juice business that is a legacy juice business on top of a relatively new one, so Minute Maid and Simply that work extremely well together. We have fairlife, we have BODYARMOR. So we've got a number of discrete businesses on top of the core franchise business that you would know probably better than these other business around the world.

And our job is to be able to optimize the way we engage with our consumer base through all of those businesses. The idea of being able to premiumize and drive affordability is real. It's not just words on the page. And as we talked about at CAGNY, it's getting a little bit better at that every day is really the name of the game as opposed to be expecting some massive transformational idea to pop in April or May. And that's actually a benefit to the way a system like ours operates. We have, in the United States, hundreds of thousands of people every day getting up to be a little bit better every day.

And with the help of some of these capabilities that I've just talked about in the digital area, it's tangible for that to be an outcome. So with all of that being said, the consumer base in North America is -- as I say, is strong. We have as a key area of focus, not just at the market level, but even when you get underneath a market like North America at the state level or at the city level, the ability to be much more granular in terms of our expectations. And as we've talked before at the higher level, volume is an important part of the algorithm going forward, and that translates all the way down to the ground level. So whether it's volume acceleration or volume being a core part of the algorithm, I prefer to use the latter as a way to think about our approach to all of our key markets, but including North America in 2026.

Great. And maybe on fairlife, given it's a very important brand and it's driving a lot of growth in North America. You obviously have more capacity that is coming online, as we speak, right? You have 30% increased capacity. There's obviously a lot of new entrants in the space. But can you help us understand like how can you sustain the share gains? What are the opportunities in terms of distribution, whether it's in gas and convenience? Like how do you see the evolution of the brand with this new capacity?

Sure. And it's a great example and really an inspiration for us on the whole topic of innovation. If you, again, go back and start with the consumer, the fairlife is made up, as you well know, of both fairlife white milk Core Power is underneath the fairlife umbrella, and we have fairlife Nutrition also. And the investment that we've made in fairlife, gosh, many, many years back, is one of those areas of opportunity that we saw back then in the world of innovation to get closer to a broader consumer set and to hit a nerve, a consumer nerve, as we've done with fairlife, is something that comes along not every day, comes along every so often.

And so to have leadership in a category that is growing and that is sustaining relevance to an even broader consumer set is something that we're very pleased with. And the -- it has actually created, as you well know, the capacity challenge. We see the investments ahead of not just the most current plant, but we'll have further investments across the footprint in the U.S. coming on stream over the next 3 to 5 years. We see the opportunity ahead to be pretty robust.

You cannot -- you can never sit on your -- sit on the laurels of what you've accomplished to date, but it's a pretty darn good place to start from. And as we go forward, I would see the innovation opportunity in this category to be quite strong. And I know from my conversations with our team there that there's -- that they are jumping at the bit to have even more capacity to continue to drive an even more relevant portfolio. So it's been a wonderful addition. It's a subset of our broader ambition to be in a position to be the preferred choice for consumers around the world. And as I say, it's an inspiration to this broader innovation theme that we talk about a lot being able to deliver what we see out there today, but more importantly, to start being even better at anticipating what's around the corner.

Great. Moving to EMEA. Obviously, a lot of questions more recently on the Middle East, given the geopolitical situation there. Obviously, still all of uncertainty, but maybe can you give us an update on size of the business there, has been an area of strength over the last couple of years. So like, obviously, still uncertain, but like I'd love to hear your latest thoughts on the region.

Sure. The EMEA as a segment is made up of you've got Europe, you've got the Middle East and you've got Africa, so 3 -- and even within Europe, you've got different segments. So let me just start with the Middle East. Clearly, the conflict that is underway there was certainly not on our radar screen even a few weeks back when we were together in CAGNY. And as always, with this type of environment, our primary focus is on our people, on our operations and their safety, on the potential disruptions that may happen either in that region or beyond the region given the nature of the conflict. And it's just another example of the need to have a playbook that you can quickly bring into action. And it's another example of why we continue to talk about having an all-weather approach to dealing with this world that we're living in.

With regard to this -- to the size of the business, it's an important part of the business. It's not the largest segment of our business around the world, but it's a very important piece of the business. And we're less -- honestly, at the moment, I'm less focused on size and we're much more focused on safety, on continuing to do all that we can to ensure our people are okay and to ensure our operations can withstand whatever comes at them.

And on the Europe part of the business within EMEA, like we've heard some companies talk about the European consumer being a little bit more cautious of the energy prices there, probably have a little bit more impact on consumer sentiment. So can you help us understand there how the business is doing? You also gained share for many years there. So like help us understand like how you're seeing the consumer involving?

Yes. I would -- if you wanted to compare and contrast a little bit, I'd say the consumer in Europe is somewhat more -- overall somewhat more challenged. And then our system is adapting, and we have 2 great bottling partners covering the majority of Europe. And they get it, they understand the local markets. And even within Western Europe, you've got to differentiate between what's happening in one market versus another because it's not always an external set of challenges, sometimes we ourselves have opportunities to do better. And so we're very much bringing to life the notion that Henrique is championing around more markets doing more for the total equation.

So we have a lot of focus on understanding, as I've said earlier, these different segments of consumer and being in a position to offer whether it's on one end, more affordable options or on the other, leveraging the purchasing power that others have. So we feel that Europe is -- Western Europe, in particular, a very important part of our algorithm. And we have -- I think we've got very strong plans going into 2026 to deal with an environment there that is relative to the U.S. is probably -- is a little more challenged.

On Latin America, I just want to ask about Mexico, especially given the sugar taxes that went into place in January. So can you help us understand like the pricing that has been passed through, the elasticities? And based on prior examples, right, there's been prior sugar taxes, like how long did it take for the consumer to kind of get adjusted to the new pricing?

Our system in Latin America has demonstrated, gosh, I don't know how many iterations of pivot have happened across Latin America, whether it's a tax increase, a geopolitical issue, a macroeconomic issue. And it actually inspires, I think, many of our colleagues around the world on the -- on how it's possible with the right mindset to overcome whatever gets thrown at you. As a general statement, I think it's super impressive to see the -- how quickly they can adapt and pivot.

With regard to Mexico, the tax increase that has occurred over the last number of months, the pricing has been adjusted to reflect that increase. And we can -- we, as an entire system, are leveraging all of the tools that we have around pricing, packaging, engagement with our consumers to manage the headwind that, that increase has thrown at us. The World Cup is, as I say, a big asset for this year. We see that as a way to potentially drive even more engagement offsetting the headwind, as I say. We are celebrating our 100th anniversary of doing business in Mexico, which is a nice reminder that there's ebbs and flows along the way when you have that type of time line to think about. And I expect the business in Mexico to continue to be resilient and to continue to figure out ways to overcome whatever gets thrown at us.

I think it's hard to say based on what happened 7 or 8 years ago that the same thing is going to happen this time. So I'm not -- like I'm not yet going to predict exactly what the short-term outcome is. But I do know that the folks who are in Mexico feel as if they've got a very robust set of capabilities to continue to deploy and to sustain relevance with the -- with our consumer set in Mexico. And across the rest of Latin America, it's -- I would need to really spend the morning here to kind of drill into a number of the big markets because the backdrop is not the same everywhere.

But broadly speaking, Mexico -- or not Mexico, Brazil continues to be a terrific market for us. And then some of the mid-tier markets, Chile, Argentina, Peru, Ecuador, et cetera, these are all markets that have their own set of both challenges and opportunities. And again, going back to the CAGNY point of wanting to get more for more markets, these are markets that we'll be inspecting even more closely as we go forward.

Great. And maybe finishing up our trip around the world with Asia Pacific. I guess, look, 2 markets that you -- both you and Henrique called out at CAGNY, China and India, 2 key priorities in terms of the size of the price and in terms of the opportunity in terms of per capita consumption. What gets you the confidence to get back to those markets back to solid growth given, obviously, there's been a lot of ups and downs there, but a big opportunity longer term?

Yes. I think the -- when you're talking about over 25% to 30% of the world's population, it sort of gets -- it gets your attention in the business that we're in. China has -- and there -- again, different backdrops. China continues to be a very important market for us. And while the performance over the last 3 or 4 years in the post-COVID years has not been as we would have thought it could have been going back 7 or 8 years, it's still a massive business for us. And we have done a sort of a reset, I'd say, in the last 3 years to really hone in on the categories that we believe we can drive a leadership position over time.

The consumer has been reticent in their spending patterns given the backdrop that they're dealing with. The savings rate in China is astonishing. They are -- the Chinese consumer has got a couple of trillion dollars, I think, in their bank accounts or elsewhere. And so I'm still quite optimistic that the growth opportunity ahead for us in China is actually very robust. And the challenge that I see is less with the consumer and it's more with our ability to adapt to what's being happening in that market.

And again, when you go to China, you're going to find very different markets. You're going to find parts of China as developed and as interested and anxious for premiumization as you will in Manhattan. And yet there are parts of rural China where affordability, availability continue to be the priorities to execute against. And so we're -- for us as a system, getting that right, getting that equation right, being able to meet the consumer where they are is fundamentally the challenge.

India, growth market, we've seen its ebbs and flows, not just in the last couple of years, I've been going to India now for over 30 years, and it's never a straight line there. I do like the way in which the country, and again, the country, it's a country of 1.2 billion, 1.3 billion people. The state map, you've got different customs, traditions, ways of working, ways of consuming; North, South, East, West that you've got to become really good at adapting to.

But when I think about India and I see the infrastructure development, the electrification of the country and the digitization of the country driven by the government, it's a much more attractive backdrop for a company like ours to be able to think about growth than it's ever been before. And some of our numbers in the last 5 years have demonstrated that. As you look out, the macros look pretty solid. And our system there is still, I would say, in development mode. We have a combination of some strong local partners.

We own a chunk of the bottling system, which we are in the process of refranchising to a new partner. And I see a huge opportunity in the next 3 to 5 years is continuing to fortify and strengthen the foundations that we need to have in place to bring that flywheel to life. I mentioned to you at the break, we sometimes spend a lot of time talking about strategy and as we should. But for me, execution is the superpower of the Coca-Cola system. And when it's done well and done consistently on a daily basis, the opportunities that we frame are there to be realized.

Great. Just maybe last -- one last question on margins and if I can squeeze also some, one on capital allocation. So obviously, you had a significant margin expansion in 2025. Can you walk us through like the drivers of margins going forward? And then on capital allocation, obviously, you've been a little bit more cautious on given the tax case with IRS, what are kind of like the scenarios there? Like as you think about it, like obviously, best-case scenario, worst-case scenario and how does the capital allocation change?

Sure. So on margins, I'll take a step back and not just last year, but let's go back 7 or 8 years. I think we've been fairly consistent in our belief that the margin expansion opportunity is there for the longer haul. How much we drive year-on-year is a little bit dependent on context and the backdrop. Last year with some of the structural changes that we've had, we've been able -- we were able to benefit. But we see it as part of the job description. And there's a mindset that goes with being able to make real the -- what's implicit in the algorithm that we have.

And as I mentioned in CAGNY, we see a set of levers out there that are not short term in nature. What I think is incumbent upon those of us leading the charge is to continue to kind of drill in to drive new areas of -- and mine new areas of opportunity that these levers present to us, whether it's on the supply chain. If you think about our supply chain as a company and as a system because they're both relevant in the context of being able to create value over time. There's just each piece of the supply chain, whether it's on the procurement side, the logistics side, the distribution side, the selling and marketing side, offer ongoing opportunities to just do a little bit better every day and technology is our friend in that regard.

You go to the other end of the spectrum and the way we, with our bottling partners, engage with our consumers and customers, being able to do that at scale better, but more efficiently is the mindset. And I think we've been able to demonstrate over the last number of years that we can actually make that happen. So I see those levers and my responsibility with our team is to keep them alive and to keep mining for new areas. And we'll have a combination of both ongoing opportunities in that regard as well as some of the structural benefits that come from refranchising. And in 2026, I would anticipate given the time line for Africa for operating margin expansion to be more back half weighted than front half.

Great. Maybe just lastly, capital allocation quickly, like just your perspective there on given the tax case?

Sure. Well, the name of the game on capital allocation at the moment is optionality. Our job over the last few years has been primarily to generate the cash to have a good conversation on what do we do with it. And we feel good about the direction of travel on generating cash from the core business, operating our business through a much tighter working capital agenda and not eliminating, but greatly reducing the cash one-offs that we've had in the past.

And then when it comes to how do we utilize the cash? This is an important year with regard to our deliberations with -- on the IRS -- with the IRS tax case. We continue to have as a core focus, regardless of that, the ability to invest in our business and to support the dividend. And then you've got, over time, both the inorganic map as well as returning cash to our share-owners against a backdrop of an optimal capital structure. And so I don't have any new news on that front for you today. We'll continue to highlight our focus on retaining optionality depending on the outcome. And there's no point in guessing what it will be. You've got to be ready for either one. And that's what we're working on.

Great. Thanks so much for coming, John. Appreciate it.

Appreciate it. Thank you.

All right. Let's get started. Good morning. It's a pleasure to welcome back the Coca-Cola Company back to the CAGNY stage. And thank you to Coca-Cola for keeping us well refreshed and hydrated throughout the week.

Coca-Cola enters this year's conference from a position of strength, combining one of the most powerful brand portfolios in a global consumer staples environment with a uniquely scaled system that delivers consistent organic sales growth, strong returns and resilience across economic cycles. Today's presentation is especially timely as Coca-Cola begins its next chapter of leadership.

Today, we are pleased to be joined by Coca-Cola's Chief Operating Officer and CEO-elect, Henrique Braun; and CFO, John Murphy. To share their perspective on strategy, priorities and the path forward, let's welcome them.

I'll turn it over now to the Coca-Cola Company.

Thank you. Thank you, Sid. Thank you for the words. I will position myself here in the middle.

Good morning, everyone. I'm very excited to be here today for what's going to be my first CAGNY. But before I get into that, I really want to send a big shout out to James Quincey, who you had here for the last 10 years, and he had a tremendous tenure leading our enterprise to unprecedented results, and we really look forward to continuing that partnership with our new roles.

With that, some things never change. So I'll start with the forward-looking statements. You have a moment to read. And then we can jump into what's going to be our 3 chapters of the conversation today. John and I thought that it would be a good moment for us to reflect about the last decade to see not only what we have accomplished together, but more importantly, what's going to continue to be important for us in the next chapter. So we're calling that the enduring strengths. I call it 3 beliefs that we have as leaders of the system that's going to continue to be fundamental to us. And then we jump into 3 principles that are going to help us to accelerate our pace towards this next chapter on a world that continues to change.

Let's dive into this. If we reflect back, there's a lot actually to be proud about. Not only we had the right foundations from a consumer engagement point of view, bringing a lot of brands to life in a way that only us were able to do in the last few years, we also had a system alignment that is on an unprecedented trust levels with our partners. But we also had a great run with the top line and bottom line sustainably growing across these years, hitting a big milestone, which was the $3 EPS that was very important to us.

To leave that aside and start talking about what we believe are the enduring strengths and the beliefs of the system, the first one that comes to mind is something that's embedded as a hallmark of all the leaders of this company that you meet when you talk to them on a daily basis. It's the belief that this is the best industry to be in. Anywhere you slice it, and you have seen this chart on the right-hand side in many forms, the opportunity continues to be vast, either from an industry point of view, from a consumer point of view or a customer value creation opportunity. Any way you slice it, great opportunities ahead. That's very important because that's the belief in being in the industry investing for the long term.

The second one that's also an enduring strength of our system is our ability to build billion-dollar brands that are sustainably growing over the years and connecting with the consumers on a renewed basis year-on-year. We're very happy to announce that last year, we had 30 and now we have 32, 2 more coming to the family: Santa Clara, which is a value-added dairy brand from Mexico; and Innocent, a fruit juice company that also came from U.K. and it's now part of the family. Both of them were acquired and developed into these billion-dollar families.

It's important to point out here as well that you see a myriad of brands cutting across the different categories, continue to have the core sparkling as our big brands, but also 75% of them are non-sparkling billion-dollar brands. And that shows that we are definitely walking the talk in terms of getting our total portfolio beverages coming to the right space.

The third enduring strength and belief that we have is that we have an unparalleled system, working with our bottlers in a way that we create what I'd like to say the multiplying effect of us, the Coca-Cola Company doing what we do best, which is building brands and bringing the innovation pipeline to the equation and the bottlers delivering on the RGM and on the execution front, making the flywheel work in a way that generates this multiplying effect across the world.

That has not been done by coincidence. Actually, there was a lot of engineering behind it when we established the restructuring and refranchising of our bottling partners since 2015. And we went with a very clear framework in our mind, which was what are the best partners that have not only the will but the skill to win on these different territories that we are refranchising. That framework was very important for us to unlock a growth that has been unprecedented as well.

If we go back to 2015 and you look at up to now, we achieved more than 50% of the value -- the market value of the Coca-Cola Company throughout these years with these partnerships and the public traded company. So a lot of uniqueness about the business, but a big enduring strength that we'll continue to nurture as we go forward. That translates into an unmatched reach, which allows us to have scale across the globe, and it's a very important point.

And I want you to have this in your minds, not only for us closing this chapter, but talking about digital moving forward. Scale is paramount in this business for us to continue to drive growth sustainably into the future. So this unmatched reach with the most pervasive distribution system and the granularity that we can have with our bottlers operating in different markets allows us to go and think deeper and make the math works for us, which is another point that's very important about the way we work together with our bottlers is the mindset that on a business that everyone does little pieces together allows us to look at the global impact like no one.

If you look at the numbers, if we do a little bit better every day, either executing our planograms or just doing better on how we engage with our consumers, the multiplying effect of that is significant. And that is something that we're going to continue to have that mindset of always trying to get the best version of ourselves or our execution platforms daily in the market.

So those 3 key enduring strengths and this mindset of constantly thinking about how to get better, it's going to be paramount for us to take it to the next chapter of growth. But what else should be embedded into the way we're going to continue to engage consumer, customers and the ecosystem moving forward. We will continue to be faithful to our growth pillars and to our flywheels. That's not going to change. That's intact.

What will bring are 3 new principles that will help us to accelerate our connections with consumers, with customers and making the enterprise faster in getting more value to the whole equation. And I call them, number one, becoming even more consumer-centric than we are today, being closer to the consumer, reimagining the constructively discontented approach moving forward to work together with our partners on ways to have the balanced growth algorithm working for us. And third, placing digital in every connection that we have in the system. It's very important here to keep in mind that what we're doing with digital, it's not reimagining everything that we do, but actually amplifying what we do best with an opportunity to go with more agility and more scale moving forward.

So I'll dive into these 3 points. The first one you're going to hear a lot about these 4 Is: insights, innovation, intimacy and integration moving forward, how we're going to actually bring together these strategies to connect with the consumers. We have now the ability to get way more deeper insights from a local basis and extrapolate these into scalable platforms moving forward. That was done with our modern marketing, our transformation on how to get data and transform that into actions.

Innovation, we believe that we have done significant work on this, but we can do better. Local intimacy, it's very important as well on the balance of scale and also localness that it's becoming even more important as we move forward now in terms of driving new opportunities that can come to the billion-dollar families ideas that start at the local level and then later can be scaled and end-to-end integration that's also very important, which is how we integrate the marketing plans with the customers and have a 360 platform that goes from engagement all the way to transactions.

I thought about bringing to you an example that's close to all of us here, which is the execution of the World Cup -- FIFA World Cup campaign this year. It's going to be the biggest ever campaign of FIFA World Cup in the world. We are big sponsors. And the way we're going to engage this time around will show how these platforms of focusing with consumers at a global level and scaling the opportunities without losing the opportunity to have more hyper-personalized engagement with the consumers at the local level in a way that we haven't done before and bringing digital also as a great way to integrate these platforms moving forward. So let me show a video of how this is going to come together for you here in North America and all over the world as well. Thanks.

[Presentation]

Right. There's a lot of excitement there and being from South America, you know that it's close to my heart here. Let's not get into who is going to win the World Cup. But we brought here an example of -- how many of you are from New York here, I guess a lot, right? Yes. Anybody from Houston? Okay. Great. It's just an example to show you how this is actually going to land differently than other campaigns that we had in the past.

How we used to do this before, it would be a global campaign that would be more or less like a plug-and-play in different countries and then have different expressions depending on whether that country was participating in a big event like this or not. At this time around what we can do with the ability to personalize the contact with consumers in a way that has been very effective and efficient from an ROI perspective with the work that we have done through our modern marketing transformation, we can actually today, talk to the consumers in New York and Houston on a way that connects with their desires and their ways to actually connect with the sport.

In New York, it's going to be more about the European influence ways of connecting to the game and in Houston, more with the Latin American influence. That insight helps us to be a way more effective working with our bottlers on how we're going to connect with the digital platform and consumers from those locations differently than we did before and more effective. The intimacy part working on the point of sale, you have the opportunity now to have the planogram to execute that with the packages that are also more relevant for those consumers during that occasion.

So leveraging the current state of the execution of the bottlers, but with more efficiency. And then at the end, integrating the whole campaign, getting first-party data from the consumers and engaging them on an ongoing conversation with the brand long term. So we're excited where we're going with the way of thinking and with the 4 Is becoming a big part of how we're going to engage with the consumers and customers through digital moving forward. So more to come. Hopefully, you're going to enjoy seeing what is going to come next to you.

Another area that's really important for us to continue to dial up is on innovation. We're very proud about what we have done in the last few years. We pruned our brands, as you know, from more than 400 brands all the way down to less than 170 brands today. And we were able during this period also to be way more effective in the way that we have the success rates of innovation variants of each brand coming to life as well.

So a lot of the discipline there working for us. Where we believe we can do a dial up and an opportunity to step in every brand, it's about gaining these insights that we're getting from different local markets, especially the top markets around the world and accelerating the pace of innovation accordingly. So it's going to be a balance about everything that we learned, keeping the discipline, but also being more agile, how we react to the consumer needs locally, but with global opportunities to scale that moving forward.

So as you know, we have done a lot in the last few years, great examples here on the screen, but we believe that there is more to come on that front as well. Another way that we believe that we can really impact our way of delivering more from more brands and more from more countries moving forward, it's leveraging our ability to build the billion-dollar brands at scale, starting locally and then moving towards a global multibillion-dollar brand faster.

So that's the part of the slide on the left-hand side. On the right-hand side, you see also our way to look at the market development archetypes that we have currently. working with our different bottlers all over the world and the ability that we have now to move those markets from the emerging and developing stages, building the foundations into a more developed market, it's also very, very important for us as we move more towards the long term, getting more of the billion-dollar brands and more of the top markets working together.

How are we going to do that? We are creating an intersection of these 2 opportunities calling must-win missions that are clearly going to spread out for each market. So each market we understand clearly not only how and what they need to do to win with a specific brand, and on that market, what's the must-win mission in terms of the development stage of that market and how to invest together with the bottlers to accelerate the pace from left to right moving forward.

Those must-win missions will be also connected to the proper incentives so that we can drive that moving forward. So that's very important, especially because that touches on the concept of being discontent and trying to think on how we will unlock more growth moving forward. The other part that we're very excited about is how digital is going to become a superpower. I deliberately wanted to say a superpower because if you follow me on the thinking here that we do have an unrivaled portfolio of billion-dollar brands. We have an unmatched system that is very unique and very aligned.

The next iteration of that could be how we leverage digital to amplify and expand the ceiling of that competitive advantage. But it's so important that you don't miss the point that I said at the beginning. In order to unlock that, you need to have scale, and you need to have alignment on how to leverage data. I'll now say it that we are in the beginning of that journey. We need to be humble that that's the direction that we want to take it.

And if we go back to the mindset that I said at the beginning that the best time to change is when you don't need to, that's what we need and we will do together with our partners and trying to find the best way to make it possible. But we do have the ability to drive that like no one based on the strengths and beliefs that was mentioned before. And finally, who has been working with all of us this year and know me as well, there is no more important assets than our people in this business. This is a business that generates 2.2 billion servings a day.

People drink them. The leaders are people that not only nurture that idea, but that lead with the mindset of having the right and the best people working together. And we're going to continue to do that and empower our people with the right tools and the right determination, incentives to take us to the next level. So in short, one more slide. I just want to tell you that we are very proud about the journey so far.

We are very constructively discontent about what we could have done better and more importantly, what we can do better together with our ecosystem of partners and anchored on our 3 beliefs and our 3 principles we are really getting ready for the next chapter of growth, continuing that rally that has been very successful in the last few years. With that, I'll pass it on Baton to John. Thank you. John?

Thank you. Thanks, Henrique. Good morning, everybody. Nice to be back. Let me kick it off with a slide that would, for sure, have been snagged by somebody who's actually watching instead of participating this year, given the many years of blood, sweat and tears it's taken to get off that $2 base and finally hit the $3 mark at the end of 2025, a fitting milestone for James and one that has inspired all of us, and we are more than motivated to continue to drive it going forward.

And as we highlighted during our earnings call last week, we think we're well positioned for the year ahead. Organic revenue growth is within our long-term algorithm. We expect to deliver high single-digit EPS U.S. dollar growth, albeit some supported by currency tailwinds, which we're not used to and also continued investment in our brands and in our markets around the world and continued growth in our underlying cash flow.

We believe this is achievable as we continue to execute against an operating model that has demonstrated both its resilience and its ability to create value for many years now. And when I say it's continued to create value, I think it's worth reflecting on just how much value we have created to give credence to the idea that what Henrique has teed up and what I'm going to continue to reinforce is we have a model that's working well, albeit in constant need of improvement and of provocation to keep delivering what we know the potential is.

I use the word obsession, although I'm not often always accused of having that as part of my character, but I use the word obsession because it really has been the hallmark of the focus over the last number of years on top line growth, on margin expansion, on cash flow generation and on evolving towards being a higher return business.

All 4 areas when I first stood on this stage were not necessarily believed by many who are listening to us. Organic growth during that period has been well ahead of our long-term algorithm. Our comparable operating margin has expanded 5 points in that period, notwithstanding the challenges of a number of headwinds during the COVID and the FX years of weakness. We have, since 2017, generated over $80 billion, $80 billion in free cash flow, excluding 2 anomalous items that have gotten a lot of attention, the IRS tax deposit and the fairlife contingent payments.

And our return on invested capital today is now almost twice that of our CPG peers. We're not as much in admiration of that last slide as we are focused on the next one. And that is staying very, very clear eyed on what it takes to continue to create value for ourselves and the Coca-Cola Company and for those who participate in our broader ecosystem, including our esteemed bottling partners.

