可口可樂 (KO) 2007 Q4 法說會逐字稿

Good morning.

My name is Jennifer and I will be your conference facilitator.

At this time, I would like to welcome everyone to The Coca-Cola Company's fourth quarter 2007 earnings results conference call.

All participants will be in a listen-only mode until the formal question-and-answer portion of the call.

(OPERATOR INSTRUCTIONS) .

I would now like introduce Ann Taylor, Vice President and Director of Investor

Good morning.

Thank you for being with us today.

I'm joined by Neville Isdell, our Chairman and Chief Executive Officer, Muhtar Kent, our President and Chief Operating Officer, and Gary Fayard, our Chief Financial Officer.

Following prepared remarks this morning we will turn the call over for your questions.

Before we get started I'd like to remind you that this conference call may contain forward-looking statements including statements concerning long-term earnings objectives and should be considered in conjunction with cautionary statements contained in our earnings release and in the Company's most recent SEC report.

In addition, I would also like to note that we have posted schedules on our Company web site at thecoca-colacompany.com under the Financial Information tab in the Investors section which reconcile our results as reported under Generally Accepted Accounting Principles to certain non-GAAP measures which may be referred to by our senior executives in our discussion this morning and from time to time in discussing our financial performance.

Please look on our web site for this information.

Now, let me turn the call over to Neville.

Thank you, Ann, and good morning, everyone.

I'm going to start this morning with a few brief observations about the results and also highlight some of our accomplishments for 2007.

Muhtar will then provide details in operational performance and our priorities for the current year, followed by Gary's overview of the financials and some additional perspective on 2008.

Today, we reported a very positive finish to 2007 with another solid quarter of business results.

A strong 5% unit case volume growth and 12% ongoing EPS growth capped an excellent year for The Coca-Cola Company.

In the fourth quarter, all operating units reported volume growth despite tough comparisons in some key markets.

We benefited from the diversity of our geographic reach and our breadth and also the breadth of our product portfolio.

We delivered consistent financial performance and achieved results ahead of our long-term growth model in each quarter of 2007.

By successfully executing our clearly defined strategies, we achieved the following full-year results -- 6% unit case volume growth led by our international operations up 8% and robust 4% sparkling and 12% still beverage growth, 20% net revenue growth.

Even when you exclude the acquisition of bottlers, net revenue grew 12%.

Ongoing operating income growth of 14%, comparable earnings per share of 14% and cash flow from operations up 20%.

Notably, this is our 11th consecutive quarter of delivering at least 4% volume growth.

The strong top line performance is translating to bottom line results as we delivered our fifth consecutive quarter of double-digit comparable EPS.

In 2007, we sold over 1.2 billion incremental unit cases, 1 billion being organic not acquisition related.

What this actually means is that our consumers refresh themselves 1.5 billion times each day with one of our beverages.

We are a company moving successfully by executing against a clear strategic growth agenda.

Across the Company and throughout the system, talented people are driving growth and developing a culture of innovation and also improving efficiency.

We realize the journey is long and we are by no means declaring victory but we can confidently say that we have a solid foundation upon which to deliver long-term sustainable growth and value for our shareholders.

In 2007, we put our manifesto for growth into action.

In fact, we now call it the "manifesto in action." We made commitments to strengthen our sparkling portfolio, to enhance our position in still beverages, to improve our capabilities in consumer marketing, customer leadership and franchise leadership, and ensure that our business is sustainable.

I am pleased to report that we delivered against each one of these commitments and are well positioned to do so again in 2008 and beyond.

Specifically, we strengthened our position at sparkling beverages with Trademarks Coca-Cola, Sprite and Fanta all delivering solid unit case growth.

In fact, overall, we captured 72% of the global sparkling beverage industry growth for the year.

Trademark Coca-Cola continued to be the key driver with Coca-Cola Zero driving expansion of the category and gaining share.

Coca-Cola Zero is now in 55 countries and it has become our 12th $1billion brand.

Moreover, we are executing against our three-cola strategy with passionate and award winning global marketing campaigns.

This strategy has delivered the highest growth in Trademark Coca-Cola since 1998.

As I have discussed in the past, sparkling beverages are going to continue to be the backbone of our global growth in both developed and emerging markets.

Through integrated marketing and connection of our brands to consumer passion points, like the Olympics year of 2008, American idol and Super Bowl, we are uniquely positioned to capture the highly profitable sparkling beverage opportunity.

We also enhanced and expanded our still beverage business through organic growth and targeted bolt-on acquisitions.

The biggest headline was our acquisition of glaceau and its vitaminwater brand.

The (inaudible) growing premier active lifestyle beverage and it is now become our 13th $1billion brand.

The acquisition has changed the game in North America beverages and helped align the Coca-Cola system to invest behind a winning portfolio of brands.

Beyond that one headline is continued global success across categories.

