The Coca-Cola Company (KO) Q3 2026 earnings call transcript

The Coca-Cola Company (KO) held its earnings call for the third quarter of fiscal 2026 on 27 October 2026. What follows is my machine transcription of the company's public webcast, made on 27 October 2026, and not the company's official text.

A machine mis-hears names and numbers, so where one reads oddly, the webcast is the record. This recording is not split by speaker.

Transcript

Hello everyone, thank you for joining us and welcome to Coca-Cola Company's third quarter 2026 earnings results conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I'll now hand the conference over to Todd Beiger, vice president and head of investor relations. Mr. Beiger, please go ahead. Good morning and thank you for joining us.

I'm here with Enrique Braun, our chief executive officer and John Murphy, our president and chief finance officer. We've posted schedules under financial information in the investors section of our company website. These reconciled certain non-gap 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 to 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 the company's periodic SEC reports.

Following prepared remarks, we will take your questions. Please limit yourself to one question, re-enter the queue to ask follow-ups. Now, I will turn the call over to Enrique. Thanks Todd and good morning everyone. Our third quarter results reinforce the continued strength of the Coca-Cola system. We are acting with speed and discipline, enabling us to deliver strong results in an uneven environment. I want to start by thanking all our associates and bottling partners around the world. Every day, they serve customers, support communities, and bring our brands to life.

This year has required resilience, agility, and strong execution, and our people have continued to rise to the occasion. The efforts reinforce my confidence in our updated 2026 guidance and in the long-term opportunities ahead. This morning, I will provide an update on the global landscape and review our third quarter business performance. Then I will discuss how our system is delivering at scale and adapting locally to create durable growth. John will close with our financial results for the quarter, full year 2026 guidance, and some early considerations for 2027.

First, the global operating environment continues to evolve. Due political disruptions affect several parts of the world, cost pressures have accelerated, and all of these has an impact on many consumers. Yet our confidence in the long-term opportunity remains unchanged. We have a strong portfolio of $32 billion brands and unmatched the system reach with our bottling partners. These advantages matter, but so does what we do with them. For several years, we have been strengthening capabilities around consumer recruitment, digital revenue growth management, and system execution.

By staying close to consumers and remaining constructively discontented, we continue to adapt in a dynamic environment. We increasingly seen that work reflected in our performance, including this quarter. Volume group 5% and organic revenue grew 7%. Stepping back, our longer-term performance reflects a more balanced contribution to top-line growth. We expanded margins while continuing to invest in our business. We delivered double-digit comparable earnings per share growth and gained value share. Beyond the headline numbers, I'm encouraged by how we are growing.

Our disciplined investments and digital capabilities are creating momentum across many of our markets and brands. Yet, we know there is still more work to do. We continue to sharpen how we turn consumer sides into innovation, and we are balancing scale and intimacy to drive a stronger execution across our system. Our focus is simple, keep learning and do a little better every day. This quarter, I spent much of my time with our people and bottling partners in several of our markets.

These experiences always reinforce the importance of understanding local needs and responding to consumers. A strength of our system across the world. While every market is different, three themes were consistent. One affordability is working. Two, both zero sugar and original taste are recruiting consumers. And three execution and local relevance are helping us win. Let me bring each of these to life across our business. Starting North America, we grew revenue again value share for the quarter. Volume was even doing parts to the timing of the July 4th holiday and temporary challenges in certain finished goods businesses, but performance improved sequentially each month during the quarter.

Across our total beverage portfolio, we had strong volume growth from many brands, including trademark Coca-Cola, Fairlife, Poweraid, Fresca and Smartwater. Mr. Pib continued its success with another quarter of double-digit volume growth. We are applying our learnings from our strong sports playbook with the next iteration of fan work is thirsty work, which brings Coca-Cola into football fandons through team packaging, retail activation, and locally relevant fan experiences. For Halloween, we are pairing Fanta's haunted universe with limited edition ghost phase punch and collectible packaging that brings the experience from screen to shelf.

We're also creating new opportunities across our portfolio. Fairlife expanded its nutrition plan offerings with the return of fan favorite vanilla. While a body armor feat brings sports hydration beyond the workout with sparkly zero sugar format with caffeine, electrolytes, and metabolism support. In Latin America, several key markets started the year facing difficult conditions, but our teams responded with market specific actions that drove meaningful acceleration in the third quarter. We grew volume, delivered balanced top line growth, and gained value share with broad-based improvement across the region.

