TheThe CocaCoca--ColaCola CompanyCompany Latin America Investors Meeting – May 2004 ContentsContents
-- IntroductionIntroduction toto CocaCoca--ColaCola LatinLatin AmericaAmerica
-- 20032003 PerformancePerformance ReviewReview
-- 20042004 HighlightsHighlights
-- SummarySummary
2 HowHow AreAre WeWe OrganizedOrganized
Latin Center (Central America & Caribbean, Mexico Venezuela, Colombia & Ecuador) > 2.2 Billion UC > 680 MMUC Martin Machinandiarena Dan Sayre
Brazil South Latin (Argentina, Chile, Peru, Bolivia, >1 Billion UC Uruguay & Paraguay) Brian Smith > 760 MMUC
James Quincey
(Volume Figures – 2003) 3 LatinLatin AmericaAmerica-- 4141 CountriesCountries,, 100+100+ KOKO BrandsBrands
Honduras Mexico Per Caps- Total Products 184 527 % NARTD share % 23.9 % 30.5 $ 958 $ GDP Per Cap $ 5,773 Colombia 73 Guatemala % 11.5 107 $ 1,767 % 19.7 Venezuela $ 2,042 139 % 32.5 Ecuador $ 3,139 162 Brazil % 36.4 $ 2,030 135 % 18.9 Peru $ 2,539 105 % 35.5 $ 2,200 Argentina Chile 220 350 % 23.2 % 53.6 $ 3,323 $ 4,723 Information Dec ’03 GDP Per Cap Source: March ’04, Latin America Monitor 4 NARTD Share and Per-capita consumption source: Inform KO With A Great CSD’s Business - The Largest Beverage Category
2003 Latin America NARTD Industry KO Share of Category
Sport Drinks Tea 22% Juices 66 MMUC Fruit Still 264 MMUC Tea Drinks 23 MMUC 360 MMUC Sport Drinks 9%
Juices 1% Packaged Water SS Fruit Still 8% 2.3 Billion UC Drinks
Packaged 5% CSD's Water SS 7.3 Billion UC CSD's 59%
0% 50% 100%
Source: Canadean ‘03 5 Lead KO System With A Clear Understanding Of Environment Dynamics
20032003
• Economic slowdown • Government holding socioeconomic Mexico structural changes • GDP 1.3%
Restricted • International confidence Economic Brazil • Consumer purchasing power still constrained Conditions • GDP <1% • 2 month strike Venezuela • Unstable conditions • GDP (-11%)
• Peruvian Family • Operations in Peru, Venezuela, Ecuador, Mexico • Entering in Costa Rica
Evolving • Moving closer to PDBs Competition • Shifting strategies to compete more aggressively in Pricing
Other • Competitor’s efforts to gain leadership in Categories Non-CSD’s segments 6 Keeping A Solid Market Position
PBG • ’03 volume +1% Kola Real Reducing prices • Reducing Share of CSD’s in Venezuela -0.8 pp Kola Real • Share of CSD’s Below 3% and stable Gallito • 0.4% Share of CSD’s & stable Tubainas • Not growing • Reducing Share of CSD’s -1.4 points vs Jan ‘03
Kola Real • Reducing share of CSD’s in Ecuador -2.0 pp vs Jan ’03 PDB’s • Reducing Share of CSD’s in • Stable in Peru Chile -1.3 pp vs Jan ’03 • Stable in Argentina
Information Jan ’04 Source: Nielsen / TRAC Worldwide Ltd (Peru & Ecuador) / Datos I.R.I. (Venezuela) 7 And Continue Producing Solid Results
• Maintained share of NARTD across LA SBU
• Build a New Business Model in Brazil
• Emerge stronger after crisis in Argentina & Venezuela
• 4% volume growth in 2003
• Launched a new Pan-Latin America platform for Coca-Cola - “De Verdad” advertising drove efficiency / effectiveness - Common platforms for main programs
• Continue successful innovation on CSD’s - Vanilla Coke, Coca-Cola Light with Lemon - Lift Manzana Verde, Fresca Rosa, Fanta Free, Kuat Naranja, Nativa, etc.