Trademark Minute Maid increased unit cases 5%, driven by the expansion of Minute Maid Pulpy in China and other emerging markets.

We have built a strong global juice position in all of the great countries, Brazil with Jugos del Valle and [supa mice].

Russia with the Molten brands, India with Maaza and now Minute Maid and of course China where Minute Maid Pulpy is the number one brand in key metro markets.

In sports drinks and water we continue to look for the highest value opportunities and drive innovation through functional enhancement.

Additionally, we are starting to make progress in the ready to drink tea and coffee categories.

While we are number one globally in both categories, we are continuing to innovate in-house as well as work with our global partners, Nestle and [Ille] to capture the opportunity in these fast growing categories.

This solid performance across the portfolio resulted in our Company growing faster than the industry and capturing close to a quarter of the 5.5 billion incremental nonalcoholic ready to drink unit cases sold in 2007.

We gained nonalcoholic ready to drink volume and value share globally driven by share increases in both sparkling and still beverages.

Our progress in consumer marketing and commercial leadership sparked new interest in our expanding portfolio among shoppers, retail customers and our bottling partners.

The Coke Side of Life, Happiness Factory, the movie, and other award winning marketing programs have reignited the energy and the optimism right to the core of our brands.

And our bottling partners are investing behind the business and drive the inspirational market themselves at the point of sale.

The combined efforts across the system are working and driving our winning performance everyday in the marketplace.

Next a commitment that has become a true passion for me.

We recognize that we cannot have a sustainable business unless the communities that we serve are themselves sustainable.

Our commitments center around four key touch stones.

Water, where we announced our new global partnership with the World Wild Life Fund to conserve seven of the world's most important water sheds and to become water neutral in all our beverage production processes.

Packaging, where we see opportunities to turn today's waste products into valuable resources for the future.

We announced a significant expansion of our U.S.

recycling efforts by investing $60 million including the building of the world's largest PET bottle-to-bottle recycling plant in South Carolina and just last night, we announced the long-term target to recycle or reuse 100% of our aluminum beverage cans, which we sell in the U.S., which builds on our previously announced goal to recycle or use, reuse 100% of our PET plastic bottles.

Climate, we are intensifying our efforts to reduce carbon emissions.

For example, at the 2008 Summer Olympic Games, we will provide more than 5,000 climate friendly coolers and vending machines.

And finally, well being.

We need all consumers to understand the equation of calories in and calories out.

We provide a range of beverage choices for our consumers and believe they thrive at the nexus of refreshment and nutrition.

They all play a role in a balanced diet for all age groups.

Overall, I am pleased with our accomplishments and strong performance in the quarter and the year.

We have put in place a strong foundation and remain confident in our outlook for 2008.

While we continue to monitor the weakness in the U.S.

economy, we remain optimistic about the resiliency of our portfolio, particularly in the developing and emerging markets.

Of course, our eyes are wide open and we will continue to analyze and respond appropriately to both opportunities and challenges.

We believe that we will continue to progress off this strong base.

Before I turn the call over to Muhtar, I would like to make a few comments about our announcement in December.

As you know, we announced plans to begin a seamless transition of the CEO responsibilities to Muhtar effective July 1, 2008.

This is something that I have been engaged with the Board on since my return in 2004.

I have always believed that effective succession must be planned early in the game and also must be one of the core imperatives of how you manage the Company.

Having worked closely with Muhtar for nearly 20 years, I am confident that his combination of industry knowledge, operational excellence, strategic vision, and commitment to our people which he has already demonstrated as President in 2008 will continue to take our Company forward.

With that then, let me now turn the call over to Muhtar to provide the details on our operations.

Thank you, Neville.

Good morning to everyone.

The strong results we have achieved in the quarter completed what was a successful year for the Company strategically, operationally and financially.

The consistent execution of our strategic agenda and the renewed vigorous confidence across the organization enabled us to deliver balance geographic and portfolio growth throughout the year.

The fourth quarter was no different as all of our operating units once again delivered positive volume growth.

Clearly the systems investments behind this brand, its people and its capabilities are paying off.

We have built a strong foundation for sustainable, long-term performance.

In the first quarter of last year, I outlined my key priorities for 2007 and I am proud to say that due to the dedication of our people around the world, we have made significant progress against each of those initiatives.

First, our international operations continued to be the primary driver of growth for the Company.

Volume performance exceeded our long-term growth target in every quarter of 2007.

This success reflects the disciplined execution and local approach of our bottling partners everyday in the marketplace and the connection of our brands with consumers around the world.

Second, in North America, we took a number of aggressive actions which address some of our challenges and enabled us to deliver on our commitment of sequential improvement in the second half of 2007.

We remain committed to restoring consistent growth in our home market while becoming the preferred beverage partner for our customers.

Third, our system-wide efforts resulted in improved efficiency for faster decision making and operating expense savings.

These savings created operating expense leverage and were partially reinvested to drive top line growth.

