2018 Business & Sustainability Report - Coca-Cola IE
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CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix Letter from James Quincey 3 SUSTAINABLE AGRICULTURE 30 Letter from Our Board of Directors 5 Shared Opportunity: Agriculture Sustainable Growth for Across the globe and around the clock, OUR COMPANY India’s Smallholder Farmers and Our Portfolio 32 At A Glance 6 we never stop working to give people The Coca-Cola System 7 the drinks they want and to improve Total Beverage Portfolio 8 CARING FOR PEOPLE the world we all share. Business Transformation Timeline 9 AND COMMUNITIES 33 Human Rights 34 Selected Financial Data 10 Women’s Economic We turn our passion for consumers Progress Against Our Sustainability Goals 11 Empowerment 35 into the brands people love, and create Our System in Context 12 Workplace 36 Diversity & Inclusion 37 shared opportunity through growth. Giving Back 38 PRIORITY ISSUES Our Approach to Managing Our Priorities 13 PARTNERSHIPS 39 That’s the essence of Priority Issues: Stakeholder Engagement 40 Risks & Opportunities 15 Sustainable our transformation. Development Goals 41 PORTFOLIO TRANSFORMATION 17 Providing Choice to Consumers 18 A GLOBAL PERSPECTIVE ON CLIMATE CHANGE 43 Reducing Calories— Expanding Portfolio 19 REGIONAL HIGHLIGHTS 46 Shared Opportunity: Sugar Reduction ABOUT THIS REPORT 51 Refreshingly Less Sugar 20 DATA APPENDIX 52 WORLD WITHOUT WASTE 21 ASSURANCE STATEMENT 67 Shared Opportunity: Waste PRAISE: Transforming Waste GLOBAL REPORTING into Value in Indonesia 25 INITIATIVE INDEX 68 WATER LEADERSHIP 26 Shared Opportunity: Water Replenishing Cape Town in a Time of Drought 29 The Coca‑Cola Company 2018 Business & Sustainability Report 2
CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix Letter from Letter from Our James Quincey Board of Directors On May 8, 1886, a store Lifting, shifting and scaling brands around the world: in Atlanta served the first Coca-Cola. • We used the strength of our distribution system to help launch Today, that now-famous drink forms brands like Fuze Tea, smartwater the foundation for a total beverage and AdeS across multiple markets company that offers more than 500 with increased speed and agility. brands and 4,300 products worldwide. • Worldwide, we expanded 165 products into additional markets While many brands have come and in 2018. gone during the past 133 years, our success is based in part on our history of investing in the success Making strategic investments and sustainability of the communities for the future: we call home, from our hometown of Atlanta to more than 200 countries • We strengthened and expanded and territories where you can find our our portfolio through mergers products today. and acquisitions, including Costa Limited, which closed in In 2018, we continued to transform our early 2019 and gives us a global portfolio and, in turn, our company. coffee platform. We delivered strong, geographically • We invested in a strategic balanced revenue growth and value partnership with the premium share gains in line with our strategy. sports hydration brand There are many highlights, including: BODYARMOR, one of the fastest- growing beverage trademarks in the U.S. More innovation, including options with less sugar: Investing in the Coca-Cola system • Globally, sparkling soft drink advantage: volume was up 2% in 2018, fueled by double-digit volume growth of • We are aligned with our bottling Coca-Cola Zero Sugar, along with partners to capture growth strong performance from new, low- opportunities. Since 2010, we’ve and no-calorie versions of sparkling invested—with our system—more beverages such as Sprite and Fanta. than $125 billion to strengthen Letter from • Our innovations included Coca‑Cola our platform for growth, including Plus Coffee, now available in technology, such as connected James Quincey multiple markets around the world, coolers; and in new plants and and a restage for Diet Coke in route-to-market innovation. North America that included new • For example, our bottling partner packaging, marketing and flavors. Arca Continental, the first Latin • We launched about 600 new American bottler to operate in the Chief Executive Officer products. Of those, more than 250 U.S., announced a $250 million were low- or no-sugar, and more investment in a new facility in Texas than 400 were juices, teas, waters to help us get more drinks to the and other non-sparkling beverages. market faster. The Coca‑Cola Company 2018 Business & Sustainability Report 3
CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix Letter from Letter from Our James Quincey Board of Directors Building leadership for success • establishing or joining 10 global and metrics. This is an idea born from and a growth culture: recycling/packaging partnerships; stakeholder engagement and our belief • announcing four packaging that, working together, we can create a • We announced several key technology advancements including positive impact and respond effectively I n 2018, we continued leadership appointments, including the opening of our PlantBottle TM IP to the collective challenge of the to transform our portfolio Brian Smith as president and chief for use across the industry; and UN Sustainable Development Goals. • launching bottles made from and, in turn, our company. operating officer, John Murphy as 100% recycled materials in We are pleased with our progress chief financial officer, and new group We delivered strong, and business unit presidents. multiple markets. against some of our goals, while geographically balanced • Our new Global Ventures group, recognizing that more needs to be led by Jennifer Mann, was created We replenished 155% of the water done in other areas. We will continue to revenue growth and value to ensure we connect and globally we use in our finished beverages take action and grow our business the share gains in line with scale key acquisitions, investments to communities and nature in 2018, right way—not the easy way. our strategy.” and brands such as Costa, innocent, continuing to exceed our 2020 goal. We also economically empowered more Sincerely, Dogadan and Monster. • These changes will help us continue than 865,000 women in 2018, adding to build a culture that fuels our an additional 17 countries. transformation and supports growth worldwide. We don’t just recognize our responsibility to be a part of the solution to challenges we all Creating Shared Opportunity face—we embrace it. through Growth For us, that means using our size, scale and success to create shared James Quincey While we’re