In Mexico, the environment remains challenging, but we are seeing encouraging progress by combining affordability, strong revenue growth management capabilities, and locally relevant marketing and discipline execution. In Brazil, momentum remains strong across our total beverage portfolio. Trade Mark Coca-Cola delivered another strong quarter while Sprite and sports beverages also performed well. We continue to connect our brands with locally relevant passion points, including the rock and Rio music festival, while also investing behind growth opportunities across our total beverage portfolio.

In Argentina, the environment remains challenging. We have strong plans in place and while there is still more work to do, we're encouraged by progress across the region. Moving to India and starting with Europe, for the quarter, we grew volume, but we lost value share in a few key markets in Western Europe, and we are taking actions to improve performance. Following the FIFA World Cup, we transitioned into soccer activations around the English Premier League and Bundesliga, while continuing to build everyday consumption occasions through our Muse platform.

We are complementing these efforts with affordable propositions like our 500 ml Supercan and are continuing to focus on price pack architecture to help us recruit consumers and drive transactions. In Africa, despite cycling a tough volume comparison, we gained value share and delivered high single digit volume growth. We celebrated 75 years of Coca-Cola system in Nigeria with an end-to-end activation. To meet evolving consumer needs in South Africa, we adapted an affordable single-serve package from India, giving it a locally relevant name, Mashaasha, meaning quick.

We also activated our spring box rugby team partnership with the BE ABOC campaign and limited edition collectible player scans. In the original Middle East, ongoing geopolitical conflicts continued to disrupt business in parts of the region. Our system was resilient, delivering another strong quarter with volume growth and value share gains. From coke studio featuring Pakistani artists to affordability initiatives to locally relevant taste innovations like Sprite, Comminte and Fanta, Pomegranate, our teams are adapting to dynamic market conditions.

Finally, in Asia Pacific, performance varied across our operating units, but we encouraged by the progress in many markets. We gained value share in grew volume, revenue and profit while price mix remained pressured due to negative geographic mix and affordability initiatives. India delivered strong volume growth with each of our top 10 brands growing double digits. We expanded our consumer base by scaling both affordability and premiumization, strengthening execution and leaning into emerging channels. For example, we expanded our Sprite and Spicy platform into the QSR channel in India with new combo activations, social media content and influencer collaborations which contributed to Sprite's volume growth of nearly 20% in the region.

In China, the consumer environment remains subdued with cautious spending and soft domestic demand. Despite this, we delivered another strong quarter of volume growth with strength in trademark Coca-Cola and Fanta. We continued to advance our digital capabilities to create more consumption occasions and connective consumers in new ways. These actions are helping us drive immediate consumption packages and accelerate significant growth across digital commerce and emerging channels. In Japan, volume declined as consumers remained pressured in a challenging macroeconomic environment that was heavily impacted by a diverse weather.

For the quarter, we gained share, expanded our consumer base in trademark Coca-Cola and accelerated zero sugar volume growth. We're adapting our offerings and executing to meet changing needs. In ASEAN and South Pacific, volume growth was brought based across many key markets. Affordability, zero sugar offerings, innovation, stronger execution, a helping us recruit consumers and create new growth opportunities, including the launch of Coca-Cola Zero Zero and Thailand. In Vietnam, we are expanding our affordable single-serve package which is now available in over 400,000 outlets with high report rates.

To sum it all up, while the global operating environment remains uneven, we are encouraged by the momentum across our business and believe in our ability to deliver more for more markets and more for more brands. I'm energized by the progress we're making across the Coca-Cola system. We are learning as we go, continue to raise the bar and finding new ways to create value. The actions we are taking are helping us deliver today via strengthening our ability to create value for the long term.

With that, I'll turn the call over to John. Thank you, Enrique, and good morning, everyone. Our results, once again, demonstrate the strength and adaptability of our business. For the quarter, organic revenue grew 7%. Our unit cases grew 5%. Our two-year, year-to-date volume growth average of 2% reflects a more sustained and balanced contribution to top-line revenue growth. Concentrate sales were two points ahead of unit case volume due to the timing of concentrate shipments. Price mix grew 1%.

This was driven by four points of pricing actions, partially offset by three points of unfavorable mix, primarily due to geographic mix, timing of investments, and category mix. Comparable growth margin increased approximately 170 basis points and comparable operating margin increased approximately 110 basis points. Both reflect underlying expansion, currency tailwinds, and a favorable structural impact from last year's sale of our finished product operations in Nigeria. Importantly, margin expansion did not come at the expense of investment, and we continue to drive greater productivity and efficiency across our operations.

