Coca-Cola Co Earnings Call Insights: Global Macro and Incremental Spending
Bill Schmitz – Deutsche Bank Research: Muhtar, I know you have been doing a lot of globe-hopping lately, so can you just talk about sort of the global macro, maybe some granularity about regional growth rates? I know you were at (indiscernible) Davos, just to give us some color on how you think things are going to trend over the next year. I know you kind of covered it big picture, but maybe some more granularity?
Muhtar Kent – Chairman and CEO: Bill, I think – I’ve recently been to Korea, to Australia – in the last 10 days to also Southern Russia, in Sochi but I think essentially in Europe, there is a sentiment there that people are beginning to feel that it’s not going to get any worse, that there will be some expansion happening as we move forward instead of just purely fiscal restraint and monetary restraint so there is that feeling beginning to emerge, but I think it’s going to be a long recovery. Certainly in China, we’re seeing the transition happen, from a purely export led economy to one that is more balanced with consumer spending and a combination of consumer spending as well as export led balanced economy. I think there were some challenges in that transition initially where there was a divergence between GDP growth and pure disposable incomes for a while, but I think long-term that’s going to be very beneficial for everyone, this transition in China. I think in general, Japan is going to also, I think the consumer sentiment will continue to be modeled and volatile there and it’s subdued. The rest of the world, whether it’s Africa, the youngest billion; Latin America, Eurasia, Middle East, we see – and of course Asia, Southeast Asia and other parts of Asia, Indian subcontinent, we see growth, we see very disciplined monetary policy, balanced budgets, good banking system and the consumer is more positive and so, it’s modeled in this mix and here in the United States, we see some signs of improvement. We need to wait and evaluate the impact of the payroll taxes as well as the higher gasoline prices. It’s too early to say, but it’s a recovery, that is at best lukewarm, but we feel that it could get better. That’s how we see the world and based on that we continue to invest for opportunity, we continue to invest based on our long-term models and plans with our bottling partners to continue to generate both, volume, top line and income growth.
Bill Schmitz – Deutsche Bank Research: Then can I just follow-up with the change in the structure of CCR North America? Does this change your sort of philosophy on sort of how long you’re going to own the asset and maybe how it’s going to be operated going forward?
Muhtar Kent – Chairman and CEO: Are you talking about just the restructuring?
Bill Schmitz – Deutsche Bank Research: Exactly. Like sort of three different regions, I guess, there were seven different businesses before and now there is three. Does that sort of change your view on how long that asset stays with TCC?
Muhtar Kent – Chairman and CEO: It’s got nothing to do with that at all. Think of it as – last year we announced a new productivity and reinvestment program that includes continued synergies from our North America CCR, Coca-Cola Refreshment operations to be able to enable us to continue to invest in our brands to grow in North America, 11 consecutive quarters of growth. When we first talked about growth in North America, back in ’09, people thought that we were trying to go to the moon with a glider. Now it’s reality. 11 quarters of consecutive growth and we intend to continue that. We see this as a growth market and therefore enabled us to continue to invest in our brands, this just ordinary course of business. Think about it exactly like that. It’s not a big deal, ordinary course of business and therefore it’s got nothing to do with the United States bottling structure. It’s just part of ongoing business and I will have – Steve Cahillane is here with me on this call as well as Ahmet Bozer and Irial Finan, so I can ask Steve to also comment.
Steve Cahillane – President of Coca-Cola Americas: Muhtar, you said it very well. This is very much an effectiveness play. Two years ago, when we put these businesses together, we had a simple mantra. First, we were going to make it work, then we were going to make it better and then we were going to make it best. We’ve learned a lot over the course of last two and half years. One of our most successful organizations is our foodservice organization which is the line around the three geographic units. We are moving our national retail sales and our field sales organizations, also around the same three units, which will really build our total efficiency and effectiveness, our ability to work together, our ability to continue to invest in this market, invest against our brand, put more feet on the streets. So we are very excited about new organization and I think it will get us from making it better to making it best.
Bill Pecoriello – Consumer Edge Research: I just wanted to clarify one thing first, Gary. When you were hitting the long-term FX, neutral operating profit targets, you expected to do that in 2013 as well as in the long run. Then with close to zero, operating expense leverage guided to ’13 despite the savings, you are signaling stepped-up spending, so just want to get an idea of where you are focusing that incremental spending on?
Gary P. Fayard – EVP and CFO: Yes, I was trying to be pretty clear, but let me be very clear. We expect to hit our long-term growth targets both in 2013 and long term. That applies to 2013 as well. So, we are comfortable with that and would expect to be able to deliver that. The second thing is we have always had a mantra that you invest through a crisis. We have been in a global crisis for a number of years now, but we have got history and we have seen what happens when you invest through the crisis, when you come out the other end as Muhtar says, we see things slowly improving across the world, but we expect to come out at the other end much stronger than we were even going in. So, we’re going to continue to drive efficiencies, productivity and then reinvest that back to grow the business, and growing the brands. The brands are stronger than they’ve ever been, but we think we can drive it even further. So, we’re going to continue to invest behind the brands.
Muhtar Kent – Chairman and CEO: Just one point to add on that Bill, I always say, as you go up, the air gets thinner. Always remember, we’re adding on top of significant increases from prior year all the time, just on sparkling beverages alone, we’ve added over 0.5 billion cases each year. So, we’re cycling that every year and we’re continuing to grow. I think that is really important and in three years the worst I guess, probably macroeconomic environment we’ve seen for a long time, we’re able to generate volume growth in line with our growth expectations, revenue growth in line with our growth expectation and income growth and generating record revenues of $48 billion, record income as well as record cash growth. So, it needs to be taken into that context, continue to crack the calculus for growth.
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