Coca Cola (KO) Q1 FY26 earnings call: guidance and Q&A

Inquired about the balance between volume and price/mix for the rest of the year, especially in North America and Asia, and the sustainability of Q1 unit case growth given Easter timing and affordability focus.

Henrique Braun stated confidence in a balanced growth algorithm for the full year, with quarterly variations. He emphasized that affordability options are a key part of their RGM strategy, particularly for low-income consumers, and that the company is managing all levers to deliver on updated guidance.

“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.”

asked by Dara Mohsenian · answered by Henrique Braun

Asked about the fluid cost environment, particularly for bottling partners facing aluminum and PET pressures, and how Coca-Cola is collaborating with them to navigate these headwinds.

John Murphy acknowledged the fluid environment and bottlers' higher exposure to commodity costs. He highlighted a well-established playbook involving RGM capabilities, cross-enterprise procurement for resiliency and productivity, and localized cost management strategies to navigate the situation with agility.

“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.”

asked by Stephen Robert Powers · answered by John Murphy

Questioned the balance of managing Diet Coke and Coke Zero, and how the Zero-Zero relaunch in Europe fits into the no-sugar portfolio strategy, asking what the company does to ensure system balance.

Henrique Braun expressed satisfaction with Trademark Coke's performance and explained that the Zero-Zero relaunch was driven by consumer insights (desire to reduce caffeine intake in the evening). He emphasized that improved RGM capabilities, consumer-centricity, and innovation discipline allow for successful portfolio expansion and execution.

“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.”

asked by Lauren Lieberman · answered by Henrique Braun

Asked about the negative gross margin contribution in Q1, timing elements, inflation impacts (tea/coffee), and the general progression of gross margin. Also, sought clarification on how the timing of the CCBA sale could dictate margin progression in H2.

John Murphy attributed Q1's gross margin compression primarily to a one-off inventory item in APAC and commodity pressures in tea/coffee. He expects gross margin trends not to go backwards for the full year, citing RGM and efficiency levers. He clarified that the CCBA sale, being a lower-margin business, would mechanically improve the overall company margin profile upon divestiture in H2.

“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.”

asked by Christopher Carey · answered by John Murphy

Inquired about the underlying drivers of strong performance in APAC, particularly China and India, its sustainability, and what the company is doing differently.

Henrique Braun highlighted that APAC is a developing region where the focus is on building the industry and foundations for the future, with a long-term view. He noted that China's strategy of focusing on quality volume in winnable categories is paying off, and India is building a full portfolio with local brands, though it's still far from a mature market. John Murphy added that Q1 margin compression in APAC was due to a unique inventory item and structural geographic mix.

“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.”

asked by Robert Ottenstein · answered by Henrique Braun

Asked Henrique Braun about any new learnings in his first few weeks as CEO and potential changes to the marketing approach, especially regarding recruiting younger drinkers.

Henrique Braun stated a smooth transition and reaffirmed his belief in the company's existing strengths: being in the best industry, having an unrivaled portfolio, and an unmatched system reach. He emphasized leveraging consumer-centricity and digital capabilities to unlock further growth, engage consumers, and create value, maintaining consistency with past successful strategies.

“I would not be the one to touch that and change the trajectory because I fully believe in that.”

asked by Michael Lavery · answered by Henrique Braun

Asked about the sustainability of Q1 mix headwinds and the expected underlying price/mix for the year, specifically for Latin America.

John Murphy reiterated that the company aims for a more balanced algorithm (volume and price/mix) for the full year, with Q1's 3% volume and 2% price/mix being close to expectations. He noted that some Q1 mix headwinds (North America category mix, Latin America geo mix) are not expected to fully repeat, and the company is confident in meeting its balanced algorithm guidance.

“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.”

asked by Robert Moskow · answered by John Murphy