We are investing behind our brands and executing revenue growth management strategies that help us better serve consumers across brands, packages, price points, and occasions. Putting it all together, third quarter comparable earnings per share of 91 cents reflected an 11% increase, including a two-point benefit from currency tailwinds. Year to date, free cash flow was $11.4 billion, an increase versus the prior year. Our balance sheet remains strong with our net debt leverage of 1.3 times EBITDA, which is below our target range of two to two and a half times.

We're continuing to judiciously manage our balance sheet as we await a court decision related to our ongoing dispute with the IRS. We are confident in our long-term free cash flow generation and the optionality it gives us as we move through the fourth quarter and into 2027. Our priorities remain the same, invest in our business, and return capital to share owners. Now, let me turn to guidance for full year 2026. We now expect organic revenue growth of at least 5%, which includes the impact of slight de-stocking and six fewer days in the fourth quarter.

Our commodity exposure overall remains manageable. However, we are seeing elevated cost pressures in aggregate driven by increased logistics and transportation costs. We now expect comparable currency neutral earnings per share growth, excluding acquisitions and divestitures of at least 9%. Devestitures are now expected to be an approximate 2% headwind to comparable net revenues, and we continue to expect an approximate 1% headwind to comparable earnings per share. This assumes the pending sale of Coca-Cola beverages Africa, clauses during the fourth quarter, subject to regulatory approvals.

Based on current rates and our hedge positions, we continue to expect an approximate 1-point currency tailwind to comparable net revenues and continue to expect an approximate 3-point currency tailwind to comparable earnings per share for full year 2026. Underlying effective tax rate for 2026 is now expected to be 19.7%. This reflects certain benefits in the current year that we do not expect to repeat going forward. All in, we now expect comparable earnings per share growth of at least 11% versus $3 in 2025.

Finally, we now expect to generate at least $13 billion of free cash flow in 2026. There are some considerations to keep in mind for the rest of the year. As a reminder, the fourth quarter will have six fewer days versus the prior year. We also now expect slight de-stocking in the fourth quarter, therefore we expect concentrate shipments to slightly trail unit case volume for the full year. For the fourth quarter, following the anticipated re-franchising of CCBA, we expect a 4-point headwind to comparable net revenues, a 3-point headwind to comparable earnings per share and slight margin benefits.

While it is too early to provide specific guidance for 2027, we do want to share some considerations based on what we know today. Overall, we expect consumer behavior to remain largely unchanged, which value being a very important consideration across all markets and income groups. The investments we've made today and the actions we've taken across our business position us to enter 2027 ready to execute. With respect to commodities, we continue to manage various cost pressures and look for ways to navigate the environment through productivity initiatives with our cross enterprise procurement group and using all of our revenue growth management levers.

At the same time, we'll continue to invest behind our brands, maintain disciplined cost management and focus on expanding margins over time. With the anticipated re-franchising of CCBA, we expect an 8-point headwind to comparable net revenues and a 2-point headwind to comparable earnings per share, but expect positive impacts to both our margins and the return profile of our business. Additionally, as previously announced, we are exploring a potential IPO of our bottling operations in India and will provide further updates as appropriate.

Regarding currency, if we assume current rates and our hedge positions, there would be a slight headwind to both comparable net revenues and comparable earnings per share for full year 2027. Many factors could impact both our currency outlook and broader business outlook between now and when we expect to provide guidance in February. To summarize, we are pleased with our third quarter performance. Our proven all-weather strategy continues to be our best ally to sustain our momentum for the rest of the year and into 2027.

Across our many markets and operating environments, our people continue to rise to the occasion, and we are grateful for their dedication every day. With that operator, we are ready to take questions. Ladies and gentlemen, to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, press star 1 again. Our first question comes from Darra Mohsenian from Morgan Stanley. Please go ahead and take your line is open. I wanted to touch on those events.

It would be helpful just what you learn from the summer events with the World Cup and even America's 250, how you're using technology investments to enable the system to better activate those events. But also really how you're working to hold on to incremental customers or greater demand from the existing customers during the events as you look across your brand portfolio and then be just maybe taking it broader as you look out to 2027 across the business globally.