And finally, we continued to push the envelope with innovation in product, packaging, delivery as well as customer service.

The global success of Coca-Cola Zero, our most successful launch in the past 25 years, is a perfect example of this.

Today, I would like to share with you details on our progress and add some perspective on our priorities for 2008.

Our international operations continued their strong performance and increased full year unit case volume by 8%.

The performance was broad based as evidenced by 19 of our key 22 markets delivering positive growth.

Unit case volume growth in our international operations was led by the emerging markets.

For the year, we achieved double-digit unit case volume growth in such markets as China, India, Brazil, Russia, Turkey, Eastern Europe and Southern Eurasia.

In the Philippines, since we acquired control of the bottling operations we also have delivered double-digit growth.

Africa also produced solid, balanced growth across key markets including a 13% growth in South Africa.

While it is clear that we are maintaining our focus and winning internationally, there are a few key markets that I would like to highlight where aligned system execution is delivering progress and results.

Latin America continued the success with all business units delivering solid growth.

Latin America is now our largest operating group in volume terms selling over 6 billion unit cases.

It is also our second most profitable operating unit with $1.75 billion in operating income.

Mexico increased unit case volume 6% while Argentina increased 9% and Brazil delivered double-digit growth.

The strong performance reflects the success of our strategies to drive growth in sparkling beverages led by Trademark Coca-Cola and expand our footprint in still beverages both organically as well as through acquisitions such as Jugos del Valle.

The strong performance in Mexico is particularly noteworthy as it validates our ability to transfer best practices to drive balance growth in high per capita markets as all around the world.

In Mexico, our highest per capita market in the world, we added another 25 servings per person in 2007.

The growth across the portfolio led to share gains in both sparkling as well as still beverages for the group.

The European Union group has established a solid foundation for sustainable growth evidenced in the balanced geographic and category performance.

Our marketing program and strong execution of our bottling partners provided the platform to overcome a difficult summer weather comparison from 2006.

For the year, unit case volume increased 3%, successfully cycling 6% growth in the prior year as we achieved solid growth in most key markets.

We are encouraged by our progress in Great Britain which returned to growth in the fourth quarter.

Full year volume results in Germany were positive although volume was slightly down in the quarter as we cycled strong growth in the prior year quarter.

We continued to make progress in this market as demonstrated by our move to a one bottler system and remain confident that we are building a foundation for consistent sustainable performance in Germany over time.

Europe delivered solid growth with sparkling beverages up 2% and still beverages up 15% for the year.

Sparkling growth was driven by 3% growth in Trademark Coca-Cola including the continuing success of Coca-Cola Zero now in 21 countries in the U.

The strong performance of still beverages was the result of solid organic growth in Minute Maid, along with Nestea, Aquarius, POWERade and Burn, as well as targeted bolt-on acquisitions.

The brand performance led to volume and value share gains in both sparkling and still beverages for the quarter and the full year.

It is clear we have the right strategies in place and the EU leadership team is effectively managing our business with the goal of delivering consistent sustainable growth.

In 2007, we also validated our track record of rapidly addressing problem markets and delivering on our commitments to restore growth to those markets.

Let me give you some examples.

Japan delivered its fifth consecutive quarter of unit case volume growth factoring 2% growth in the prior year quarter, importantly, all four key trademarks delivered growth.

The double-digit volume increase in Trademark Coca-Cola drove sparkling beverage growth.

Execution of the three-cola strategy led to Trademark Coca-Cola achieving its highest volume growth rate in 30 years.

Georgia grew 1% in the quarter, its first growth in eight quarters.

The performance was driven by growth of the 190 milliliter can in the vending channel.

The results reflect progress against our previously shared plans to stabilize Georgia's performance.

Aquarius (inaudible) also continued to perform strongly with innovation and solid integrated marketing execution leading to all four brands gaining share for the year.

We have gained significant traction in Japan during 2007.

With our management team in place and the help of our brand portfolio improving we will continue to build upon a stabilized business in 2008.

Now let me turn to the Philippines.

After acquiring the bottling franchise in March of 2007, we committed to quickly stabilize this key market and demonstrate sequential improvement throughout 2007.

Our team's efforts to seamlessly integrate and improve execution through improved availability and focus on rapid execution resulted in performance ahead of our original expectations and volume growth for the full year.

We continued to invest in market capabilities and cold drink equipment while driving supply chain efficiency.

We remain confident that our management team will continue to drive growth in 2008 in the Philippines.

Overall, I am very pleased with the performance of our international operations.

We have a talented and experienced team of operators across the system and our bottling partners are aligned to deliver high quality, broad based growth while investing to solidify the foundation for sustainable growth in the future.

Let me now discuss the progress we are making in North America.

In the fourth quarter we achieved 1% unit case volume growth, the second consecutive quarter of growth.

And we delivered on our commitment of sequential improvement in the second half of 2007.