proud of our business opportunity through growth—creating Chief Executive Officer results in 2018, companies like ours real opportunity for our communities, April 24, 2019 have a responsibility as leaders. As we grow, we will continue to support our customers, our employees and local economies and help create our shareowners. economic opportunity. Our commitment to doing business the Leveraging Data to Help Us Grow right way continued in 2018, as we set Our Business the Right Way out to show the world that the drinks they love can make life more enjoyable, Finally, I am a firm believer in the without harming our planet and the importance of data. In a digital and natural resources we all depend on. data-driven world, good information helps us make better decisions. In early 2018, we announced our World When we share our data, we can help Without Waste initiative with a clear, drive collective accountability for us simple goal: to help collect and recycle and others. a bottle or can for each one we sell by 2030. The company’s progress during In this year’s report—our first combined the first year included: business and sustainability report— we created a detailed Data Appendix to share more details on our progress The Coca‑Cola Company 2018 Business & Sustainability Report 4
CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix Letter from Letter from Our James Quincey Board of Directors Letter from Our Board of Directors Our company’s heritage of innovation, growth and In 2010, we launched our 5by20 program with value creation includes 133 years of creating beverage the goal of helping to empower 5 million women brands loved and shared by people around the world. entrepreneurs by the end of the year 2020. The program is considered one of the most ambitious Today, The Coca‑Cola Company is continuing to women’s economic empowerment initiatives ever build on this heritage by opening new horizons for undertaken by a commercial enterprise. By the end growth as a total beverage company. Our portfolio of 2018, we had empowered more than 3.2 million is evolving and expanding to meet the changing women across 92 countries. From the Philippines to tastes of people around the globe. Our board of South Africa to Poland and beyond, we have provided directors strongly believes in the bright future of training, mentorship and other support. our brands, our business and the positive impact we have, and should have, on local communities. Looking beyond 2020 New Horizons for Growth Sustainability will of course remain a central focus for our company and our board well beyond 2020. Our Since becoming CEO in May 2017, James Quincey longstanding belief is that our business can only be as Herbert A. Allen 4, 5, 6 has led the company in exciting new directions and strong and successful as the communities we serve. assembled a strong leadership team with extensive President, Chief Executive Officer and Director, Allen & Company Incorporated system experience, robust industry and consumer There is an inextricable connection between building knowledge, and an enhanced focus on innovation a thriving business and strengthening communities. Ronald W. Allen 1 Muhtar Kent 4 and growth. He has also continued our legacy of That is one reason we decided to publish a combined Former Chairman of the Board, Chairman of the Board, sustainability with the introduction of the global business and sustainability report this year. After all, President and Chief Executive Officer, The Coca‑Cola Company World Without Waste initiative. business and sustainability are not separate stories Aaron’s Inc. for The Coca‑Cola Company—but different facets of Robert A. Kotick 5, 6 James has demonstrated that he is the right leader the same story. Marc Bolland 1 Chief Executive Officer and Director, to serve as our next board chairman. Our world and Head of European Portfolio Operations, Activision Blizzard, Inc. our industry are changing rapidly and, as chairman As we look to our future leadership, we remain a The Blackstone Group L.P. and CEO, James will help The Coca‑Cola Company brand business. As a board and a business, we Maria Elena Lagomasino 2, 3, 6 Ana Botín 2, 5 Chief Executive Officer and continue to innovate for long-term growth and continue to believe that, just as a brand is a promise, Executive Chair, Managing Partner, WE Family Offices value creation. a great brand is a promise kept. And we think these Banco Santander, S.A. words speak to the heart of The Coca‑Cola Company Sam Nunn 2, 7 and what we’re all about. Richard M. Daley 2, 7 Co-Chairman and Former Chief Executive Accountability for Sustainability Executive Chairman, Officer, Nuclear Threat Initiative Our entire board of directors thanks you for your Tur Partners LLC; Of Counsel, The board’s Public Issues and Diversity Review interest in The Coca‑Cola Company and for joining Katten Muchin Rosenman LLP James Quincey Committee keeps us abreast of the ways broad us in our ongoing journey of innovation, growth Chief Executive Officer, societal and environmental trends may impact the and value creation. Together, let’s raise an ice-cold Christopher C. Davis 3, 5 The Coca‑Cola Company interests of shareowners and other stakeholders. Coke to the bright future ahead! Chairman, Davis Selected Advisers— Throughout the year, the committee receives detailed NY, Inc. Caroline J. Tsay 1 briefings and updates about progress against our Barry Diller 2, 4, 5, 6 Chief Executive Officer, sustainability goals. This is critical to fulfilling its Very best regards, Compute Software Inc. Chairman of the Board and responsibility to provide oversight of the company’s Senior Executive, IAC/InterActiveCorp David B. Weinberg 1, 6 sustainability commitments, actions and results. and Expedia Group, Inc. Chairman and Chief Executive Officer, Judd Enterprises, Inc. As we look back on the past decade, we’re proud Helene D. Gayle 3, 7 of the Coca-Cola system’s sustainability progress. Chief Executive Officer, 1 We particularly want to note our progress on water The Chicago Community Trust Audit Committee Muhtar Kent 2 replenishment and women’s empowerment. Committee on Directors Chairman of the Board of Directors Alexis M. Herman 3, 7 and Corporate Governance 3 In 2015, we reached our 2020 target of returning to Chair and Chief Executive Officer, Compensation Committee 4 communities and nature an equivalent amount of the New Ventures LLC Executive Committee 5 water used in our finished beverages, and we have Finance Committee 6 exceeded our goal every year since. In fact, we have Management Development Committee 7 replenished more than 1 trillion liters of water to Alexis Herman Public Issues and Diversity Director and Chair of the Public Issues Review Committee communities and nature over the past decade. and Diversity Review Committee The Coca-Cola Company 2018 Business & Sustainability Report 5
CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix At A The Coca-Cola Total Beverage Business Transformation Selected Financial Progress Against Our Our System Glance System Portfolio Timeline Data Sustainability Goals in Context At A Glance $31.9B $202.1B 500+ 4,300+ Net Operating Market Brands Products Revenues Capitalization As a total beverage company, we have been creating shared opportunity (2018, as Reported) (As of 12/31/2018) through growth since 1886. 2018 GLOBAL UNIT CASE VOLUME BY REGION 20% 27% 30% 23% North Latin Europe, Middle Asia America America East & Africa Pacific 133 YEARS OF REFRESHING GLOBAL HEADQUARTERS PRODUCTS SOLD IN 200+ CONSUMERS ATLANTA, GEORGIA COUNTRIES & TERRITORIES THE COCA-COLA SYSTEM 2018 GLOBAL UNIT CASE VOLUME BY CATEGORY CLUSTER* ~225 ~900 Bottling Partners Bottling Worldwide Plants JUICE, DAIRY AND PLANT-BASED 8% >700K ~28M SPARKLING SOFT DRINKS 70% TEA AND COFFEE 4% Employed by the Company Retail Customer WATER AND SPORTS DRINKS 18% and Bottling Partners Outlets * Excluding energy drinks cluster Regional: Global Unit Case Volume b OUR SUSTAINABLE BUSINESS PRIORITIES VOLUME GROWTH Total Company Unit Cases (in Billions) 29.3 29.6 29.2 29.2 28.2 28.6 27.7 26.7 25.5 24.4 SUGAR WORLD WITHOUT WATER COMMUNITY REDUCTION WASTE STEWARDSHIP We create value for We are expanding We believe a World We replenish water everyone connected reduced-, low- and no- Without Waste is back to nature and to our business, and sugar options across possible. communities. we economically our portfolio. empower women. 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 The Coca‑Cola Company 2018 Business & Sustainability Report 6
CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix At A The Coca-Cola Total Beverage Business Transformation Selected Financial Progress Against Our Our System Glance System Portfolio Timeline Data Sustainability Goals in Context How We Operate THE THE COCA-COLA The Coca‑Cola Company COCA-COLA COMPANY markets, manufactures CONCENTRATES INNOVATION, CREATION and sells: SYSTEM* & MARKETING •b everage concentrates and syrups • finished beverages (including FINISHED sparkling soft drinks; water and PRODUCTS sports drinks; juice, dairy and plant- based drinks; and tea and coffee). BOTTLERS In our concentrate operations, The Coca‑Cola Company typically generates net operating revenues by selling concentrates and syrups to authorized bottling partners. Approximately 225 bottling partners Our bottling partners combine the worldwide concentrates with still and/or sparkling water, and/or sweeteners, depending on the product, to prepare, package, sell and distribute finished beverages. More than Our finished product operations 1.9 billion DISTRIBUTION consist primarily of company-owned servings or -controlled bottling, sales and a day distribution operations. CUSTOMERS & CONSUMERS * The Coca‑Cola Company and its bottling partners are collectively known as the Coca-Cola system. The Coca‑Cola Company does not own, manage or control most local bottling companies. The Coca‑Cola Company 2018 Business & Sustainability Report 7
CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix At A The Coca-Cola Total Beverage Business Transformation Selected Financial Progress Against Our Our System Glance System Portfolio Timeline Data Sustainability Goals in Context Total Beverage Portfolio #1 VALUE SHARE ACROSS ALL CATEGORY CLUSTERS 500+ BRANDS (EXCEPT ENERGY) SPARKLING SOFT DRINKS JUICE, DAIRY & PLANT-BASED WATER AND SPORTS TEA AND COFFEE ENERGY2 >50% ~10% ~15% ~15% ~15% 2018 Retail Value Share 2018 Retail Value Share 2018 Retail Value Share 2018 Retail Value Share 2018 Retail Value Share Coca-Cola Fresca Del Valle juices fairlife Dasani waters smartwater G eorgia coffee Ayataka green Burn Full Throttle and nectars ultra-filtered milk1 tea Diet Coke Coca-Cola Odwalla Minute Maid Aquarius vitaminwater Gold Peak teas Honest Tea NOS Zero Sugar and coffees Fanta Sprite Simply Chivita ILOHAS ZICO coconut Juices water Schweppes Powerade sports drinks Coca-Cola Plus Coffee innocent Smoothies and Juices Ciel Water Monster Energy Globally, sparkling soft drink In 2018, we further lifted, shifted In 2018, we introduced the In 2018, we announced a new volume was up 2% in 2018, fueled and scaled on-trend brands like new bottle made from 100% Fuze Tea operating group, Global Ventures, by double-digit volume growth innocent across markets. recycled material for the purified, to ensure we connect and globally of Coca-Cola Zero Sugar, strong noncarbonated water brand We launched Fuze Tea across scale key brands and partnerships growth in the low- and no-calorie 1 The fairlife® brand is owned by fairlife Ciel in Mexico. major European markets in 2018. like Monster. LLC, our joint venture with Select Milk offerings of Sprite and Fanta and Producers Inc. Products from fairlife are 2 Energybrands are owned by Monster supported by innovations such distributed by our company and certain Beverage Corporation, in which as Coca-Cola Plus Coffee. of our bottling partners. The Coca‑Cola Company has a minority investment. The Coca‑Cola Company 2018 Business & Sustainability Report 8
CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix At A The Coca-Cola Total Beverage Business Transformation Selected Financial Progress Against Our Our System Glance System Portfolio Timeline Data Sustainability Goals in Context Business Total Beverage Company: Our Accelerated Transformation Transformation Timeline 1886 Announced our support Coca-Cola invested in Introduced Developed new Gold Launched more First Coca-Cola sold of the recommendation Nigerian beverage Coca-Cola Zero Sugar— Peak bottled coffee than 500 new in Atlanta, Georgia. by several leading leader Chi Limited, a reformulated and beverages, expanded 1992 health authorities, maker of popular value- rebranded version Honest Tea into products globally 1899 Powerade 2016 including the World added dairy and juice of Coke Zero— Western Europe, in 2016. That’s introduced as a Health Organization, beverages, and fairlife in Belgium, France, and in partnership more than one Large-scale that people should milk captured over one- Ireland, the with Dunkin’ Donuts Coca-Cola bottling hydration offering. a day! limit their intake of third of the retail value Netherlands and the announced a line of begins. added sugar to no more growth in value-added United Kingdom. branded iced coffee 2005 than 10% of their total dairy in its second year. beverages. energy/calorie intake. 