Can you just discuss the challenge you see from cycling some of these tougher comparisons on the unit case side and how you think about the system's ability to continue to sustain volume growth going forward. Thanks. Thank you Darra, it's great to hear from you. Look, first of all, we're really excited with the results that we had on Q3 because it shows sustained and steady momentum that we had from the first half was important to continue that to the Q3.

You see in the numbers that we're getting more for more markets and more for more categories. And that showed up also and how we continue to gain value share, you know, globally. So it's 22 consecutive quarters of values again so we're feeling that we get the right momentum this strategy is working in an environment that continues to be better dynamic to your point about the World Cup. And specifically here in the US also the 250 campaign.

Those were great moments for us to pressure test our end to end activation going from the brand strategy, the innovations that we brought to life, the revenue growth management and execution coming in a very integrated way. We showed up really well as a system, not only North America, but globally, and we leverage that into Q3, and we're going to continue to leverage using Q4 and 2027 parts of the tech data and AI that we use during the World Cup.

You see on campaigns like Fanta Halloween that you can see the connected packaging really with great content and going all the way down to a transaction, which brings that ability for us to start pressure test, the opportunity to drive more engagement to transactions moving forward so the plans continue to be addressed market by market in the environment that continues to be very dynamic. And we feel good about where we are right now for Q3 and building the plans for 2027 as well to the point that you asked as well on what we're going to be bringing in for next year.

I always start with the energy that we see with our customers when they see our plans here to date and what we are laying up for the rest of the year and next year. Yes, we're cycling here today, here to date high volume here. But we earned that right with getting closer to the consumer and building the flexibility on our plans to develop the right foundations to get where we are. We believe in our momentum we believe in the plans, a lot still to happen until we get to next year, but we believe that we have everything that is under our control to guarantee that we continue to deliver on our long term algorithm.

Our next question comes from Chris Kerry from Wells Fargo securities, please go ahead your line is open. Hi, good morning everyone. Good morning, Chris. You know, a key strategy coming into the year was to drive more balanced top line across volume and price mix. Certainly, as noted with their question, you're on track for an exceptional year from a volume delivery standpoint. And you'll have to compare against that going to next year as you just noted. But one of the things that I wanted to drill into a bit was the price mix side, which, you know, at, if it turns out to be about 2% this year will see, you know, could prove one of the lower costs of the price mix years in about a decade.

So the question is really as you as you go into 2027. How do you think the price mix strategy involves so as to continue to deliver on the commitment that you have around your top line algorithm. Given that, can you perhaps provide a bit of perspective on how much control you have over that price mix line is clearly geographic mix there's category mix you have pricing investments this year. And, and I think underlying the question is just your ability to have control over the complexion of your top line as opposed to there are just these headwinds coming at the price mix line that are perhaps out of your control as you go into next year.

So, I love any context on that. Thanks. Chris, topic close to our hearts here. The two year volume keg or it's, it's still around the 2% mark, maybe slightly above that given the last two quarters so we still feel good about the objective to deliver a balanced revenue algorithm, you know, two to three points volume two to three points price mix as we as we move forward. When you take into account some of the factors that have impacted our price mix numbers recently, there are, there are, it's worth unpacking a little bit.

You know, we mentioned in the script that we had four points of underlying pricing in the quarter. And, and that's pretty consistent with our year today's numbers, a little bit of higher inflation from a couple of the, the couple of markets in the emerging world but pretty, pretty consistent. And then it's the, I think it's the mixed piece that has had a bigger impact on on that PM or number, and maybe a little bit of a surprise to some but within that about two thirds of it.

Relate to actions that that either we have taken ourselves proactively, or reflect as some, you know, just some of the inherent mix that has taken place this year, particularly with the finished goods performance. And if you were to factor in the topo Chico situation we've had this year, and you factor in the timing of investments. And you take those out, you know, our, our price mix for the year is pretty much within the band that we would look to deliver.

Now, as we go into 2027 says it's a little early to give specifics on, on what we expect for 2027 but just look at the, at the volume keg or the volume momentum that we have been delivering were continuing to look closely across the world at pricing dynamics, going into 2027, you know inflation is one factor, but we also, we also take into account a number of other factors. You know the state of the consumer market by market, the competitive environment, customer environment, etc. We provide a little more color in that in fab.

But the, the mix piece will continue to see some geomics headwinds just given the nature of the overall portfolio globally with the developing markets will continue I believe to outgrow some of the developed markets volumetrically. But two thirds of the mix, as I said, this quarter were due to factors which we think our managers will go into next year. Our next question comes from Lauren Lieberman from Barclays, please go ahead your line is open. Great, thanks.

