KO
#We certainly did well in a number of the categories, particularly some of the premium categories.
What was a little weaker in this quarter was some of the juice businesses and some of the tea businesses, which are not as high value to us.
So that is what netted out on the 2%.
What you think ---+ what I think you see is over the year, you see very strong growth in Vitamin Water, in sports drinks, and some of the other categories, as well, so I think it is a broadening of the portfolio, a focus on innovation, but yet there's some head winds on juice, linked somewhat to commodities.
Sure, good morning, <UNK>, <UNK> here.
Look, North America, I think is a combination of many, many things.
I mean it has I think been the result of a number of years working on multiple fronts.
Working on innovation across the portfolio, getting into categories, refining the propositions, learning, refining the propositions.
It is about, in the sparkling business, the better marketing, the more media spend.
It is about the focus on the pricing and packaging architecture, with more smaller packages, and it is about getting the execution right.
It is the refranchising, bringing new excited bottlers in.
In the end this is a result that has been built by a great team of people, who have been very focused over a number of years about regenerating growth in the North American business.
As <UNK> said, they have had six very solid quarters of volume and revenue growth.
And I think there are a lot of learnings.
There is no silver bullet, but there are a lot of learnings.
Having said that, Japan has also been on a good run, the past three quarters are very good volume growth, you know, doing well on offsetting deflationary pressure.
Again a similar story.
The team is very focused on a multiple category approach, innovation in the products, increasing the quality and quantity of the marketing.
But always in parallel and in alignment with the bottler where you got to get better execution.
Good marketing on its own is not going to get you the answers.
There's got to be more and better marketing along with more and better execution.
I think that's you see.
And to some extent, Western Europe, that kind of came, new Coca-Cola European partners came well out of the stables on the first quarter.
I think the formula is going to be the same.
More and better marketing.
More and better execution.
And a multilane focus on categories and cranking out the learning, the [trying stuff], the innovation, and pushing ahead.
And I think that is something we are going to continue to press across the developed markets.
Now, turning to China, I think China, again, I don't think, if I gave the impression it was all weather, that would be unfair to the team on the ground in China, and the system there.
They have done a lot of work to address the big change in how the consumer responded to the economic circumstances in China.
I think part of it is, you know, it is a part of the world that has had such consistent growth rates over the last decade, but a little bit of a slowdown maybe towards some exaggerated pull-back on spending, so I think there is a little bit of stabilization coming through in the macros.
We saw that.
We have definitely taken action in the things that we can control.
Not just in the commercial policies, to strengthen the wholesaler and distributor network and working through the inventory problem, but also on the pricing and packaging.
To give you one example, a very small example, but it is symptomatic of how fast China can change.
If you go to the cafe channel in China, all of the noodle shops up and down the street, people go there at lunchtime.
Last year they were packed with people.
This year, you go, they are a third empty.
You go okay, maybe the economy slowed down.
No, that's not what is happening.
The explosion of online to offline ordering and the availability of lots of people on bikes and motorbikes to deliver stuff and the apps the aggregate wraps to buy food, it has been an explosion of ordering online and delivery food.
Such that there's just as many people buying from these cafes, but sometimes in some parts of China, a third of it is being delivered to people, whether it is work or to students, so we have to adapt that packaging.
Having a returnable glass bottle in that cafe doesn't help you with offline delivery.
So we have had to revamp the packaging offer so we are there with the right package to go where the consumer is going.
That is a micro example of the sorts of thing we have had to do in China to adapt to how the market is changing and is contributing to the stabilization.
But it is as I said, a country undergoing change in its economic model and that will throw up new and different consumer behaviors to which we will have to adapt.
Hi, <UNK>, it is <UNK>.
Look, we have had a much better run in the Philippines in the last few quarters, actually, strong numbers the first three quarters.
This year actually, last year, was three very strong quarters as well; so I think since FEMSA has been in, there they have built on the work that [BIG] did, they have gone about fixing the fundamentals.
There were some fundamental structural stuff that still needed to be improved and I think they grasped that in the early days an we are starting to see the benefits of that coming through in the last six quarters.
Again, it is not silver bullet stuff.
It is not too complicated in the sense of, you know, it has been about adapting the price package architecture, it is about some of the emphasis on of some of the sparkling brands in the Philippines, some of the local brands that we de-emphasized and re-emphasized some of the more global brands and the stronger local brands, rebuilding and continuing to construct a more solid distributor network.
Obviously Philippines is complicated given all of the islands and the issue of moving product around.
I think they have kind of worked the system in terms of getting the thing nicely oiled in terms of the cogs so the product could get everywhere, backed up with a little more marking and a little sharper focus on certain categories and I think that's played through.
I think the team on the ground has done a good job of taking the performance to a higher level.
Good morning.
Hi, <UNK>, this is <UNK>.