This is not a new slide. These are not new ideas, but they are ones we know can deliver value, quality, leadership on the top line, allocating our resources, our dollars, our time, our people to where it matters most, driving underlying cash flow generation, evolving month by month, year by year having what I call a fit-for-purpose balance sheet and as part of all of that continuing to deliver superior capital returns.

So I think it's worth drilling into each one of these just to give you more of a flavor as to what's our underlying thinking and our focus to sustain our value proposition for the coming years. This is a busy chart here. I'll summarize it in a couple of headlines. One, the long-term algorithm assumes a more balanced construct between volume and price mix.

Number two, we're very clear on the variables that we need to pay attention to that can impact that external variables, population, inflation, disposable income, access, physical access, digital access. And over the last few years, I think we've been able to fine-tune that top line engine around a few key focus areas. Number one, stay the course on becoming a total beverage company in all of our key markets. driving more share and more value at the micro level. Number two, improving innovation, as Henrique highlighted, not only delivering and executing what's in today's pipeline, but investing for a more future-backed set of opportunities that our industry is offering at all times.

Number three, refreshing what we call the must-win missions for our top markets. Number four, digital, again, to reinforce what Henrique said, becoming our best friend as opposed to being a disruptor. And last but certainly not least, winning the scale versus intimacy battle, and that's a daily consideration for our broader ecosystem as we continue to drive the top line.

Our second imperative is to generate more margin expansion. And the headline here is that we feel confident in our ability to do so while at the same time investing appropriately against our brands, our markets and our people. And so beyond the top line I've just talked about, there are numerous levers to work with.

We're driving gross margin discipline through leveraging what we think are unique advantages for the Coca-Cola system, our cross-enterprise procurement group that has been now operating for over 25 years and continuing to create differential value each and every one of those years and working end-to-end through our ecosystem on what we would describe as having a future-ready supply chain, taking into account not only the efficiencies that are available, but staying flexible to meet the many unknowns that seem to pop at us each and every year.

Secondly, the marketing line of our income statement and that of our bottling partners has been one we've had specific focus on, both to have it working with more impact and less waste. A system the size of ours over time, it's natural that you build up pockets of inefficiency, blind spots. And I think the work that Manolo and his team have been doing to reinvent the way we do marketing, but doing it with a keen eye to the dollar value that we need and the dollar value that it creates has been super impactful.

Number three, our business model. We have been on a journey to an asset-light model, but there's more to it than just what sits on the balance sheet or what doesn't. It's about creating and orchestrating an ecosystem of collaborative players who together can make the sum of the parts greater than one. And last but not least, continuing to, as I say, back in the office, just be a little bit wiser each day, each week in how we utilize the resources were offered, were provided, were held accountable for.

We know this works, the numbers on the slide, I'll leave them for you to take a look at, at your leisure. That's my contribution to the creative side of things today. Resource allocation is not a new idea. In fact, it's a theme we've discussed in all of the meetings I've been part of over the previous number of years. However, we think there's an opportunity to gain even more leverage from it, something I think about as potentially our new secret sauce.

In the center of this slide here is words Fuelight360. For the last couple of years, we've been developing a new capability to work with our bottling partners on being able to optimize our spend end-to-end. It allows us to hone in on what's going to deliver the most value for our buck, and it allows us to collectively think about how to improve our allocation of capital over time to support the business.

Historically, we have done a better and better job by, I would describe, suboptimizing our media spend, our trade spend, our point-of-sale materials, our coolers. But when you have the ability, and we are building this through our -- through some of the AI work we're doing to be able to pool it all and to work collaboratively end-to-end, the opportunity that it presents is even greater. So we're very excited about this and look forward to continuing to demonstrate its benefits over time.

Cash flow generation has been obsession #3. And when you strip away a couple of what I describe as anomalous items that have certainly and for good reason, gotten headlines, you can see over time the underlying generation strength of the business. And in year 2026 and beyond, we know the levers of a quality top line appropriate CapEx to support the growth opportunities. This year, we continue to support some of our bottling franchises that we own in Africa and India. But I see that number will go down over the next couple of years as we continue on that journey.

Improved working capital. We're not yet best-in-class, but we have made tremendous progress, particularly on our payables and receivables over the last few years to be almost there. And the elimination over time or the reduction over time of nonrecurring cash costs. These are tried and true, they work, and we will continue to have a very, very strong focus against them.

I talked about a fit-for-purpose balance sheet earlier on. We've made tangible progress in recent years with the refranchising work that we've had underway, understanding what does it take to drive a greater return on invested capital and being focused on our capital structure and the flexibility that we need and we look for to manage what comes at us over time. So we continue to mold this balance sheet to best support our growth ambitions in the future. And as we do this, to keep optionality for whatever future ultimately arrives at us.

One of the big learnings over the last few years is not to put all your eggs in the basket on any one future. It's creating the agility to be ready for whichever one does happen. And we think our balance sheet is much better serving us in that regard today. We will continue to complete the play on refranchising, notably in India and Africa. We will continue to optimize our equity investments over time. We know we need to invest more in new capabilities, particularly with the role that technology increasingly plays in our lives.

And at times, we've got to play defense, and we will be ready to do so when those moments come. We have a capital allocation model that is tried and true and has been in place. And in 2026, creating the ability to invest in the business, continuing to support the dividend and be well positioned to manage whatever outcome we have with the tax case is priority #1. And then mid- to longer term, using this year as a base to optimize our capital structure for the future and generate maximum returns to our shareowners using the various mechanisms we have at our disposal. So we feel good about where we are going into '26, and we'll continue to update you as some of these areas progress throughout the year.

And so we are -- we stand here to say we feel ready for the longer term. We have a long-term growth algorithm that we know is achievable. We feel good about the drivers that will allow that to happen. And we have confidence in the overall strength of our ecosystem to be behind us as we pursue this journey forward. So thank you for your time this morning. If you want a short version of my remarks, it's around $3, 4 obsessions, 5 imperatives. And we're very focused on all 3. Thank you.

We have 2 minutes left. I think we'll take questions in the next room. Let's just move on. Happy to take your questions in the breakout. Thanks.

At this time, I'd like to welcome everyone to the Coca-Cola Company's Fourth Quarter 2025 Earnings Results Conference Call. Today's call is being recorded. [Operator Instructions]

I would now like to remind everyone that the purpose of this conference is to talk with investors and, therefore, questions from the media will not be addressed. Media participants should contact Coca-Cola's Media Relations Department if they have any questions.

I would now like to introduce Ms. Robin Halpern, Vice President and Head of Investor Relations. Ms. Halpern, you may now begin.

Good morning, and thank you for joining us. I'm here with James Quincey, our Chairman and Chief Executive Officer; Henrique Braun, our CEO-elect and Chief Operating Officer; and John Murphy, our President and Chief Financial Officer.

We've posted schedules under Financial Information in the Investors section of our company website. These reconcile certain non-GAAP financial measures that may be referred to this morning to results as reported under generally accepted accounting principles. You can also find schedules in the same section of our website that provide an analysis of our gross and operating margins.

This call may contain forward-looking statements, including statements concerning long-term earnings objectives, which should be considered in conjunction with cautionary statements contained in our earnings release and in the company's periodic SEC reports. [Operator Instructions]

Now I will turn the call over to James.

Thanks, Robin, and good morning, everyone. Before I get started, I'd like to thank all of you for your support and collaboration over the years, from the analysts on the call to the investors who are listening to the many employees and other stakeholders who are joining us as well. Today will be my last earnings call. It's been a tremendous honor to be the CEO of this remarkable company. Coca-Cola gave me the opportunity to serve consumers, customers and communities around the world and work alongside incredibly talented and dedicated colleagues and friends.

Our company has achieved a lot over the last decade. Looking back to CAGNY 2017, we set 4 strategic priorities: accelerating our consumer-centric brand portfolio, strengthening our system, digitizing the enterprise and unlocking the power of our people. And I think we've done a good job meeting those priorities.

We've added 12 billion-dollar brands to our total beverage portfolio, bringing our total to 32 billion-dollar brands. 75% of our billion-dollar brands are outside our sparkling soft drinks. And while we've expanded our portfolio to offer consumers more choice, we've also reinvigorated growth of our legacy sparkling soft drink brands. Trademark Coca-Cola retail sales grew by over $60 billion, and the brand is the highest valued food and beverage brand in the world according to Kantar with a long runway ahead. Alignment with our bottling partners is better than ever, and we have a clear line of sight into completing our refranchising strategy. This work created a virtuous circle for our system with higher returns, additional investment and further value creation.

We've also taken foundational steps to digitize our system. We've made good progress connecting with consumers and customers on a more granular and personalized level.

And lastly, we've built a culture that prioritize our willingness to take risks, learn through iteration, push each other and scale successes. Our people and our growth mindset remain 2 of our biggest advantages.

As a result of delivering on these 4 strategic priorities, we've had a 7% average organic revenue growth since 2017, above our long-term growth algorithm. After years of being stuck at around $2 comparable earnings per share, we inflected our earnings, overcame ongoing currency headwinds and have achieved a $3 comparable earnings per share in 2025. We also created more than $150 billion of market value for our shareowners and outperformed the consumer staples industry.

Our foundation today is as strong as it's ever been. No matter how you slice it by category, by consumer, by channel, we have immense growth opportunities ahead of us. Henrique will bring new energy to ushering our next chapter of growth, and he's particularly passionate about our brands, franchise operating model, digital engagement and our people. We both started at the Coca-Cola Company in the same year over 30 years ago, and he's been an invaluable partner to me over the past decade. He's worked across many functions and has created value for our system on every continent where we do business. The best days for our system continue to be ahead of us, and I'm confident we'll capture these opportunities under Henrique's leadership.

So without further ado, I'll pass the call off to Henrique Braun, the next Chief Executive Officer of the Coca-Cola Company.

Good morning, everyone, and thank you, James. I'd like to take a moment to thank you for your leadership during your tenure as CEO and for your incredible contribution to our system. You leave a legacy of returning our business to growth. It's a privilege to be the next Chief Executive Officer, and I look forward to partnering with you in your ongoing role as the Chairman.

Now I'd like to discuss our 2025 performance. Despite a complex external environment in 2025, we delivered on our initial top line and bottom line guidance set last February. We also continued our streak of gaining value share for the last 19 quarters. Organic revenue growth was in line with our long-term growth algorithm. While unit case volume was flat in 2025, we ended the year with better momentum as volume improved each month during the fourth quarter.

If you take a step back, we have a long track record of navigating complex external dynamics to hold or grow volume each year. Over the past 50 years, annual volume declined only once, and that was during the pandemic. Rounding out the P&L, ongoing efficiency and effectiveness initiatives drove strong comparable operating margin expansion in 2025, which contributed to 4% comparable earnings per share growth despite 5 points of currency headwinds and a 2-point increase in our comparable effective tax rate.

During the fourth quarter, we grew volume despite cycling a tougher comparison versus the prior year. We continue to invest to build our system for the year ahead as well as for the long term.

Starting with North America. We delivered strong results despite continued macroeconomic pressure on lower-income consumers. We gained both volume and value share and grew volume, revenue and comparable operating income. We had broad-based strength across our total beverage portfolio as trademark Coca-Cola, Sprite Zero, Fresca, Dasani, fairlife, BODYARMOR trademark and Powerade each group volume. Innovation contributed to our growth as Sprite Chill and Coca Holiday Creamy Vanilla had strong performance. Across our portfolio, our system focused on accelerating cold drink equipment placement, expanding availability of value offerings and winning share of visible inventory.

In Latin America, we are lifting and shifting learning from across our markets and leveraging our systems capability to navigate a challenging external environment. During the fourth quarter, we managed to gain value share and grow volume, revenue and comparable currency-neutral operating income. Both Coca-Cola Zero Sugar and Sprite Zero Sugar had strong performance. In Santa Clara, our value-added dairy brand in Mexico, became another addition to our stable of billion-dollar brands. To drive consumer demand, we tapped into key passion points by linking Fanta with Halloween. We also continue to focus on refillable packaging, value offerings and attractive absolute price points across our portfolio.

In EMEA, we gained value share and grew volume and revenue. In Europe, volume declined as the quarter started slowly before recovering. To drive transactions, we activated several campaigns focused on the holiday and the upcoming Winter Olympics. In the U.K., we leveraged our English Premier League partnership to engage consumers with customized product offerings. In Italy, to kick off the Winter Olympics Torch Relay, we launched a music festival in Rome. And our Coca-Cola truck followed the Olympic flame across key towns and cities ahead of the games.

In Eurasia and the Middle East and in Africa, we grew volume in both operating units. We tapped into key innovations grounded in local consumers in sites like Sprite Lemon & Mint in the Middle East and had impactful marketing campaigns like Schweppes Born Social 2.0 and Cherry Coke in Nigeria. Our efforts to highlight the localness of our system and sharpen our revenue growth management capabilities led to volume growth in both operating units in 2025.

Lastly, in Asia Pacific, we gained better share and had flat volume. However, revenue and profit declined during the quarter. Volume growth in Japan was offset by declines elsewhere, driven primarily by softer consumer spending, weaker industry performance and cycling a strong growth in the prior year.

We are continuing to invest in long-term growth opportunities across Asia Pacific, and we are implementing granular channel execution plans and tailoring our brand price pack architecture with a focus on attractive absolute price points and value offerings.

In summary, we are responding to different dynamics across our markets by adapting faster, leveraging our portfolio power and investing for growth. As I prepare to step into the CEO role and think about what's next, there will be a balance between continuing what's working, evolving where we can to become more effective and efficient. While we are proud of what we have accomplished, future success is never guaranteed. We must remain discontented. Every day, our system needs to focus on being a little bit better and sharper everywhere to drive transformational impact.

We have enduring strength, which includes an incredible foundation of $32 billion brands and unmatched system reach. Our mission is both to increase this number of billion-dollar brands and to turn today's billion-dollar brands into tomorrow's multibillion-dollar brands.

To drive product quality leadership, I'm excited about 3 key areas. First, we will aim to step-change recruitment, especially with the young adult consumers, by better integrating our marketing campaigns with commercial execution at the point of sale. We already have a good starting point. In the U.S., for example, we have 10 of the top 20 beverage brands for young adult drinkers, including Coca-Cola, which is the #1 beverage brand.

Second, we need to get closer to the consumer and improve our speed to market. While we have made some progress with our overall success rates over the past several years, our innovation today is not where it needs to be. We are striving to better anticipate the next growth opportunity in beverages and shape what comes next, driven by our deep consumer insight.

Third, I am energized about steering our future RAD system. We must be intentional about putting digital at the core of every connection with consumers, customers and across the system. The better than ever alignment that we have today with our bottling partners is simply the starting point.

Putting all together, we'll look to continue expanding our horizons and shape our future. We have a durable strategy and our runway is long. I'm confident we will deliver on our 2026 guidance and capture the vast opportunities available. I look forward to sharing more details on how we are thinking about evolving our culture and our enterprise to fuel a new decade of growth next week at CAGNY.

With that, I will turn the call over to John to discuss 2025 performance and guidance for 2026.

Thank you, Henrique, and good morning, everyone. First, I'd like to recognize James and congratulate him for his tremendous career and amazing leadership as our CEO. It's been an absolute honor working alongside him. I'm also confident in the company's future as Henrique steps into the CEO role.

Looking back at 2025, we remained agile and focused on improving execution of our strategy to deliver on our guidance. During the fourth quarter, we grew organic revenues 5%. Unit case growth was 1%. Concentrate sales grew 3 points ahead of unit cases, driven primarily by the timing of concentrate shipments and an extra day in the quarter.

Our price/mix growth of 1% was primarily driven by approximately 4 points of pricing actions, offset by 3 points of unfavorable mix, which was driven by an unusual combination of business mix, category mix and timing of a number of items.

Comparable gross margin and comparable operating margin both increased approximately 50 basis points. Both were driven by underlying expansion, partially offset by currency headwinds. Putting it all together, fourth quarter comparable EPS of $0.58 was up 6% year-over-year despite 5% currency headwinds and an increase in our comparable effective tax rate.

Free cash flow, excluding the fairlife contingent consideration payment, was $11.4 billion in 2025, which is an increase of approximately $600 million versus the prior year's free cash flow, excluding the IRS tax deposits. Growth was driven by underlying business performance and lower tax payments versus the prior year.

Adjusted free cash flow conversion in 2025 was 93%, in line with our long-term targeted range for the third consecutive year.

Our balance sheet remains strong with our net debt leverage of 1.6x EBITDA, which is below our targeted range of 2 to 2.5x. We'll continue to judiciously manage our balance sheet as we await a court decision related to our ongoing dispute with the IRS.

Enabled by our all-weather strategy, we have demonstrated our ability to navigate local market dynamics to deliver on our global objectives. Our 2026 guidance builds on the results we've achieved over the past several years. We expect organic revenue growth of 4% to 5%, which is in line with our long-term growth algorithm. We also expect growth in comparable currency-neutral earnings per share, excluding acquisitions and divestitures, of 5% to 6%. We continue to focus on investing behind our brands to drive balanced top line growth with volume as a key priority.

Notwithstanding volatility in certain commodities and evolving global trade dynamics, we expect the overall impact on our class basket to be manageable. Divestitures are expected to be an approximate 4-point headwind to comparable net revenues and an approximate 1 point headwind to comparable earnings per share. This assumes the pending sale of Coca-Cola Beverages closes subject to regulatory approvals during the second half of 2026, and includes the impact of divesting CHI, which was our juice and value-added dairy finished product operations in Nigeria.

Based on current rates and our hedge positions, we anticipate an approximate 1 point currency tailwind to comparable net revenues and an approximate 3-point currency tailwind to comparable earnings per share for full year 2026.

Our underlying effective tax rate for 2026 is expected to be 20.9%. All in, we expect comparable earnings per share growth of 7% to 8% versus $3 in 2025. We also expect to generate approximately $12.2 billion of free cash flow in 2026 through approximately $14.4 billion in cash from operations, less approximately $2.2 billion in capital investments.

Driven by our free cash flow generation, we have an unwavering commitment to reinvest in our business and grow our dividend. Approximately 25% of our expected 2026 capital investments related to company-owned bottlers and the remaining capital investment is primarily growth oriented, which includes building capacity for our concentrate and finished goods businesses.

For the past 63 years, we've grown our dividend. In 2025, dividends paid as a percentage of adjusted free cash flow was 73%, which is relatively in line with our long-term payout ratio of 75%.

With respect to acquisitions and share repurchases, we'll stay both flexible and opportunistic. On acquisitions, while our track record has not been perfect, we have created a lot of value in aggregate. Just over half of our portfolio of $32 billion brand was created inorganically. Most of these were bolt-on acquisitions that we never scaled ourselves.

On share repurchases, we'll continue to repurchase shares to offset any dilution from the exercise of stock options by employees in the given year.

Putting it all together, our capital allocation policy prioritizes both discipline and agility to drive the long-term health of our business and create value for our stakeholders.

Finally, there are some considerations to keep in mind for 2026. First, due to a calendar shift in the first quarter, where we'll have 6 additional days, we expect approximately half of the benefit to be offset by concentrate shipment cycling and timing. Also, the fourth quarter will have 6 fewer days. Additionally, we will have lost equity income due to divesting our interest in Coca-Cola consolidated in November 2025.

Lastly, assuming the pending sale of Coca-Cola Beverages Africa closes during the second half of 2026, subject to regulatory approvals, we expect the impact from acquisitions and divestitures to be back-half weighted.

To sum it all up, we're focused on continuing what's working and transforming where needed to deliver on our 2026 guidance and create enduring value for our shareowners. We believe we're well positioned to drive top line growth, margin expansion, cash generation and returns over the long term. Next week at CAGNY, I'll elaborate further on how we will do this.

And with that, operator, we are ready to take questions.

[Operator Instructions] Our first question comes from Dara Mohsenian with Morgan Stanley.

First, best wishes, James, after a remarkable run under your stewardship, and congratulations to Henrique. I just wanted to get into the nitty-gritty of the 4% to 5% organic sales growth outlook for 2026. I was just hoping to get some perspective on the balance between price/mix and volume in 2026. First, obviously, the Q4 price/mix result was dragged down by geographic mix and timing, as you mentioned. What's the more normalized price/mix run rate as you build up the geographies and look forward to 2026, particularly in a tough consumer environment and relative to what you view as a more underlying run rate on price/mix coming out of Q4?

And then just on the volume side, impressive 1% result in the quarter against the tough 2% comparison, but you do have an extra drag on volume from taxes in '26, perhaps some concentrate timing, still difficult consumer environment. So I just wanted to get perspective on volume prospects also for '26 and just, again, the balance between volume and price/mix that's implied in the organic sales growth guidance.

Well, thanks, Dara. And I was slightly worried there you're going to try and cram in all the questions for the next few years in your last opportunity to ask me one. Let me unpack a little, particularly, as you mentioned, 2025 price/mix, and then roll into '26. And again, I'll take this opportunity on my last call to make an exhortation to people, particularly as it relates to price/mix and inventory, given our position in the supply chain, to always try and take a 4-quarter view. What do I mean by that?

In the fourth quarter, pricing came in at 1%, but actually, it was really 4%. Underlying pricing, as John mentioned, was really 4%. There was this 3% negative mix, partly with [ BIG ], partly with some geographies and categories. In previous quarters, it's been plus 2 or plus 3. If you look across the last 4 quarters, that mix number is even. So it's always useful to take a 4-quarter view on the mix component. If you take that, what you see is 4% underlying price and 1% volume. So you see the fourth quarter in simple terms as a 5% of revenue growth quarter, which is very much what we've been delivering through '25 and back into the previous year. So I think that's super important to bear in mind.

And then if we talk historically, as we've -- as inflation has moderated as we have stabilized -- seen some of the economies around the world stabilize, we have been expecting our go-forward guidance to see a more balanced mix of volume and price. And so I think that's what you kind of see for 2026, is a view that we still are going to be top line driven. We see strength in everything we're doing. And I know Henrique and John will unpack that in CAGNY. But we are just being a little more realistic as we always are on where we need to improve to get that volume in '26 and being a degree of prudence, some of the weaknesses would need to resolve themselves and bounce back, India, China, some of the Aseana countries in Europe, and then we've got the kind of the Mexican tax headwind starting now. We have just been what we believe to be realistic and prudent, but still super important, we are leaning into growth. We believe we have all the strategies and execution to drive top line growth well into the future.

Our next question comes from Steve Powers of Deutsche Bank.

Congrats again, both to you, James, on your past accomplishments, and Henrique, on the accomplishments to come. I guess following up on Dara's question related to the 4% to 5% call for '26. James, a few months ago, you talked about some steady, [ you expressed ] as light drizzle in the macro environment that seems to be trending worse for consumers. I guess, how have you assumed those general operating conditions trend in the year ahead? And as we think about the balance of that 4% to 5% growth that in '26, from a different perspective, you talked about volume versus price, I guess the contributions that you're expecting from emerging versus developed markets in the year ahead, would be helpful as well.

Sure. Yes, I think light drizzle was the December phrase, which I still think is true relative to what people were expecting. And look, and I think this mix between volume and price also -- look, we believe we will get back to a balance, so call it 50-50. What is important this year is to know that the places that need to get better are contributors of long-term volume growth. India is a long-term contributor to volume growth. That needs to build back, and we would expect that to ramp up during the year. Similarly, China was a little weaker in the fourth quarter than it had been during the year, and we're looking to see that build back up through the year. And a couple of other ASEAN and European market.

So the bit that will -- and obviously, the Mexican tax headwind is more likely to be impactful at the beginning of the year in the first quarter and then, to some extent, mitigate as we execute the actions to try and offset the impact. All of that would lead you to conclude that we need to see the actions executed and see that volume start to build back in some of the volume-driving countries through the year. So therefore, you might see a little more price at the beginning of the year and a little more balanced towards the end of the year, if that makes sense. But in the end, we're looking, and the guys will talk about it in CAGNY next week, to get more growth, more brands and more markets.

Our next question comes from Lauren Lieberman with Barclays.

I wanted to talk a little bit about profitability. North America operating margin expansion, another strong year and now at 30% margins for the first time in this operating unit. I think, one, I've asked John, I've asked you about it in the past, you were like, "Oh, it's a one-off. Don't get too excited about profitability in North America." But it does look like there's been structural change. So I just wanted to talk about now maybe long-term view of that. Is this an appropriate level of margin? Is there more incremental reinvestment you need to do? Do you feel like you're kind of over-earning in some way profitability-wise? Is there more work to do and more expansion that can happen?

Lauren, I'd answer it in 2 parts, take the opportunity to talk about it at the total company level. We have, I think in the last 8 years, have averaged about 60 basis points a year operating margin expansion. We have talked frequently about the fact that it's not a fluke. There's lots of levers that we have in the supply chain, marketing investment, how we run the business.

And North America has been our, I guess, our performer over the last few years in tapping into all 3 sources. And they expect, and we expect there, our folks running North America, and we expect them to continue to sort of lead the way because there's still tremendous opportunity to, as Henrique said earlier, just get a little bit better every day.

We'll talk again next week on a sort of a deeper dive into some of these levers and how they have been and will continue to help us deliver on our long-term algorithm, which, as you know, implies modest expansion on a going-forward basis.

Our next question comes from Chris Carey with Wells Fargo.

I wanted to bring the discussion back to some of these markets in 2025, which caused a bit more volatility for the business. Some are getting a bit better, I think India. China still has opportunities to get better. Mexico will be implementing the excise tax, so there could be some volatility around volume. I wonder if we just take a step back, can you perhaps comment on some of the markets which have been a bit more challenging or more volatile perhaps than usual in 2025 and how we should be thinking about overcoming those challenges into 2026? Both because the compares get easier, but also some of the actions that you'll be driving in these markets. James, you had mentioned a few in a prior comment. But I wonder if we could just focus in on this concept and talk a bit more strategically about the sequential development and some of the actions that you're thinking through.

Chris, it's Henrique here. I'll take this one. So first of all, I think it's important to look at the numbers on Q4 because it tells a lot about what you mentioned in terms of how we got puts and takes all over the world, in stronghold markets that continue to have the momentum, in others that we expect to do better and, for different reasons, they were on ups and downs during the year, as James had mentioned, China, Indias of the world and Mexico this year with the headwind that's coming with the taxes. But I'll cover how we're going to actually leverage the whole world performance to continue to deliver towards our outlook, okay?