Good morning. I wanted to talk a little bit about reinvestment. I know, you know, the mantra is more with more and it looks like this quarter in terms of the reinvestment that went into estuary. There was a lot of more. So if you could just talk a bit about how much advertising and marketing was up, how much of this is sort of a step to stage into 27 because the growth margin and also while we're on margins underlying growth margin.

I think in the slide was up 70 basis points. So just curious how to think about that right. You've talked about mix has actually been a headwind. So is it just the absolute strength of the volumes flowing through the driving that that gross margin strength so marketing investments were the s uni dollars when and then drivers are the underlying 70 basis points and gross margin. Thanks. Yes, Lauren, thank you. Let me start with the with the gross margin numbers.

You know, we've, as you're well aware we, you know, we think of gross margin and three distinctive buckets, you know, the underlying strength of the business. The, the structural and currency were, were benefiting from some currency headwind or some currency tailwinds. This year. But the underlying, the underlying numbers just just reflects the quality of, of top line and the ongoing focus we have on managing our, our cost base. So, you know, as you go as you think about the underlying going forward, you know, implied in in our algorithm is is modest expansion and we, we believe we have the ability to sustain that as as we go forward.

The marketing investments. Yes, we have taken a number of actions in recent months to set us up for a strong start to 2027. And then we have double digit growth in above the line, and we have a number of programs that we're working in partnership with our butters on to, as I said, to be ready for, for a strong start into 2027. Go forward, that we will have a, we'll have marketing investments growing more or less in line with our with with margins, with gross margins to, you know, to get the shape of the P and L for where we wanted to be, not just for 27 but beyond.

Our next question comes from Steve powers from Deutsche Bank, please go ahead, your line is open. Yes, hey, great. Thanks, and good morning. You know, we've spoken about this before, but just the reality is that a lot of the inflationary pressures facing the system today, sit more heavily with your bottling partners. Then with the concentrate business itself, and I guess, as you in that context, as you you approach collective 2027 planning, you know, how would you characterize bottler economics today, and their stance relative to those inflationary pressures.

And any impacts that may be having on, you know, considerations around future pricing investment levels, or just the way that system economics are shared as you think about your head. Thank you. Steve, look, first of all, we always look at that from a system point of view, it, everything starts from how we're going to first grow our plans aligned with our brand plans for market. And we feel that we have great plans for 2027 and we are actually anticipating that with investment these year as we have done in previous years to to be ahead of the curve, right, to get the momentum that we have.

And the flexibility that we built during the year to continue to invest on those plans regarding cost, which is one input into into the plan the environment remains very fluid. And commodities have been manageable for us at this time. Looking forward, we are working with the bottles right now through all the levels that we have as a system, one of them, it's our cross enterprise procurement group that we procure the number, the big commodities that we have for the year, together, and with that we bring also other levers into the equation, which is productivity cost management and our RGM to ensure that we have an operational environment that can be totally linked with our growth plans for next year.

And more to come as we learn during the next few months. But so far, it has been something that we believe it's going to be manageable on the overall scheme of things. Our next question comes from Philippo Falorni from city, please go ahead, your line is open. Hi, good morning, everyone. I wanted to go back to the North America business. Enrique, you mentioned that there were a few impacts on the volume being flat in the quarter time and go forth on July.

And some changes in the finished business. Can you expand a little bit more on that? And given we see solid consumption data and truck channels, are you expecting some improvement as we move forward. And then on price mix. I know you were cycling a difficult company in Topo Chico and fair life. How should we think about that, particularly that mix component as we as we look ahead on the price mix in North America. Thank you. Thank you.

So enough America. Let me step back and talk a little bit about the quarter and the year so far. We continue to see solid performance. In North America, we grew this quarter right revenue, we gained value share, we expanded margins, we got pricing in line with inflation that was really important that shows that the brands have the equity and the right to take price. And we kept investing in our brands, the impact that you're mentioning on the price mix was definitely impacted by the cycling of a very strong prior year on some of the premium brands that were generated through our finished goods, including Topo Chico.

One of them that you know, and body armor as well. So with that into the equation if you take that out, actually, and you take the impact of the July 4 that fell into the second quarter and we mentioned that before, we would see volume growth. So we see the momentum is still there. Now, in terms of the strength of our strategy and our brand you also feel confident that we have pretty good momentum, especially with trademark Coca-Cola that grew again this quarter.