We continue to focus on revitalizing the sparkling beverage category with our three-cola strategy, Red, Black and Silver.

For the year, all three brands gained category share.

Coca-Cola Zero continued to deliver strong double-digit unit case volume growth even after two years in the marketplace.

Our key priorities for Coca-Cola Zero are continuing to build trial, increase awareness and furthering channel penetration.

For the second year in a row, the Coke Side of Life ads that were featured during the Super Bowl telecast were amongst the favorites of both media critics and viewers.

It's mine, where the nice guy finishes first in a tussle for a Coke over the streets of Manhattan, made the top ten list in U.S.A.

Today's ad meter and also was the most popular nonalcoholic beverage commercial out of nine beverage ads that aired during the Super Bowl event.

The glaceau acquisition continues to perform beyond our expectations as the Trademark achieved triple-digit unit case volume growth in the quarter driven by both sales velocity and increased availability.

Additionally, we successfully moved distribution to a hybrid model to take advantage of the strength of our system while leveraging glaceau's unique route to market strategy.

I am pleased to report that the transition to our bottlers has been successful.

This acquisition has aligned our North America system and we continue to expect the acquisition to act as a catalyst for growth across our entire North America business.

While we have made significant stride with our portfolio and organization in 2007, we still have much to accomplish.

Overall, however, I am confident that our North America system is executing against the right priorities and we remain relentlessly committed to our goal of returning our home market to sustainable growth.

Our successes with Coca-Cola Zero, glaceau, POWERade, FUZE, Full Throttle, Minute Maid, Simple Juices, Dasani and our recent investment in (inaudible) tea provides the business a much stronger base from which to build in 2008.

Our bottling partners are aligned and the system is in an approved position to serve our customers and compete in the marketplace even with an uncertain U.S.

macroeconomic environment.

Finally, I'd like to share the progress we have made in driving efficiency and effectiveness.

As I've said, the result of productivity ultimately is leverage in the income statement.

In 2007, we successfully achieved this in the core business as well as in our bottling investments group.

We flattened our organization from 80 fully functional offices to 37 business units across the world.

This allows us to improve the speed of decision making and it improves our effectiveness.

We executed Lean productivity initiatives at our concentrate manufacturing facilities and were able to increase capacity as well as operational efficiency.

This resulted in the elimination of costs associated with a concentrate plant in Ireland.

Within bottling investments, we reallocated expenses from manufacturing and production supply chain and invested in market facing roles to further drive execution in the trade.

For The Coca-Cola Company productivity remains a critical growth enabler to ensure the sustainability of our results over time.

Looking forward we see three main areas of opportunity.

First, supply chain optimization which will allow our system to maintain or enhance our gross margins and increase affordability of our product.

Second, marketing and innovation effectiveness, where we optimize investments behind our brands and leverage global best practices.

And third, operating efficiency which we use to fuel growth and build the foundation for future performance.

This includes the ability to fund investments behind the highest impact innovations in product, packaging, ingredients, as well as equipment.

As I look forward into 2008, part of the reason I remain confident is the results of the robust planning process we completed with our bottling partners.

We have the plans in place to drive towards our ultimate goal of sustainable growth.

We are focused on five strategic priorities.

First, continue to drive growth from our leadership position in sparking beverages.

Sparkling beverages provides the oxygen to our business.

We know there's tremendous opportunity to grow all of our sparkling products in both developed as well as emerging markets.

Second, drive faster growth in our still beverage portfolio by adding new functional benefits, developing affordable formulations, pursuing strategic bolt-on acquisitions and seeking margin enhancements.

Third, continue to generate and leverage the balanced growth that we have achieved across our geographic footprint.

Growth in our emerging and brick markets remain robust even as headwinds are developing in the U.S.

economy.

In North America, our business is stronger, our bottlers continue to invest and we are better positioned from a portfolio and operating structure basis.

Fourth, accelerate the commercialization of our innovation pipeline through aggressive investments in products, ingredients, packaging and equipment.

Fifth, further strengthen our system capabilities.

Consumer marketing, commercial leadership and franchise leadership remain our core capabilities.

We will continue to drive productivity across our system so that we can expedite decision making and rapidly respond to the changing marketplace.

Savings extracted from these initiatives will enhance our ability to achieve consistent and sustained growth.

And last, but not least, leadership development is the top priority across our system, fostering even more collaboration, accountability, clarity and calculated risk taking than ever before.

Supporting all of this is our strong belief in the health of our business, supported by the sustainability of the communities we serve.

We understand that by acting as an engaged positive corporate citizen we help create communities of favorably disposed consumers and as those communities grow our business continues to flourish.

I am pleased with the results we achieved and the progress we made against our strategic agenda.

As we enter 2008, we will be watching carefully the volatility in the macroeconomic environment.

From the strength and foundation which I referred to earlier, we are better prepared to weather any potential challenges.