8 MexicoMexico
9 Consistent Performance
Volume
7% CAGR • Volume & Profit growth
• Healthy Coca-Cola Brand with stable indicators MMUC KO gap vs Nearest Competitor - Daily Consumers 7 : 1 - Favorite brand 5 : 1 1999 2000 2001 2002 2003 - Positive purchase intent 2 : 1 - Consumer base 3 : 1
Operating Income Currency Neutral 13% CAGR* • Successful innovation in CSD’s - Vanilla Coke, Lift Green Apple, Fresca Rosada MM $
• Leadership in Water Business - Acquisition of Risco Brand /100% conversion to Ciel 1999 2000 2001 2002 2003 - Reached Category Leadership in •Reported Operating Income grew by 9%, plus a 4% personal packs Negative Currency Impact, resulting in Currency Neutral Operating Income of 13%. 10 BrazilBrazil
11 AA CoupleCouple OfOf YearsYears Ago…Ago…
Drastic Hyperinflation fluctuations in / devaluation purchasing bursts power Consumer, Trade, Competitive Transformations Heavy informality, significant tax evasion
Unstable political environment, volatile rules
12 Our System Confronted Tough Conditions, Developing an Operating Mentality Anchored in ...
1998-2002 KO Volume & Rev/uc Indexes, Share Trends
114 120 100 Volume Index Protecting Volume – 100 Share / Focus on 80 60 48.5 50.4 pricing 100 Share of Sales 40 69 20 Rev/uc Index
0 1998 1999 2000 2001 2002
2002
Few Package Options
2L PET 2/3 of volume Mix 13 TheThe DynamicsDynamics OfOf TheThe OperatingOperating MentalityMentality CreatedCreated AA ViciousVicious Circle…Circle…
ChronicChronic SystemSystem DisalignmentDisalignment
CapabilityCapability CuttingCutting NoNo ProfitProfit // ROICROIC MentalityMentality Low System Profitability
RestrictedRestricted Price-DrivenPrice-Driven PortfolioPortfolio && ConsumerConsumer ExecutionExecution
RestrictedRestricted DifferentiationDifferentiation
14 InIn 2003,2003, CreatedCreated AA NewNew BusinessBusiness ModelModel
Have taken significant steps
• Agreed to long-term strategy with AlignedAligned && our bottling partners HealthyHealthy BottlersBottlers
• Worked in close partnership with BrandsBrands ProfoundlyProfoundly bottlers to offer new packages and Sustainable AnchoredAnchored withwith ValueValue DrivenDriven tailor customer options to drive Profitable Growth revenue & profit growth LoyalLoyal CustomerCustomer ConsumersConsumers RelationshipsRelationships AcrossAcross KeyKey SegmentsSegments • KO organization restructured & realigned with strategic priorities SegmentedSegmented && DifferentiatedDifferentiated BPPCBPPC Arch.Arch. • Recalibrated prices for value creation Organizational Capabilities
• Rebuilt Execution Capabilities
15 GeneratingGenerating PositivePositive ResultsResults
+2.2 pp
Coca-Cola brand growing share of volume System profit increasing significantly
2002 2003 +50%
+2.4 pp
2002 2003 And also share of value
2002 2003 16 ArgentinaArgentina
17 From Strong Economic Expansion to Deflationary Recession - To Abrupt Implosion
21% Decline in GDP since it’s peak Post Default & Chaotic 295 Devaluation 285
275
265 Consumers resetting values/relationships & 255 +7% Annually looking for security 245 Real GDP - GDP Real AR$Bn
235 -21%
225 I-02 I-99 II-01 II-98 III-00 III-97 IV-99 IV-96
Real GDP Source: INDEC (Instituto Nacional de Estadística y Censo) 18 Cohesive plan to Emerge Stronger; organization restructured to drive it
Emerge Stronger
- Protect consumer base with focus on Coke, while strengthening relationship with our brands
- Ensure System financial & operational viability
- Reset Customer relationships & gain execution advantage
- Retain solid foundations in Quality, Government Affairs & Community Relationships
19 Historic opportunity to strengthen Coca-Cola’s connections with consumers
understandingCommitted to to define deep relevantconsumer actions
- In real time - Coke plan rebuilt aligning tone,
Continuous Tracking of Consumer style, and mechanics to new • Perception Social Environment Identity Continuous • • Continuous Tracking of Consumer Crisis Engagementreality Tracking of Social Moods & Values Environment “ Refreshing the mood “ Targeted Deep Dives & Experiential Research Universal/Teen “ Connecting Coke leadership with Argentine dreams “
New Couple/Family Xmas “ Reinforce loyalty thru value with moms and newly unemployed dads” Xmas Promo Affordable Packages “ Provide access to the new poor to KO beverages “ RefillablePackages “It’s what’s inside that matters”
20 OurOur EmergeEmerge StrongerStronger StrategyStrategy WorkedWorked
• 13% volume growth vs +5% in NARTD Industry +7.6% in GDP