Diet Coke and Coca-Cola zero, especially Coca-Cola zero growing double digit again, and fair life continues to do really well power rate. Also grew, and, and we have other areas that we have work to do, which is always good for us also to, I'm still here our motto of being constructed with this content that areas for us to work on. One of them is to do a better performance on sprite and body armor and our supply chain going into the next year.

So, all in all, we, we believe that we have the good momentum as a system and the right plans to navigate through the rest of the year and play it to itself. And I would just add, Felipe, if you're looking at the overall volume number, we, we, you know, the restaurant industry continues to, to be under pressure. And so when you're looking at the, at the scanner date, etc. I think you're seeing a stronger business at home versus away from home, largely driven by consumer pressures that we've talked about in the past.

And while our own business continues to have a lot of momentum across those channel that I think the underlying pressure across the consumer landscape is there, and I think it will be there for the rest of the year as we go into 27. Our next question comes from Andrea to share from JP Morgan, please go ahead your line is open. Hi, good morning everyone. So I have a question on exporting the theme of affordability. And, of course, among all the CPGs, you have significantly significant brand equity.

How should we be thinking about the list pricing and your bottling partners have historically been able to take pricing in the low single digits. If we put the geo mix, the geographical mix aside, do you think you should can count on our GM capabilities, and would you allow some selective pricing while protecting the entry price points. And then I clarification on the quarter, you always raised guidance, and you have the six year selling days, john you called out, also the, the talking comments but you have also had that in the third quarter.

So I was ahead of the third quarter. So I was hoping to think about like how it's a wide range of course, minimum five allows you to to have a wide range there. So I was thinking, you know, how demand and this talking and how we should be thinking how many points of headwind that could be. Thank you. So I'll start off the question on especially on our strategy on the four billion john can chime in on the outlook.

So, look, the four ability, you need to to look at these on the full context of revenue growth management. One of the legs of how we get closer to the consumer. These days, the criminalization is equally important so we always look at both. What we are seeing across the world and this is something that especially in my travel, the last quarter going dividing conquering here with john going different parts of the world. We had seen that value continues to be something that cuts every market and every consumer that we see all over the world, and that means different things for the consumer, which then touches into a four billion periodization in a in a way that we capitalize that in our plans and make elaborate on that on the affordability.

What we always look at is, do we have the right value, the relevance of that brand, and the worth choosing option for the consumer to keep them in the franchise. The answer is yes, we continue to to push forward and get more coverage of that packaging format if not, we adapt our plans and put it that in place. A good example of that is what we did in Africa. We are tracking from what we've learned in India, where they had one package, which is a single serve P T package with plasma technology that can allow you to go in longer routes and still keep the shelf life high.

Now we imported that into Africa and that plays on affordability on both of these markets, and it's going to continue to be very important moving forward because the consumer loves the brands but needs to be closer to. What they can afford on the criminalization side that equally important in this equation. We play at the category mix. There are few brands that continue to help us with that enough America got core power. You got smart water, and you got in other parts of the world, also different packaging sizes that allows us to play with the convenience, and that value equation for the consumer also works really well.

In the overall RGM strategy, we end up delivering what we need so it goes intended affordability and a criminalization, and that's what you're going to see not only the rest of the year, but building into 2027. John, if you want to add them. Yeah, Andrea the the whole, you know, marriage of unit cases with with our concentration happens this year has proven to be. Maybe the more challenging year that I since I've been around for a few reasons you've got the, you know, this, the first quarter and the fourth quarter, you know the plus six the minus six days, we have, as we've seen it since the start of the year around the world a an external environment that's quite unpredictable.

And I think our system has a tendency to want to get ahead of that. And so the, the expectation that we highlighted in guidance reflects the best information we have at the moment. There's a couple of our segments where we do expect to see some de stocking on the back of what has happened here today. But we've still got some distance ago in the year and we'll, you know, we're keeping, we're keeping a close eye on this area.

And, you know, as we, you know, it's six less days. It's, it's difficult to, to predict with accuracy just the cutoffs as we, as we move towards the end of the year so that's the best information we have at the moment. And, and, and based on, on all the inputs we get from, from around the world and if there's changes to the quarter, we'll certainly have the opportunity to, to update closer to the end of the year.