1955 Coca-Cola Zero Fanta Orange introduced. introduced in Italy, the first new product distributed 2007 by the company Acquisition of since 1886. Energy Brands Inc. (glacéau), maker of vitaminwater and 1960 smartwater. The purchase of Minute Maid 2009 2017 marks the first venture outside Coca‑Cola Freestyle, of carbonated an innovative Announced Topo Lifted and shifted Scaled glacéau Along with our bottling Reduced sugar in beverages. fountain dispenser Chico®, a premium smartwater®, ZICO® partners, acquired more than 300 of new formula for that allows coconut water and AdeS®, the leading soy- sparkling mineral water, our drinks globally, consumers to select Appletiser® into based beverage brand and Barrilitos Aguas while introducing Coca-Cola Zero 1961 from more than 100 Sugar into 20 new markets. in Latin America, now Frescas™, a flavored, more than 500 new Sprite lemon- beverages, unveiled. being rolled out across noncarbonated water products across a total markets in 2017. lime beverage key markets in Europe. beverage, as part of the beverage portfolio. introduced. company’s portfolio in 2012 the United States. Select Milk 1963 Producers entered Tab introduced, into a partnership the first diet drink with the company to produced by the form fairlife, LLC. company. 2013 1975 Coca-Cola Life, Georgia Coffee naturally sweetened 2018 introduced with cane sugar and in Japan. stevia, introduced in Argentina and Chile. Scaled successful Invested in the Grew tea and coffee by Diet Coke mounted a Announced 1982 brands like Fuze premium sports 1% for the year, largely successful comeback plans in 2018 to Diet Coke Tea, smartwater and hydration brand driven by innovation in North America, with introduced as the AdeS across more BODYARMOR in the and new product new marketing and acquire the global first extension markets, helping to United States. launches including new flavors. operations of of the Coca-Cola aggressively expand Georgia Craftsman in Costa coffee, which trademark. our portfolio. Japan and Authentic helps us get into Tea House in China. hot beverages. The Coca‑Cola Company 2018 Business & Sustainability Report 9
CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix At A The Coca-Cola Total Beverage Business Transformation Selected Financial Progress Against Our Our System Glance System Portfolio Timeline Data Sustainability Goals in Context Table Title Selected Year ended December 31, (In millions except per share data) 2016 2017 2018 Financial Summary of Operations1 Data Net operating revenues $ 41,863 $ 35,410 $ 31,856 Net income from continuing operations 6,550 1,182 6,727 Net income attributable to shareowners of The Coca‑Cola Company 6,527 1,248 6,434 Per Share Data Basic net income from continuing operations $ 1.51 $ 0.28 $ 1.58 Basic net income 1.51 0.29 1.51 Diluted net income from continuing operations 1.49 0.27 1.57 Diluted net income 1.49 0.29 1.50 Cash dividends 1.40 1.48 1.56 Balance Sheet Data Total assets $ 87,270 $ 87,896 $ 83,216 Long-term debt 29,684 31,182 25,364 Organic Revenue Growth Operating Income Growth Diluted Net Income Per Share Adjusted Free Cash (Non-GAAP)2 (Non-GAAP)3 from Continuing Operations Flow Conversion Ratio Growth (Non-GAAP)4 (Non-GAAP)5 5% 11% 13% 75% 8% 70% 3% 1% ′17 ′18 ′17 ′18 ′17 ′18 ′17 ′18 Organic Revenue Growth Income Continuing Operations Diluted Net Income Cash Flow Conversion 1 4 Reflects The financial statement line items in Summary of Operations were unfavorably impacted by the refranchising of comparable currency neutral diluted net income per share from continuing operations, which is a non- bottling territories in North America as well as the divestitures of certain company-owned bottling operations. In GAAP financial measure. Reported diluted net income per share from continuing operations grew 474 percent and addition, net income attributable to shareowners of The Coca‑Cola Company for the year ended December 31, 2017 declined 82 percent for the years ended December 31, 2018 and 2017, respectively. was unfavorably impacted by a net provisional tax charge of $3,610 million recorded by the company as a result of 5 Adjusted the U.S. Tax Cuts and Jobs Act signed into law in December 2017. free cash flow conversion ratio = free cash flow adjusted for pension contributions divided by net income from continuing operations adjusted for noncash items impacting comparability. Adjusted free cash flow 2 Organic revenue is a non-GAAP financial measure. Reported net operating revenues declined 10 percent and conversion ratio is a non-GAAP financial measure. 15 percent for the years ended December 31, 2018 and 2017, respectively. Note: See pp. 54–57 for a reconciliation of non-GAAP financial measures to our results as reported under GAAP. 3 Reflects comparable currency neutral operating income (adjusted for structural items and accounting changes), which is a non-GAAP financial measure. Reported operating income grew 14 percent and declined 12 percent for the years ended December 31, 2018 and 2017, respectively. For more information about our performance, see the Data Appendix. The Coca‑Cola Company 2018 Business & Sustainability Report 10
CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix At A The Coca-Cola Total Beverage Business Transformation Selected Financial Progress Against Our Our System Glance System Portfolio Timeline Data Sustainability Goals in Context 2020 Sustainability Goals Our publicly reported 2020 sustainability goals drive us to continually improve. We aim to achieve our goals through a concerted effort by The Coca‑Cola Company and approximately 225 bottling partners in more than 200 countries and territories. We have set ambitious goals to drive system-wide change beyond small operational improvements. Packaging Water Giving Back Women Percentage of bottles and cans we refilled Percentage of water used in our Percentage improvement in water Percentage of the company’s annual Cumulative number of women or helped recover equivalent to what we finished beverages returned to efficiency since 2010 operating income invested back into entrepreneurs economically empowered introduced into the marketplace 1, 2 nature and communities 3 local communities across our global value chain 2030 GOAL 2020 2020 100% GOAL GOAL 150% 155% 1.6% WORLD WITHOUT WASTE 25% 1.5% 5M 133% 115% 1.2% 1.2% 3.2M 59% 59% 59% 58% 56% 2020 2020 GOAL 58% GOAL 15% 16% 2020 2.4M 75% 100% 13% 56% 12% GOAL 1% 1.7M 1.2M ′15 ′16 ′17 ′18 ′15 ′16 ′17 ′18 ′15 ′16 ′17 ′18 ′15 ′16 ′17 ′18 ′15 ′16 ′17 ′18 Taking Packaging additional rev1 packaging types into Water Return Water Imprvmt Efficiency Giving Back Women consideration, our rate was 56% for 2018.1 Human Rights Agriculture Climate Percentage of bottling partners Percentage of direct suppliers Percentage of ingredients sustainably sourced Estimated percentage reduction of that achieved compliance with our that achieved compliance with our the carbon footprint of the “drink in 2017 2018 Supplier Guiding Principles Supplier Guiding Principles your hand” since 2010 4 2020 2020 90% 89% 87% 89% 2020 92% 90% 88% 89% 2020 GOAL GOAL GOAL GOAL 100% 25% 76–100% 98% 95% 21% 19% 51–75% 14% 12% 26–50% 0–25% ′15 ′16 ′17 ′18 ′15 ′16 ′17 ′18 APPLES BEET CANE COFFEE CORN GRAPES LEMONS MANGOS ORANGES TEA SOY ′15 ′16 ′17 ′18 SUGAR SUGAR Bottling Partner Compliance Direct Suppliers Compliance Climate Agriculture 1 Our 3 As method to track our 58% packaging collection rate against our 2020 goal focused on our predominant estimated working with our many external partners and using generally accepted, independently peer- package types (glass bottles, steel and aluminum cans, and PET plastic bottles), which make up approximately reviewed scientific and technical methods. Finished beverages based on global sales volume. 85% of our portfolio. Because of new data that we have available to us, our 56% collection rate against our 4 The World Without Waste goal takes into account a more inclusive collection rate, representing all of our consumer calculation of progress toward our “drink in your hand” goal has been internally vetted using accepted packaging—including beverage cartons, juice boxes and pouches, etc. (see p. 24). and relevant scientific and technical methodologies, which are aligned with GHG Protocol Scopes 1, 2 and 3. Due to the nature of our franchise bottling system, our manufacturing emissions are normally split between 2 Ourpercentage calculations of progress toward collection of 100% of the equivalent of the consumer Scopes 1 and 2 for company-owned facilities and Scope 3 for bottling partner facilities. However, in our “drink packaging we sell has been internally vetted using relevant scientific and technical methodologies, but those in your hand” calculations, we consider the full Coca‑Cola system (including franchise bottling partners) in the methodologies are evolving as the industry learns more about calculating collection in different markets. We are calculation of our manufacturing, distribution and refrigeration emissions. working to improve our data collection and measuring systems. As systems and methodologies improve, we will revisit our prior estimates to ensure their accuracy and make any necessary corrections to our public reporting. For more information about our performance, see the Data Appendix. The Coca‑Cola Company 2018 Business & Sustainability Report 11
CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix At A The Coca-Cola Total Beverage Business Transformation Selected Financial Progress Against Our Our System Glance System Portfolio Timeline Data Sustainability Goals in Context Our System in Context SHARED OPPORTUNITY Our business operates within a wider context. We consider this context carefully, and we continuously apply what we learn to manage our impacts, aiming INPUTS OUTCOMES What We Depend On What We Create to create shared opportunity as we transform into a total beverage company. Our short- and long-term success depends on a range of inputs, CONSUMER & such as ingredients, water CUSTOMER DEMAND and packaging from our many INCREASING TRANSPARENCY suppliers, and the talents and CONSUMER, CUSTOMER & AND TRUST passion of our global workforce STAKEHOLDER INSIGHTS and system employees. And, of THE PRODUCT CHOICES: COCA-COLA course, our business generates RAW MATERIALS: SHARED OPPORTUNITY SHARED OPPORTUNITY Total Beverage Portfolio revenue from consumers who Water, Ingredients, Energy, SYSTEM provide us with their trust Raw Materials and the financial resources to COMMUNITY IMPACT: operate, innovate and grow. TALENT: Local Community Support, Watershed Protection, Access to Safe Water and Sanitation, As a result, we create a range Employees, Farmers, Partners PASSION FOR Recycling, Disaster and Humanitarian Relief, of outcomes including diverse Around the World CONSUMERS Education, Arts & Culture beverage products; economic benefits such as jobs, taxes paid INNOVATION FINANCIAL RESOURCES: and community investment; ECONOMIC DEVELOPMENT: Top-Line Revenue MARKETING ecosystem impacts and Jobs, Women’s Empowerment, Taxes Paid, Community Investment, Value and Revenue initiatives; and customer and GOVERNANCE for Customers, Growth Opportunities shareowner value. RECYCLED MATERIALS, REUSE MANUFACTURING DISTRIBUTION PACKAGES, WASTE, See the Coca-Cola system CARBON EMISSIONS REINVESTMENT diagram. FINANCIAL RESOURCES, PROFIT, DIVIDENDS SHARED OPPORTUNITY The Coca‑Cola Company 2018 Business & Sustainability Report 12
CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix Our Approach to Priority Issues: Managing Our Priorities Risks & Opportunities Our Approach to Managing Our Priorities THE COCA‑COLA COMPANY THE COCA-COLA SYSTEM Our board’s role is overseeing the company’s long-term business Corporate Sustainability Sustainability strategy, which includes providing review of and guidance for our Governance Governance Approach ongoing transformation to a total beverage company. I am pleased with how this board works with At The Coca‑Cola Company, we set high The Public Issues and Diversity Review We aim to achieve our operating and management toward the common standards for our people at all levels Committee helps the board fulfill sustainability goals through a concerted goal of long-term value creation and strive to meet these standards responsibilities relating to diversity, effort by The Coca‑Cola Company and for our shareowners and consistently. Our sound business sustainability, corporate social approximately 225 bottling partners other stakeholders.” principles and practices foster a strong responsibility and public issues of in more than 200 countries and innovative, and collaborative culture, significance, especially with regard territories. We have set ambitious goals SAM NUNN which is committed to ethical behavior, to ways in which these issues may to drive system-wide change beyond Lead Independent Director accountability and transparency. affect the shareowners, the company, small operational improvements. communities in which we operate, Information about the company’s and the general public. This