But the all-weather strategy has been working for us because we leverage not only the ones that have the momentum to offset these other markets. If you go specifically into the 3 that we mentioned, in APAC, when we have China, for instance, being a big market for us, volumetrically speaking, but it has been also a market that we have seen the consumer sentiment and the spend being below pre-pandemic days. Nevertheless, we continue to gain share in the market. We took a strategy there to build this for the long term, and we continue to have good inroads on the quality leadership on the core, and we continue to win in that. So it's more of a long-term market, and we expect on our plans to continue to drive that next year, but with some volatility in that.

With India, we had last year different impacts from industry dynamics, weather. It was a market that we continue to invest also ahead of the curve, and we believe that we can get back on track in 2026.

Finally, the other market Mexico. We have to look at the context of Latin America. We have had headwinds in the past in different markets and the system together was able to build the right capabilities and address it through very good foundations on RGM. That's exactly what we're doing in Mexico, and leveraging the other markets that have the right momentum to get that algorithm going.

So in a nutshell, we believe that we have plans to continue to navigate well and the all-weather strategy should put us in a good shape to deliver against the LTGA.

Our next question comes from Filippo Falorni with Citi.

Congrats from me as well to both James and Henrique as you step in a role. Maybe first, just a little bit of expansion on the expectation for the North America business into 2026, especially around a few points. Obviously, you have incremental fairlife capacity coming in early in the year. So maybe give us a sense of how you're thinking that would play out throughout the year and the growth for the brand that you're expecting.

And also as we get into the summer, you obviously have the World Cup and a lot of activation around that event. Any expectations around potential uplift there? And then lastly, last year in Q1, you had the negative temporary issue with Hispanic consumers around the video. So anything that you can think there to potentially see some more benefit in the first part of the year in North America?

Filippo, I'll take that one as well. Look, North America 2025, remember that we started the year with the challenge that you mentioned, on some fake news that impacted part of the portfolio. And then we started to go on a sequential basis improving quarter on quarter. We finished, as you see the numbers down in Q4, on a positive note, and with good momentum across the portfolio. We continue to grow on the core, on sparkling, especially on Coca-Cola Trademark. And then we look at also fairlife continue the momentum. We have also very encouraging news on our dual strategy on sports with Powerade and BODYARMOR, not only gaining share, but volume in the market. smartwater continues to do well as well.

So from a portfolio basis and a consumer resilience, we believe that we have the good momentum and the plans to continue to build on an environment that didn't change so far in terms of the low-income consumer being pressured and also allowing us to continue to drive this across the different parts of the country to continue to grow and do better every day with our bottlers executing that strategy. So in a nutshell, we believe that we have good plans to continue the momentum that we have, and we expect North America in 2025 to continue the momentum that we built in 2025 -- in 2026 with the momentum we built in 2025.

Our next question comes from Rob Ottenstein with Evercore.

Please let me echo everyone's congratulations. So maybe moving in a slightly direction, over on the FX side. Could you maybe remind us your approach to currency? It's a little complicated, different than some other companies. What the guidance entails and how that is, where I think I'm seeing a 1% tailwind to the top line, but 3% on the bottom line, if I read that correctly? So what is driving that? And then what is your philosophy in terms of currency benefits, whether you'll be investing that into the business or dropping it to the bottom line, perhaps making up for some of the, as James mentioned before, being stuck at $2 for a number of years due to currency. Is this a chance to catch up on that?

And then if I may, just kind of looking out, given your hedging policy multiyear, based on where we are today, do you see currency being a similar tailwind to '27 or greater or less than the '26 guidance?

Robert, indeed, it's been a while since we've talked about FX and even longer since we talked about FX tailwinds. So good to just anchor any conversation on FX to our broader growth equation. And at the root of that equation is a focus for us to win in each of our markets over time. And for that to happen, we have got to be able to invest in a consistent manner, which, among other things, allows us to price appropriately against both the local macros and the competitive backdrop. So that's part one.

Hence, sort of fighting that, part two is, at the total enterprise level, we are committed to growing our U.S. dollar earnings as we've demonstrated over the last few years. And so our hedging program is an enabler to manage both of these tensions. So on the one hand, it removes the burden of sort of nonmarket-driven fluctuations at the local level. So that local market's kind of focus on winning. And secondly, it provides clarity to us at the enterprise level to the task at hand to grow U.S. dollar earnings. So that's sort of the strategic rationale as to why we hedge.

And question for any given year is, okay, how are we going to execute optimally against that? And for 2026, we've taken advantage today of some uncertainty regarding the U.S. dollar, to lock in benefits. The tailwinds that we reflected in our guidance today is driven largely by a weaker dollar in some of our larger emerging markets, most notably in Latin America and South Africa.

And on the point about how far we [indiscernible] well-hedged against the G10 currencies. Decisions on emerging market currencies are very much linked to the economics of doing it. As you all know, the further out you go, the more challenging the economics become. So we're well-hedged to '26 under G10 and we're as hedged as it makes sense economically on the emerging markets.

So all of that's incorporated into the guidance, 1% NSR, 3% of net income. And we feel good about that being our going-in position for the year. As I say, it helps local markets focus on what they need to focus on, and it certainly gives us our homework here at the enterprise level to deliver the U.S. dollar earnings growth.

Our next question comes from Andrea Teixeira with JPMorgan.

So James, congrats on your amazing run as CEO and now as Chairman, and wishing Henrique continued success now as CEO. My question is on the impact of SNAP changes in the U.S. And then a clarification regarding the Mexican tax, an initial read from the trade, and did that inform your conservative stance for organic sales growth in 2026?

Sure. Andrea, I'll do SNAP and then Henrique can talk about the strategy in Mexico. Look, overall, SNAP, I think, is going to end up being manageable. It's a relatively small number from -- seen from a global basis, and we think it's manageable at the U.S. level. Clearly, we think that consumers should be allowed to choose, but regulation is regulation. What we think will happen is people will choose to spend the cash they got on certain things and they'll use the SNAP credits where they're applicable. And at the end of the day, what that all boils down to is we have to make them the brands and the beverages that they want to have and want to be able to spend their disposable income on. And that just puts the challenge on us to give them the category, the beverage, the brand, the pack size, the price point, the most works for them. And net-net, we see it as a manageable impact in the U.S. and overall globally.

So I'll let Henrique comment on how we're approaching the Mexican tax situation.

Yes. On the Mexico one, yes, clearly, it is a headwind that came to us in the beginning of the year, already implemented. But this is a market that you know as well that we have a system that has been for years working tremendously aligned, building the foundations of RGM and allowing us to play that impact of the taxes across the different packages, prices and channels in a way that optimizes how we actually go and try to be in front of our consumers and our customers with an impact that continues to be accepted, right, by the consumer and the customers moving forward.

There is another point that helps us as well in 2026, is the fact that Mexico will host the World Cup event. It's the biggest event on earth in terms of engagement to its consumers and customers as well. And we are dialing up our campaigns. They're up from day 1, from Jan 1, we already had the campaign in place. On top of that, we celebrated 100 years of the system in Mexico as well.

All of that helps us to go and navigate through what is a headwind. But with all the tools that we have in place as a very focused system, to navigate that throughout the year. Remember that as well we have other tax increases in the past, which we learned from the mistakes and the right movements that we made in 2014 moving forward, and we apply those learnings this time as well to navigate these in the best way.

Our next question comes from Peter Galbo with Bank of America.

John, I was hoping, just from your prepared remarks, to dig in on a couple of topics. I know we've talked about the mix impact. But maybe you could just give a little bit more detail. I think you specifically called out some timing of investments and there was a bit commentary more focused on EMEA and Asia Pac. So just any additional detail there?

And then just the second part, John, in your remarks, I think you talked about maybe a headwind at the equity income line, not only related to some of the refranchising but some other initiatives. Just how much of a hit that is to the EPS for the year would be helpful as we try to think about bridging operating income down to EPS.

On the first question, yes, maybe just a little bit more detail. There were 3 primary drivers and each them roughly worth about the same, about 1 point each. So we've had the impact of some of the emerging markets growing faster than the developed markets. And typically, the emerging markets are slightly lower margin. Secondly, in a couple of the developed markets, we've had some categories that in the fourth quarter, of a lower-margin nature, not dramatically up, but still lower, performing better than the higher ones. So that's another point. And then the third point relates primarily to just some of the timing of marketing investments, primarily to both factor in the end of the year and the fast start programs we have in place around the world.

So it's very -- it's the first time that I can remember going back, gosh, many quarters, to have 3 of those types of effects hitting us in the same quarter. So it's a one-off, more than something to think of as a trend going forward. And as James said earlier, take a step back and look at the full year and the way we've built our guidance for '25 and reflects more full year view, and that's been a good benchmark in which to guide for next year -- sorry, for this year.

I'm sorry, the second -- you had a second question? Yes. So as I said, the primary driver that I alluded to is the sale of the consolidated shares towards the end of the year. And there's a lot of puts and takes that go into the equity income line, so I won't get into all of that detail. But the primary driver is the last equity income on consolidated.

Our next question comes from Peter Grom of UBS.

Congratulations to you both as well. I had a cash flow question. So just maybe with a much stronger year expected on cash flow front in '26, would love to [indiscernible] on your capital allocation strategy and specifically whether you would consider leaning further into any of your 4 strategic priorities in the year ahead.

Great topic. I think the starting point here is to get -- is to look at the underlying drivers over the last few years. We've had some unusual items, the IRS tax deposit and the fairlife contingent consideration, which I know on a year-to-year basis has been a little confusing perhaps. But for me, what I look at is the underlying momentum coming from the business, and we see that having had a positive impact on a steady basis.

As I mentioned in my prepared remarks, there's a very clear picture as to how we want to best utilize the cash that is coming in. When you go to the top 2 line items, we are investing in the business as the business needs. About 1/4 of our capital investments this year and last year goes towards the franchises that we still own in Africa and India. We have highlighted investments we're making in our finished goods businesses elsewhere in the world, notably with fairlife. And we also have the opportunity in a number of parts of the world to shore up capacity for our concentrate business as it continues to be challenged in some areas to supply market needs.

So that's been a priority, will continue to be, and there's no -- there's not a lot of controversy about it.

Secondly, with regards to the dividend, we continue to be very proud of the 63-year track record of growing the dividend, and we are supportive of that trend continuing.

And then last, less longer term is the idea of being both flexible and opportunistic when it comes to any inorganic opportunities and share repurchasing. For 2026 in particular, the idea going into '26 is to have as much optionality as possible to manage some specific variables, one of which is the outcome of the tax case that we have had with the IRS for many years, which we expect to certainly have a have a significant milestone towards the end of this year, early next year.

And it's important for us to feel good about whatever outcome happens either on that or in other areas, that we have what we need to deal with it. So '26, very clear on the flexibility needed. And in the meantime, we'll continue to focus the rest of the company on the core business, driving cash so that those longer-term priorities, as I just outlined, can get the attention that they deserve.

Our next question comes from Kaumil Gajrawala with Jefferies.

I'd like to maybe step back to maybe we started on the questions of the call, which is just sort of understanding the direction of travel for 2026. It looks like from an EPS perspective, you grew 4% with a 5% hit from FX. This year, you're expecting 7% to 8% with a 3-point benefit. So making adjustments there, it looks like quite a slowdown. So just curious what your -- what's underneath that? Is it investment? Are you just being conservative because it's the beginning of the year? Or is there something else in there?

Yes. Let me take that and complement the comments already made. The starting point is what do we think the top line can deliver. And when you look at the guidance we've provided, the 4% to 5%, it reflects the sum of many parts around the world. We have momentum in some markets and we've had challenges in other markets coming out of '25. And we expect to be able to continue in the markets going well, and over the course of the year to have the kind of recoveries that this guidance deserve. So that's part one, really important.

Secondly, we've had a long-standing conversation on staying ahead of the curve when it comes to investing in our brands, in our markets with our bottling partners and also in how we run the company. Henrique will talk next week about some of the priorities we have to continue to build capabilities. And so there is a bias going into next year to invest somewhat ahead of the curve.

And then the third area, just to keep in mind, is that we have -- we've called it out, but it's important that there some structural cycling as well as some of the below-the-line items that I mentioned earlier regarding Coke. So we're being -- I think we're being prudent going into '26 given the dynamics at the top line level and given the work that's underway in a number of key markets to get momentum, particularly to get volume momentum to where it needs to be.

Our next question comes from Charlie Higgs of Redburn.

And yes, just echoing congrats, James, Henrique and Robin on your new roles. All the best of the future on your great innings. James, I just wanted to ask about your move into the role of Executive Chairman. It sounds slightly more involved than the traditional Chairman role. Is that interpretation correct? And could you maybe just outline what your key priorities are in the role?

And then I was just curious, Henrique, on your comments on more to do regarding innovation, I'm sure we'll hear more next week, so I don't want to jump the gun too much, but could you perhaps just give some high-level views of where you see the most opportunity and how to execute on those in the context of a slightly weaker global consumer environment?

Charlie, I'll share a few thoughts and then pass the baton figuratively and literally to Henrique to talk about the innovation question. I think Executive Chair is clearly more than just a full-on independent nonexecutive chair [indiscernible].

The easiest way to understand it is that there are 2 buckets. One, which is things that the executive chair can do basically at the asking of the CEO to help him operate the business. There's a whole load of stakeholders and people and things, it's -- he has a very full agenda being CEO, he has a very full agenda at the Coca-Cola Company, notwithstanding there's a large team [ to helm ], and so there's an opportunity to help bridge that transition by continuing to carry the can on a set of things.

But let's be clear, the person running the company is the CEO. The Executive Chair is there to help on certain issues where the CEO needs it, and that's part of the transition.

The other piece of the puzzle is the Chair is involved because the Board is involved. I mean, the Chair is also the representative in a way of the Board. There are a set of issues around capital allocation, risk, long-term talent, where the Board is obviously interested. And there I can help work with Henrique and the team on making sure that we have the best possible dialogue at the Board level on those issues. That's the simple equation.

Charlie, and you're spot on, we're going to share more next week at CAGNY, very excited about it. But let me give you a hint here about what I meant by that on the earlier remarks. Look, we're definitely making great progress on innovation over the years. You remember that we went from 400 brands to about 170, pruning those brands to continue to accelerate the pace on bigger and better brands connected to consumers. And part of that was to improve our batting ratio there out of the park on innovation, which we have been doing. We've been very disciplined about getting that success ratio better than the past. And we believe that now, just looking at the insights on the different markets, that the world continues to be really open and the consumers looking for more innovation at the local level as well. And that's where we believe that we can make a bigger difference.

When I say that we want to be closer to the consumer, is to understand them from a local point of view and not miss that opportunity to start in a local market, something that can turn into a $1 billion brand later and then scale. We have put a lot of efforts in discipline on how to grown the brand, learn how to grow them, and leverage scale. Now it's about bringing more of those localness opportunities into the family and then accelerate. To that extent, you know that we announced today as well 2 more billion-dollar brands to the family, so innocent and Santa Clara from Mexico. That's a great example of something that started locally. And then we've invested behind it. Now the bigger brands and a lot of the learnings from that can be turned into other places to bring more brands to that family.

So more next week, but that's the idea. It's an evolution for where we are with an acceleration of innovation being more accretive to the LTGA.

Our next question comes from Carlos Laboy with HSBC.

James, John, Henrique, thank you for the focus, clarity and the growth. You previously said that you reinvest capital you raised from refranchising back into those markets. Should we expect a step-up in marketing and innovation investments in India? On a related basis, can you discuss for India the extent of the digital investments that you've been able to make in B2B platforms and advanced analytics and so forth for the purpose of more granular execution by point of sale before you refranchise? And what's your vision for how the demand fulfillment capability is going to evolve there?

Carlos, great to hear for you. So let me step back here because it's not only about India. I think it's a strategy that has been working for us. And John mentioned 2 questions before that this idea of investing together, bottlers and us, ahead of the curve. It's, number one, showing the belief that the system has in this industry. And on top of that, that we invested that same idea in every market we operate in. That's very unique from the core. Every market has one mission and it's important.

So India, specifically speaking, we not only have been investing with our bottling partners ahead of the curve. I think we mentioned a few quarters back the level of investment that we had on new lines in India that has been unprecedented. That's just to give you an idea about that investment. And we will continue to invest because this is a market for the future. We're still building the industry in there. And that's why we need to continue to invest ahead of the curve, because it's more -- almost on the model that build and will come, right? Because really on this market, you can actually continue to push forward.

Digital, it's part of it. It continues to be an opportunity in India. Why? Number one, because digitally speaking, the country infrastructure is pretty high, as well as being an acceleration across the whole India in the last few years. And we also invested behind it with a lot of focus on not only engaging with the consumer through data, tech and AI, but also from a customer point of view, developing a platform that we call Coke Buddy, which is a platform that connects the bottler to the customers through a digital platform that has been growing from day 1. We're still at 1/4 of the entire outlet base that we can reach in India, but we think that we are already deploying digital ordering, AI, agentic AI, to determine the next best SKU. And the next phase of that growth will be an end-to-end digital platform that will connect not only the consumer, the customers, but the experiences, to translate that engagement into transactions. So India, for those reasons, is a market that, on that space, it's going to continue to be ahead of the pack as well.

Great. Thanks very much, everyone. To summarize, we are well positioned, I think, to achieve our objectives both in 2026 and the long term. It's a great foundation that's been set. As we've talked, this is the time for a seamless leadership transition and I have every confidence Henrique is the best person to help lead the Coca-Cola Company, the team and the system on our next chapter of growth. Thank you very much for your trust, your investment in the company and for joining us this morning.

Thank you, James.

Yes.

Ladies and gentlemen, this concludes our conference call. Thank you for participating. You may now disconnect.

Hi, everyone. I'm Dara Mohsenian, Morgan Stanley's Beverage & Household Products analyst. I'm very pleased to welcome Coca-Cola back to Morgan Stanley's Global Consumer and Retail Conference. Before we get started, I do have to note there are important disclosures on Morgan Stanley's website at www.morganstanley.com. And if you have any questions, feel free to reach out to your Morgan Stanley sales representative.

So joining us today from Coke, we have Chairman and CEO, James Quincey. James, great to have you back here. Thank you so much for joining us.

So I thought maybe we could start with the consumer looking around the world. Obviously, there's been a lot of volatility from a macro standpoint. We saw some of that in your Q3 results. You talked about a weaker-than-expected start on the last call to the quarter, but a better September. Can you just give us a bit of an update on what you're seeing from a consumer standpoint as you look around some of the key regions of the world? And also just your perspective on the Coke system ability to pivot and manage around that consumer environment, probably a bit of weather driving the divergence within Q3, but some of that was also the actions that you took. So sort of curious what you can do within this environment?

Yes. I mean we don't have an update on Q4, obviously. But I think Q3 was some examples, and then we can talk about the macros and how they project out. Clearly, September was better than July and August, we've done some good pivoting. Whatever the headwinds and tailwinds coming from the macros, we're very focused on the things we can control across the full spectrum from the marketing through the innovation, the execution, and the pricing. And we were able to pull a number of those levers in the third quarter to get a better result.

Despite the fact that the consumer macros in general, continue to be tepid, potentially still trending down a little bit, particularly for the bottom half of the income pyramid, whether that's the developed markets or a number of the emerging markets. And so I think the things we were able to do speak to the ability to adapt of Coke and the Coke system and the bottlers to get some stuff done to get a better outcome in September than we had in July and August despite what was going on.

I think it's -- you mentioned the weather and just kind of using that as an analogy or a metaphor. I think the macro forecast you see out there for '26, the level of light drizzle continues to go up, not down, and the macros are trending off a little in '26. So I think this balance of headwinds and tailwinds, which is always there, is just looking a little more weighted to headwinds as we're going through the year and as we look out macro-wise, into next year. Of course, we've got to take that in balance with all the things we're going to do, all the investments we're going to make. We're continuing to lean into growth and focus on the flywheels of growth, and we'll come back in February with what do we think the net of all that is. But I think in general, the consumer is kind of under pressure and incrementally a little worse, but not apocalyptically.

Okay. And could you give us a little bit of more insight on some of those levers you pulled in September, what's most important from a system in terms of response in this environment?

Yes. I think the one thing that we have talked about and is a very important lever, especially in the current circumstances is the segmentation, particularly with regards to affordability. If the consumer is under pressure, it's not everyone, everywhere at all times. The top half of the income pyramid is actually in good robust shape. And so it's really the ability to say, okay, where are the people who are under pressure? What characterizes them from a consumer insight behavior point of view that will help target the marketing, what's the message, what platforms it need to go out on?

And where are they making their shopping occasions because, of course, when they're under pressure, they tend to move where they shop. So instead of spending money over here trying to activate in this type of store, I actually need to be over here activating a different sort of occasion because they're now moving to smaller baskets in different channels. So the ability to move the investment money around to follow those consumers both from a kind of mindset point of view, but also a spending pattern where and how they're spending is something we're able to bring life on a relatively short-term basis and witnessed Q3. It doesn't solve all the problems, but it certainly does make it better.

Okay. And we've been through a bit of abnormal period here over the last few years of pricing well above long-term averages. You've talked about returning to more of a balanced approach going forward, volume picking back up, maybe pricing not being as strong. Maybe just break down volume, pricing mix, the way you think about it looking out to 2026 and beyond versus recent delivery and how you think about those 3 buckets interplaying with each other?

Yes. So the long-term growth model we put out was the 4% to 6% on the top line. And we said we're looking for a balance from price and volume. And preferably, we want to be at the mid- to high end of that range. But if you take that as 5% to 6%, what are you looking for? You're looking on 2% to 3% on volume and 2% to 3% on price in the long run.

Clearly, over the last number of years, there's been way more inflation, way more price, and that has somewhat had an effect on offsetting volumes. And so the volume has been kind of 1% to 2%, let's call it, 2%, and price has been much, much more. As that inflation has moderated, the input inflation has moderated, we have come down as well. We certainly are not thinking the consumer is just going to accept inflation just because we have costs to go up. We have to make sure we earn that pricing power in the marketplace.

So I think we've taken an appropriate amount based on what we've been able to earn through our actions, not just pass through input costs without thinking about the consumer. But that's going to start to moderate. Are we down to the 2% landing zone for the developed economies and a little more for emerging markets? No, not yet. So we're on that pathway. We'll see exactly what that looks like in '26. So there's some balance there between have we arrived on pricing and will volume stop again, but we're certainly looking for volume growth because in the end, this is a consumer franchise and for it to be a stock that not just compounds but has a big terminal value component if terminal ever arrives for a stock, then it has to be growing well into the future. So we're very focused on volume growth, not just frequency of existing consumers, but recruitment of each new generation of consumers going forward.

Okay. And unlike a lot of companies in the space, you've grown volume pretty consistently, but it's been at moderate levels over the last few years. So just as you think about the level of visibility that volumes do pick up as pricing moderates, what gives you confidence there, particularly in the CPG landscape where we haven't seen a lot of that. We generally have seen volumes remain at pretty moderate levels?

Yes. I mean we've seen pretty reasonable or moderate levels of volume growth over the last high inflation years. I think in the end, the structural underlying features behind the beverage industry remain in place. So if you look back over a multi-decade history in beverages, the industry evolution and growth tracks very closely with GDP or personal income growth, the emergence of urbanization in the middle class. Basically, people got money. They live a faster life. They want to have convenience, they want to have beverages, they want to have access to choice. It's a very long-term trend with very clear correlations. And that motor continues to run.

And it's a very stable industry. If you take a histogram over 30 or 40 years of what did the industry grow on any 3-year average, it's heavily clustered in revenue terms around the 4%. If it's not 4%, it could be 5% or it could be 3%, but it's very clustered on the 4%. So you've got an industry that not only has underlying structural reasons to grow with plenty of headroom in the 80% of the world that's emerging markets of the population, but it's actually very stable growth. So I think it's all there. I'm not sure how normal 2026 will be. But in the long run, I'm very confident we'll get a balance of price and volume and continue to lead the industry and to be a share gainer in the industry such that we can stay ahead of those histograms.

Okay. Revenue growth management and price pack architecture have always been really a core capability of the Coke system. Arguably, they're more important even today in driving affordability given the external consumer environment. So just as you think about leveraging RGM, you touched a little bit on how pricing might stay above the long-term trend to some extent also dissipate in '26. Just how do you think about that conceptually from a consumer standpoint?

You talked about earning the pricing. Have you earned the ability to price pretty robustly? Or is your mindset to be just more judicious given inflation in recent years, given the overall consumer environment? Just how do you put it all together when you think conceptually about pricing? I know it will be different region by region, but how do you think through that?

So one of the things we do as one of the parameters of brand equity for each of the brands and obviously, in each country, we track consumers' views on worth what it costs. So we're not trying to guess where the consumers believe that we're giving them a fair deal. We're tracking it. So we're looking at what it costs so we can work out, are we getting there.

As a bias, I think we don't try and push them. We tend to be more conservative. In other words, we're not trying to push our look for an extended period of time and then have to do a course correction. We'd rather earn it steadily even if that meant we're fractionally behind where we should be because I think that's a more conservative approach that's better for the long-term development of recruitment of the category as we go forward.

We're not trying to get over -- we're not trying to be wildly Coyote off the cliff on pricing. We're actually better off, I think, as a company and as an industry. If we're slightly more conservative, we try and earn the pricing even if we're slightly behind. Even if we are under [indiscernible] in 1 year, we can catch up again as we go forward. So I think that's a much better approach for the long-term development of the beverage industry. And as we go into 2026, I think we'll see what that looks like.

Right. Okay. And RGM specifically, can you give us a sense of how much opportunity is left there? I know you'll say it never ends, but you've done a lot of work already, but also in this consumer environment, it becomes more important. So how are you thinking about the pace and evolution of RGM as we look out over the next few years?

As you rightly anticipated, the answer is it's an endless set of opportunities because it's both a piece of generating the value for the consumer because it's a way of giving them the option of the package at the price point in the channel that most suits them. So it both helps create the demand and then helps deliver it from a pricing perspective.

I mean in the end of the day, RGM, if you imagine the demand curve, price volume, if you've only got one SKU, you can only have one square under the curve. The more SKUs you have under the curve, the more rectangles you draw, the more of the demand curve you create. So the RGM is about the ability to basically capture the maximum under the demand curve in the most efficient way with the consumer and be able to adapt to changing circumstances. We talked about Q3.

Effectively, the demand curve moves as the consumers have less money or more money, they are motivated to go out or eat at home, they move that spend around. And so RGM is a mechanic to allow you to move where you're focused so that you can maximize how adapted you are to where the money actually is. And so therefore, it's an endless form of adaptation and in a way, helps you create the value for the consumers that you can then capture, which is an advantage of being -- having scale. So you need scale in order to be able to have all the complexity of that, that then creates the value you can capture.