First, let me just say that over the last four or five years, we have been actually working really, really hard to reconfigure the Japanese bottling system.
We had 13 bottlers what, back five years or six years ago, and now we are working towards having 85% of the total business in Japan, which as you know is a very large business for us, under one roof.
And I think that [itself] first, and without looking outside, without looking anywhere, it is a huge re-architecture that is yielding substantial savings, and we can redeploy that into being, into route to market, into ways we actually get our products the most effective efficient way to the customer, and through the customer to the consumer in Japan.
Regardless of any encouragement from the outside, we are on track to end up in a very efficient, very 21st century bottling system and consumer goods delivery system in Japan that is working well Now, are there other communities, as that is just not related to cost savings.
And yes, there has been early, very early discussions in Japan.
I can't say any more than that and we will continue to look at opportunities to see if we can even make our Japanese system even stronger.
But that is very early days, again, in terms of the level of discussions that have taken place.
Good morning, <UNK>.
Sure, let me say a couple of thoughts, and then <UNK> will give you some comments on the margin.
Look, the stills, if I can say one thing, which is the stills is not a category.
It is a combination of many different categories and even those categories re-segment between premium, mainstream, and more affordable.
And so what we are focused on doing, as we invest in the stills business, is yes growing in aggregate, in top line numbers, but we are being selective on focusing on those places where we think we can generate a better return in the long term.
It is not a growth of bulk water.
It is a focus on where is the consumer demand, what is on trend, and if you just pick out a couple of things that are on trend, things like coconut waters, or premium juices or premium ready to drink coffees, these are all very high revenue products.
<UNK>, do you want to talk about the margins.
Sure.
Hi, <UNK>.
You are going to see some impact on margins, but mostly initially, because as we are going into these businesses, whether we are developing them internally or whether they are through bolt-on acquisitions, they do have a margin impact.
But then as we get scale, as we continue to work on the supply chain, et cetera, we do start to improve the margins.
So I would say the initial issue for margins and then over time, we are able to do things that will improve the margin impact.
But initially, yes, as a category itself, a lot of these stills have higher cost of goods ---+ they have higher revenue but higher cost of goods, so that does impact margins.
Sure.
<UNK> here.
Look, I think it is important to say that the premium opportunity in China is big, but it is not as big as the mainstream opportunity.
We are absolutely focused on investing in that premium opportunity.
It is very much about the big cities, the white collar.
It is going to be also about some of the premium parts of the still categories.
We are going to go after that.
But in the end, the biggest mass of consumers, the biggest mass of disposable income will be in the mainstream.
So it will have to be a combination, of yes, addressing the premiums, but also going after the mainstream with the greater affordability, expanding the distribution reach, upgrading the execution into the third tier cities and in the rural areas, that is also going to be a big driver of our revenue.
In terms of the categories, I think what has been going really well, by example, is we have taken an approach of premiumizing our water business in China.
One of our most recent billion dollar brands, Ice Dew, comes out of China.
Effectively, we are driving the business from ---+ in the end ---+ a one RMB price point to a two RMB price point.
That is one of the biggest drivers of growth, is the water at the two RMB.
The places where we have taken ---+ had a little tougher time is perhaps in the juice category, with sparkling in the middle.
Again, when you look at what is growing in terms of the categories, what you do see is it maps quite closely to the consumer segments in terms of who is suffering and who is not suffering in terms of disposable income.
The juices, the kind of ambient, more going to the rural areas, have been hit a little harder.
The premium waters which are perhaps more in the cities have been doing well.
And on the second question about the structural impact, so we will obviously give more information on 2017 later, as we get closer to the beginning of the year.
But I will say that in the ---+ particularly in the North America refranchising, the impact will be significant in 2017, because as we are moving to get all of the refranchising completed in 2017, that is, we will be moving more than we have moved in all of 2015 and 2016 combined.
So it will be a large impact in 2017, and we will work to give you all more color on that later in the year, or early 2017.
And as far as 2018 is concerned, the refranchising will be done, but it will be ---+ the impact will be basically the cycling of it, obviously the timing of these transitions will be significant, not only to 2017 but also the impact it will have on 2018.
And then we have some costs that we have to get out in 2018 that we will be working to get out in early 2018, that will be basically a function of the refranchising as well.
So we will give you more color as time passes.
Thank you, <UNK>, <UNK> and <UNK>.
We are working aggressively to evolve our sparkling strategy and expand our brand portfolio in order to address changing consumer preferences.
And we are on track with transforming our company to a higher margin, higher return business, focused on building strong brands, enhancing customer value, and leading a strong dedicated global franchise system.
Looking forward, we remain confident that the long-term dynamics of our industry are promising, and we absolutely believe that the Coca-Cola Company is well positioned to deliver long-term value to our shareholders.
As always, we thank you for your interest, your investment in our company, and for joining us this morning.