entails We have robust programs in place to corporate governance, including the evaluating and reviewing information identify issues for our business and company’s Code of Business Conduct, pertaining to social, political and stakeholders, and cross-functional Corporate Governance Guidelines, environmental trends, with oversight teams working across our system to Certificate of Incorporation and Bylaws over diversity and sustainability goals, gather data and perspectives to inform are on our website. Information as well as human and workplace rights. our actions. Beyond our internal about how to report concerns about Enterprise Risk Management team, the company and our public policy The committee reviews, at least this also includes the work of our engagement and political contributions annually, all shareowner proposals, dedicated Stakeholder Engagement policy can be accessed here. public policy advocacy efforts, function that partners with business political contributions and charitable units, bottling partners, NGOs, The company’s board of directors has contributions to ensure alignment with governments, and people in established a number of committees company policy and our overall values. communities all around the world. to assist in discharging its duties. These include an Audit Committee, The committee reports to the board a Compensation Committee, regularly regarding actions and a Committee on Directors and recommendations, and annually Corporate Governance, an Executive conducts a self evaluation, which it Committee, a Finance Committee, a presents to the full board. Management Development Committee, and a Public Issues and Diversity Review Committee. The charter for each committee can be viewed on our website. The Coca‑Cola Company 2018 Business & Sustainability Report 13
CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix Our Approach to Priority Issues: Managing Our Priorities Risks & Opportunities Priority Issues Matrix Focusing on the highest-priority environmental, social and governance Obesity concerns and category perceptions issues for our business and our stakeholders is a foundational step Water stewardship in how we conduct business and develop our corporate strategy. It is also foundational to how we build, evolve and report on our business and our sustainability efforts. For example, since we conducted our priority issues Packaging INCREASING CONCERN TO STAKEHOLDERS analysis in 2015 (see chart to the right), the company has launched strategic global initiatives including Our Way Community engagement Forward and World Without Waste, Women’s economic empowerment Climate change risks and conducted a climate scenario Responsible sourcing analysis. Human rights Greenhouse gas emissions During 2019, we will be undergoing Energy use and efficiency a thorough review of our priority Responsible supply issues in collaboration with a cross- chain management functional internal team and key external stakeholders. This will ensure Occupational health and safety that we take into consideration the Employee wellness, Product safety and ingredients changing social, environmental and development economic context as we evolve our and engagement business, along with wider stakeholder Diversity and expectations. equal opportunity Manufacturing waste Learn more about our approach to stakeholder engagement here. * This matrix represents the results of our 2015 priority issues analysis. INCREASING CURRENT OR POTENTIAL IMPACT TO THE COCA-COLA SYSTEM The Coca‑Cola Company 2018 Business & Sustainability Report 14
CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix Our Approach to Priority Issues: Managing Our Priorities Risks & Opportunities Priority Issues: Risks & Opportunities As a company operating Product Innovation Plastic Waste with a growth mindset and a presence in almost Consumers are adopting healthier diets Concern about plastic waste has and lifestyles, which include eating and risen sharply as waste collection and every country and drinking less sugar, creating demand recycling infrastructure have not kept territory in the world, we for a wider range of low- or no-sugar pace with plastic manufacturing, products, and new ingredients, such causing an increase in plastic waste consider our risks and as plant-based protein. This trend in the environment. Issues such opportunities in a global presents a growth opportunity for as changes in local regulations to us, and we listen to consumers as we discourage the use of plastic and the context. evolve our long-term business strategy. cost of material inefficiencies of linear production models all constitute risks Many of the issues we face are Along with the business opportunity, across our global operations. There are interconnected and evolving quickly, there are also real risks. For example, hotspots in regions where recycling and we need to understand them to there is a growing concern among infrastructure is weakest and/or where fulfill our long-term vision to grow in a consumers, public health professionals, ecosystem damage from pollution way that creates value for all people— and government agencies about is most acute, including oceans and consumers, customers, suppliers and the increased prevalence of obesity, coastal areas. communities—while working toward which is correlated to several non- solutions that benefit us all. communicable diseases. The food and Innovations in packaging materials, beverage industry has a responsibility such as plant-based raw materials Throughout this report we reference to help adequately address these that substitute for petrochemical our transformation to a total beverage Approximately 14% of plastic challenges through innovation and new feedstocks, as well as circular company. There are many issues of packaging—including beverage product offerings. models that turn post-consumer relevance to our company, both in packaging as well as that of other plastics into new, economically viable relation to this transformation, and consumer products—is collected value streams, present multiple more broadly as a global growth for recycling globally.1 Our collection opportunities. These new plastic business, which we explore in more We support the current rate for non-returnable PET plastic production models offer improved detail in our key sustainability topics recommendation by several leading bottles is approximately 52%, in part ecosystem impacts and carbon and subsequent pages. The following health authorities, including the because PET plastic has a high value footprint reductions, accelerate the risk and opportunity areas help World Health Organization, that relative to other types of plastics. 