I look forward to 2008 being another successful year for The Coca-Cola Company.

Now let me turn the call over to Gary.

Thank you.

Thanks, Muhtar.

Good morning.

As Neville and Muhtar indicated, the fourth quarter was a solid finish to the year where we achieved strong consistent performance in all quarters.

As you saw in the release, reported earnings per share was $0.52 on a diluted basis for the fourth quarter, an increase of 79%.

This included a net charge of $0.06 per share primarily related to restructuring charges and some asset write downs.

Therefore, after considering items impacting comparability in both the current and prior year, adjusted earnings per share for the quarter was $0.58 versus $0.52 in the prior year, an increase of 12%.

This is our fifth consecutive quarter of double-digit EPS growth and it is important to note that we successfully cycled our toughest quarterly comparison, cycling double-digit growth in both ongoing operating income and earnings per share in Q4 2006 again with double-digit growth in Q4 2007.

I am sure you have also noticed that our volume growth, growth rate for the quarter was 5% versus our full year growth of 6%.

We believe this is a very solid result.

Sparkling beverages grew 4% for the quarter and for the full year, still beverages increased 11% versus full year 12%.

This quarter was impacted at -- by a strategic decision to de-emphasize low value water in several countries such as China, which caused volume to round down to 5% in the quarter.

For the year, reported earnings per share increased 19% to $2.57.

This included a net charge of $0.13 per share primarily related to restructuring charges.

After considering items impacting comparability in both years, earnings per share was $2.70 versus $2.37 in the prior year, a 14% increase.

For the year, unit case volume growth was 6% in line with concentrate sales, revenue growth was 20% and 12% excluding structural changes related to bottler acquisitions.

The increase was driven by a 6% increase in concentrate, a 4% currency benefit and a 2% favorable impact from price and mix.

After considering factors impacting comparability, operating income growth was 14% and 10% on a currency neutral basis.

In terms of margins, our core business remains healthy and expanded margins for the full year as we drove top line growth and delivered operating expense leverage.

Bottling investments continues to improve margins as well.

Cash from operations for the year increased 20% to $7.1 billion on strong underlying business performance and a decrease in working capital.

We repurchased approximately $1.75 billion of our stock for the full year in line with our prior guidance.

Additionally, the Company paid $3.1 billion in dividends to shareowners in 2007.

For 2007 this contributed to a 30% total return to our shareowners.

Now, let me address some of the factors that we see impacting the Company in 2008.

As you know, our long-term growth targets are 3% to 4% volume growth, 6% to 8% ongoing currency neutral operating income growth and high single-digit ongoing earnings per share growth.

We successfully exceeded these targets in 2007.

Our picture of success will be to continue to exceed these targets.

We recognize that there's some uncertainty, particularly as it relates to the U.S.

economy; however, as Muhtar said, we remain committed to restoring growth in our home market and believe our business is well positioned to navigate headwinds that might develop.

Emerging and brick markets have maintained their robust growth even against the backdrop of uncertainty in the U.S.

market and we remain positive on the global macroeconomic outlook, especially in many of these emerging markets.

As Muhtar detailed, we will continue to focus on driving efficiency and effectiveness across our organization and we will utilize the realized benefits to further improve our ability to deliver consistent and sustained performance.

On commodity costs, 2007 was certainly a difficult year with cost pressures from several of our key system inputs, particularly in North America.

Commodity cost volatility remains a risk.; however, as we said on the third quarter call, for 2008, we continue to expect to see a moderation in commodity cost pressures.

Currently, our assumptions on commodity costs versus 2007 are a slight increase for the system and essentially flat for the Company.

We expect to deliver operating expense leverage on both the core and bottling business in 2008, and we will continue to invest behind our brands and innovation initiatives.

Additionally, selling and service expenses will increase as we invest for growth in our bottling operations as well as investments behind our brand acquisitions, particularly in North America.

General and administrative expenses were tightly controlled in 2007 and we will continue our disciplined approach in 2008.

We would expect net interest costs to increase for 2008 as we carry a full year of higher debt associated with our 2007 acquisitions.

For 2008, our best estimate is that the full year underlying effective tax rate will be between 22% and 22.5%.

From a capital expenditure standpoint, we purchased approximately $1.4 billion in net PP&E during 2007.

For 2008, we expect the total company net capital expenditures will be approximately $1.6 billion to $1.7 billion as we make investments in recently acquired bottling operations.

And we anticipate that our range of share repurchase on a gross basis will be $1.5 billion to $2 billion this year.

Now, let me move to currency.

We are effectively covered for the full year on the yen and for the first three quarters of 2008 on the other key hard currencies.

Based on anticipated benefits of current hedging coverage in place, the Company expects currencies to have a minimal impact on operating income in 2008.

Finally, let me say a few words about quarterly phasing.