Our next question comes from Robert on scene from ever core please go ahead your line is open. Great. Thank you very much. You had a pretty nice increase in your guidance for free cash flow. Your leverage is down, you know, to, I think 1.3 you said. So it's wondering if you could talk about, you know, the drivers on the free cash flow and then you mentioned in the opening comments about increased auctionality from your strong free cash flow and balance sheet.

Going into 27. So maybe if you could elaborate on that and then put these comments in the context of potential outcomes from the IRS case. Thank you. Thank you. Let me, let me take those one by one so free cash flow year to date. Three primary drivers. The first and the most important one is underlying business performance has been has been strong. We've, we continue to make progress on, on working capital initiatives, our cash conversion cycle.

If I get it correct is as good as it's been for for many years at the moment. And then we have some, we have some, some timing that we'll that'll play its way through the rest of the year. For example, our CapEx year today it is a little behind what you would typically expect and we've got, we expect that to, to make up in the in the fourth quarter so key message though is free cash flow is, is strong and we've, we've, we've got momentum as we close out the year into next year.

We, we've used the word optionality very deliberately over the last number of months because we are in a situation where we're anticipating a decision in the coming months in the IRS case. And at the same time, we, we, we continue to think ahead as to the various outcomes that that decision could generate and feel good where we are with respect to being able to manage a best and worst case scenario so the name of the game has really been to strengthen the balance sheet.

I believe our balance sheet today is as in as good a shape as it's been for for many years. And to be ready in 27 to deliver on the priorities that we outlined in the in the script, we'll continue to invest in the business primarily in the short term organically. We, we remain open to other opportunities. We don't see them in the immediate horizon. And, and as always we're, we're here to return capital to our share owners.

And again, in the at the moment that's primarily through our, our dividend. So, you know, think of, think of the work today has been focused on strengthening the balance sheet, being ready for a decision and the outcome of that decision to, to do the right thing for the, for the business and, and to be ready for for whatever that that that might mean in 27 and 28. Our next question comes from Peter Grom from UBS please go ahead your line is open.

Great. Thank you. Good morning everyone. So, I wanted to follow up on the lead those question on North America. You touched on some of the timing dynamics, but you also mentioned that you saw sequential improvement and volume performance each month throughout the quarter. So, I was wondering if you could elaborate on that and have you seen that momentum continue into the fourth quarter. And then John touched on the at home versus away from public component. Are you curious if you've seen, do you see any notable shifts in that dynamic years for growth.

Thanks. So on the, on the volume, yes, we saw that improvement month or month on, on the quarter and the biggest in impact in that was really what we said before was the July 4 impact. You know, that fell into the Q two. So we knew that would start the first month, you know, of the quarter lagging behind it. What we have seen in the mentioned when you look at the overall flat volume for the quarter.

We're cycling a, a good performance up to particular last year as well, which has also an impact on that. And we just got back with the particular in Texas. So it's great news. I think to everybody and to the, to the consumers that have been waiting for for too long. It's the first step back. And we will sequence that moving into 2027. Right. So that volume will start to to come back. Definitely, it's something that we're looking forward to.

The other ones. Really the momentum that we have we grew Coca Cola trademark like we mentioned really good growth on the zero variants as well. For life continues to grow power rate grew as well fresca Mr P. has been another very good surprised still small and the overall volume to impact the overall volume for North America. But we think the innovation pipeline it's something that we're very excited with that so on all what we see is, we have the momentum, we got the right plans in place.

We have also going into the Q for which is important to reinforce the biggest quarter that we had in North America last year. And we have six last day so you need to, to compose that with the equation but when you look into a daily average sales we, we have the momentum that was built over the quarter. Our next question comes from Peter Galbo from Bank of America, please go ahead. Your line is open. Hey, good morning.

Thanks for taking the question. John, I was just hoping to get maybe a clarification and then the question is tied to that. But on the currency effects guidance for 2027. I just wanted to understand if that was updated through through yesterday. And the context of it being obviously there's been some pretty big currency movements even in the last 48 hours and some big important markets for you. I know you copy added your commentary that there's, you know, many factors that could impact currency between now and in February but just want to understand kind of in real time how you're thinking about that.

Given some of the moves that we've had and whether that's embedded in the, you know, in the slight headwind kind of outlook that you have for for 27 at this point. Thanks very much. Yeah, great. Great question. And the short answer is no. We need to, we need to take into account what's, you know, what's unfolded over the last 24 to 48 hours. And, you know, we'll continue to suggest just being quite as you, as you've seen throughout the year, there's been quite a lot of movement.