Right. Great. That's helpful. We talked about earning pricing. Part of that earned pricing is the consistent market share gains you've had over time. You've had a great track record, but your competitors don't sit still. So how do you think about pressing that advantage going forward, continuing to outperform as you look going forward from here?

Yes. In a way, I don't see that any different than any other year, in the sense that it's a great industry. It's big, it's growing and it's profitable. The incumbents want to do better and other people want to get in. So we're always going to have a pretty intense level of competition. Yes, we've done well in the recent years. But everyone that didn't do well in the last few years is not withdrawing from the industry. They're not giving up. They're like, okay, there's a lot of money here. I need to find my way to a white space or do something different that can get around whatever Coke -- like everyone's out there trying to work out the next solution to do better than they did in previous years.

So we've got to do the same. Even though we won over the last number of years or one of the winners over the last years, we cannot rest at all. The old expression that we would have, the future belongs to discontented. It's absolutely true in the beverage industry. So we have to sit down. What are we going to keep? What are we going to evolve? What are we going to transform? How are we going to come back and make sure next year is another winning year? If you think you're the winner, that's probably the beginning of the end. You have to start. It's like, okay, they want our lunch, how are we going to stay ahead.

Great. Perhaps we can turn to Fairlife. I think it's somewhat underappreciated part of your business. So a, just maybe level set us how big is the business today, describe your competitive advantage, take us through a bit of the basics? And b, what really drives your competitive edge going forward? Obviously, we're seeing protein drinks and the overall space as a high-growth category, but that's also bringing in a lot of new entrants. So just as you look at your ability to continue to succeed in this space over time, how do you think about your competitive position?

Yes. I mean we haven't disclosed how big it is. But obviously, you can see in Nielsen that we're the largest value-added dairy player in the U.S. Actually, under a different brand name, Santa Clara, we are also the largest value-added dairy business in Mexico as well. So I don't think anyone would have bet on that being true 5 or 10 years ago. Why is it working? One factor that will come back is patience.

But why is Fairlife -- because they -- firstly, they are fantastic products. Why are they fantastic products? It is a combination of the R&D on producing the product and the manufacturing and agricultural ecosystem that sits behind it, creating a superior tasting and actually a superior performing product. I mean you can taste those products versus any other product, and they are just better products. So there's a lot of IP, trade secret, agricultural practice, R&D behind the makeup of those products, and it's a relatively high capital per case as well. And so there is a bit of structural competitive advantage in the products itself. They've done some good marketing. They've done some good commercial policies. But fundamentally, they're great products that have a good brand attached to them.

So I think there's still enormous potential for Fairlife and Core Power and the Fairlife Nutrition Plan going forward. And once we get the increased capacity online as we stop effectively being on allocation, which is how we're going to end this year and start building in -- unleashing the capacity coming into next year, then we will be able to expand and do more innovation in this area because there's a long way to go for protein, clearly, lots of people coming in. We know there are other subcategories and categories we can get into with the Fairlife technology. We just don't have the capacity to do it yet, but that's going to start coming on. And we have further investment plans laid out on how to keep extending the manufacturing footprint so we can meet the long-term demand for protein and for these drinks.

Okay. And as you think about the business over the next couple of years, this incremental capacity that's coming online, which is pretty significant, how big of an unlock is that for the business? Just help us understand, is it channel expansion from here? Is there a lot more innovation, more flavors? What does it allow you to do commercially?

I think -- step number one is not beyond allocation. So this plant is about 30% more capacity. We need to put on some more capacity as well over the next few years. So there's clearly more capacity that is to come in. But one, we can come off allocation, which is not a great place to be with retailers. No retailer loves that. And then once we've done that, we can then start looking at flavors, pack sizes and start getting into other categories where we know we have a superior product.

Okay. And how significant are mix opportunities maybe as you think about expanding the product offering? There is a big opportunity in single-serve gyms, things like that?

Everything. I mean, I think there's a lot -- there's a very significant unconstrained -- if you think about the unconstrained headroom, there's a lot of opportunities to keep going and expanding it. So I think this can be a motor of growth for a good number of years.

Okay. And obviously, you've been successful in the U.S. You've been successful in Latin America. We're greedy. We're wondering about Europe. I know very different regulatory environment. It's a very different landscape. Are you more focused in North America for now given the growth opportunities in the business? How do you think about international expansion longer term in dairy? And what does it really require? Is it -- you have 2 different brands, concepts in the U.S. and Latin America. Do you think these are translatable? Or might it require a different approach?

In the short term, let's make sure we don't take the eye off the ball on the U.S. That's like job #1, 2 and 3. We're doing well in Mexico. That can continue to build up. Each new area or country we go into is a complex equation. It's not like it's way more complicated, obviously, as you intimated, than launching a soft drink somewhere. You've got to organize the whole agricultural system. The regulatory systems around the world country by country on milk are very different, quite complex and you need to get into them and understand them.

And so yes, we are looking at where could we take this? I mean it's a great product. Like you go around the world, and there are protein milk drinks out there in all different countries. None of them are close to as good as Fairlife and Core Power. So there is an opportunity for a superior product. And we just need to, at the right time, work out, is there a sensible way to get there that's doable for us.

Okay. This has been -- Fairlife was a tremendous investment.

You're going to say [indiscernible] it wasn't.

Yes. Looking forward, you mentioned at CAGNY, you can be opportunistic with M&A. You've got a number of discrete free cash flow headwinds behind you, an influx of cash from a couple of bottling transactions, et cetera. Is there more of a window now to fill in gaps geographically or by product category, particularly in a tougher consumer environment where maybe you have more willing sellers? And just the lens you think through strategically in terms of strategic criteria as well as financial criteria when you look at M&A would be helpful.

Okay. First thought, innovation, of which bolt-on M&A is effectively a piece is going to go back up in importance in the coming years. It was important in the pre-COVID years as a driver of the industry and portfolio expansion for us, both our own -- and which we talked about at CAGNY, we put up the slide on how many do we create ourselves, how many do we buy small and build, that underlying thematic, I think, will start to emerge again. Now that we're past COVID and the whole kind of [indiscernible], we'll see more innovation in the industry and more potential for bolt-on M&A.

It's not an overnight thing because really the bolt-on M&A tends to be stuff that was invented 5 to 8 years ago. So it's got enough longevity that you can go, okay, that actually might work in the long run, and I can expand that internationally. But that means it was probably invented in 2020, which was not a very good year for launching innovations or just before that. So there's a bit of a thinner pipeline. But in general terms, innovation and bolt-on M&A, supported M&A will start to come back as a bigger feature, I think, for us and for the industry in the coming years.

And that also fits with our capital allocation. Clearly, we're through a whole series of discrete payments of all sorts of nature, and we're likely now to start having post CapEx, post dividends, a surplus of cash. You haven't asked yet, but the long-running process of the IRS tax case, the appeal should play out by the end of this year -- by this year, I mean, 2026 or early 2027. So there will be an important milestone in terms of how much capital is there available more or less than we have today.

So I think we're not going to do anything in all likelihood strange between now and then because we just need to get to that point. But if something comes up on the bolt-on side, then we'll be opportunistic. And when we look at it, it's like, is it the right strategy? Is it the right price? Do we have the right leader? Do we have the right execution plan?

Right. Okay. Great. That's helpful. It's very rare. You've been here many times, and we've only had, I think, 1 year in the last 14 years where FX was actually favorable. It looks like it may be the case in 2026, although I probably just jinx you. So look, how do you conceptually think about that FX benefit next year? Do you sort of manage the business more currency neutral and FX will fall where it may? But also, how does that tie into your pricing actions? So more of a longer-term question given it's a fairly unique phenomenon versus what we've seen in recent decades?

Yes. I mean, firstly, we largely compete locally in local currency in each country. Why? Because the main consumer is earning money in local currency. The retailers are working locally and the competitors largely are more local than they are dollarized. And so really, the competitive dynamic is in the local currency. Of course, there are inputs that are U.S. dollar-based or euro-based or whatever, but the predominant feature is competition in local currency. So we are going to continue to compete in local currency.

And what we've said over the last decade or so is we will then look as a corporation to use the portfolio to try and manage it so that we make sure that, as you pointed out, if the dollar is a headwind each year, we can still find a path to grow in dollars, the revenue and, of course, the U.S. dollar EPS line. But we're going to continue to compete in local currency and to win share in local. And that will be true if it becomes a tailwind, the U.S. dollar becomes a tailwind. We're going to still compete in local currencies.

And then obviously, that will -- to the extent that it is not correlated to lower inflation. So the dollar is not always an entirely independent variable. It could be that if the dollar strengthens, it exports lower inflation to other parts of the world. So we get FX tailwind, but we get a kind of an inflation headwind, if you like. We need to see how that's likely to net out in 2026. But to the extent there's FX, that will then be in the overall equation, one of the things we look at, do we use some of that to invest? Do we drop some of it to the shareholders? But in the end, we're going to try and manage all the variables, and we have not yet cooked the cake for 2026.

Right. Okay. We've seen smaller brands crop up more in this space and across CPG, enabled by e-commerce originally and technology. As you think about competing against those smaller brands, how big a concern is that? How do you sort of stay ahead of the pack and innovate? And also, maybe you can turn to AI and technology and how that is allowing you to develop your brands more potentially versus some of these smaller brands where maybe it opens things up more for them with Agentic AI or prompting or things like that?

I mean, so from our side, clearly, the advent of AI and the application of it to both understand what the consumer is doing, the trends they are responding to, plus how can we leverage ingredients and beverages to produce a better solution is creating opportunities on both sides. And so that application is at play already. And then we have -- actually, there are some things coming in 2026 that respond to the first one, which is the AI picking up what the consumer is doing and us putting a product back into the marketplace. And we'll talk about that at CAGNY [indiscernible].

So there's both of those things happening at the same time. In a way, the simplest way to think about that is, okay, all of that should be applied so that we can increase our success rate of innovation, which in the beverage industry is a very low percentage of creating something big after 7 or 10 years. But with all that technology and our industry experience and scale, we have a higher success rate, and we can use the AI to help increase that success rate. So that's what we need to do.

As it relates to the marketplace, partly there's lots of new stuff coming to the marketplace because as previously described, it's a big market, it's growing and it's profitable. So it's attractive for people to try and come in. And the barriers to entry are actually relatively low, whether it's e-commerce or the availability of third-party contracting, you can get into the industry relatively easily. So you see a large number of people try.

The barriers to scale are actually quite large. And so the success rate is extremely low for innovations. And I think that's going to continue to be true. And if you look back at our last year's CAGNY chart, if you add up the sum of all the small players, they have not gained share over the last 8 to 10 years. So there's a lot of churn because it's a hard industry to win in over a long period of time. But people come with great ideas. Sometimes we follow similar ideas. Sometimes we do bolt-on M&A. But for us, it's all about driving up our success rate on innovation.

Okay. Do you think -- has AI already increased your success rate on innovation? Is it to come? How do you think about that curve? And maybe an update on marketing effectiveness to -- from AI?

I think we're seeing improvements on the innovation side with AI. It's super hard to know whether it's going to work because it takes so long to know whether you've really, really created something at scale, it's going to take a while to know whether that's real. But AI is starting to make a difference in kind of the big areas of the main kind of business. It's starting to make a difference on the marketing. Again, we've made the Christmas ad using AI. It's quicker, it's cheaper. And not just it quicker and cheaper, but it's much more customizable.

So I think what we're going to see as the world moves from, let's say, the last 5 years where we're kind of all a bit more synchronously in the same roller coaster of COVID and inflation and ups and downs. The world is more divergent geopolitically, economically, et cetera, I think, going forward. And that's within countries and across countries. And so the AI can allow greater segmentation, targeting and adaptation of our core marketing areas. So I think FIFA World Cup, soccer for the Americans next year coming, there's much more ability with AI to do more specifically targeted advertising and marketing even within a global brand like Coke and a global program like FIFA.

So marketing can become more faster, cheaper to make and more targeted and more segmented. On the selling system -- and generative AI is clearly coming there. The selling system is also getting a lot of benefit from the AI. So in the old days, you had to wait for the -- what we would call, the pre-seller, so the salesperson to turn up before the mom-and-pop store can make an order. We visit roughly 30 million stores every week around the world. Slowly moving forward, you have a website or an app, so the customer can order when the salesperson is not there.

Then the AI starts sending suggested orders, then the AI starts working out not just what that [indiscernible] regulator is doing, but what all the people like them are doing and suggesting the order and going -- well, successful retailers like you ordered XYZ. And then you can start connecting it to the consumer system. So the consumer system can work out, okay, we're launching this product in this area, which stores don't have -- and so the 2 systems can start talking to each other. So there's plenty more to go to drive those.

We know there's upside on the marketing side. We know the sales system enabled by the AI produces higher revenue, connecting the 2 will also take us to a different place. So there's much more to come. And then internally, the AI, the analytics and the engines and the agentic stuff is going to get us stuff faster and cheaper. But as I tell people, if you just put it on top of a bad process, you're just going to get to a bad place faster and cheaper. You're not going to get to a better place. So a part of what needs to happen internally is you need to fix some of the internal processes so that when you speed them up, they're actually -- you actually get a better result, not more worse results.

Right, right. You're a fan of history. The history in large-cap CPG companies is they tend to perform in 5-year cycles or so of success and then typically come back to the pack. Just culturally after a period of success, how do you ensure the organization doesn't get complacent, extend that track record of success? And we've seen a lot of restructuring announcements in the group recently. You've been through your own on a post-COVID basis, a successful restructuring. You made some comments on that more recently also. So just what needs to sort of continue to evolve as you think about Coke going forward and in order to keep that constructive discontent you mentioned earlier in place?

Yes. Look, I think it's an internal challenge of leadership. I mean it's human nature to somehow want to settle and stay with the status quo. We've talked much about the old Woodruff expression of the future belongs to the discontented. And as you've mentioned, history, then I'll bring it up. But we had our global system meeting in Rome in July. And I put up a slide given that we're Rome, given that we've had, as you say, a relatively long track record of delivering on the algorithm, winning market share, growing the consumer base.

Okay. What happens when you're super successful and you were a Roman General and you've got your triumphal parade through Rome. They stack -- they stick a person on the back of your chariot as you're getting all the accolades who wish was in your ear, memento mori, which means, remember, you die, which is another way of saying, don't let it all go to your head. And this is what I said in July. Actually, as you like history, I also put up the 1996 cover of Fortune Magazine, October, I believe, which is the picture of the Coke bottle with Rogerinruco in it. Rogerinruco bottled up by Coke.

And I asked the question, what was the Coke stock price 5 years after that cover? It was negative. What was the Coke stock price 10 years after that cover? Negative. Like do we need any more signs that winning does not guarantee the future? We've got to stay discontented. What are we keeping? What are we changing? What are we transforming? And that's what we're focused on. And that's why we -- on the last call, we'll make some changes. We've got to stay focused on what is it we need to do to win next year and the year after and the year after that, independent of how well we've done in the past.

Okay. And you're coming up on almost a decade here, 9 years into your CEO tenure. Maybe let's take a look back. What are you most proud of during your time as CEO in terms of what you've instilled in the organization? Any areas you haven't made as much progress you want to or are really looking to drive going forward? And at some point, it won't be another 10 years, most likely. So how would you address any investor concern around succession when this remarkable run under your leadership does come to an end at some point?

In a way, if there's one piece of the culture, it's like, yes, we've got to love our brands, we've got to be proud of winning, but we must remain discontented about the future. Like the better you do, the greater the risk, you take your eye off the ball or you start celebrating your own success. That, I think, is the most important thing to keep drilling in because you want to do -- you want to win again next year. And if you look at the people who win gold medals, we're not in an Olympic year, like the hardest day is the day after they win because it's like I have won now, what do I do? No, you have to get back and train and win the next one, which is actually much harder.

And so if there's one thing about the culture, it's celebrate the success but stay discontented about the future. This is a great industry. Everyone wants to have lunch. Like we've got to keep on the game. And if we can keep that culture going, then we can have another 100 -- next year is 140 years. We'll have another 140 years of growth because the value of the Coke Company is not that it races ahead in any 1 year, it's that it compounds over a long period of time. And that's the interest in the Coke Company.

And that's what I think it will all be about. And we've been working on succession since the day I started with the Board. That's how it should be. And when the moment comes, we'll have a great system. It's not a single-person event, it's a team event, and we'll drive it. It's a big Coke system. And if that culture has landed and we stay disintented, then we will drive success, not just for many years, but for many decades to come.

Right. Well, great. That was very helpful. We really appreciate having you here. Thanks for coming.

Thank you.

And we'll move on to the next session.

Perfect.

Thank you.

At this time, I'd like to welcome everyone to The Coca-Cola Company's Third Quarter 2025 Earnings Results Conference Call. Today's call is being recorded. [Operator Instructions] I would like to remind everyone that the purpose of this conference is to talk with investors, and therefore, questions from the media will not be addressed.

Media participants should contact Coca-Cola's Media Relations department if they have any questions. I would now like to introduce Ms. Robin Halpern, Vice President and Head of Investor Relations. Ms. Halpern, you may now begin.

Good morning, and thank you for joining us. I'm here with James Quincey, our Chairman and Chief Executive Officer; Henrique Braun, our Chief Operating Officer; and John Murphy, our President and Chief Financial Officer. We've posted schedules under Financial Information in the Investors section of our company website. These reconcile certain non-GAAP financial measures that may be referred to this morning to results as reported under generally accepted accounting principles.

You can also find schedules in the same section of our website that provide an analysis of our gross and operating margins. This call may contain forward-looking statements, including statements concerning long-term earnings objectives, which should be considered in conjunction with cautionary statements contained in our earnings release and in the company's periodic SEC report.

[Operator Instructions] Now I will turn the call over to James.

Thanks, Robin, and good morning, everyone. In the third quarter, the external environment remained dynamic. And in response, we adapted our plans as needed, focusing on sharper execution and investments to drive growth. With one quarter remaining in 2025, we're on track to deliver on our reiterated top line and bottom line guidance.

We also believe we're well positioned to achieve our longer-term commitments. This morning, I'll provide some context on how we're executing our all-weather strategy in the current operating environment. Then I'll pass the call to Henrique, who will discuss our segment performance and how we're working to unlock the full potential of our system. Finally, John will discuss financial details for the quarter, our guidance for the full year 2025 and some early considerations for 2026.

During the quarter, the operating landscape remained complex. While many consumers remain in overall good shape, certain segments of the population are under pressure due to varying factors. Some factors are transitory like unseasonal weather. Others may be long-lasting, like the cumulative impact of inflationary pressures, uncertain trade dynamics and an ever-changing geopolitical environment.

Despite this backdrop, we've delivered volume growth. July and August was slow to start, but September ended on a stronger note. Organic revenue growth continued to be at the high end of our long-term growth model and ongoing efficiency and effectiveness initiatives drove comparable operating margin expansion.

This led to a 6% comparable earnings per share growth despite 6% currency headwinds. We benefit from operating in a vibrant and resilient industry with ample headroom for growth. For the 18th consecutive quarter, we gained overall value share. We also held or gained value share across each of our geographic segments. By offering consumers choice across our total beverage portfolio by leveraging our systems capabilities.

We continue to build momentum to develop our industry and expand our lead over the long term. To deliver in today's environment, we're capitalizing on the strength of our portfolio and focusing on improving execution across all aspects of our strategic growth lie wheel. We have unparalleled portfolio power as demonstrated by our $30 billion brand, which we estimate represents approximately 1/4 of the $1 billion brands in the industry is approximately double our nearest competitor.

As we continue to develop love brands, we expect our number of $1 billion brands to grow. Our marketing transformation is centered on connecting deeply with consumers through digital engagement, personalized experiences, and cultural relevance. For example, we recently partnered with Universal Pictures and Bloom House on a Halloween campaign for Fanta that was activated in approximately 50 markets.

Building on last year's success, the campaign featured iconic power characters on our packaging, limited-time flavors and immersive retail and digital experiences. While we're building capabilities in marketing, we're also prioritizing bigger and bolder innovation like Sprite plus tea in North America, Bacardi mix with Coca-Cola in Mexico and Europe and Powerade spring box addition in South Africa.

During the first 3 quarters of this year, innovation contributed strongly to revenue growth, and we're continuing to have strong velocities on our innovation. Last, our marketing and innovation agenda is brought to life by execution in the market. Over the past decade, we've been on a journey to re-franchise company-owned bottlers to fortify our system and unlock further growth.

Recently, we reached 2 significant steps in completing this journey. In July, we sold a 40% ownership stake in our company-owned Indian bottler to the [ Jubilant Bhartia Group. ] Additionally, this morning, Coca-Cola Hellenic announced its intention to acquire a controlling interest in Coca-Cola Beverages Africa, which is expected to close next year, subject to regulatory approvals.

We believe these moves will unlock growth opportunities in India and Africa. [ Jubilant Bhartia ] has built and grown consumer businesses in India and Coca-Cola Hellenic has demonstrated a strong track record in Nigeria Egypt. Our global franchise model is a strategic differentiator and is very difficult to replicate. With these milestones, we have a clear line of sight to complete our re-franchising strategy allowing us to further focus on brand building and innovation complemented by integrated execution with our bottling partners.

In summary, we're confident we can navigate what comes at us, deliver on our 2025 guidance and create long-term value for our stakeholders. With that, I'd like to hand off the call to Henrique. In his nearly 30 years of the company, Henrique has worked on multiple continents and has been a strong partner to me and to our system in driving sustainable growth

Thank you, James. I'm glad to be joining the call today. I would like to begin by discussing how we responded to varying market dynamics during the quarter by adapting faster and then I will spend some time covering actions that we are taking to ensure we get better and sharper every day.

Starting with North America. We delivered strong results despite ongoing differences in spending between income groups and slower traffic across channels, volume was flat and improved sequentially for the second consecutive quarter. We also gained value share and had strong revenue and profit growth.

We're investing behind our brands which led to broad-based strength across our total beverage portfolio. In addition to ongoing strength with Coca-Cola Zero Sugar, Diet Coke had strong volume growth by reaching a new generation of consumers, with campaigns like no design, which invites drinkers to take a diet coke break.

We also launched innovations for our loyal consumer base like retro Diet Coke with cherry and this October, we are bringing back retro diet Coke with lime nationwide in the U.S. Across our portfolio, our system accelerated codeine equipment placement expanded availability for key packages and one share of visible inventory.

In Latin America, volume was flat but we gained value share in group organic revenue and comparable currency-neutral operating income. We are taking steps to address softening macroeconomic conditions in key markets like Mexico, we are seeing good reactions to some of our integrations, but we believe it will take time. We had continued growth in Brazil, where we gained value share with strong performance from Coca-Cola Zero Sugar driven by increasing trial with Duo pax for the linking the brand to the mills occasion and expanded refillable packaging option.

Also, in Mexico, [ Santa Colada ] recently became the value share leader within value-added dairy. In EMEA, we continued to grow volume and delivered strong revenue and profit growth. In Europe, volume declined driven by [indiscernible] tougher comparison versus previous year and mixed performance across Western and Eastern markets.

We partnered with the English Premier League with Coca-Cola, smart water and Powerade to tap into consumer passion for football. We featured this partnership on our packaging and offered exclusive fans activation and access to tickets, which helped recruit weekly plus drinkers.

In Eurasia and the Middle East and in Africa, we grew volume in both operating units despite volatile macroeconomic backdrops. We further emphasized our mix of local and global brands launched the impactful marketing campaigns like our partnership with [ Springbok Rugby ] in South Africa and innovations like [ Cape bubble ] in Turkey. Also, we sharpened our revenue growth management capability and highlighted the localness of our system.

Lastly, in Asia Pacific, volume declined across each of the operating units driven by softer consumer spending, weaker industry performance and inclement weather in a few markets like India and the Philippines. However, we gained by the share and grew revenue and profit for the segment. We are focusing on granular channel execution plans, tailoring our brand price architecture with a focus on affordability and investing for growth.

Putting it all together, we continue to execute in an uncertain external environment with strong plans in place and a focus on driving profitable growth. While our strategy continues to deliver, the world around us is changing. And as we have done throughout our history, we will continue to evolve to capture the full potential of our system.

Together with our bottling partners, we are leveraging capabilities to deepen consumer connections, build on brand and execute of excellence. Digital platforms are helping us to connect the dots across our system enabling better experiences for our consumers and customers. As we adapt, we will enhance the way we work to move faster and with greater precision.

We will become even more consumer-centric to drive enduring growth for our system and industry. Overall, I'm encouraged by the energy across the network. We are learning fast, pushing boundaries and unlocking new opportunities to deliver for the long term.

With that, I will hand the call over to John.

Thank you, Henrique, and good morning, everyone. Today, I'll comment on our third quarter performance discuss the outlook for the remainder of 2025 and provide some early commentary on 2026. During the third quarter, we grew organic revenues 6%. Unit cases grew 1% after a slower start, we ended with improved performance. During the quarter, 2-year volume trends accelerated each month.

Concentrate sales were 1 point behind unit care sales driven primarily by the timing of concentrate shipments. Our price/mix growth of 6% was primarily driven by approximately 4 points of pricing actions and 2 points of favorable mix. Pricing from intense inflationary markets has largely abated. Comparable gross margin declined approximately 10 basis points while comparable operating margin increased approximately 120 basis points.

Our year-to-date comparable operating margin expansion has been driven by our continued productivity mindset. While we're continuing to invest for growth, we're also driving productivity, including prioritizing supply chain efficiencies and improving the efficiency of our advertising spend and being prudent with our expense base.

Putting it all together, third quarter comparable EPS of $0.82 in increased 6% year-over-year despite 6% currency headwinds, higher net interest expense and an increase in our effective tax rate. Free cash flow, excluding the [ Fairlife ] contingent consideration payment was $8.5 billion, which was an increase versus the prior year. Growth was driven by underlying business performance and lower tax payments, partially offset by cycling working capital benefits in the prior year. Our balance sheet remains strong with our net debt leverage of 1.8x EBITDA, which is below our targeted range of 2x to 2.5x.

We're confident in our long-term free cash flow generation and have ample balance sheet capacity to pursue our capital allocation agenda, which prioritizes reinvesting in our business and returning capital to our share owners. I also want to give a quick update regarding our ongoing dispute with the U.S. Internal Revenue Service.

A portion of our case relates to royalties from our Brazilian affiliates that were blocked under Brazilian law. The recent 3M appellate court decision addressed the same underlying regulation. We believe this case is highly supportive of our position. As we have said many times in the past, we're continuing to vigorously defend our overall position and are encouraged about our chances of prevailing on appeal.