2 shift away from single-use plastic, provide a snapshot of the global people should limit their daily intake and in some regions also create context in which our transformation of added sugar to no more than new employment. is taking place. 10% of their total energy/calorie consumption. 1 New Plastics Economy—Ellen MacArthur Foundation those methodologies are evolving as the industry 2017 report, p. 16. learns more about calculating collection in different markets. We are working to improve our data 2 Our percentage calculations of progress toward collection and measuring systems. As systems and collection of 100% of the equivalent of the consumer methodologies improve, we will revisit our prior packaging we sell has been internally vetted using estimates to ensure their accuracy and make any relevant scientific and technical methodologies, but necessary corrections to our public reporting. The Coca‑Cola Company 2018 Business & Sustainability Report 15
CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix Our Approach to Priority Issues: Managing Our Priorities Risks & Opportunities Water Resources Climate Change There are many threats to water There is growing concern that Innovations in ingredients and quality and availability, including an increase in global average packaging materials are becoming unsustainable agriculture practices, temperatures and the resulting more scalable, while access to poor sanitation infrastructure, runoff changes to the climate will cause renewable energy is increasingly and industrial pollution, and overuse of significant disruptions in weather mainstream. Companies that take water resources. Additionally, climate patterns around the globe, creating advantage of the significant potential change is exacerbating water scarcity more frequent and severe natural of these and other solutions have the through increased droughts and floods, disasters, including fires, storms and opportunity to improve the resilience which in turn impact farmers and other floods. In addition to direct impacts of their own supply chains, operations water users who will need to adapt to on our operations and communities, and distribution networks, while water stress in many different regions. this may affect food security and contributing to greater stability of the Our products depend on the availability also decrease the agricultural planet we all share. of high-quality water, as do the people productivity—and/or increase the living in the communities where we cost—of key agricultural commodities. do business. Policies that incentivize emissions reductions, and initiatives that reduce Limiting global warming to By bringing our expertise and other deforestation or other negative below 1.5°C will be required to resources to bear, we can ensure that impacts through land-use changes for remain below relevant global our operations contribute positively food production, are also increasing. risk thresholds—and this will entail to healthy freshwater and marine These changes are important rapid and far-reaching transitions ecosystems around the world. We can considerations for companies as in land use, energy, industry, use these same resources to provide they assess CO 2 emissions in their buildings, transport and cities. 2 access to safe drinking water and value chains as well as key supplier sanitation while helping to restore relationships. These and other natural water cycles, benefiting factors combine to create a growing multiple aspects of our value chain and financial business risk, of which For more information on our climate the people and communities we serve. investors and other stakeholders risks and opportunities, see p. 45. are increasingly aware. According to the World Economic Forum, water crises have been among the top five global risks in each of the last seven years.1 1 CEO 2 IPCC Water Mandate report, The Business Case 2018 report summary. for Water Stewardship (2018). The Coca‑Cola Company 2018 Business & Sustainability Report 16
CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix Overview Providing Choice Reducing Calories— to Consumers Expanding Portfolio Taking Action and Expanding Choice 425,000 tons of sugar removed on an annualized basis through People’s tastes and Using Data to Reduce innovation such as new recipes and smaller package sizes preferences are Sugar and Calories in 2017/2018 changing, so we’re changing, too. Around the world, consuming less sugar is an increasingly important issue Driven by our passion for consumers, for many people. we have been shifting our mindset and Total culture, as well as the way we measure To meet these changing consumer Reformulations our success, resulting in bold action to needs, we have updated our approach Globally transform our portfolio. to more effectively measure our sugar and calorie reduction efforts. Since our 18 20 ~80 2016 CEO-led Our Way Forward initiative of our Gradually reducing sugar was launched in 2017, we have been aggressively reformulating recipes top brands are across our entire portfolio1 to reduce sugar, using our marketing low- or no-sugar muscle to promote low- and no-calorie or have a low- or ~310 2017 Making smaller, more beverage options and investing along no-sugar option with our system to make smaller convenient packages so packages more available. We have also controlling sugar intake is easier been accelerating the expansion of ~400 beverage options across our portfolio. 2018 Offering more new drinks Just as we harness data and analytics that provide benefits like to inform and improve our growth nutrition and hydration efforts at scale, we also track our sugar and calorie reduction efforts from market to market. Giving people the information they need to make informed We keep track of metrics resulting from the sugar reduction levers choices we are using, such as total calories from sugar—both added and natural sugars—across all of our brands, 2 sugar reductions from a combination 1 To of new recipes, 3 promotion of low- and maintain consumer acceptance and avoid moving so far that consumers substitute higher no-calorie beverages, and reduced sugar alternatives, it is widely accepted that package sizes. reformulation is a gradual process. The cumulative effect of these actions 2 Thisdoes not include calories from non-sugar ingredients such as protein or fat. is lowering the average calories per 3 Due to regulations affecting 100% natural juices, package in our portfolio. natural sugars must be left intact to be classified as 100% juice. The Coca‑Cola Company 2018 Business & Sustainability Report 17
CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix Overview Providing Choice Reducing Calories— to Consumers Expanding Portfolio Putting Consumers First We’re exploring and bringing to market Responding to new sugar alternatives that help us keep the great tastes people love but Local Conditions to with less sugar and fewer calories. For Reduce Sugar example, Coca-Cola Zero Sugar realized double-digit volume growth in 2018 globally as we continued to invest as We are taking action on sugar a system in marketing and promotions reduction even where it means of this zero-calorie sparkling changes to our most popular, product innovation. time-tested products—putting our strength in innovation to work for our We’re also heavily promoting our consumers’ evolving needs. low- and no-sugar drinks, making them more visible and easier to find. Coca-Cola Chile’s portfolio is now And we’re bringing drinks like organic composed of 95% low- and no- tea, coconut water, juices, purified calorie beverages representing a water and beyond to more people in significant reduction in sugar and more places. calories. The Coca-Cola system Smaller, More removed the equivalent of 33,000 tons of sugar from the market through Convenient Packages recipe changes across our Chilean beverage portfolio. Smaller, more convenient packaging Coca-Cola Singapore launched new helps people control sugar intake more Sprite and Fanta Orange recipes in easily for themselves and their families. 2018, which contain more than 40% less sugar without compromising on • Today, about 44% of our sparkling taste. In Japan, we continued to offer soft drink brands come in convenient no-sugar product varieties including packages of 250 mL (8.5 oz.) or less. Ayataka FOSHU tea and Japan • Smaller packages of sparkling soft Craftsman Black (no-sugar) coffee. drinks in North America again posted double-digit growth led by 7.5-ounce The commitment we made along with mini cans of sparkling soft drinks like the European soft drinks industry Coca-Cola and Sprite. to reduce the average added sugar content of still and carbonated soft drinks by 10% has led to 16 national sugar reduction pledges in the EU to More than 30% growth for date, and counting. mini cans in North America in 2018.* For information about our innovative sugar reduction in Mexico, see p. 20. * Nielsen AMC. 18
CEO/Board Our Priority Portfolio World Without Water Sustainable People & Partnerships Climate Regional Data Letters Company Issues Transformation Waste Agriculture Communities Change Highlights Appendix Overview Providing Choice Reducing Calories— to Consumers Expanding Portfolio Offering More Responsible Marketing New Drinks We do not target our advertising to children under age 12, anywhere in the We’re looking for ways, whenever we world. Examples of this longstanding can, to make many of our beverages policy in action include: better and more nutritious by providing We’re making reduced-sugar vitamins, minerals and electrolytes, • We do not place advertising in media products more available through while also introducing more dairy, where the audience is comprised reformulation. We’ve reformulated plant-based beverages and different of over 35% children under 12 years hundreds of products around sweetness level options to meet an old, including television shows, the world. We’re also making our increasing range of consumer choices. print media, websites, social media, zero-sugar products taste better. With this in mind, we launched more movies, SMS/email marketing, and promoting them more. As we than 600 products in 2018 including: animation, third-party characters, take these actions, consumers are celebrities/games/contests, branded responding positively in the sense • Sprite Fiber+, a no-sugar drink toys/merchandise, talent selection, that they are accepting sugar- with dietary fiber and the flavor point of sale, and merchandise items. reduced products at a good rate. and refreshment consumers expect • We do not design our marketing We also see growth in our zero- from Sprite, was launched in China. Giving People communications in a way that sugar portfolio as well as in smaller • Coca-Cola Batch Blends Coffee pack sizes.” and Chocolate, a no-sugar beverage Information appeals primarily to children under 12. • We work with industry platforms combining refreshing Coca-Cola such as the International Food & ROBERT LONG taste with chocolate and real We continue to put clear, easy-to-find Beverage Alliance (IFBA), World Chief Innovation Officer coffee from Brazil, was launched nutrition information right up front to Federation of Advertisers (WFA), the in Vietnam. support informed choices, without the EU Pledge initiative, Children’s Food • smartwater alkaline, which is ionized guesswork. and Beverage Advertising Initiative to ensure the pH level is 9+, was Delivering Strategic launched in select U.S. markets. (CFBAI) and others to put meaningful actions in place to reduce the Growth exposure of children to advertising of We lead the food and all products high in fat, salt or sugar. beverage industry in • We evolve our commitments to Prioritizing consumers’ preferences respond to changing societal means identifying strategic voluntary front-of-package concerns, including advertising acquisitions and investments in calorie labeling. For example, on digital platforms, and work emerging brands. In 2018, we in Europe, we are introducing with local industry to join these announced the definitive agreement trials of color-coded nutrition framework commitments and scale to acquire Costa Limited. Costa is collective actions. the leading coffee company in the labelling to help people • We openly participate in audits by United Kingdom and has a footprint know exactly what is in the external organizations that monitor in more than 30 countries in the drinks they enjoy. Our labels our advertising to demonstrate fast-growing coffee category. We build on a scheme that is compliance with our standards and also acquired a minority ownership all relevant authorities. stake in BODYARMOR, a sports already familiar to more than drink that contains potassium and 500 million people across other electrolytes, vitamins and the European Union, adding See more information on our approach to coconut water, with no artificial colors responsible marketing here. red, amber and green colors or flavors. to the numbers for key nutrients (fats, saturated fat, salt, sugar). The Coca‑Cola Company 2018 Business & Sustainability Report 19
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