So it's, it's one we're watching, watching very carefully. And, you know, if there's a, if there's sufficient movement over the course of the next number of weeks, we'll certainly would want to provide an update on that. And, you know, as I say, there's, there's been quite a lot of swings throughout the course of this year. And there's one to, is one to keep watch on, but the, the, the numbers that I talked about in the, in the script, do not reflect the movement in the real particularly over the last day or two.

Our next question comes from Camille Gajra Walla from Jeffries, please go ahead your line is open. Hey guys, I guess, first, I'm sort of a labor the point but just for purposes of clarity. On the de stocking is the full year intended to be sort of below in line or above in terms of concentrate versus shipments and then maybe if there are particular regions where the de stocking is expected to occur, I think that'd be useful.

And then on gross margin you had a, you know, such a strong concentrate shipment number. Can you give some context of leverage on the GM and maybe leverage on the SGA line as well and how it sort of works top to bottom because you probably won't have this spread going forward. And so, to what degree can we, can you help us forecast what margins would look like in the context of maybe better aligned unit case volume and gross margins.

Sure, on the, on the de stocking. Yeah, as I, as I said, in the previous, the previous question on this topic. It's a, it's a somewhat of an anomalous year in trying to predict exactly right now if you ask me, we expect shipments to run slightly behind volumes for the full year. That's, that's our, that's our in going assumption that's, that's linked to the guidance that we've provided. And as I've said, you know, there's a lot happening around the world.

And there's every possibility that that could deviate but that's the in going assumption, as we, as we head into the rest of the year. Margin question, the, if I, if I line up, if I line up cases shipments, everything else. We, we, we expect to have margin expansion for the full year. And, you know, again, the, the, the, the exact, the exact amounts that we, that we're anticipating. It's really on trend with what we've seen thus far this year.

Our next question comes from Kevin Grundy from PMB Berba. Please go ahead and line is open. Thanks, thanks. Good morning, everyone, and congrats on another strong quarter. We mentioned the brand twice, but, but, but haven't spent a lot of time on the strategy and that's, and that's fair life, which has been a fantastic success story. Additional capacity came on this year. So we've seen a nice re acceleration and the standard data. Can so a few questions related to the brand one, can you talk about updated plans and how you defining success to where you see the brand sourcing occasions at the moment and then three, maybe an update on the opportunity.

For the brand outside of the US, understanding the supply chain complexities. So thank you. Okay, thanks Kevin. Look, we, we love the brand is no fantastic performance and we pleased to see number one, not the quarter of strong and double digit growth across all the variants right so fair life. The nutrition plan and also on core power, and that has been really encouraging you remember that at the beginning of the year, we're still lagging behind, you know, the demand and supply with the ramp up of Webster.

So we're getting better and better at that with the ramp up of the plant, and to the extent that we were able to launch also a new flavor for nutrition plan, the vanilla flavor, which is doing really well as well. First, already that we're going to have in the pipeline going to 2027, the banana flavor, which is great right back. We have a lot of fans for that flavor. And it's something that we always wanted to start expanding so good news is, we're getting the product back on the shelf to keep up the demand and the pipeline looks strong, going to 2027 when you look at.

Overall, investment ahead of United States and Canada that we have today, we're still working around it. The brand has tremendous equity value, and that it's going to be embedded into our longer range plans. So, more to come on that. But the number one priority for us right now is to keep up with the demand in these markets because there's still plenty of growth opportunity for us, and it's important component of our growth moving forward. Our last question today comes from Bonnie Herzog from Goldman Sachs please go ahead your line is open.

Bonnie, maybe a mute. So, no money. So, I think we got to the end then. Okay, great. Look, to close us out. Our performance reflects the hard work of our teams and partners around the world. We continue to stay close to consumers and doing a little bit better every day and we are very pleased with that. We are confident in our ability to deliver our 2026 and long term objectives. And thank you for your interest for your investment in our company and for joining us this morning.

Thank you so much. And gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

Where this company stands

I read earnings calls because the companies I own are in them, and I publish the transcripts because the call itself beats the headline about the call. Whether The Coca-Cola Company is one of the ten in the portfolio I run is a question for the Top 10: ten names a month, each with the case for owning it and the risks that would prove it wrong. Its page says what the list is, how to read it and how to get it.