As previously mentioned, we're confident we will deliver on our 2025 guidance. We continue to expect organic revenue growth of 5% to 6% and expect comparable currency-neutral earnings per share growth of approximately 8%, both of which reflect delivery in line with our long-term growth algorithm. Based on current rates and our hedge positions, we continue to expect a 1- to 2-point currency headwind to comparable net revenues and an approximate 5-point currency headwind to comparable earnings per share for full year 2025.

Our underlying effective tax rate for 2025 is now expected to be 20.7%. All in, based on what we know today, we continue to expect 2025 comparable earnings per share growth of approximately 3% versus $2.88 in 2024. Last, excluding the [ Fairlife ] contingent consideration payment, we now expect to generate at least $9.8 billion of free cash flow in 2025.

There are a couple of considerations to keep in mind for the fourth quarter of 2025. We're cycling a more difficult volume comparison in some of our key markets. And due to our reporting calendar there will be one additional day in the fourth quarter. While it is too early to provide specific guidance for 2026, we want to share some considerations based on what we know today.

First, a calendar shift will impact the quarterly cadence as we will have 6 additional days in the first quarter and 6 fewer days in the fourth quarter. We're focused on driving balanced top line growth with volume as a key priority. As inflation moderates, we anticipate pricing to normalize and we lean into both affordability and premiumization, depending on what the market demands.

With respect to commodities, while we're experiencing cost inflation we believe the overall impact is manageable. However, the company and our system source several items exposed to volatility and trade dynamics, which could cause our outlook to vary across our markets.

We continue to challenge all aspects of how we work, and we see opportunities to unlock cost efficiencies that can be reinvested to support portfolio growth and long-term value creation. Regarding currency, if we assume current rates and our hedge positions, there would be a slight tailwind to both comparable net revenues and comparable earnings per share for full year 2026.

Many factors could impact both our currency outlook and broader business outlook between now and when we expect to provide guidance in February. In summary, while our external environment is dynamic, we see great potential for our industry and remain steadfastly focused on driving growth.

We are confident in our ability to deliver on our 2025 guidance and create enduring value for our stakeholders. With that, operator, we are ready to take questions.

[Operator Instructions] Our first question comes from Steve Powers from Deutsche Bank. Great

James, John, Henrique, I think each of you alluded to in your remarks, entering September, you'd called out momentum that was trending a bit slower than expected in the third quarter, and you highlighted a few specific markets at the time, Mexico and Latin America, India, Vietnam, Thailand and Asia. Obviously, it appears that you came out the quarter with seeing a bit more acceleration, which is obviously encouraging.

But I'm curious as to whether you describe that to sequential improvement in underlying category trends. or more your own interventions made in response to shifting consumer sentiment? And then either way, maybe just a little bit more color on how those recent observations factor into both your 4Q, your fourth quarter views as well as your approach to fiscal 2016 planning?

Yes. Sure. Thanks, Steve. Yes. As you say, we -- when -- I think Henrique is at the conference, we pulled out a little bit of softness at the opening part of Q3. You talked about where it was Mexico and a number of parts of Asia, India, China and some of the ASEAN countries. And clearly, we got a bit better in September, some sequential improvement.

I think it would be fair to say as much as anything that was a doubling down by the system, increases in marketing and focus and innovation from us working with the bottlers on some affordability and revenue management options and some step-ups in execution. So I don't think the environment changed markedly in September from July and August, we just got more focused on drilling down into what needed to be done and to driving the quarter.

And I think, therefore, as you look out to Q4, I don't think the environment is changing that quickly. So I think we're going to have to be on the top of our game. We certainly expect to lean into and invest for growth in the fourth quarter. We have a lot of good marketing and innovation programs coming from Halloween all the way through to Christmas.

So we'll be driving that and obviously executing with our bottlers. But I think, again, as you kind of hinted in the question, the environment is going to stay more or less the same, and we've got a focus on driving our own results and trying to get volume growth going into the fourth quarter, especially as we're cycling a steeper comparison versus last year.

And then as we look out to -- that's going to be a long way away from here and going through the year. Certainly, as John commented in his considerations, we certainly expect to see inflation and pricing moderate back to a more normal range. I think as we talked about on the previous call, if our long-term growth model calls for 4% to 6% on the top line and we look for balance, which kind of implies 2% to 3% on volume and 2% to 3% on price.

Certainly, that hopefully will get easier as we go through the year, but that's what we're aiming for. Our long-term objective remains to grow volume as a way of expanding our consumer franchise and earning the right to pricing so that we can stay at the top end of our revenue growth algorithm.

Our next question comes from Lauren Lieberman from Barclays.

I wanted to ask you guys a little bit about local competition in various markets because I think historically, when consumers under pressure, affordability becomes a discussion point, you'll start to see some bubbling up of local competition particularly in sparkling. So I was wondering if you could just go through with us any markets where that's been a factor and then kind of what you're doing in response.

Yes. Thanks, Lauren. I think actually, there's a big overall shift to a little more localness, not just from a competitive point of view. If you kind of look back the last 5 years, the whole world went on a kind of a similar journey with COVID, with lockdown, we're coming out of lockdown with inflation.

There was a certain -- all on the same roller coaster effect of the last 5 years. And now that is starting to diverge in all sorts of ways, geopolitically, economically. And we are certainly seeing that there's more dynamism in regional competitors and some of the local competitors. I think regional would be more fair to call it that. But I don't think it's just about affordability.

I think this is part of a sort of kind of pendulum that swings out there with things becoming a little more global or a little more local and then a little more global. And what we're seeing at the moment is there's kind of a swing of the pendulum and a little more to regionality. Affordability is a feature of that, but it's certainly not the only feature, the identity of the brands, the innovation that's coming, you see different things in different places. So as we go forward, we're responding by driving more resources to the front line so that we can have different responses in different places.

And that's one of the things that Henrique was calling out in his piece, which is like we need to get even closer to the consumer, which is a way of saying, we need to be able to have different responses in different places, using the great strength of our global system and the scale that gives us but being able to respond to the different dynamics and the intimacy needed in the different parts of the world.

Our next question comes from Dara Mosenian from Morgan Stanley.

So James and Henrique, you mentioned some of the consumer stresses that we're seeing in general around the world. I just want to dive a bit deeper into Latin America. It's obviously tied in with the U.S. economy, but also the policy changes that we're seeing in the U.S.

So I think it would just be helpful to get an update on what you're seeing in the ground in Mexico as well as Brazil in the last few months and just how that consumer environment might impact your forward performance, but also your strategy changes in that region, specifically, Henrique mentioned some of the Mexico changes more recently.

It'd be helpful to get a deeper update there.

Dara, good here for you. Look, Latin America continues to be a market that had very strong system. And we are coming off like years of strong growth -- most recently, you have seen that we have over the last few quarters on a progressive improvement this quarter coming to flat, but also, it's important to unpack that, saying that Brazil continues to be pretty strong.

Colombia and Chile also grew in the quarter. And then Mexico is also a big market, but it's on a progressive improvement, but not yet where we want it to be. There are macroeconomic issues in the country. And also, our plans to really pivot and address that has been put in place in the last few quarters.

We have seen some of the bright spots coming out of that. But it's too early to say that we out of the woods here on getting Mexico really on a growth trajectory. What we see is that it's going to take a little bit more time in there. And in the rest of Latin America, we have more momentum.

So to your question about whether it's something more related to the whole region -- it's not specific to that. It's more related to the country itself.

Our next question comes from Filippo Falorni from Citi.

I wanted to ask about the refranchising efforts given this morning's announcement on CBA which is clearly a very important step in your goal of becoming the world's smallest dollar. I guess, can you walk us through what will be left after the transaction closes in terms of other territories to potentially refranchise.

And then in terms of the margin implications from refranchising, a few years ago, you had a target of like a mid-30s operating margin target for the Coca-Cola Company. And it seems like you're getting pretty close there to that after this transaction.

So can you walk us through like the path on the margins post refranchising?

Sure, Filippo. I'll let John jump in on that margin target and the evolution towards it. Look, with the 2 deals that we have announced with the Bhartia Group, Jubilant Bhartia Group in India, and with Hellenic relative to Coca-Cola Beverages Africa. Actually, those 2 transactions are the last 2 large pieces setting us on the path to completing the refranchising strategy that we started in 2015.

And just to remind, because that's taken us 10 years, the most important thing here was to find the right partners for each of those assets, the right owners who could drive the investment in capabilities into the future. And we have seen through all the refranchisings we've done over time that if we find the right partner to put these bottlers into their hands, they invest more, they do better.

The bottler performs better and it helps us drive overall growth of the total system. So the combination grows faster and is more profitable. So it's been a very successful strategy over the years. And with these 2 pieces, we will largely put ourselves on the path to completing refranchise. The things that will be left are just a handful of smaller countries like Malaysia and Singapore.

And so think of it as this is the final piece of stone in putting refranchising strategy to bed. And we now have a system that is super capable and set up to drive growth well into the future. And I'll let you answer the margin question, John?

Sure. Sure, James. Thanks, Filippo. Maybe it's worth taking a step back and go back a few years. And in 2017, our operating margin was 26.5%. And since that period, there have been 2 primary positive impacts offset by ongoing FX headwinds. The first has been the refranchising to date. And the second has been our continued focus on expanding margins in line with the implied guidance in our long-term growth model.

As you look at this year-to-date, the primary driver has been the latter. In other words, as I mentioned in my remarks, a lot of focus on managing our cost base. lot of focus on managing our supply chain and getting some of the benefits to the bottom line of the marketing productivity work that we've had underway.

And so as you look to the next couple of years, you can, I think, assume that the implied expansion that we expect from the core business will continue and the math will play itself out in terms of the uplift in overall the overall margin profile of the company with the latest refranchising that James just talked about and our expectations for the next couple of years to finish the play.

Our next question comes from Chris Carey from Wells Fargo Securities.

I wanted to ask to category question. So just on coffee, it was the second quarter of [indiscernible] growth after about 1.5 years of declines. Can you just reorient us on your latest thinking on your coffee strategy? Why has it been a bit tougher perhaps some of the drivers of the recent improvement and how you see the general attractiveness of this category going forward?

And if I could, just on Zero Sugar, it's had this really nice run of reacceleration over the past couple of years from some slowing in 2023. Can you just talk about the runway there? And I ask because you're starting to bring up Diet Coke a bit more over the past couple of quarters.

And I just want to maybe test a bit whether there is some broadening of this, what's called a light strategy with a bit more breadth.

Thanks, Chris. Let me start on coffee. I mean, firstly, the coffee category is a super attractive category. I mean it's very large is profitable and is growing and it's relatively unconsolidated. So let's start with coffee is an interesting category. If we can find -- one is interesting, too, it's interesting to the Coke system, if we can find a way to plan it that works for us.

And we've tried a number of things over the last decades to find a path that works for us in coffee, Costa being the most recent iteration of that. And what -- the summary on what's happening there is actually, the Costa business is doing well. As you say, it's returned to volume growth, we've been reinvesting in the stores, principally in the U.K., continuing to increase the footprint of the total park of the Costa Express machines and doing kind of beans to machines in a number of other countries.

So the business is doing well and is getting some good growth from the top to the bottom line. The commentary we made last time is the investment hypothesis didn't work out as we expected in the sense that we were looking for much more growth in the non-retail store side of the business, which much more suits the Coke system and that has not -- we have not found a path to that in the last number of years.

And so we are kind of standing back and reflecting on what that means for us on where we should go next in coffee. But in the meantime, it's a great business across the business, and we continue to run it to be successful. It just didn't create a multiplier so far that we're looking for into our broader business.

And then on the lights and zeros and diodes, look, the headline number is 0s and diets are our mid-teens percentage of total soft drink volume. So there's both an opportunity or a possibility that they could become a bigger piece of soft drink and actually help to continue to grow the sparkling category around the world.

And so I think you're seeing both some degree of self-cannibalization in marketing, but also a way of the sparkling category continuing to grow globally and particularly in the developed markets. And I think the -- yes, we called out a Diet Coke because I think there was a period of time, decade-long, maybe longer, maybe 2 decades where diet coke particularly in the English-speaking countries, was declining, and it has more recently stabilized over the last years and is actually growing this year as well as in Coke Zero Sugar to grow.

So the strategy has always been there to do justice for each brand on its own, but we have found more recently, more responsiveness to investment in marketing and innovation for Diet Coke in particular, and that has gone alongside sustained growth in Coke Zero.

So lots of growth in the future.

Our next question comes from Kaumil Gajrawala from Jefferies.

Dig a little more maybe on the consumer and CPG, particularly in the U.S. and Europe, where gearing mix messages, I suppose, from whether it's banks and retailers versus what we're hearing from CPG. And many of your CPGs have restructured. So curious where you stand and where we are.

Obviously, there's no restructuring. There's a bit of productivity. But can you just maybe talk about the differences in what we're hearing versus what maybe we're seeing for your business?

Yes. Okay. I mean let me stand back and have a thought on the industry and where we sit in it. And certainly, I hear from the banks that there's bits of the CPG industry that are under pressure in recent years. But let me focus in on beverages more particularly. The beverage industry has been characterized for many, many decades as being a growth industry.

You can do a histogram of the growth rates of the beverage industry for decades and the kind of all the growth rates cluster around the 4% to 5% growth each year. So it's -- and there are underlying structural reasons about economic growth, urbanization that drive the creation of the beverage industry. And as we've talked about in previous investor conferences, actually the #1 feature of the beverage industry is yet to be created.

There's actually tons of potential ahead. So it's an industry that grows. And we, for the last 5, 10 years, have been very focused on how do we not only be the leader in that industry, but the winner in terms of market share. So we can take the industry growth, which we support through our investments, but also win and lead in that industry.

And how have we done that? We've talked about the flywheels of investing in marketing, innovation, RGM execution. And we've supported those by using marketing funds. But also, as John alluded to in his comments, we have had ongoing programs of productivity through the whole P&L, whether that be in COGS, marketing or in SG&A.

Sometimes that is more of an event. We've reorganized ourselves a couple of times. You'll remember, Lean Center a number of years ago, then we did the thing called emerging stronger coming out of COVID. So there are more episodic more big events of moving the organization around. But each year, we're looking for continuous improvement and continuous productivity.

And as we think about what's coming next, and you mentioned that a number of people have talked about restructuring. What we see going forward is, look, -- the industry is going to keep growing. We're the leader, and we're winning share. And what we need to do is to continue to fuel the top line growth.

There was a -- if I diverge for a second, there's a famous -- at least famous at Coke speech that was written by the CEO of Coke Robert Woodruff, on the 50th anniversary, which is almost 90 years ago. It's only 1.5 pages. Speeches were shorter in those days. And he didn't have a title and he wrote on the title, the future belongs to the discontented and I think that is the key feature of [indiscernible]

Yes, we've been growing. We've been winning in the marketplace. And it's easy to be discontented if you're not doing well and you're under pressure from everyone else in the investor base. The hardest thing is to say I've done well and be discontented enough with yourself that you know you need to change and you know you need to transform. So think of what's coming as we're going to continue to drive that top line revenue growth, we're going to find the extra investments to drive that growth.

And yes, we will be discontented with ourselves and think what do we need to continue, what do we need to evolve and what do we need to transform to generate those funds for growth, and that will include ongoing productivity as we bring in AI and Agenic Tech over the coming years, and we'll do some restructuring of the organization in the coming -- in 2026.

But this is all about replicating the game plan over the last 10 years of finding productivity through the whole P&L to invest and drive top line growth that falls to the bottom line.

Our next question comes from Bonnie Herzog from Goldman Sachs.

All right. I actually just had a quick question on your business in Asia. Organic sales in the quarter were up 7% and accelerated sequentially. So just hoping for some more color on the strength you're seeing in the region? And how sustainable this strong, I guess, high single-digit price/mix big.

Yes. Thanks, Bonnie. This falls into the bucket of 1 of the sporadic questions about how strange the Asia Pacific segment is. And what I would encourage is to look at multi-quarter trends in Asia Pacific because for management reasons, Asia, they're all on a different times.

And it's much easier to manage when you're out there and you put them all together. But they are quite disparately different businesses. You've got the emerging market businesses with, let's say, India at one end with huge, huge, huge potential for growth in volume over many, many years, but much lower prices all the way through China, ASEAN and then at the other end of the spectrum, you get to Australia and Japan, which have been growing but have much higher realized prices given the developed economy.

And so one of the predominant effects in Asia Pacific is how fast did each of those components grow. And in this particular quarter, as we talked about earlier, India, because the monsoon China because of some of the economic pressures and ASEAN. Those markets underperformed our expectations in volume terms.

And so as the mechanical effect of putting all that together, that means that in a waiting sense, the lower-priced countries did [indiscernible] which means that the mix looks like it's shot up not shot up -- we've increased slightly in Japan and Australia, which then produces a PMO effect that looks like pricing went up a lot in Asia Pacific.

Which is the inverse of what normally happens, which is when the emerging markets grow, it looks like prices are flat or declining in Asia Pacific because of the growth of the lower price markets. So this is a mix effect problem or waiting problem of the way the segment is constructed, we manage each country to drive the business.

And so I would not overemphasize this. We should look for Asia Pacific over time to drive volume growth for the emerging markets, the pricing will go up in each country. But as that mix is out in the segment, you don't see it come through in the Asia Pacific segment quite so obviously.

Our next question comes from Robert Ottenstein from Evercore.

Great. James, I wonder if we could kind of circle back to a topic that was in much discussion a couple of years ago and has stated a little bit is GLP-1 drugs and at this point, you ought to have some reasonably good data on their impact on beverage consumption.

One consultant that we work with talks about an increase in consumption of protein, energy and hydration driven products from GLP-1. So I was wondering what your data says, do you see those interests increases? Do you see areas where there's weakness? And then just to double-click on protein, if you can give us an update on your platform, how capacity looks and when it comes on and how you see the competitive environment developing as competitors kind of sharpen their tools and new competition comes in?

Sure. Thanks. Yes, we certainly are out there generating data on what seems to be happening with households and people that are on GLP-1 I think it's still ultimately early days to know the full cycle. But I think what you're seeing is very similar to what we're seeing. Obviously, we track not just what they do on nonalcoholic beverages but across what they eat and the alcoholic beverages.

And so one can see the full change in the diet makeup -- as it relates to nonalcoholic, clearly, we can see some very emerging conclusions. They tend to drink last full sugar soft drinks, but they tend to drink more diet soft drinks, also hydration, more coffee, and as you say, a big shift towards protein drinks.

I think that's a really standard set of conclusions that everyone sees. And then as it relates to what we're doing on protein, Obviously, we've got Fairlife and CorePower which have been standout successes for the last number of years and continue to grow in the third quarter.

The capacity that we've talked about of the big factory in upstate New York is on track. We expect to begin to produce on time, and ramp up that capacity through the course of 2026. As much as I would love it to all be available on January 1. That will not be the case. And so we do see ourselves having a much more unconstrained ability to satisfy consumer demand over the course of 2026.

Yes, competitors coming into the space across all sorts of food and beverages into protein. We believe we have great brands. We have excellent products. There'll be a lot of new innovation. Our objective is to drive the fairlife in the core power brands. We have lots of new innovation, and we will have more capacity coming online, and it's going to be a growth area for sure in 2020.

Our next question comes from Andrea Teixeira from JPMorgan.

James, I guess your comment takes to the question. I appreciate what you said, the culture of this content and great in the organization. And your comment right now on Fairlife and Core Power, you obviously had a lot of as retailers are still on a location and fully understand that you're not going to have the capacity right on January 1.

But how should we be thinking like given the allocation and innovation you spoke to, as we go into 2026, perhaps in the second half, we're going to see the acceleration there. And then as you think about like potentially lifting into international, I understand that this is going to be more of a -- probably another 2026, but long term, would you see a fit perhaps even like with Santa Clara, Mexico and other places where you can build that protein, obviously, is a very difficult supply chain?

Or I should say difficult, but just a longer-term supply chain. Is that something that you're thinking longer term? And then thinking of staying in Mexico since we spoke about Santa Clara. How should we be thinking about like the sugar drink taxes that you faced, obviously, in 2014, you pivoted really well, you bounced back much higher than you were before.

And that was one is, I think, in pricing. So how can you think about like how to face potentially if that is implemented.

Yes. Okay. Fairlife.

Look, the New York factory when at full capacity will give us about 30% more capacity or volume potential for like -- so we certainly are going to have the opportunity to significantly grow into 2026 and to move out of having the product on allocation to our retail partners and that will take some time through 2026. So this is not a small factory.

It's, I think, one of the largest, if not the largest dairy processing facilities in the U.S. and it's going to add 30% capacity. So that will be good and that will help us get out of the kind of bottlenecks that we're in at the moment and get into the marketplace. As it relates to international expansion, you alluded to and I've said it before, the dairy industry is a complicated and protected industry around the world.

It's certainly not a lift and shift in a simple sense of the word. But obviously, we are looking at the growth in the sort of beverages and brands that we have achieved with Fairlife, and we have taken some of our learnings from the U.S. and help to shape the way we've executed Santa Clara in Mexico. So Santa Clara and Mexico, for example, grew 13% in volume in the third quarter and became the #1 value-added dairy brand in Mexico.

I think since we bought Santa Clara a decade or so ago, we've increased its size by 10x. So we've clearly found something that if we have the right platform we can make it work with the brand and the product ideas. But we have also had some failures in the dairy business. Luckily, the successes were way bigger than the failures, which were small -- but we do know that it's a complicated business to get into around the world, but we will be looking to see how we can leverage the essential product ideas behind Fairlife and Santa Clara into innovations around the rest of the world.

As it relates to the Mexico tax, which I believe was passed like a couple of days ago, yes, it's a significant increase. Obviously, we're working with the bottling system to look at how we accommodate and adapt to these increases that will be January 1, 2026. As you pointed out, 2014, there was a tax increase in Mexico, which we were able to adapt to by doubling down on the marketing and the innovation using all our RGM technology and the execution of the bottling system to come through it stronger.

Obviously, there's likely to be some impact in the early days and then as we use all the implementation to recover from that. But yes, we are expecting it to come in the beginning of next year, and we will be all hands on deck to come up with the latest adaptations of the strategy now that we know what the final policy actually is in Mexico to come up with a plan and execute it starting this year.

Our next question comes from Peter Galbo from Bank of America.

I had a question on North America. I think it was one of the markets actually where you did see that 2-year kind of stack growth rate accelerate a bit, both on volumes and maybe on organic sales. Henrique, in your comments, I think you spoke a bit about just differences between spending on income groups and then maybe some different activities on channels.

So I just was hoping to get a bit more detail and color on -- on one hand, you're seeing the business actually perform relatively well in North America. It seems like maybe there's a bit of cautious comments on some of the other factors, both on consumer and on channel that would love to get a bit more detail on

Sure. Glad to do that. So look, we had a tough Q1, as you remember. And since demo, we have been seeing the question improvement in North American volume-wise, we're really pleased with that, that in the Q3, we not only grew that, but we won volume and value share -- when we look from a consumer point of view, we continue see divergency in spending between the income groups. The pressure on middle and low end income consumers, is there.

What we have done since Q1 that has been really paying off, it's really to go back to the drawing board and have the plan that would really tackle not only affordability but premiumization as well. And you'll see that actually reflected on our price mix composition. 2 points of that positive mix came from premium brands like Topo Chico's Smart Water and Fairlife, but we're also pleased with the introduction of packaging architecture that are addressing that pressure that the consumers have on their daily disposable income with the introduction, for instance, of mini cans that today, it already represents USD 1 billion in revenue by itself.

So we're pivoting accordingly. We know that the consumer landscape has not changed, but that's going to be continue our game -- working together with our bottlers throughout this come out strong.

Our next question comes from Peter Grom from UBS.

I wanted to go back to Steve's question just on the volume for progression where it sounds like a lot of the improvement is related to better execution rather than a better backdrop. So 2 questions. One, have you seen that improvement sustain as we move into October and then second, John, you mentioned tougher volume comps in the fourth quarter in some key markets.

So would you anticipate unit case volume stepping back versus what we just saw? Or could we see continued momentum despite the tougher comps.

[indiscernible] it's a little early in October to call October for anything. But I would say the market is still growing. This is not something that there's some sort of [ precipital ] decline in anything going on. It's just I think the waste of what's going to drive success is more -- slightly more on our own actions -- our own marketing, our own innovation and our own execution.

And yes, the tougher comps will be there, but that's not a way of saying we want to decline in the fourth quarter. We are certainly looking to continue to rebuild momentum and we'll see where we get to on that.

Our next question comes from Michael Lavery from Piper Sandler.

I wanted to ask a margin question, maybe with 2 kind of quick components. One is just maybe understanding if you have any visibility on currency impact next year, you called up 100 basis points, I assume transactional headwind in the gross margin build -- is that likely to fade?

Or how do we think about maybe how that flows through in 2016, if you've got the better currency on the top and EPS side, and then just also in the quarter, you had EBIT margins up well ahead of the gross margin performance. Were there any timing considerations or how sticky should we consider that to be? Is there anything in there we need to think about that may be a one-off?

Michael, let me -- on the first one, I think in my script, I mentioned we -- right now, based on everything that we know, there will be a slice tailwind for 2026. And assuming that, that actually materializes, yes, I think we would see a slight benefit to the -- on the margin front. So Part 1.

Part 2, step out of -- I know we spend most of the time on the quarter itself. I think when it comes to the margin trends, I really like to step back and look at the trends over multiple quarters. And in line with our -- with the long-term algorithm. We continue to be focused on delivering against that over time.

We have had some timing benefits in -- and we also are in 2025 earning more productivity in the marketing area with some of the digitization work, et cetera, that we have underway, that is more pronounced for this year. I don't see that being the same every year. But as we go into 2016, we should have a little bit of a tailwind and the objective will be to continue to have that expansion of margins in line with the algorithm.

Our next question comes from Kevin Grundy from BNP Paribas.

Great. I want to come back to Lauren's question on competition, but focus here on North America. So your 2 key competitors are addressing bigger structural considerations with activist investors, uniquely involved at both PepsiCo and or Dr. Pepper. Can you please comment on what you think this will mean for the Coca-Cola Company, both near term and longer term?

And to the extent you care to comment and you may not what dynamics, whether this is potential refranchising, just a more deliberate strategic focus, scope of brand support? Do you think is potentially most critical competitively for -- the Coca-Cola Company. So your thoughts there would be appreciated.