As many of you know, we report unit case volume on an average daily sales basis, kind of like same-store sales, to eliminate comparability issues due to calendar variations.

For 2008, we will have one extra day since it is a leap year.

The first quarter will have one fewer day than Q1'07, and the fourth quarter will have two more days versus Q4 '07.

This will not impact our unit case sales reporting but will impact our concentrate sales and, therefore, revenues.

Additionally, also remember that Easter will shift from Q2 last year into Q1 this year.

Those are the topics that I wanted to cover and now we can turn it over to your questions.

Operator?

(OPERATOR INSTRUCTIONS) .

Thank you.

Your first question comes from Judy Hong with Goldman

Morning, everyone.

Just looking at the fourth quarter volume trends globally, you have talked about a bit of a slow down, sequentially, I am just wondering how much of the decision to de-emphasize the water brand really impacted the global volume number.

Good morning, Judy.

This is Muhtar.

Basically we had sparkling growth was the same number for the full year and as well as the fourth quarter, and we still achieved 6% growth in sparkling, international business so we are very pleased with that trend.

What you see is a slight slowing down of the still beverages, mainly water and that is because we have had growth in juice, good growth in juice comparable to the full year, same as also in sports, also for tea and coffee.

Essentially, it has been a de-emphasizing of the water business in big large markets, particularly in Asia, like China as well as Indonesia and therefore-- and mainly as a result of that category being low value for us.

It has been a specific action on our part and we feel very confident about our business in all of the categories.

Okay.

And just kind of following up on that in terms of looking at just over the next 12 to 24 months and think about the macro outlook.

You sounded still positive about the macro but just in terms of whether there are any regions or markets that may be a bit more concerning if the U.S.

starts to show a bigger slow down.

Judy, Neville here.

One other thing on the water just to give you a data point.

Full year growth was 13%, if we take out vitamin water here the quarter was 8%, so that gives you the metric in terms of what happened with regard to water in the fourth quarter.

We don't see there being a major impact on the emerging economies or the developing economies.

There will be one or two economies where, in the developed world there have been housing bubbles where we think it will be some pull back, but balance, we think that the momentum that we have behind our existing brands and new brands, the better execution, all of the things we talked about in our call are such that we are going to be able to manage what may be a 0.5% decline at the worst in terms of overall global growth.

I think we are ready to address the U.S.

issue.

So, let me put it to you this way.

We feel we have a strong tail wind behind our business and that that is going to carry us through 2008, even as we see some areas where there will be some economic dislocation.

Thanks.

Your next question comes from Bill Pecoriello with Morgan Stanley.

Morning everybody.

I was hoping to get a little bit more color on the Pacific division which decelerate sequentially aside from the China water strategy, some of the other markets that you didn't discuss in the release, Indonesia, Korea, there were some reasons there for the sequential deceleration versus the prior quarters and what efforts you are doing in those markets to improve the growth.

Thanks.

Bill, hi.

Essentially, Indonesia was specifically related, again to a slower down of the water just like we mentioned for China.

As far as Korea is concerned as you know we've had a transition of our bottling partnership there we are very confident that our new partnership and alignment with our new bottling partner there will take us into a modality of growth in Korea for the years to come.

We are confident about that.

There's been a slight slowing down in the Australia economy but we feel generally confident that our business will perform in terms of its past historical trends in 2008, quarter-by-quarter in the Pacific.

Just to pick up on Korea, I think there's a real pattern here that you have seen with us.

In terms of acquisitions, in some instances we turn it around very quickly like Philippines, in others more in depth reforms required, Germany would be one example of that.

We take the pain along the way and that's really Korea, that's the story of Korea.

And we are confident that we will see that one turning around, I think we have a good track record in that., we can deliver against it.

And then on the bottled water we should expect that across the four quarters as you made that decision and that would impact the following three as well?

No, I don't believe it will meet I think we now are in a situation where we are going into 2008 pretty clean, in terms of where we want to be in the water category.

Thanks.

Your next question comes from Bryan Spillane with Banc of America.

Good morning.

Morning, Bryan.

A question on operating leverage.

If you look at the 10% organic or currency neutral operating profit growth for the year.

If you could give us a break down of how much of that growth was acquisitions, how much was cost savings and how much was sort of underlying organic growth and then as we look into '08, the company has taken over $400 million of charges over the last two years and what's the pay back on some of the restructuring actions and as we look at '08 what should we think about in terms of productivity as a contributor to profit growth?

Okay, Bryan.

We hesitated on you for a minute because as we take these questions we are just trying to make sure that in fact you are who you say you are.

I am the real deal.

As has been experienced by a few companies over the last couple of weeks.

As we look at it, let me take you through a couple of different ways.

Basically, if you look at currency neutral operating income, we have gotten about of 10% growth about 8% of that is out of the core concentrate business, about a point is out of the bottling investments group and about a point out of acquisitions, so that is kind of how it comes to your 10% operating income growth currency neutral, okay.

