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    KO
    Earnings call· Sep 2025(Q3 FY25)

    COCA COLA CO KO

    Oct 21, 2025 Source

    Executive summary

    The Coca-Cola Company Q3 FY25 — Strong Performance Amidst Dynamic Environment, Refranchising Nears Completion

    The Coca-Cola Company delivered strong Q3 FY25 results, with robust organic revenue growth and comparable EPS expansion, despite a dynamic operating landscape and significant currency headwinds. The company is nearing completion of its refranchising strategy, which is expected to unlock further growth opportunities. Management remains focused on driving productivity and investing in marketing and innovation to sustain long-term growth and market leadership.

    Highlights

    5

    • Organic revenue growth of 6% was at the high end of the long-term growth model.

    • Comparable EPS increased 6% year-over-year despite 6% currency headwinds.

    • Gained overall value share for the 18th consecutive quarter, and held or gained value share across all geographic segments.

    • Net debt leverage of 1.8x EBITDA was below the targeted range of 2x to 2.5x.

    • Expected free cash flow (excluding Fairlife contingent payment) for FY25 is at least $9.8 billion.

    Concerns

    4

    • Comparable gross margin declined approximately 10 basis points.

    • 6% currency headwinds impacted comparable earnings per share in Q3 FY25.

    • Volume declined across all operating units in Asia Pacific due to softer consumer spending, weaker industry performance, and inclement weather.

    • Mexico is experiencing softening macroeconomic conditions and will face a significant sugar tax increase effective January 1, 2026.

    Guidance & targets

    10
    CategoryTargetConfidence
    Organic revenue growth
    5% to 6%
    high materiality
    High
    Comparable currency-neutral earnings per share growth
    approximately 8%
    high materiality
    High
    Currency headwind to comparable net revenues
    1- to 2-point
    medium materiality
    Medium
    Currency headwind to comparable earnings per share
    approximate 5-point
    high materiality
    Medium
    Underlying effective tax rate
    20.7%
    medium materiality
    Medium
    Comparable earnings per share growth
    approximately 3%
    high materiality
    High
    Free cash flow (excluding Fairlife contingent consideration payment)
    at least $9.8 billion
    high materiality
    High
    Currency impact to comparable net revenues
    slight tailwind
    medium materiality
    Medium
    Currency impact to comparable earnings per share
    slight tailwind
    medium materiality
    Medium
    Long-term growth algorithm
    4% to 6% on the top line
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    North America
    Despite ongoing differences in spending between income groups and slower traffic across channels, North America delivered strong results. The system is investing behind brands and adapting to consumer pressures with both affordability and premiumization strategies.
    Volume: flat (improved sequentially for the second consecutive quarter)Value share: gainedCoca-Cola Zero Sugar: ongoing strengthDiet Coke: strong volume growth (new generation consumers, campaigns like 'Know the Signs', retro flavors)Cold-drink equipment placement: acceleratedKey packages availability: expandedVisible inventory: won share
    		strong growth——strong growth
    Latin America
    Volume was flat, but the segment gained value share and grew organic revenue and comparable currency-neutral operating income. Steps are being taken to address softening macroeconomic conditions in key markets like Mexico, with some positive reactions to interventions, though full recovery is expected to take time.
    Volume: flatValue share: gainedBrazil: continued growth, gained value share (Coca-Cola Zero Sugar driven by dual packs, meal occasions, refillable packaging)Mexico Santa Clara: became value share leader within value-added dairy
    		grew——grew (comparable currency-neutral operating income)
    EMEA
    The segment continued to grow volume and delivered strong revenue and profit growth despite volatile macroeconomic backdrops in some regions. Europe saw a volume decline, but Eurasia, the Middle East, and Africa grew volume. The company emphasized local and global brands and impactful marketing campaigns.
    Volume: grew (overall)Europe volume: declined (cycling tougher comparison, mixed performance)Eurasia and the Middle East volume: grewAfrica volume: grewPartnership: English Premier League (Europe, with Coca-Cola, smartwater, Powerade)Partnership: Springbok Rugby (South Africa)Innovation: Cappy Bubble (Turkey)Revenue growth management capability: sharpened
    		strong growth——strong growth
    Asia Pacific
    Volume declined across all operating units, driven by softer consumer spending, weaker industry performance, and inclement weather in markets like India and the Philippines. Despite this, the segment gained value share and grew revenue and profit, focusing on targeted execution and affordability.
    Volume: declined (across each operating unit)Value share: gainedChannel execution plans: focusing on granularBrand price architecture: tailoring with focus on affordabilityInvestment: for growth
    		grew——grew