You almost got that, Kevin, so my favorite answer, which is I couldn't possibly comment because it's M&A. Look, Clearly, there's a lot going on around us globally and in particular, in North America with the competition. But let me go back a little bit to what I said with Lauren. It's a great industry. That's why people want to be in it.

We're the leader, and we've been winning share consistently over the last number of years. Clearly, we have to focus on what we need to do. And to the extent that competitors are doing other things other than trying to win immediately in the marketplace, and I'm sure they've got a sense of urgency anyway.

As I said on the call, we got to remain discontented. We've been doing well. And the #1 thing we've got to do is avoid being contented with our performance and what's happening around us. We've got to think about what's next. And we've got to transform from a position of solid performance.

And that's what's going to drive the extra investment drive the growth and extend our leadership in the marketplace. And that's all we can do. And we've got to take this opportunity to double down and pull further ahead in the U.S. and around the world.

Our next question comes from Robert Moscow from TD Cowen.

Just a quick question on Europe. It's not a huge part of your business, but volume was down. And I thought with the hot weather in the third quarter, that would have provided a tailwind to offset the tough comparisons to a year ago. Can you be more specific about your market share in Europe on a volume basis? Was it up or was it down?

Look, Europe there were parts of the world, the oops. There were some places in Europe, which had strong weather. I would say that Europe has been largely resilient in the third quarter and over time. But it's also true what we talked about in terms of the U.S. consumer is also relatively true for the European consumer.

The top end of the pyramid has got money and has been investing. But the bottom end has been under pressure. And so we're doing okay in Europe. But there's definitely pressure the same way that is in the U.S. on the bottom end of the consumer.

And you can see those same kind of value-seeking behavior trends that you see in the U.S. for the bottom end in terms of panel, in terms of package mix in terms of channel performance. So I don't think there's anything much more to say there.

But I think the European business has been doing okay, and we'll continue to focus on where we need to go.

Our last question today will come from Carlos Laboy from HSBC.

James, you spoke about how you continue to evolve to drive revenues. It would be good to hear how your governance principles keep improving with the boomers for that purpose. So in Latin America, for example, 5 years ago, you redesigned the governance principles with the bonders, and we got that LTM agreement and some common KPIs between bottling executives and your executives and has produced more CapEx and faster revenue and higher ROIC from the bottlers.

So against that backdrop, can you speak to how you've revisited the locally relevant governance principles in these recently franchised territories of Africa, India, maybe Philippines, Indonesia or with other bottlers in order to continue to evolve this mutually agreed clarity of what each side is supposed to do and allow us to keep for the purpose of faster revenues and higher ROIC.

Yes. Thanks, Carlos. Yes, Look, as we've gone around the refranchising outside Latin America, I think 2 things are important to highlight. One, which I kind of alluded to earlier, which is the process of choosing the new ownership groups and very much thinking and evaluating that, if you like, through a kind of skill and will matrix, like who has the skill, who has the will and who has the capital to drive these franchises forward into the future.

And that's why we've been very choiceful in finding the right partners and taking our time to set these up well. And then as it relates to how we set the relationships up, of course, we've done so in a very similar way around the world to the way that we have evolved the relationships in Latin America, which were, of course, not refranchising, but evolutions of very enduring, long-lasting relationships with long-term owners of our bottling assets in Latin America.

And it was a very similar mindset we have started these relationships around the rest of the world, whether it be the creation of CCP in Europe, the refranchising in the Philippines, the most recent deals in India or in Africa or even in other parts of Asia. The direction of travel is a very clear corridor similar to Latin America.

Ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the call back over to James Quincey for closing remarks.

Thank you, operator. So to summarize, we're confident we'll deliver on our near-term and longer-term objectives. We're continuing to invest behind our brands and enhance our capabilities and fortify our systems drive long-term growth. Thank you for your interest, your investment in the company and for joining us this morning.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

Okay. We're going to get started. Hopefully, some people have lunch out there. So I'm really excited to welcome Executive Vice President and COO; Henrique Braun of The Coca-Cola Company with us in Boston after his first appearance here last year.

The operating backdrop has been dynamic, to put it mildly, but Coke's results have been strong and steady throughout, and we continue to see flexibility across the company's global footprint to navigate unforeseen challenges and even turn these moments into opportunities. So Henrique, you're now roughly a year into your role as COO. I guess what have been your top priorities? And across the system today, how would you describe the atmosphere? And what are you and the bottling partners collectively prioritizing?

Great. Thank you. First of all, thank you for having me here, Lauren. It's always great to be with you. I have 2 very clear priorities. Number one, to continue the momentum that we have built with the system in the last few years. So really looking into the performance. So I work very close to the operating unit presidents and the bottlers to get that algorithm going in the right direction. And secondly, equally important, unlocking the future growth for the company, also co-creating that with our bottlers.

If I build on the momentum that we have, it has been a journey of more or less 5 years together, having very clear vision for the system working together hand-in-hand. And we have not only aligned plans for the long term, but on the short term, pivoting a lot faster than we used to do.

In terms of the consistency that I see in the market, I had the opportunity to actually travel the whole world in the last 2.5 years, visiting the majority of the top 40 markets. And I can clearly see a great energy, great alignment from the bottling system and our teams working as one team, excited about the business. We also see a tremendous drive for finding opportunities within the current operations, doing a sharper execution every day. And that's an important component of our growth algorithm when you have a massive business like we have, Coca-Cola operating in more than 200 countries. If you can do just a little bit better every day on an aggregated basis, the unlock of that opportunity continues to be tremendous. So I would give a lot of credit to our bottling partners because they have been raising the bar on execution on every day, not only capturing the opportunity that are coming at us, but unlocking others that only comes with that execution drive.

The second one on unlocking future growth, we also work together looking at what would be the investments that we need to make in a particular territory, whether that's a developed market or more a developing and emerging market, investing ahead of the curve. And if you look at the level of investments that the system put on in the last few years in terms of CapEx over NSR, it's a step up versus previous period, which really corroborates the fact that we aligned on the long term as well.

And one key element of this unlocking growth for the future, it's also how we are getting future-ready on the digital transformation space. We totally see our system positioned today well transferring into a world that's going to be completely digitized under the 3 pillars of consumer, customer and enterprise. And we're doing that in a diligent way looking at how we maximize our investments and learn from each other a lot faster.

So in a nutshell, really focusing on getting the performance right, but making sure that we're building a system for a better future.

Okay. Great. If I look a little bit closer in, I understand volumes are a big focus for both you and the bottling partners given the important role this plays in sustainable long-term growth. It'd be really helpful, I think, to hear your view on where volume trends stand today and what are the keys to accelerating that going forward?

Yes. So I would start by saying volume is a key component of our long-term growth algorithm. The way we like to say, it's about growing quality volume -- it's not only about the volume itself, but it's how we get the price/mix also positive, driven by having the right brands, the right packaging and the right segmentation coming all together.

So that's the direction of travel. It's never a straight line. And what we have been seeing actually lately is that, that has been a momentum that it's slower than expected. We saw in the Q2 in a few markets. In Q2, we saw that we were a little bit slight negative on volume. We still delivered on the top line. And we continue to see a slow momentum in some key markets that volumetrically are important, like Mexico and a few markets in APAC, like India, for instance, and a few others like Vietnam and Thailand.

So when you look at all of that together, whether it's impacted by weather or geopolitical tension or macroeconomic impact, the most important thing is that we are totally aligned with the bottlers on pivoting with actions that don't derail the long-term value creation for the brand and for the enterprise.

Okay. Do you think there are areas where -- because a lot of the discussion overall has been on pricing and if companies in general, have taken too much price and if that's part of the dynamic that's putting pressure on volumes. Do you think that's the case in any of your markets today?

The short answer is no, and we have a reason for why we believe it's so we're very diligent as well in looking at a few metrics that you can check the temperature, whether you were a little bit off mark on the pricing, which is under the RGM capabilities. One that's very important is how we're doing market share-wise, right? So we continue to actually expand our footprint on those markets.

And the second one is a metric related to the continuous recruitment of our consumers to our base. We have an internal metric that we track that on a monthly, quarterly basis, which looks into the weekly plus drinkers. A weekly plus drinker is a drinker that drinks one of our products or a particular category once a week, 52 weeks in a year and intenders who are drinkers that drink commercially available beverages once a week, 52 weeks a year.

When you see that, that base continues to be healthy and you see the market share going in the right direction, we know that we are actually maximizing through the RGM capabilities, the price points that talks to the equity that we earned the right to take from the work that we do together and more importantly, continue to monitor that moving forward.

Not to say that if, for some reason, one of these marks are off, we also have with our bottlers a very agile process to pivot tactically. But the important thing when you do that, when you see that there is an opportunity to play around the pricing points is how the overall packaging architecture meets that consumer needs in the -- either with an affordable option or a premium option for the less impacted consumers from an elasticity point of view.

Okay. Great. I know that volume growth will differ between developed and developing markets. But if we focus on the latter, much of the opportunity comes from creating the industry from the ground up. Over the past decade, I think the statistic is that commercial beverages have grown market share by 5 points in D&E markets, but that's still less than half the share you see in developed. So what have been the key learnings in developing the industry internationally so far? And what's needed to drive that next 5 points of commercial beverage growth?

Yes. So if you think about it, driving the 0.5 every year has also been a very positive message to the industry itself. So it continues to show that in developing emerging markets where 80%, 8-0 percent of the whole population of the world lives in, getting that extra point, it's amplified the footprint in a way that it's good for the industry and it's good for us that we're leading the way moving forward. And we really like to think that a great part of that industry growth came from some fundamentals that we have been very disciplined about, which is our growth flywheel, which is about with our partners, developing brands and propositions to the consumers that meet that consumer needs at the local level.

So being very consumer-centric on the marketing and brand side, bringing innovation accordingly to this consumer centricity, leveraging the global brands, but without losing the intimacy of that local market. A few examples of that is what we have done with transferring products that we're doing well in one market to another, like Topo Chico, for instance, that is a brand a lot of people enjoy here, the Topo Chico Water started in Mexico and has been expanded here. POWERADE that started in North America and continues to get traction together with BODYARMOR became the #1 sports drink globally. Some of these are really good examples that transferring categories that are already developed in some markets going there helps with the marketing and the innovation side.

The other 2 elements of that is on RGM and execution that together with our partners, we need to build this over time. It does take time. And the partners that we have today understand that investing ahead of the curve in capacity, in capabilities to actually unlock the real value moving forward, it's going to be important. So if you fast forward, if we continue with that pace or we accelerate that, what we want to be is to be on the forefront of the industry and capturing the bigger fair share that we have been capturing today, and that's where our mindset is.

Okay. Great. Let's talk a little bit about how the company is getting better at resource allocation against the biggest opportunities. What category country combinations have been identified through this resource allocation model that strike you as most exciting?

Yes. Look, when I have a business that we operate in 200 countries, right, with more than 30 million customers that we serve every day and 2.2 billion transactions. It's -- you need to find a way to segment it and maximize our resources in a way that it's really delivering market by market, category by category under the growth algorithm.

And we believe that what we have been doing in terms of getting clear enterprise priorities goes a long way for us not to keep the eye distracted from growing the most important enterprise priorities, which is growing the core first and then more. And this has been really a very disciplined process for us with the bottlers to ensure that we have the fully funded plans on brand Coke, the whole Coca-Cola trademark, Sprite and Fanta, together, they are -- make up for a fourth biggest beverage company in the world if we put them together. And when we unlocked that opportunity over time under the enterprise priorities, it became very clear that we needed to continue to bring more innovation to these brands and find occasions for them to continue to amplify the footprint.

A good example is what you've seen here outside our Fanta Halloween innovation, which through this enterprise priority under the Fanta umbrella, we knew that we needed to start owning occasions that the brand could connect really well from a consumer perspective. And we've been very pleased because this innovation is now hitting more than 50 markets, and we have many examples like that.

But the whole point about the enterprise priority is let's not lose the sight that if we continue to do well on the core and overall, we step up our capabilities from the flywheel, we will unlock enough growth for everything else. And that has been playing really well with us, the bottlers and our customers as well.

Okay. Great. Let's talk a little bit about India in terms of priorities and opportunities. So you've made clear the growth runway is really attractive for this market, albeit non-linear. We hear non-linear often. But what's the long-term competitive risk from local players in India?

So India, it's a very interesting market. I at least travel there 3, 4 times a year. It continues to be a market with very long-term potential. It has recently -- when you look at from a year-on-year basis, continues to grow for us, for the industry and for other industries in there. But it's a market, if you look at that with the angle of segmentation across the countries that I was talking about, it's still very small in terms of the industry size and consumption, one of the lowest actually. The math works that way with 1.4 billion plus consumers, that base will continue to be expanded and the frequency of drinks over time will be in there.

So it's -- to us, clearly, it's a game of long term. What we are seeing as well is very inherent of every market that's growing or category that starts to grow, a lot of new entrants want to play. And that's a good thing to grow the industry. It's not a good thing if you digress from your strategy and pivot on tactical moves because of a player that maybe is not playing a game to be here for the long, long term.

And I'll take aside to tell you data points that are very important for us here. What we know about our industry globally as well, whether it's developed or developing markets, 30,000 new products or brands SKUs come to play every year, come to the market. 5 years later, 85% of all these introductions are gone. And less than 1% after 7 to 10 years actually make it to $1 billion brands.

So being in this business for a long time, we know how to react on a short-term attack by different competitors without taking away the eye from the ball in the future. So our game in there it's competition, it's welcome to grow the industry. We will not step out of our strategy to build the right foundations with the flywheel that I talked about and invest capacity ahead of the curve because that's what we have done in other markets, and it has been paying off here for years.

Okay. Great. Let's shift to developed markets. So just this notion of return of small brands is something that we've been seeing a lot of across the industry -- or across staples, I should say. And you've talked a lot about barriers entry low, just those numbers bear it out and the barriers to scale are high. I guess how does the system, if at all, you said you have a lot of experience in this, but how does the system reorient to compete against emerging or nascent brands when the activity picks up?

Yes. I think the same way that the dynamics works for developed and developing markets. What we really pay a lot of attention to is whether it's a new product driving a new category that didn't exist yet. We -- through our innovation council that we have, we do have insights that look at, is it something that it's going to stay here for the long term. Should we participate in that now? Or should we actually wait and see a little bit because taking our eye from the core and for the strategy might actually jeopardize a much bigger opportunity than going through that.

But we measure this through our governance, and it's very important to pay attention to this because, as I said, very few new brands or products make it, but some of those make it at the end of the day, right? So we really need to be diligent and humble to pay attention to this. But we are happy with all the introduction that we have been with the recent innovations that we brought to the market as well. So on the aggregated basis, we feel that we have the right strategy on innovation.

Okay. Great. And there's such a -- to that point, there's such a solid track record of scaling larger brands at the company, but also nurturing small and medium brands that have been acquired. And I think that's probably not as appreciated. I think the numbers you guys have cited is 15 of your $1 billion brands were developed internally and 12 you scaled post deals. So maybe you can talk about what the keys to success are on scaling these acquired brands or maybe some of the acquired brands that have been less successful?

Yes. So I think a key learning for us is on all the M&A acquisitions is what's at the end of the day, the overall value that we created for the system, for the ecosystem, for customers, consumers and so on. And we feel good about it based on what you just described. But part of it is to be also very transparent about what didn't work. And part of these processes throughout the years made us a lot more effective and choiceful on where to play.

Let me just build on what you mentioned before. I think it's a good message to everyone. We helped the 30 $1 billion brands, 15 of those we developed organically over the years. Again, they follow the same path that I mentioned before, it takes at least 7 years to 10 to actually make it to a $1 billion brand successfully. And then the other 15 came through inorganic growth. 3 of them, we bought already higher than $1 billion. The other 12, we generated all that value with our partners moving forward.

And it's very important in this to look at why that happened. And the underlying trend that we see that it's when you tap into a white space that you're actually not tapped into today, whether that's amplifying your current brand range or a new white space from a consumer need point of view. So everything starts with the consumer centricity. And from there, we develop that.

So that's why it's not a coincidence that products like fairlife came to fruition because it really hit on a need state that clearly was a white space for us. We failed before in other dairy acquisitions. I participated in one of them in Latin America that didn't materialize. But the learnings that we actually got from that helped us to be a lot more effective on fairlife or in Santa Clara in Mexico that just turned to be the #1 flavored milk drink in Mexico as fairlife is the #1 in value-added dairy here.

So it's not something that happened with that acquisition. It's all the learnings that we had over the years that made up for that. So that's how we look at M&A. But if you get the white space and it's a clear connection with the consumer needs and the value creation overall, we know that it's going to work majority of the time.

Okay. Switching gears a little bit. The business is now generating consistent operating leverage. And so it feels that the fundamental attractiveness of a franchise model is now bearing out in the financials, not just in the top line and the execution. A lot of that has come down to leveraging scale. And so I'd love to hear you talk about where and how you see this playing out, kind of what are the notable ways in which Coke is unlocking these sort of benefits of scale?

Yes. So again, I think on the refranchising, John always reminded us that we wanted to be the smallest bottler in the world, right? So that clearly was a clear reason why? It's because we knew that the moment that we were sure that we could hand over those markets to bottlers that would come with the right wheel and right skill to develop that market, we would get a lot more value than running that business. And that has been the case.

Every single refranchise if we pull it back, similar to the M&A opportunities that we discussed before by categories, bringing the bottlers that share the vision that they are all in for being there for the long term, that they know it's not going to be a straight line, that they know that they need to invest ahead of time, things come naturally to a value creation phase, and that has been the case for us recently.

One point that I want to reiterate that's also very unique to the Coca-Cola system, and it happened again now when we picked our partners in India most recently. In every single bottler that we have, there is an element of multi-generational belief in the business and that, that's the best place to put your resources and to actually pass it on to the next generation, whether they're going to be sitting on the boards or they're going to be on the sidelines, the steering, but making sure that the business continues to drive, it's a really important element of this whole business globally because when we talk about the global view and then the intimacy at the local level, there is nothing that beats the roots from local places and from multi-generational passing that belief in that value moving forward.

And I can speak as an executive of the company being 29 years, it's the same feeling as being an associate of the company. Passing it on, it's such a great transfer of energy and belief that the best days are ahead, and we continue to push to nurture that through. So that's also important when you pick the next refranchisee bottler.

Yes. When we think about scale, I wanted to also talk a little bit about digital. I know digital is something that you've been very, very focused on, and it obviously drives top line growth, but also a lot in terms of margin expansion. So can you talk a little bit about key focus areas for you within the broad umbrella of digital and kind of key insights that you're taking away from that focus?

So we're definitely leaning into tech, data and AI under this umbrella that a lot of people call digital transformation for us. It's more about the business transformation making the bridge from a world that had been analog for many years into a world that's going to be there. It's becoming totally digitized. And how we go about it, I think, was very important for us to be together with the bottlers and say, where are we going to actually change our game and each one of us having clear roles and accelerating that transition, that transformation was very important.

So on the consumer front, we took the leadership and not only we were the first company to actually do an ad with AI 2.5 years ago when we launched Masterpiece on a project that we worked with OpenAI and Bain. And that really unlocked a lot of different learnings for us. Fast forward last year, Christmas campaign was heavily developed by AI, really narrowing the creative work from months into weeks or days.

So all of that coming together shows that we are in the right direction of testing. It's not something that we could come and say, it's already clear where we're going and how that's going to impact top line or even on the productivity side. But the direction of travel shows that we're going to be way more precise in generating sights into actions. And that's where we are on that angle.

On the customer side, very quickly, the bottlers started to run the digitization of their sales force platform. It's going really well. And they really not only getting closer to the consumers, but understanding better what is the next SKU or next product, the next proposition that we need to bring that's going to add more value to the customer and to the overall package for the consumer and the shopper. And there are a lot of great learnings from that. And we have a gathering that we do with the top bottlers where we share all the best practices every year.

Next week, actually, we have the [ digital ] and tech in Atlanta, where we have all the bottlers coming sharing best practice. So we're very excited with the direction of travel. scratching the surface on a full transformation, but very pleased with the first learnings and where we believe we're going to go in the future.

Okay. Great. Let's see. I'm running out of time. Okay. Let me ask a little bit about sparkling, just a couple of portfolio questions. So you mentioned, of course, sparkling flavors and what's been going on with Sprite and Fanta. But the Coke franchise in general, right? I mean that's been the strength of the Coke franchise globally has been so important to the performance of the business over the last several years. Just want to talk about things you might be doing differently to recruit. You mentioned weekly plus and how important that is. So what are things that you're doing that's really driving that recruitment engine?

Yes. So we're proud of the trajectory of the whole Coca-Cola trademark brands that we have and what we have learned through everything that I explained in terms of the flywheels and the digital helping us. We are actually learning how to engage with the consumers in a way that we have not done before with a lot more granularity in every market.

In North America, right now, we do have a lot of data that can allow us to be way more precise on how to drive a digital ad campaign to the cohort that will talk to the Coca-Cola trademark drinkers or to the Sprite drinkers or to the Fanta drinkers or to the fairlife drinkers. This is done by that ongoing iteration of the process with one thing in mind, which is how can I engage with consumers better to understand their need states and have a 2-way communication that I continue to iterate my own brand campaigns that feels more personal to the consumer. And that's where we're heading as we speak. And that has been translating into a more effective way in the marketplace.

Very simple example in North America this summer, we had here the World Cup -- FIFA World Cup Soccer Club. And we also had the vibe of starting the football season in North America, which is a big thing for all of us. And then you would have to take a decision on which way to go. With the segmentation that you have, you are able to talk about the same passion point, sports, but with a different segmented consumer that still drinks the product, but something that they say, oh, you're talking to me because really I prefer soccer and you're talking to you, Lauren, that prefers football. But it's the same campaign in a way that really -- vice versa.

But at the end of the day, that's where we're going, right? It's so important because that allows us to be more nimble about everything that we do about the brand, and that's connected with the digitization of the customer front over time. We believe that the execution can also be more focused. So far, it's a period of learning and trying to scale these great ideas.

Okay. Great. We only got a few minutes left. So I want to circle back to sort of where we ended last year as well, which was the idea of being constructively discontent. How do you keep the organization motivated, avoiding complacency -- good place to be, right? How do we keep them from getting complacent. But yes, I'm just curious because I think for a lot of companies, that's a very difficult thing and maybe the status quo.

I think, first of all, not to forget that you need to be humble from every position that we're in. And that comes with time, being 139 years in every market we have great moments, tough moments and then revamps. And the more you look back and you learn from it was driven the pivoting moments came from a crisis that was generated a lot of times by things that you can't manage, but others that we took the eye from the ball in there. So that humble view about where we are, but really think about what can we do better every day. It's something that we have been nurturing and it's growing across the culture in the business. And clearly, in our mind, it's this mindset of we're just getting started for the future.

And the bottlers' dynamics with the company also works on that benefit as well because they want more from us. We want more from them. And when you have the trust levels that we have, we challenge each other in a way that's always constructed to do something bigger. And we truly believe that nurturing this would take us from the momentum that we have today to a better future, co-creating this with them, our customers and the communities that we operate in. So humble mindset, but constructive.

That's a wonderful place to end. So please join me in thanking Henrique for being here. We're going to go to breakout.

Thank you.

At this time, I would like to welcome everyone to the Coca-Cola Company's Second Quarter 2025 Earnings Results Conference Call. Today's call is being recorded. [Operator Instructions] I would like to remind everyone that the purpose of this conference is to talk with investors, and therefore, questions from the media will not be addressed. Media participants should contact Coca-Cola's Media Relations department if they have any questions.

I would now like to introduce Ms. Robin Halpern, Vice President and Head of Investor Relations. Ms. Halpern, you may now begin.

Good morning, and thank you for joining us. I'm here with James Quincey, our Chairman and Chief Executive Officer; and John Murphy, our President and Chief Financial Officer. We've posted schedules under financial information in the Investors section of our company website. These reconcile certain non-GAAP financial measures that may be referred to this morning to results as reported under generally accepted accounting principles. You can also find schedules in the same section of our website that provide an analysis of our growth and operating margins.

This call may contain forward-looking statements, including statements concerning long-term earnings objectives, which should be considered in conjunction with cautionary statements contained in our earnings release and in the company's periodic SEC report. Following prepared remarks, we will take your questions. Please limit yourself to 1 question. Reenter the queue to ask any follow-ups.

Now I will turn the call over to James.

Thanks, Robin, and good morning, everyone. Throughout the first half of 2025, the external environment has continued to evolve. To adapt, we stay close to the consumer, managed our growth portfolio of brands and double down on our all-weather strategy.

After the first half of this year, we're on track to deliver on both our top line and updated bottom line guidance. We're confident we can navigate varying local market dynamics during the remainder of 2025 to deliver on our updated guidance. This morning, I'll provide details on the operating environment and our second quarter business performance. Then I'll explain how we're pivoting our plans and building new capabilities to deliver amidst the current realities. John will end by discussing our financial results and providing further commentary on the outlook for the rest of the year.

Coming into the quarter, we expected the operating landscape to be choppy. Volume declined 1% during the quarter as we cycled a difficult comparison versus the prior year. 2-year volume trends were on track in April and May but decelerated in June in the face of adverse weather in several key markets and pockets of consumer pressure. Several markets that were weaker in the first quarter improved volumes sequentially, including the U.S. and Europe. In these markets, the plans we've implemented are working, providing further confidence we can influence the trajectory of our results. We also delivered 5% organic revenue growth and robust margin expansion, which led to 4% comparable earnings per share growth despite currency headwinds and the higher effective tax rate. More broadly, our industry remains resilient.

During the quarter, we gained value share, which represented our 17th consecutive quarter of value share gains. Across the world, we're navigating complex dynamics across many markets by leveraging our global scale while stepping up local execution. Starting in North America. While volume improved sequentially, it declined due to the continued uncertainty and pressure on some socioeconomic segments of consumers. We continue to invest behind our brands, which led to value share gains and revenue and profit growth. Our price/mix decelerated as growth in some of our premium stills brands moderated during the quarter.

Our granular action plans to win back consumers with contextually relevant advertising more focused value and affordability initiatives and close customer partnerships are working. Several bright spots in our total beverage portfolio include Coca-Cola Zero Sugar, Diet Coke, Fanta, fairlife, BODYARMOR and Powerade, which each grew volume. We're continuing to get good traction with our foodservice customers on both renewals and category expansion and our system is stepping up execution and earning increased share of visible inventory.