Okay.

Relative to the charges we in fact had within OPEX, let me just talk about, for the quarter and the year, kind of the the same.

What we did this year, we had significant increase actually in marketing because we continue to invest behind the brands and we in fact accelerated some of that in the fourth quarter because we've had a really good year and we recognize we have flexibility to do that, to continue to drive the growth that we are seeing across all of our markets.

Within sales and service it has been up but primarily it has been up because of the acquisition, primarily the bottlers but you will see some continued increase from that, not only there but also the brands.

Within G&A ,in fact, G&A in the fourth quarter on, if you make it apples to apples, G&A in the fourth quarter was up 3% and 100% of that was due to incentive plans we have accrued for long-term plans because we have actually exceeded.

It is where we want to be.

Relative to restructuring charges, the biggest restructuring charges this year was really around closing a concentrate in Ireland which will be completely closed by mid year 2008.

It was a result as we said from a flying lean manufacturing techniques to that and we have been able to in fact shut down a whole plant without any increased, no increases anywhere else.

We are taking those, some of that is going to the bottom line but a lot of of that we are reinvesting actually behind the brands and into innovation to drive the sustainability of this business over the long-term.

Is it fair to say that the pool of productivity is going to be bigger in '08 than it was in '07?

It is just a matter of how much you spend back and how much you flex to the bottom line?

I would like to make one comment to build on what Gary said.

You will see us relentlessly focusing across the entire organization on the effectiveness and efficiency measures and also the programs.

As we said, we will take some of that to create more expense leverage on the P&L and we will continue to invest for health of our brands long-term.

Bryan, just on the fourth quarter marking, when I came back, I discovered that we had major markets in the fourth quarter weren't spending a penny.

The numbers wer'nt that good but they still wern't spending a penny.

We are back up at a level now where we are 12 months, good solid support ran behind our brands and that's part of what you saw in the fourth quarter.

So we are in good shape now going into '08.

Okay.

Great.

See you guys next week in Florida.

Thanks.

Once again, ladies and gentlemen, if you would like to ask a question, please press star and the 1 on your telephone key pad.

Your next question comes from the line of Mark Schwartzberg with Stifel Nicolaus.

Thanks, good morning everyone.

Muhtar, I was hoping on your priority, specifically the one about accelerating still beverage growth you could peel the onion more for us there, talk about the roll of existing brands in that acceleration, the roll of new brands and giver us some idea if you can about regions you see the opportunity being bigger than other regions.

Yes, I think that, as I said, the key is organic growth, as I said in, in my remarks, organic growth is oxygen of our business and you will see us continue to drive innovation in on organic growth in still beverages.

I think the Minute Maid brand and the success of it in markets like China and Vietnam, Korea is a great example of that.

I think you will see us in, we have just launched that also in India and it is doing very, very well.

You will see us focused on glaceau internationally.

You will see certainly adding much more function and benefits to our portfolio through innovation.

I would like to highlight one thing that Neville said.

We are now the leader in juice in all four brick markets; that's an incredible footprint, when you look at Brazil, Russia, with our [dugbly] brand when you look at Brazil with Jugos del Valle and sucos mice, and when you look at China with the Minute Maid Pulpy across all metro markets number one.

So in India with MAZA both in the mango category of juice as well as the lending mango category as well as in the citrus now with our new launch.

And many other emerging markets.

So you will see us focused much more on organic growth, we have got a great portfolio and we have a great innovation pipeline we will drive-thru that portfolio.

I know it is early but your comments on on glaceau internationally.

We have heard your willingness to look at that since the day you announced deal, but you've had six, seven, eight months to test the water from a consumer buying or potential buy in in markets other than the U.S.

other than North America.

Have you found anything of interest there in terms of the opportunity for that brand on the other side of the world if you will?

You will certainly see glaceau in international markets in the very near future.

CC, yesterday said in Canada, they will launch it in Canada in quarter two.

I think you will see us in different international markets with that brand.

Okay.

The linkage between that and POWERade here in North America is notable is that fair linkage at least in some cases on the other side of the Atlantic and Pacific?

We have said always that you glaceau is a wonderful brand that has categories and sources volume from different categories whether it is sports or enhanced waters or the entire active life style category.

So it is, it is a category really on and we believe that it will also hit the same buttons with consumers in international markets as we progress that trademark in vitamin water into the national markets.

Very good.

Thank you, Muhtar.

Your next question comes from John Faucher with JPMorgan.

Morning everyone.

Quick question on Japan, it looks as though the fourth quarter of this year was only about the second positive volume number on a positive comp in the past couple of years, the last being last year's Q4.

Can you talk a little bit about the ability to sustain that.

What level operating profit you have been delivering in Japan on a currency neutral basis over the past year or so and can you keep the volume positive while maybe needing to accelerate the operating profit growth there over the next couple of years?

Thanks.