    Operational metrics

    12
    Unit cases
    1grew
    Q3 FY25

    Unit cases grew 1% in Q3 FY25, with improved performance after a slower start. 2-year volume trends accelerated each month.

    Concentrate sales
    1behind unit case sales
    Q3 FY25

    Concentrate sales were 1 point behind unit case sales, driven primarily by the timing of concentrate shipments.

    Price/mix growth
    6
    Q3 FY25

    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
    10declined
    Q3 FY25

    Comparable gross margin declined approximately 10 basis points.

    Comparable operating margin
    120increased
    Q3 FY25

    Comparable operating margin increased approximately 120 basis points, driven by continued productivity mindset.

    Net debt leverage
    1.8xbelow target
    Q3 FY25

    The balance sheet remained strong with net debt leverage of 1.8x EBITDA, which is below the targeted range of 2x to 2.5x.

    Fairlife capacity increase
    30
    ramping through 2026

    The new factory in Upstate New York will provide about 30% more capacity or volume potential for Fairlife, ramping up through 2026.

    Santa Clara (Mexico) volume growth
    13
    Q3 FY25

    Santa Clara in Mexico grew 13% in volume in the third quarter and became the #1 value-added dairy brand in Mexico.

    Mini cans revenue
    $1B
    current

    The introduction of mini cans in North America already represents USD 1 billion in revenue by itself, addressing consumer pressure on daily disposable income.

    Billion-dollar brands
    30double nearest competitor
    current

    The company has 30 billion-dollar brands, which is approximately 1/4 of the industry's total and double its nearest competitor.

    Operating margin (2017 baseline)
    26.5
    2017

    In 2017, the company's operating margin was 26.5%.

    Marketing productivity
    more pronounced
    FY25

    In 2025, the company is earning more productivity in the marketing area with some of the digitization work, which is more pronounced for this year.

    Industry KPIs

    8
    MetricValueDetails
    Category brand sharegainedvalue share
    EPS organic EPS growth6%
    Gross operating margin120bps
    Organic revenue growth6%
    Unit case volume growth1%
    Pack architecture pricing actions$1BUSD
    Bottler franchise system economics40%
    Cold drink equipment distribution reachaccelerated

    Product announcements

    6
    ProductTypeDetails
    Sprite + Tealaunch
    BACARDÍ Mixed with Coca-Colalaunch
    Powerade Springboks additionlaunch
    Retro Diet Coke with Cherrylaunch
    Retro Diet Coke with Limelaunch
    Cappy Bubblelaunch

    Deals & partnerships

    2
    Jubilant Bhartia GroupSale of 40% ownership stake in company-owned Indian bottler

    In July, we sold a 40% ownership stake in our company-owned Indian bottler to the Jubilant Bhartia Group. This is one of the last two large pieces of the refranchising strategy.

    Coca-Cola HellenicIntention to acquire a controlling interest in Coca-Cola Beverages Africa

    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. This is one of the last two large pieces of the refranchising strategy.

    Capital programs

    1
    Fairlife New York Factory Expansionon track

    Benefit: approximately 30% more capacity or volume potential for fairlife

    The capacity that we've talked about at 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. This factory is one of the largest dairy processing facilities in the U.S.