In Latin America, volume declined, but we grew organic revenue and profit. We benefited from the improving economy in Argentina and Coca-Cola Zero Sugar had strong volume growth in Brazil and Mexico. In Mexico, despite cycling a difficult comparison versus the prior year and navigating a more difficult start to the year, 2-year volume trends improved during the quarter until uncharacteristically cold weather and a major hurricane impacted the trajectory in June. To drive transactions, we're reprioritizing investments driving affordability with refillables and premiumization with single-serve offerings and scaling connected packaging and our systems digital customer platforms.

In EMEA, all 3 of our operating units grew volume and we also had revenue and profit growth. In Europe, volume growth was driven by both Eastern and Western markets and was partially helped by cycling an easier comparison versus the prior year. Coca-Cola Zero Sugar Sprite and Fuze Tea each grew volume. We activated our share campaign across 38 markets in Europe and included prominent musicians and influencers. The campaign leveraged our memory maker digital tool, which allowed drinkers in some markets to share personalized means and videos with friends and family. We also tapped into Sprite Spicy Meals and [ oneafanna ] campaigns.

In Eurasia and Middle East despite multiple conflicts in the region during the quarter, we grew volume and on value share. We're leveraging our learnings to emphasize the localness of our system, which includes local sourcing, production, employment and distribution. We're focusing on locally relevant sparkling flavors, innovations and affordability with attractive absolute price points, value packages and tailor promotions. In Africa, despite a worsening macroeconomic growth outlook, we grew volume. Egypt, Morocco and Nigeria, each continued their strong momentum. Our systems actions are working. We've refined our pack price architecture executed fewer but bolder integrated marketing campaigns and accelerated cold drink equipment placement.

Lastly, in Asia Pacific, after a strong first quarter, we had mixed performance across the region. Volume declined that we grew both revenue and comparable currency-neutral operating income. In ASEAN and South Pacific, volume declined as growth in Australia and the Philippines was more than offset by declines in Thailand, Indonesia and Vietnam. However, we won value share, and our system is taking action by scaling refillable offerings, increasing outlet coverage and accelerating crude placement. In China, we grew volume despite a cautious consumer environment, thanks to stronger performance from Trademark Coca-Cola and in the eating and drinking channel.

Our system is developing more granular channel and customer-specific execution strategies, driving more tailored promotional campaigns and accelerating cooler placement. In India, after a strong start to the year, volume declined as our business was impacted by early monsoons and geopolitical conflict early in the important summer season. In response, we're engaging consumers with integrated marketing campaigns like Coca-Cola and Meals supported by execution in the QSR channel, sums up with Biryani, Sprite with Spicy Meals and [indiscernible] festivals and tailing these activations to regional and local needs. Also, our system is adding customer outlets and recently surpassed 1 million customers on its digital ordering platforms.

In Japan and South Korea, industry volume declined amid a challenging macro environment. Our volume was also down, reflecting industry dynamics and a strong prior year comparison. Nevertheless, 2-year volume trends remained positive during the quarter. In response to the external environment, our system is refining channel and investment strategies to capture emerging growth opportunities.

To sum everything up, while the external environment continues to evolve, we remain steadfastly focused on maintaining agility, and we're taking the appropriate actions to deliver on our updated 2025 guidance. Critically, to deliver amidst the current realities we're enhancing capabilities along each facet of our strategic growth flywheel by investing to drive transactions in the back half of the year. Our marketing transformation allows us to more quickly test ideas, share learnings and scale successful campaigns. For example, to mitigate consumer pressure in Mexico stemming from geopolitical tensions, our teams implemented tactics similar to those developed last year in Turkey tailored to local needs.

During the quarter, we launched the [ Juntos Posen ] Annuals campaign, which highlights our long-standing contribution to the Mexican economy. At the same time, we lean further into consumer passion points and pull forward our World Cup activation by giving away 1,000 tickets to next year's event. As a result of these initiatives, combined with strong local execution, monthly value share trends and consumer perception scores improved significantly in Mexico during the quarter. While we're lifting and shifting learnings across markets, we're also revamping and creating new campaigns and leveraging passion points. In April, we launched the return of the iconic Share of Coat campaign across more than 120 countries with over 30,000 names on approximately 10 billion bottles and cans tailored to local markets.

Also, in North America, we launched the bring the juice campaign during the quarter, which featured a collaboration between Minute Maid and World Wrestling Entertainment that includes digital experiences, limited time-only packaging and in-store activations. Our innovation agenda supports our overall growth strategy by focusing on understanding and anticipating consumer needs to make a greater impact and improved return on investment, we're leveraging our portfolio of $30 billion brands. For example, during the quarter, we launched Sprite plus Tea in North America, which contributed to increased share of visible inventory. This limited time-only innovation blends the refreshment of Sprite with the flavor of tea and as to the recent hit under the Sprite trademark, including Sprite Chill, Sprite Winter Spiced Cranberry and Sprite Lemonade. Sprite plus Tea started as an experimental project. We scaled the launch of seeing strong consumer demand and positive social media reaction as a result of on brand innovation, Sprite became the #3 sparkling soft drink brand in the U.S. as Beverage Digest announced in April.

We are always exploring ways to meet evolving consumer preferences for great-tasting refreshment, including with our iconic Coca-Cola brand. As you may have seen last week, we appreciate the President's enthusiasm for our Coca-Cola brand. And as part of our ongoing innovation agenda, this fall in the United States, we plan to expand our trademark Coca-Cola product range with U.S. cane sugar to reflect consumer interest in differentiated experiences. This addition is designed to complement our strong core portfolio and offer more choice across occasions and preferences. Revenue growth management is a critical tool to segment our consumers and channels, and we're increasingly integrating the capability with our marketing expertise to drive transaction growth.

To step up our capabilities, we are leveraging learnings across our markets and marrying digital investments with clear compelling points of sale messaging in stores and on packs. While it takes patience and discipline to build our refillables franchise, we're tapping into learnings from our strong capabilities in Latin America to grow refillables over the long term in Africa, the Philippines, Thailand and parts of Eurasia and the Middle East. On the premiumization side, we're leveraging our experience in North America to grow mini cans in Europe. And finally, last year, we piloted an AI-based pack price channel optimization tool in Mexico Results so far have shown this tool improves our offerings and speed to market. So far, we scaled this platform to 8 markets across 4 operating units.

Lastly, robust local execution is key to ensuring the success of our top line initiatives. Our system is stronger than ever, which ultimately leads to commitments to further invest to drive growth. We've collectively ushered in a culture of learning from one another and we aspire to improve every aspect of how we do business. To summarize, while the external environment continues to be dynamic, and there is no doubt that much uncertainty remains in the downhill, we remain growth-orientated. We're continuing to pivot our plans as needed, and we are harnessing our all-weather strategy to deliver on our growth ambitions. Before I conclude, I'd like to recognize the efforts and unwavering dedication of our system employees around the world.

With that, I'll turn the call over to John.

Thank you, James, and good morning, everyone. In the first half of 2025, we delivered positive volume organic revenue growth at the high end of our long-term algorithm, robust margin expansion and continued earnings per share growth in a very dynamic operating landscape. During the second quarter, we invested with discipline to achieve our objectives. We grew organic revenues 5%. Unit cases declined 1% and largely due to a weaker-than-expected June. Concentrate sales were even with unit cases. Our price/mix growth of 6% was primarily driven by approximately 5 points of pricing actions and 1 point of favorable mix. Pricing from intense inflationary markets contributed to approximately 1 point of price/mix growth down from approximately 5 points in full year 2024.

Comparable gross margin increased approximately 80 basis points and comparable operating margin increased approximately 190 basis points. Both were driven by underlying expansion, partially offset by currency headwinds. Approximately 1/3 of our underlying expansion was driven by faster realization of our productivity initiatives, while the rest was driven by timing of investments and favorable cycling versus the prior year. Putting it all together, second quarter comparable EPS of $0.87 increased 4% year-over-year despite 5% currency headwinds, elevated net interest expense and an approximate 2-point increase in our effective tax rate. Free cash flow, excluding the fairlife contingent consideration payment was $3.9 billion, which is an increase of approximately $600 million versus the prior year. Growth was driven by underlying business performance and lower tax payments, partially offset by cycling working capital benefits in the prior year. During the quarter, we made our final $1.2 billion transition tax payment related to the 2017 Tax Cuts and Jobs Act.

Our balance sheet remains strong with our net debt leverage of 2x EBITDA, which is at the low end of our target range of 2 to 2.5x. We're confident in our long-term free cash flow generation and have ample balance sheet capacity to pursue our capital allocation agenda, which prioritizes continuing to invest in our business and returning capital to our shareowners. Enabled by our all-weather strategy, we're updating our 2025 guidance, which takes into consideration our actions to drive growth in a dynamic context and what we know today about our external environment. We continue to expect organic revenue growth of 5% to 6% but now expect comparable currency-neutral earnings per share growth of approximately 8%, both of which reflect delivery in line with our long-term growth algorithm.

Based on current rates and our hedge positions, we now anticipate an approximate 1 to 2-point currency headwind to comparable net revenues and an approximate 5-point currency headwind to comparable earnings per share for full year 2025. While we recognize there has recently been some favorable currency movements, we hedge much of our developed markets and some of our developing market exposure and will take time to see the full benefits. We will continue to utilize a disciplined hedging strategy that provides greater certainty for decision-making. Our underlying effective tax rate for 2025 is still expected to be 20.8%, which is more than a 2-point increase versus the prior year.

All in, based on what we know today, we now expect 2025 comparable earnings per share growth of approximately 3% versus $2.88 in 2024. There are some considerations to keep in mind for the remainder of 2025. We continue to expect our external landscape to be dynamic and we expect recovery in some markets to take time. We are expecting concentrate sales to run slightly behind unit cases during the third quarter. Based on what we know today, we continue to believe the impact of global trade dynamics and our cost structure will be manageable. Given the strong margin expansion that came through earlier in the year, we no longer expect margins to be back half weighted in 2025.

Last, due to our reporting calendar, there will be 1 additional day in the fourth quarter. So in summary, while the external environment continues to evolve, we're successfully pivoting to continue to deliver top line growth, margin expansion and earnings per share growth. In the first half of the year, we've effectively tackled many challenges not anticipated at the outset, and we will continue to adapt to whatever lies ahead. Thanks to the proven strength of our system, we have great confidence we will deliver on our updated 2025 guidance and create enduring value for our stakeholders.

And with that, operator, we are ready to take questions.

[Operator Instructions] Our first question comes from Lauren Lieberman from Barclays.

I was struck by the use of the phrase word pivot, pivoting our plans, adjusting our plans a couple of times in both of your prepared remarks. And yet you had very solid, good, strong organic sales growth this quarter. Profitability was really striking. And the outlook for the second half feels comparably strong, frankly, with just a little bit less margin expansion. So maybe I can just really focus on that pivot plans piece to understand maybe more concisely what it is. Is your thinking about the back half of the year, does the environment feel that it's tougher? Does it mean that the sort of puts and takes of which markets you thought would go 1 way versus another is the key to what that pivot commentary means. But I could use a little clarification on all of that.

Sure. I think -- and thank you for noticing that we had a strong first half and a guidance that implies a strong second half, and we certainly are aiming to deliver that. I think how you should interpret the Pivot comment is really in the context of us pursuing growth under the all-weather strategy. This year has been, I think, characterized by rapid terms of events and twists and turns which has required us to respond with greater agility and speed. So if you just can't compare and contrast Q1 to Q2, in Q1, the U.S. and Europe were slightly weaker, but we pivoted or we adapted with some agility and we got much better coming into Q2 in those developed markets. And yet, in Q2 in a couple of our big emerging markets, Mexico and India, for example, partly, they had strong comparisons to prior year, but we got hit by some early monsoon in India, which is the important selling season plus the India/Pakistan conflict brief as it was plus whether in Mexico, which required us to pivot to bring back growth in those parts of the world coming into the second half. So it's really, if you like, about the need for the all-weather strategy to be taken up another notch in terms of how fast you can pivot and execute to still deliver the results that we're delivering.

Our next question comes from Dara Mosenian from Morgan Stanley.

So on proteins a space that's on trying with the consumer. It's growing at very strong rates. You obviously have a clear competitive advantage with the fairlife brand. But given all those factors, you are running into capacity constraints. So just with that as a backdrop, I was hoping you could give us a sense of how much of an unlock the planned U.S. capacity additions are starting in early '26 for fairlife both the total volume, but also how that will enable you to manage each of the 3 fairlife product areas differently? And then also, can you discuss if there's any international fairlife plans on the horizon outside of North America over the next few years? I know replicating the North America dairy manufacturing footprint will be difficult. So just how realistic is international expansion at some point and then what time frame?

Sure. Firstly, fairlife continued to have strong growth, double-digit volume growth in the second quarter. Clearly, that's moderating slightly from Q1 and prior year. But we still expect to get volume growth in the second half, again, although moderating as we wait for the capacity to come online. I think the team has done a great job of creating some space this year to keep growing. As you point out, the New York facility will come online at the beginning of 2026. Obviously, that doesn't all turn on with a flick of the switch on day 1 as much as one would wish it would so and that will ramp up over 2016, but it will steadily debottleneck our constraints on capacity across all the different fair life variants and package sizes.

So we have that coming online in '26. We also have over the time going into the future options to expand capacity on some of the existing facilities. So I think the narrowing of the corridor is really the second half, maybe the first few months of next year, but we're basically going to get through that and doing really well with their life so far. Secondly, as it relates to international, having made some investments in dairy, which were unhappy in small countries and with small investments -- it is worth pointing out that Santa Clara in Mexico also had a strong performance, is now the #1 value-added dairy business in Mexico. So not under the fairlife brand, but actually a big market with a good position in value-added dairy there. And we continue to look at other international opportunities. As you rightly point out, the structure of the dairy industry in the U.S. is differential relative to other parts of the world. But protein is very on trend. We know that Fairlife and CorePower are strongly differentiated and preferred as products and brands. And we are, of course, looking to see if we can deliver those sorts of consumer benefits in other parts of the world in ways that we feel would make us -- give us a competitive advantage versus whatever is in the marketplace at the time. More to come.

Our next question comes from Steve Powers from Deutsche Bank.

One James, just going back to Mexico and India. Just given some of the pivots that you've made in those markets going into the back half. I guess the question is, how quickly do you expect a rebound in those markets? And if there are any other markets as you go into the back half that you would flag as kind of known kind of watch points going into 3Q. I'd also like to just because of the strong profit improvement or profit performance in the first half and in the quarter, we just saw it doesn't -- it seems to imply maybe a little bit more reinvestment in the back half. And if that's the case, just any color on where that incremental investment may be targeted would be helpful.

Sure. Firstly, whilst being known to be calm, I'm not wildly known to be patient. So the sooner the volume bounces back, the better. I think in the case of Mexico, clearly, the Q2 last year was the strongest quarter. It's worth being upfront and saying Q3 was the weaker quarter. So I think we're going into a cycling that should help us. We've got some strong plans to take Mexico or 1 example, on affordability, doubling down on refillables and some of the value offerings. We're also celebrating our 100th anniversary in Mexico with Juntos Pociananios, which is really about emphasizing the long-standing economic impact, which is going back to some of the Hispanic issues that bled across the board in the first half. And we're pulling together some of the marketing activation and execution activation with our bottling partners.

So we we're confident not just in the long term but also in our ability to get back to growth as we come into Q2 and get out of the some of the colder weather and the hurricane that was true in June. In the case of India, India, as we've talked or both John and I have said in previous calls, is never going to be a straight line. And indeed, Q2 was not -- but we're very bullish on India overall. The Q2 did decline, as I said, the conflict in the monsoon. But we have a lot of marketing campaigns focused on India. We have also just set up the first kind of refranchising piece with the Jubilant Group for the company-owned bottler that we're having, which is basically at the bottom half of India, and that's up and running with a new CEO.

So we think that will bring some new energy and dynamism and focus and proactivity to the execution in the marketplace. So we think we've got a strong plan from a marketing and innovation point of view, the local franchise bottlers we're doing better than the CBO in the first half. and with some reenergized focus on this transition bottler, we're pretty confident on where we'll go in India. And then as it relates to the unauthorized second question, profit improvement yes, it does imply a little bit of reinvestment.

In the second half, there's a piece of timing in there. We had expected more of the productivity in the second half, and we've got some more -- some of it in the first half, which, of course, moves the money around. And so that's a piece of it. But we also are, as we've said in previous years, we continue to lean into growth. We've got a growth strategy. We're delivering growth, and we're going to continue to invest into that to drive momentum and assure momentum in the second half, but also set ourselves up for a good 2026.

Our next question comes from Filippo Falorni from Citi.

I wanted to ask about the North American market. We've seen a little bit of an improvement in the volume, in the unit case volume still negative. But just any thoughts on the outlook as you move forward in the back half, especially on 2 points. The QSR and away from home China more broadly, how are you seeing the trends evolving there. And then also the trend among the expanding consumer, which was the pressure in Q1 and it seems to have gotten better throughout Q2.

Sure, firstly, overall, the U.S. business did a very strong job in coming back from a slower start in Q1 and getting sequentially better in getting some good revenue growth, share was good and profit was good. So really getting better. And I think that's in the context of a pretty resilient overall consumer. The aggregate spend is holding up. Yes, there's some pressure in those with lower incomes, where we've targeted some affordability and some special focus on marketing and occasions. So I think the overall outlook continues to be resilient, and we're investing for growth in that. Just on the Hispanic consumer, yes, we had a problem in the first half. If you take the end of June, by the end of June, we had basically got back to the share we started the year with. We got back to the brand equity scores we were looking back and we got back to the household penetration. But obviously, as that went down into the valley from January to March, it had to climb out of the valley from April to June. So it was still a headwind in the second quarter, but the issue is now largely resolved. We're back to where we were.

And there was a lot of good stuff on some very targeted contextual advertising against the basically the false video and a lot of focus on how local the Coke business is. It's made in the U.S. It's made by U.S. employees. It's distributed by U.S. employees and U.S. retailers. So I think we've kind of put that one behind us for now. And then the away-from-home channel. Obviously, depending on where you are on the way from one channel, you get slightly better or slightly worse footfall than traffic. But I think this is really not a different reflection of the overall economy, where you see some of the bits of the channels where you've got the lower income consumers a little more focused on affordability offers. So you definitely see that coming up. But the team has done a good job on customer renewals and bringing in new accounts like Costco and Carnival. So we're seeing some pretty good reaction there. But I don't think one should think about it as that different representation than the overall market.

Our next question comes from Bonnie Herzog from Goldman Sachs.

All right. James, I wanted to drill down something. You mentioned that productivity came in better than expected in the first half. So just hoping you could just provide a little bit more color on sort of what drove that upside? And then how we should think about that in the back half in some of your -- the rest of your productivity initiatives planned for this year?

Sure. 2 basic sources of the productivity. One was the benefit of the marketing transformation. We've been on a journey for the last few years on the marketing transformation, which is not just about the effectiveness and the digitization of the advertising and the segmenting of the advertising, but also about the efficiency, both the producing it and buying the media where we use the advertising and we were able to capture some of those savings. And just from a timing perspective, there was just a little more of them in the first half and the second half, but those were always on the way and it's a product of the work we've been doing over the last couple of years. to really reform how we do the marketing to be not just more effective, but to also bring some efficiency to bear. And then the other piece of the productivity we're setting out to be as disciplined as possible on the operating expenses. And to be a little more frugal and to invest our money a little wiser as we went in, and we were able to just capture some of those benefits as we came into Q2, ahead of the second half. So mainly just getting things done a little quicker than anticipated, which is good news.

Our next question comes from Chris Carey from Wells Fargo.

This will be slightly connected, but a bit more specific. North America margins were incredibly strong in Q2, even with higher marketing on a year-on-year basis. I understand there are so many puts and takes. But I would love to get your take on how these margins have been evolving some of the key drivers between perhaps pricing or cost savings product mix, channel mix. Again, I fully appreciate there are so many drivers every quarter, but the evolution here has been sequentially and directionally positive and moving in the right direction. So I'd love to get your broader thoughts on what you think is driving this and the durability.

Sure. Firstly, I mean, I'll give you some factors relative to Q2. But as I've done, normally, the question comes on Asia Pacific on margins being strange movements intra-quarter I would encourage you to take a multi-quarter view of any bits of the business rather than one. Having said that, clearly, the margins got better in Q2 in North America. Clearly, part of that was coming from the productivity initiatives, as I just described them. Some of it comes a little bit from -- with the deceleration of some of the vertically integrated businesses, they're mixing in less operating expense, so that, that kind of makes a difference. The vertically integrated business is tending to have a slightly lower percent margin than the concentrate businesses -- so that's another driver of what's going on.

I think what's also important to understand is none of this is happening in the absence of continuing to invest behind our brands. we were still very strongly investing not just in innovation, but actually in absolute marketing terms in the U.S. market to continue to drive growth. So -- it's not -- whilst the margin has been improving in the U.S. marketplace over time. And then if you go back 4 years, it was not in a great place. So I think it's kind of more normalized. And what is the feature of is that normalization of productivity, but the most important story is continuing to invest heavily behind our portfolio, our innovation and our execution to drive growth and gain share.

Our next question comes from Kaumil Gajrawala from Jefferies.

I guess 3 questions in a row on margins, but this will be a bit different. Obviously, productivity coming in a little bit better, the margins look great. At the same time, the impact from foreign currency seems to be abating and if it continues in this way, might even move in a positive direction as we get into next year. Can you maybe just talk about the operating leverage across the P&L given how much has changed so far? And these really 2 factors sort of very much moving in your favor.

Let me take that one, James. So yes, you've got 2 distinctive factors. I think James has covered well the drivers of operating leverage on both the gross and operating margin lines, which we continue to expect to deliver in the second half of the year, Albi is at a slightly lower rate than we had previously flagged. And then on the currency front, as you all know, we hedge to -- as a risk management tool to help us smooth fluctuations and provide greater certainty at the local market level. And in the year-to-date, the main influences year-to-date has been the performance of the G10 currencies, which we hedge on a consistent basis. And there, those hedges are somewhat offsetting the actual dollar weakness that we have seen in those -- against those currencies emerging on the emerging markets front, not as much.

And so as we look to the second half of the year, and we'll provide more color in October on our outlook for 2026. The updated guidance reflects a softening of the of the negative impact that we had been experiencing on the overall currency front. So net-net, slightly better environment. We continue to hedge, as I said, to smooth the fluctuations that we typically experience will provide an update for '26 on the October call.

Our next question comes from Robert Ottenstein from Evercore.

Great. James, can you talk a little bit about globally, what you're seeing in terms of consumer strength. The sense I got and maybe I misheard, but the sense I got was that you were a little bit surprised by some pockets of consumer weakness globally apart from the weather apart from geopolitical issues. So is that right? What are you seeing from the consumer globally? And if things did weaken a bit in June, how has that progressed into July?

Yes. Thanks, Robert. Yes, I mean, let me just stand back again on the volume around the world. The second quarter, we had good performances and improving sequentially -- so North America improved sequentially. Europe was up, Middle East was up, Africa was up. China was up -- and apart from the 2 that I mentioned in terms of the weaker performance, India and Mexico. There was a little bit of weakness in Japan, but there was also some -- I think the one that's kind of was the most -- I don't know if it goes as far as surprising, but let's go with surprising just for the sake of the argument. It was more Thailand, Indonesia, Vietnam, the ASEAN markets, we saw some weakness in Q2, which was perhaps a little more than we've been expecting. So I would say overall that the global economy and the global consumer remains resilient. There have been some swings in countries, a bit like I said at the beginning and answer one of the questions, things have come in and out at greater speed than perhaps historically.

And so something can get worse and then better again at a faster velocity than perhaps in the past. And there are obviously been some geopolitical events that happened in Q2, and they've come in and out quickly to some of them. So the rate of surprise is kind of speeded up. But I think you've got to stand back and see actually, overall, there was a pretty resilient consumer environment pluses and minuses by the countries. If I had to say, one, that was a little surprising it would be ASEAN, leaving aside weather and things like that. But we're confident we're investing in the right programs for the second half, marketing, innovation, RGM execution to make sure that as we drive our top line algorithm for the second half, that will come with a better volume component.

Our next question comes from Andrea Teixeira from JPMorgan.

I wanted to ask on the potential innovation into pure sugarcane. And then if you can talk about it like in the context of consumer preference, and appetite to expanding to more fiber. You see like a competitor launch into prebiotic under their main trademark and how it is simply pop performing or thoughts on participating more in that segment?

Yes. Thanks. Look, we're always -- I don't think just us, but I think the industry, given its size, its attractiveness and its growth potential, we're always looking for opportunities to innovate and see whether there's an intersection of new ideas and where consumer preferences are evolving towards. Remembering that actually most innovations don't work in the long run. But I think it's a good sign that the industry, including ourselves, are trying lots of different things. As it relates to the cane sugar, yes, we're going to be bringing a Coke sweet with U.S. cane sugar should go into the market this fall. And I think that will be an enduring option for consumers. Actually, we use cane sugar in a number of our other brands in the U.S. portfolio from lemonades, teas, some of the coffee stuff, some of the vitamin water drinks.

So that it's blended into some of our other products. And so we are definitely looking to use the whole toolbox, the whole toolkit of available sweetening options to some extent where there are consumer preferences. So we will continue to do that. And as we experiment, yes, with fiber, I think you're referring to the coke with fiber in Japan. And so that's been an interesting option, and we collected some valuable learnings for it. So we just continue to focus on trying things Understanding it takes a long time to build a new franchise with consumers, but you've got to try things, and we know our success rates substantially above the industry, but it's still a question of it takes time and commitment to build something new.

Our next question comes from Peter Grom from UBS.

Thanks, operator, and good morning, everyone. James, I wanted to ask a follow-up question on fairlife. And just in your response to Dara's question, you talked about how big that growth has kind of moderated sequentially and you expect it to moderate further in the back half of the year. I'm assuming that's simply related to the capacity constraints you mentioned and that your outlook or expectations for category growth or the competitive environment haven't shifted. So maybe just confirming that. And then just on that last point, I think it will be helpful to get some perspective on the competitive environment and how you see that evolving in the back half of the year and into '26?

So, yes, I can confirm the moderation we're expecting is the law of big numbers and the capacity constraint rather than a weakening of the proposition relative to the competition. Now we're still -- very excited about the opportunity for fairlife and core power and the fairlife nutrition plan. I have no doubt in my mind that if we had more capacity, we could sell more product today, tomorrow and going into the rest of the year. So it really is a capacity, a narrowing of the bottleneck that we're experiencing. Of course, it gets bigger and bigger and bigger, the percentages will come down even if the absolutes continue to be big in growth terms. And yes, it's not surprising that when our competitors and other people see the standout growth and success of a product like fairlife or Core Power, they will naturally seek to see if they can launch, and that's the nature of the industry, and it keeps us all on our toes to know the competition is always trying to catch us up. And so we'll be very focused on doing the best of Fair life, not just on the marketing, but on the execution. And of course, increasingly, as we have new capacity with new innovations and new thinking on where we can take the Fairlife brand and the core power brand, but exciting times ahead.