• 19% growth in Coca-Cola / 15% Rest of CSDs
• Per Capita Consumption +24 vs PY
• Improving Coca-Cola brand indicators - Favorite Brand +1.3 vs PY - Worth what it costs +1.7 vs PY
21 VenezuelaVenezuela
22 KO System Was Strained By A Deteriorating Socio-Economic Situation
Socio-economic Situation
Consumer - 2 month general strike in Dec ’02 & Jan ‘03 …dramatically deteriorated purchasing power; changing habits to “make ends meet” - GDP declined -11% in ’03; unemployment at 24%
- Exchange control during all Trade year …Adjusting inventories, focusing in high rotation items, speculating with non-controlled - Inflation accelerating at 27% price items
- Extreme political uncertainty
23 Clear Roadmap to Drive Profit Growth
- Strengthen Coca-Cola Connections with Venezuelans
- Lead Category Package & Price Architectures
- Strengthen In-Market Presence
- Accelerated system costs reductions / efficiency improvements
... Always Maintaining high level of flexibility to cope with uncertainty
24 We Obtained Exceptional Results With Coca-Cola Brand Despite a Very Challenging Context
- Volume Increase >10% vs. 2002
- Share of market: -Coca-Cola market share +4.3 pp (Dec’03 vs. Nov’02)
- Consumer Indicators (Dec’03): Gap vs. Nearest Competitor • Favorite brand: 2 : 1 • Consumer base: 1.3 : 1 • Daily Drinkers: 2 : 1
- Positive System Profit Swing
25 20042004
26 Improvement in Economic Conditions …
Total LA GDP from 1.5% in ’03 to 3.0% in ‘04
Mexico - On the road to recovery - Potential for a more solid growth
Brazil - Strengthening economic condition - Growing internal consumption - Structural reforms (taxes, energy)
Argentina - Some positive signs, but some uncertainty remains
Other Countries: the usual mixed picture Stable (Chile) Modest (Peru, CA&C) Volatile (Venezuela, Dominican Republic) Chaotic (Haiti) 27 Managing Our Portfolio
Latin Center Mexico • Accelerate growth in Key Markets, capitalizing on the KOF / PB • Main volume & profit driver integration • Will take all reasonable & prudent measures to sustain its momentum
Brazil South Latin
• Turn-around opportunity • Continue to remain close to consumer to with significant growth further differentiate & enhance brand potential health • Accelerating our new model approach Fully capture current growth opportunities 28 CSD’s Is Our Top Priority
• Coca-Cola will continue to be our growth engine
• Continuously adapting brand / package / price / channel architectures
• Deepening relationship with consumers – programs that respond to their passions and needs
• Revenue enhancing initiatives with line extensions
• Selective flavor-package expansions
29 Our 23.3% Share In NARTD Shows Ample Potential, Yet CSD’s Is Our Main Opportunity
2003 Latin America NARTD
KO Others
23 Tea Millions Unit Cases Millions Unit Cases Sport 66 Drinks
Packaged 2,339 Juices 264 Water SS 7,267
Fruit Still CSD's Drinks 358
0 100 200 300 400 0 1000 2000 3000 4000 5000 6000 7000 MMUC MMUC
Source: Canadean ‘03 30 Other Beverages Have Started To Play An Important Role in Our Portfolio
• Developing new “Go – to market” approaches that complement existing skills and know how
• Focus in areas where a leading and profitable position can be achieved
• Fully exploit global brands potential, i.e. Powerade & Nestea
• Leadership position in the large and rapidly growing water market, with - Strong local brands such as Ciel - Rapid expansion of Dasani in multiple countries
31 Strong Emphasis in Customer Programs & Profitability
• Support the development of all customers and channels
Customers • Specific programs for each channel
• Dedicated packages and price points
• Further develop revenue growth management capabilities Grow our system • Direct resources to volume & profit driving profitability activities • Keep discipline on returns and expense ratios • Continue to generate efficiencies in all areas
32 SolidSolid,, ConsistentConsistent ContributionContribution toto KOKO ResultsResults
Volume Operating Income (MMUC) ($MM Currency Neutral) 4,729 1,313 * +4% CAGR 4,086 +12% CAGR
829
1999 2003 1999 2003
* 2003 currency neutral operating income excludes the impact of $24 million stock option expenses, $20 million of charges, and $299 million currency since 1999. 33 InIn SummarySummary
• Strong Management Team and Bottling Partners - Understand market - Positioned for winning - Orientation to effectiveness & efficiencies
• Great CSD’s Base Infrastructure 4.34.3 BillionBillion UCUC
• Building Non-Carbs Business
• Solid, Consistent Contribution To KO Results
34