    Risks & headwinds

    5
    Currency headwindsQ3 FY25, Full year 2025

    6% currency headwinds to comparable EPS in Q3 FY25; 1- to 2-point currency headwind to comparable net revenues for full year 2025; approximate 5-point currency headwind to comparable earnings per share for full year 2025

    Mitigation: hedge positions

    Softening macroeconomic conditionsongoing

    Mexico

    Mitigation: taking steps to address, interventions

    Consumer pressure and divergence in spending between income groupsongoing

    pressure on middle and low-end income consumers

    Mitigation: introducing packaging architecture addressing affordability (e.g., mini cans), premiumization efforts

    Significant increase in sugar drink taxes in Mexicoeffective January 1, 2026

    significant increase

    Mitigation: working with bottling system to accommodate and adapt, doubling down on marketing and innovation, RGM technology, execution

    Commodity cost inflation2026

    overall impact is manageable

    Mitigation: continued productivity mindset, supply chain efficiencies

    What to watch in Q4 FY25

    5

    Fairlife capacity ramp-up

    through the course of 2026
    Currenton allocation
    Targetunconstrained ability to satisfy consumer demand

    Why it matters

    Critical for alleviating supply bottlenecks and realizing growth potential for a key premium brand.

    The capacity that we've talked about at 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.

    Q&A highlights

    8

    Was the Q3 volume acceleration due to underlying market improvement or company interventions? How does this factor into Q4 and FY26 planning?

    The Q3 acceleration was primarily due to company interventions, including increased marketing, innovation, and execution. The environment is not changing quickly, so Q4 will require strong execution. For FY26, the company expects pricing to normalize and will focus on balanced volume and price growth.

    “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.”

    asked by Stephen Robert Powers · answered by James Quincey

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Refranchising Milestones

    The company announced two significant steps towards completing its refranchising journey: the sale of a 40% ownership stake in its Indian bottler to Jubilant Bhartia Group in July, and Coca-Cola Hellenic's intention to acquire a controlling interest in Coca-Cola Beverages Africa, expected to close next year. These moves are anticipated to unlock growth in India and Africa by partnering with strong local operators, marking the final large pieces of the refranchising strategy started in 2015.

    02

    Dynamic Operating Environment and Adaptability

    Management highlighted a complex operating landscape with varying consumer pressures🌐, unseasonal weather, inflationary impacts, and geopolitical uncertainties. Despite these challenges, the company adapted its plans, focusing on sharper execution and investments, which led to sequential volume improvement in September after a slower start to Q3. The company expects the environment to remain similar in Q4, requiring continued focus on internal actions to drive results.

    03

    Portfolio Power and Innovation

    Coca-Cola continues to leverage its portfolio of 30 billion-dollar brands, representing approximately a quarter of the industry's total. Innovation, such as Sprite + Tea in North America and BACARDÍ Mixed with Coca-Cola in Mexico and Europe, contributed strongly to revenue growth in the first three quarters. Targeted marketing campaigns, like the Fanta Halloween activation and Diet Coke's 'Know the Signs' campaign, are connecting deeply with consumers and driving brand momentum.

    04

    GLP-1 Impact on Beverage Consumption

    Initial data suggests GLP-1 users tend to consume less full-sugar soft drinks but show increased consumption of diet soft drinks, hydration products, coffee, and significantly more protein drinks. The company is adapting its portfolio to these emerging trends, noting that Fairlife and Core Power have been standout successes and continue to grow.

    05

    Fairlife Capacity Expansion

    The new Fairlife factory in Upstate New York is on track to begin production on time and will ramp up capacity through 2026, adding approximately 30% more volume potential. This expansion is expected to alleviate current allocation constraints and significantly grow the Fairlife and Core Power brands, moving towards an unconstrained ability to satisfy consumer demand over the course of 2026.

    06

    Mexico Sugar Tax and Adaptation

    A significant sugar tax increase in Mexico, effective January 1, 2026, is expected to impact the business. The company is working with its bottling system to accommodate and adapt, drawing on past experience from the 2014 tax increase where it successfully recovered through marketing, innovation, and revenue growth management. Management expects some early impact but is committed to executing a plan to recover.

    AI-generated summary of the company’s earnings call. Not investment advice.