Our next question comes from Peter Galbo from Bank of America.

It seems like we've gone the whole call without actually talking about Europe. So I wanted to ask there James, it seems like as we get into the back half, EMEA is probably going to be driving the bus a bit from a unit case perspective. So just wanted to get your perspective on how the consumer there is going to be held up better relative to other developed markets? And how you see the second half playing out across EMEA.

Yes, so you interchanged Europe and EMEA, so I'll kind of break that down. Europe certainly did better in the second quarter. It had positive volume growth that had price mix a pretty balanced growth across the different aspects and both East and West contributing to the growth. And so I think it's still worth saying that Europe is a bit like the U.S. in the sense that there's a pretty resilient consumer overall in aggregate. But at the lower end of the income spectrum, we do see a lot of value-seeking and affordability behavior. So we're having to double down on that. We have. And within that, we had a great quarter in terms of Coke Zero Sugar and Sprite and Fuze Tea. And I think there were some really good programs on Fanta as well. So Europe, overall, a great start.

As it relates to other bits of EMEA, overall, we gained value in EMEA, Africa grew volumes despite cycling some pretty tough comps, and obviously, the macros can be pretty dynamic in Africa, but good, strong performance across Africa. And then in Eurasia, we've been leaning into the localness of the business, and that part of the world was also able to grow volume. So actually, a good performance across the main components of the EMEA group. And I think in Africa, EMEA, it was driven by Coke and flavors and some great execution by the system.

Our next question comes from Michael Lavery from Piper Sandler.

Just wanted to switch maybe a little bit longer-term question on coffee. You've obviously got brands like Georgia and Costa that are strong in certain markets, but globally, it's a big, attractive category. I guess maybe just would love to hear some of what you're learning as you reflect on your strategy there and what it might take to win and how your participation in the category might evolve over time?

Yes. Thanks, Michael. Yes, Costa, I think that counts as -- if we're going to count Georgia is 1 attempt customer counters our fourth attempt in coffee because you've got Georgia Costa, we tried with an investment in Kurgan, there was something in the 6s called Dunkin' DU and CAA and coffee. So we totally recognize what you're pointing out, which is the coffee is a large fragmented, growing category in the total beverage industry. So it's clearly attractive if we and the bottling system can find ways to participate more deeply in that category. Now having said that, our investment in Costa is not where we wanted it to be from an investment hypothesis point of view. I mean, the business is still a good business. But it's not quite delivered on the different verticals of growth that we were hoping to accelerate much quicker the ready-to-drink coffee, to express and that the at home and therefore, the business remains more weighted towards stores. and the stores we've been driving the affordability and actually doing a good job on refreshing the stores and driving the speed of service. But still, the investment hypothesis as originally intended has not played out despite the improvement in the store business. So I think I would say we're in the mode of reflecting on what we've learned thinking about how we might want to find new avenues to grow in the coffee category while continuing to run the cost of business successfully because it's still a lot of money we put down and we want that money to work as hard as possible.

Our next question comes from Carlos Laboy from HSBC.

Yes, this question may be perhaps for John. John, for years, we've heard you talk about wanting to refranchise for the purpose of focusing more on creating demand. With most of this refranchising done now, how is the focus and capability of creating demand of recruiting the consumers intensifying.

Thanks, Carlos. First, maybe just a comment on the refranchising. So we still got a couple of big chunks to go. And yet we are -- as we've discussed in the past, we're very focused on getting those over the line as quickly as is feasible. And adjacent to that, and it's -- I think it's been a feature of the last few years is this underlying emphasis on driving top line growth through an increasingly stronger growth portfolio of brands. We have $30 billion brands in our portfolio today. about half of them organic, dealer half inorganic. There's a lot of runway left on those brands and the marketing and innovation transformation that we have also discussed in prior meetings, there's still a tremendous amount to do there. So we expect to double down even more on both the existing portfolio that we have. And then through the innovation lens to either continue to develop either organically or stay opportunistic on the inorganic front. That's part one. Part two is, I think, the relationship that we have with our bottling partners around the world is -- has evolved significantly in the past few years with even greater clarity on what we expect from each other. And as a result, stronger partnerships that leads to overall better execution. With a scale business, the daily execution piece requires both of us to be at our best and a sort of a net-net outcome of the refranchising that you just asked about is that it allows us to do so and it allows us to have the franchises in the hands of partners who are equally committed to raising the bar.

Our last question today will come from Robert Moskow from TD Cowen.

John, I just wanted to get a sense of your level of conviction that concentrate volume returns to positive territory in the back half of the year. there appeared to have been some transitory elements negatively impacting 2Q and also a tough comp? And then secondly, just in terms of phasing, it would appear that fourth quarter has a tough comp in terms of concentrate volume. Am I looking at that correctly? And is there anything that you can add to that?

Sure. So yes, so we -- our guidance for the full year reflects a confidence that we will have positive volume growth in the second half of the year. I think you're up to 2 quarters Q3, we're certainly cycling a more modest prior year. I think rather than be overly focused on the prior year, I think our ability to influence the next 6 months is what's most important. And if you look at Q2 and you take away a couple of the I would call them anomalies in some of the key markets. There's still pretty good underlying momentum in the business. We have the opportunity on the back of a stronger-than-expected first half on the profit front to have more optionality on how we continue to invest some of the some of our efficiencies, which we plan to do so. So we've got a robust second half on the investment front. Underlying trends for -- in general are good. And a couple of the outliers that have been a headwind in recent months, we are comfortable that they can get back on track.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the call back over to James Quincey for any closing remarks.

Thank you, operator. So to summarize, we believe we're well positioned to deliver on our updated 2025 ambitions and guidance. We're continuing to build our systems to drive long-term growth and we're confident we will continue to create enduring value for our stakeholders. Thank you for your interest, your investment in our company and for joining us this morning. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

All right. Welcome back, everybody. For our next session, I'm thrilled to welcome back the Coca-Cola Company, and I'm equally thrilled to welcome back John Murphy, who's President and Chief Financial Officer of the company, cracking open a nice Coke Zero. We will use the entirety of our time for Q&A, and we'll get right in.

I think, John, just to state some of the obvious, well, I think 2 things are obvious. I think you operate in a great industry, at least from my perspective. But like others, it faces challenges. And I guess, I love a little bit of your perspective on some of what those challenges are and what sets Coke apart within the industry dynamic that allows it to kind of continue to win.

Steve, thanks. Great to be back and always good to be in Paris. So on -- we do operate in a great industry. And it's an industry that continues to enjoy tailwinds that notwithstanding the many other factors that can influence its trajectory in the short-term. But over the medium to long-term, I think it's more predictable than many. We depend on people. We depend on population growth. We depend on growth in consumer spending, and we rely on access, the ability to access people. And so population growth at the enterprise level will continue to be a tailwind at the local level in some markets, not so much, but bigger picture, yes. We continue to see over time, more people with more money, and we are able to get closer to them. Urbanization is a trend that has been in play and will continue to be.

And I think with the digitization of the world in general, it's not just about physical access, it's about digital access. So those underlying trends for the industry are very powerful and allow us to project low mid-single-digit growth on a sustained basis. It's -- when I say that, though, I have to go back over the last 35 years or so, the outlier years have been the more recent years. COVID being one outlier in the negative and the rebound and recovery has been on the flip side. But yes, the industry is robust, and it's not without challenge, as you say, especially when in the face of the macro environment, the geopolitical environment. There's ongoing reasons for people to reconsider their habits and to potentially do things a little bit differently than they would normally do.

For us, as a company, we have enjoyed good momentum over the last number of years. And I don't think it's by accident. We took a position a number of years back to become much more, I would say, consumer-centric, which really boils down to being more willing to offer people what they're looking for and asking for versus impose upon them what we think they should be drinking. And that has opened up for us a much bigger addressable market, and it has enabled us to galvanize our system, our ecosystem around the top line. And it's been very effective. During that same period, I would say we've become students of scale. There is no doubt in my mind that the ecosystem that we enjoy globally is one that can create more and more value, enduring value by leveraging it to its full. And I think historically, while the pieces were all there, we weren't quite able to do that. And over the last number of years on a systematic basis, that's become our friend. It's become its own tailwind.

I think part and parcel with that, the degree to which we work with our partners, with our bottling partners, particularly, has elevated to the next level. There's, from my mind, the next level of relationship of performance that is showing through on a sustained basis. And then underpinning all of that, I'd say we've -- culture is important. We believe in winning as a core trait to cultivate and nurture up and down our organization with our partners. And one could argue it's half the battle. If you go in thinking you're going to win, you've got a much better chance of actually doing so.

Okay. If we drill into the here and now, 2025, lots of different cross currents on the consumer that vary around the world. I guess maybe what is your assessment of consumer health as you go around the world, maybe starting in the U.S. and Mexico and branching out from there? And how does that translate into trends for your business at the moment?

So I'll answer it though with a little context. If I take a step back, those cross currents have been with us for a few years in different shapes and forms. The COVID period, the supply shocks, the inflationary pressures, the geopolitical environment. There's been reasons for consumers, as I just mentioned in my last answer, reasons for consumers to be somewhat derailed from their normal patterns. And I expect that to be the case for a long time to come. And I think you got to build that into your -- the way you do business. But underlying all of that, there has been through the last few years, there has been a lot of consumption. And so when we've been beneficiaries of that. So that's sort of the backdrop.

First quarter is a good -- it's just a point in time, a good example of what you think might happen doesn't exactly play out in the way that you thought. North America a good example, a good start to the year, then in February and March, some dislocation through a video that went viral that was untrue, but by the same token, influenced people's behavior for a period of time. And it's taken us a little bit of time in both -- in parts of North America and in Mexico to get back on the main highway again, so to speak, which I'm thankful that we are. This quarter, we did not have India and Pakistan almost going to war on our bingo card for -- at the beginning of the peak season in India. So these are moments that I think we should be expecting to happen with more regularity than perhaps we are used to. And then underlying all of that, I think we're still confident in the trends that we've enjoyed.

Around the world, Brazil, Argentina have been -- have continued to be strong. Mexico, we expected to have a tough first half of the year, cycling some pretty big numbers from last year. And then on top of that, the issue I just mentioned. Western Europe has been somewhat impacted as well by some of the macro and the geopolitical stuff. But overall, we feel pretty good about the direction there. Africa is a mixed bag, permanently mixed bag. When you look at the number of markets there, it's very difficult to see all of them moving at the same pace at the same time. But we've got a great system there that is probably the most adaptable of all the ones that we have around the world given how the dynamics there change so frequently.

And then Asia in the first quarter was a big boost to the overall company performance, driven by China, good Chinese New Year, which typically augurs well for the year ahead, strong start in India. Southeast Asia, some challenges in Southeast Asia that we're working on. So there's the puts and takes around the world that I expect to continue to challenge us. And I was at a meeting in March with a number of folks saying that I don't know of one of our operating units around the world that's operating to the same plan as they started the year on. And that -- that's business in today's world, business as usual.

Yes. What about across channels? There's been a lot of discussion, weaker QSR traffic, et cetera. Anything on the call out there?

Yes, I'd say the same thing. I think QSR has been -- was the channel most impacted during COVID. It's taken a while, particularly in the developed markets to get back to get momentum back. And I don't think it's back yet fully to where it was. It's much better than it was and has had -- is going to have those moments, too, where you're going to see -- you see the short-term being impacted by some of these external factors. But again, medium to long-term, the opportunity out of home continues to be very attractive to a company, to a business like ours.

You've done a good job of translating future consumption trips into media consumption occasions, which is helpful.

Exactly. Exactly.

At CAGNY, you and James talked about your new operating model and how you were focused on doing what Coke has always done, but doing it even better in terms of portfolio choice, innovation, marketing, consumer-centric execution, et cetera. What are the biggest changes underway now with respect to the broad effort to do things even better?

So my first reaction is it's not quite a new operating model. I think it's today's representation of a model that has been in place for a long time. It's -- we've been very deliberate in the way that we attack the marketplace through the eyes of the consumer and building a portfolio of brands that can do that in an effective way is and has been a priority for some time now. I think we're doing it better, but a lot of runway ahead. The marketing and innovation agenda, that we've talked about a lot over the last few years and appropriately so, given that it's the fuel that allows those brands to stay relevant, has undergone massive change, just massive change. And yet when I'm with Manolo, who was our Chief Marketing Officer, he would argue that there's bigger change around the corner. And so you've got to stay very close to that.

The bottling system, our franchise model. The franchise model is one we've had for over 120-gosh years, 130 years. So it's not about necessarily the model itself is changing, but it's how we leverage the model. We believe strongly that it's a competitive advantage when operating well. And for that to happen, you need to have a number of variables in place. great leadership, company in bottler, belief in the future, the right ambition to win, willingness to invest ahead of the curve, all that translated down through a scaled organization to be able to execute well at the local level. Execution sometimes doesn't get the airtime that it deserves because in a business like ours, all of that other stuff is kind of fluff unless it's connected to what's happening each and every day in the marketplace.

And so I think that piece of the equation has really elevated. And yet, there's big -- there's so much more we can do. And then the whole topic of talent capabilities, you're never -- you should never be comfortable. You should never think that we've arrived because the day you arrive is the day you sort of see that there's a door -- another door to open and there's more to do and more to accomplish inside that next door. But on the positive, the degree to which we have both internal and external talent at the highest level wanting to work for us and work with us tells you something good is underway. And yet when the better you have talent around you and capabilities, the more they remind you of what's missing. So there's that yin and yang at play all the time.

Okay. When we're talking about state of play, we didn't really differentiate by category. So I guess if I pivot back there and just get a sense of kind of where you're seeing the best market share -- best category momentum and market share momentum and conversely the opposite. And then where you see opportunities for kind of white space and a little bit of how you would plan to attack those, whether it's buy versus build?

Okay. So a lot of the marketing and innovation work that we've done over the last few years has been to have in market a portfolio of brands that meets existing and potentially new needs, consumer needs on different occasions. So we have a we have a bias towards playing in multiple categories. Those that we have done best in an interesting way is the ones that we're the best at like we're pretty good at selling and marketing and keeping this brand relevant. Some of the newer brands, we're still learning, and we still have a long way to go. I'm very interested in making sure that we keep the balance right, keep the pressure on our core sparkling business while at the same time, we develop and build the capabilities needed to play in some of the newer categories.

Advanced hydration is one area where there's enormous upside given the degree to which consumers are moving to wanting solutions in that space. We have a mini portfolio of brands that play in that space. And yet none of them are at the level that they could be.

Tea, the tea category is one that I believe we have huge upside. Fuze Tea has been almost a silent in the way it's crept up and is now a $1 billion brand. We have -- actually, we have a Sprite plus tea proposition going into the market that's leveraged off a student campaign on -- that went viral where they dipped their tea bags into Sprite and so that's a pretty niche idea. So taking that learning in and seeing developing a proposition like that is just an example of how I think we can bring these categories to life better.

So there's -- across the board, I could go into each category. I can argue both sides of the case that there's momentum, we're doing well. But by the same token, the opportunity ahead is plentiful, but requires us to continue to raise the bar on those variables that go into building successful brands.

Okay. You kind of alluded to an ongoing transformation in marketing and innovation, which I mean there has been one going on and -- right with tea is sort of a little bit of example where you're kind of lifting from the market, moving fast. So kind of where are we in sort of the evolution of marketing innovation? And some of that dovetails with technology and AI. Zoran from CCH participated in AI roundtable yesterday. The Coke system is very much on the forefront. So how does technology leverage into what you're doing with marketing innovation?

Yes. the technology component is increasingly important to understand the role that it can play and then to develop and build the capabilities needed to be able to do so effectively. There's a lot of reasons to feel good about the progress that we have made in the marketing and innovation front. We have been recognized more often externally with -- in the awards world than I can remember. We have -- the top line momentum is not by accident. It's a function of, I think, the progress that we've made. And we have $30 billion brands to enjoy. But there's 150 more that we also have that are not yet in that category. Many of them will never get there. And so we've got -- still got a lot of opportunity to get the portfolio to the place that we need to.

As we think about the journey ahead, there's -- you never know enough about the consumer. So there's -- we continue to invest heavily in enhancing our understanding of consumer needs, motivations and how that translates into opportunity or challenges for the industry and for us as a company.

The marketing innovation agenda itself in terms of building it to deliver against the top line objectives that we have is very, very much a work in progress. And at the outset of your question, the technology agenda is pushing us to reconsider how we think about that as we go forward. The role of AI, the role of generative AI, it's not just interesting to talk about, you've got to now convert that into real tangible outputs. And we're seeing the benefits of that. The productivity agenda that we have been driving in the marketing world for the last 6 or 7 years has given us a lot of fuel to reinvest in the business in a very -- I think, in a very appropriate way, given what we've come through as an organization, as a system over the last few years.

And then finally, I'd say the focus on the capabilities, the talent that we need to be able to lead us to that next step change is really important. It's -- it's equally important, though, to stay grounded and stay real on how exactly are we doing. And so the degree to which we now are able to track our progress at a kind of at a micro level, are we recruiting consumers through all of this great work? If so, where, if not, why? Are we -- is innovation playing in a tangible way, the role that it needs to? Are the hard savings that we know we can get actually coming through. I'm the one who can answer that question typically. And then are they coming through the right way because you do not want to be cutting into muscle. That's not the idea. The idea is to continue to innovate in the productivity area to deliver more for less, et cetera, et cetera. So there's a lot of obsession over these -- are we moving the needle on these metrics. And I think that feeds back into this ongoing kind of discomfort as to where we are today.

Yes. Is there -- are there examples you can cite of the sort of the guardrails on that -- you talked about leveraging more of the P&L after years of investment, right? But I think the devil's advocated, the concern is that you end up overleveraging and right? And then we have to go through a reinvestment cycle. So what specifically -- how is that specifically being managed so that doesn't happen?

Again, I think it's the kind of metrics that we look to, whether it's within the marketing innovation world itself in terms of how much fuel do we need? What's the -- what's the refuel rate that we are employing against our portfolio in different parts of the world is one way to give us confidence that we're not overdoing it.

Secondly, it's really important to understand it's not just about quantity of investment which is sometimes a very kind of crude way to examine one's approach. But it's also about quality, what's the mix of investment. We have -- in the last 5, 6 years, we have doubled our investment in sort of so-called digital world. Some people say, well, that's great news. And I say, well, yes, -- if it's working, if it's been invested wisely. And so we're learning -- I think many companies are still learning that just a conversion from the legacy world to the digital world does not guarantee success. And so we're also looking very closely at the quality of investment, not just quantity.

And then it all feeds into that broader algorithm -- is the top line delivering? Are we able to, at the same time, expand our margins over time. And then at the micro level inside the organization, are we supporting brands and geographies in the appropriate way. We've done a lot of interesting work in the last 3 or 4 years to prioritize those country category combinations that not only deliver a large share of the profit pool today, but we expect it to be delivers of that profit pool in the future and make sure that they're the areas that are getting an overallocation of the resources that we have available. And I think at the -- in totality, we don't necessarily have a shortage of resources. It's been able to allocate them in the appropriate way that's the big game changer for the next -- I think, for the next phase of this journey.

Okay. Great. One thing that I think we talk about every year on this stage is revenue growth management. You've been cited, so you know, by other companies is sort of the epitome of what revenue growth management success looks like, but you continue to own that scale. It's important both in terms of meeting the consumer where they are and also ensuring that you're doing so profitably. So what are -- I guess, how do you think about the runway of opportunity on revenue growth management?

It's always nice to hear the first part of your question. And I don't think there is a product in the world that you can buy at so many different price points and so many different packages and which is good evidence of the fact that we're well advanced on the journey. When I look at around the world at the areas that we are doing really well at and those not yet so well, the runway continues to be huge. So getting to scale is the name of the game here. Getting to scale the idea that underpins revenue growth management because it's not that complicated, not complicated to offer the argument that providing people with a choice of package pricing presentation in different moments throughout their daily journey is going to be a more attractive proposition than just having one size fits all. It's not a difficult argument to make. What's difficult is to scale that is to scale that in over 200 countries and to do it in a way that's relevant for what local needs are.

And so in that context, I think we're advanced on the journey, but I could take you to any single market in our portfolio and point to the plethora of opportunities that we still have ahead of us. And that's what excites us is knowing that ahead of us, we continue to have the ability to get closer to the shopper, to the consumer, to the customer with different solutions. And knowing that -- but to get there, it's not just by pressing a button or showing up, it's an equation with many variables that not many can get right. And we think we have an advantage to do so.

Yes. Strength begets strength. I'm sure you've been getting this question, you'll get this question. But I think this is more from a U.S. lens where I think it's more -- it's very much front and center, but there's been increasing discussion of food and beverage regulation, whether that's formulation regulation, changes to SNAP food assistance programs. And then you have general health and wellness considerations and GLP-1 drugs. How does that discussion influence how Coke thinks about its business priorities? And are you seeing any impact in the market today?

No, it's very topical, especially as you say through the lens of the U.S. environment. But it's not a new topic. It's one that we've wrestled with. We've at times embraced and at times, not done a great job, honestly, over our long history. But it's one that we today are -- we very much have it on the table. It's an important topic. It feeds into that broader equation of following the consumer intelligently and being willing to have your parameters challenged. I think it's the -- in many ways, it's the inspiration to want to innovate more. Innovation is typically driven by a need to create something new that delivers value that you don't have today. And I see the situation not only in the U.S. but in other parts of the world being exactly that. It's something we need to embrace as another variable in the equation and figure out how to deal with it.

In the case of GLP-1, I think it's a piece of that broader equation towards a movement because a lot of people are much more interested today in what they consume than they used to be. It's incumbent upon a company like us who's in the business of offering them choices to consume to take that seriously, and that feeds into our innovation agenda. We haven't seen -- in the data that we have access to, we haven't seen a material impact per se from a GLP-1, for example. But I don't think that is a reason to not continue to stay a little bit on your toes with regard to how we should be thinking about ongoing innovation. So yes, it's a big topic. It's one that I think we have learned. It's better to embrace it early and to feed it into the equation than to either ignore it or pretend that it's going to go away on its own.

I think Fairlife in the U.S. as an example that you can curate a brand, innovate on a brand that is on those -- is consistent with those.

Yes. And sometimes you do something for one reason and lo and behold, something else happens where all of a sudden, you have a solution that you didn't think you had and you have. And the protein area is one that's a hot topic, a big trend. And we're fortunate that we have a couple of great brands to play in that space for us.

Okay. A few minutes left. I have a couple of different questions I want to hit on. So on the bottling side of the business, over the course of the last year, you've taken -- since we last spoke here, you've taken some incremental steps towards refranchising, specifically in India. What's the strategic vision with respect to that market's operations? And then what's the current thinking on Africa, another hot topic of history on the bottling side?

Yes. So in India, the Indian market is an enormous opportunity. I think of India as you underneath the umbrella of Indian, you've got states that are bigger than most countries that we do business in. So it's a huge playing field with opportunity being realized as we speak, but the runway ahead is enormous. So configuring an ecosystem there that's going to stand the test of time has been a very important priority for us over the last few years. And not alone have we taken steps with regard to refranchising the markets that we own, we've also taken complementary steps to strengthen the franchise business in other areas. And very happy with our new partner, very happy with the progress that we're making. And I see it being sort of a very important piece in that overall jigsaw that we're creating for us to be able to capture the opportunity ahead for India. Africa, nothing new to report at this time.

Okay. On the cash flow front, favorite topic.

Yes.

We've been talking in longingly about a period of time when cash flow headwinds that you've been experienced the last few years would be behind you. I think we're at that point where Fairlife contingent considerations and tax payments, et cetera, are mostly behind you. Does that mean you're on the verge of a free cash flow conversion inflection as we move into the back half of '25 and '26? And if so, how does that bolster your optionality in terms of different strategic decisions going forward?

Yes. So for cash flow, it has been a really important topic for all the reasons that you know better than anybody. Over the last 8 or 9 years, we've gone from, I think, a position of weakness, I'd say, to one where we are today in a position to invest as we need to and to support the dividend as is appropriate. I look at the underlying cash being generated from the business as a first place to make sure we have confidence in ensuring. And then some of these onetime or these anomalous items that we've been dealing with as they fade into the background, I think we'll provide some more optionality. And our capital allocation template, though, I think, is not going to change dramatically. We have a bias to invest in the business.

Growing organically over time for me is priority #1. We're not against the inorganic -- half of -- if we've got 15 of the billion of the 30 billion are -- have come from inorganic plays. We're not against that as a potential future source of new growth to get into some of the addressable market I talked about earlier. The last 3, 4 years or so, we felt that we had brought in a lot, and it was time to sort of -- to leverage the impact that they could have. So the template is not -- I don't see changing dramatically, invest in the business, support the dividend, continue to have a balance sheet that's appropriate for the times. And in the world that we're living in, when there's so much macro, geopolitical, other uncertainties around there. It's nice to go home at night knowing that you've got a balance sheet that can -- that's going to be strong tomorrow and next week and deal with whatever gets thrown at us. And so it's a really important topic too.

Great. We've got 1 or 2 minutes left. And so I've asked this question to others as well. But if you could project yourself into the future, 5 years, June 2030, hopefully, we're back in Paris. What do you want to be able to say the accomplishments of the Coca-Cola Company was or were over those 5 years?

So 5 years ago, we weren't here. That was only -- and that's only 20 quarters ago. We weren't here. We were all on learning how to do video calls. So it's not that far away. It's not as far away as we think in that -- when I look back at what's happened in the last 20 quarters versus 20 quarters out, it's -- to me, then the answer becomes more of the template that we have offered for both our external as well as our internal stakeholders that we went through that I would like to think that it is going to continue to be the source of outperformance. For every topic that is embedded in that -- in those 5 pillars that we used to frame our conversation in CAGNY, there's something to be proud of. There's tremendous progress that we've made over the last few years.

But on the other side of the coin, there's also an enormous amount of untapped opportunity still. And it's very tempting at times to get bored with the things that are working. And my hope is that we don't get bored with those few things that we know can deliver outsized value for a long time to come.

Okay. Great place to end it. We're right on time. Thank you very much.

Thank you, everybody.