Hi, John.

I have said that clearly our target was to stabilize Japan.

And we have done that in 2008 and we have consecutively, in 2007 and we c v consecutively delivered quarter after quarter growth.

We are now in a much more normalized position in Japan.

You will see 1 and 3% growth over the years.

That's our target.

That's basically how we see the picture of success.

We expect modest profit growth in Japan, especially as we stabilize Japan in 2007.

What we see is that our bottling partners are in a much more strengthened positions, and you are seeing one of the key categories in Japan.

One also important thing in Japan in 2007 was growth in two key channels, the vending and supermarket.

The vending channel is a very highly profitable important channel.

Our bottlers willingness to continue to invest will drive further growth in that channel is our belief.

Okay.

So it sounds as though your levels of incremental investment the past couple of years you feel like you have normalized the margins there and we should see a more normalized growth rate going forward?

Is that the way to look at it?

As I said we are stabilize the business and look for a more normalized growth rate in Japan going forward.

We belief also we have strengthened our brands in all of the categories.

Sparkling notably in 2007 was a key category that has grown particularly in Trademark Coca-Cola.

Very pleasing, double-digit growth, the highest in 30 years, tea category is also growing and very healthy in term of brands as well as and as I have mentioned we have had a growth in Georgia coffee in the fourth quarter of 2007.

Thanks.

Uh-huh.

Your next question comes from Carlos Laboy with Credit Suisse.

You now have a growing collection of these noncash JVs building around the world.

Do you see more of these in the future and could you speak to maybe some of the benefits and challenges of these arrangements and how it might affect your bottling relationships?

First, Carlos, good morning.

Let me say our, we are very pleased at where our bottling relationships are in terms of how we are aligned, planning together in joint force and how we see the future and the picture of success jointly together.

The clear, it is a very simple reason why we have these JVs because we believe that the category that we have these JVs in are better suit today be run through these JVs like we now have in Latin America for our juice acquisition and in Europe and it is basically creates a focus, it creates a scale and it creates the economics that deals properly with the categories and allows the bottling partners and us to focus on how we build that business together.

Thank you.

Your next question comes from Christine Farkas with Merrill Lynch.

Gary had a question for you regarding your buy back plans of 2008 you have indicated similar levels in '08 to '07 which was under my impression pulled back based on our acquisition of glaceau, can you help us understand given your cash flows can allow a larger buy back, what's going into that consideration?

I understand CCE has planned a buy back, perhaps other considerations there can you help us understand why that level is where it is for '08?

Sure.

At least I will try.

Let me two through that.

As you look at the credit markets and volatility there, and with some modest increase of debt levels, we think it is prudent at this point to be some what conservative in financial policies therefore with what we are looking at as well as maintaining credit ratings for the system we think 1.5 to 2 million is a pretty good place to start the year.

I think then it is important as we go through the year to update you on that.

The share repurchase that was announced by CCE yesterday is also very modest dealing with trying to keep the share count kind of flat.

So a pretty modest share repurchase program.

I would say, I would sum it probably up as we will be a little cautious because of the volatility in the markets but stay tuned and we will update you as we go through the year.

But the, because the credit ratings are pretty important to us as well.

While the CCE program is modest would you anticipate participating in that to maintain your stake?

No, I think T I mean that will just be arms length where they're just going into the market, I would think.

Okay.

Great.

Just on the back of acquisition, can you tell us how glaceau contributed to your North America volumes in the quarter?

About 2 points.

Great.

Thanks, Gary.

Thank you.

Operator, we have time for one more question.

Your last question comes from Justin Hott with Bear Stearns.

Thanks.

On glaceau, CCE yesterday mentioned they might have been a little slower in promotional el ac in the fourth quarter due to I guess the transition there.

Would it be fair to say, glaceau can accelerate the great growth and some comments on where you stand with some of them around the world, your plans there.

Thanks.

This is Muhtar, just was the last question on [COVOS?]

Yes.

Okay.

Just let me give you the answer on glaceau, it was related to the transaction, and it is back on a normalized sequence now in terms of our promotional el calendar and what you see is that we've had very good progressive increases as we have transitioned the distribution bottle distribution into our bottlers and increase in the market for distribution as well as convenience stores for minute water, smart water as well as vitamin energy.

So all components are work well as we move into normalized fashion.

As far as the concerned, as we said to you before, we will continue to look at opportunities in our ownerships and where we see some opportunities, we will and we have heard Neville mention our hospital ward and we are very happy with the performance of the big group but overtime you will see us taking some more on board and divesting some.

Thanks.

Thank you, Muhtar and Gary, just to wrap up, and also thanks to each one of you for joining us this this morning.

Now, we are in 2008 and it is the next step on your journey.

I am confident that we have laid a solid foundation on which to build in 2008.

And we remain, I assure you resolute about delivery against our strategic agenda this year as we did in .37.

We will continue to leverage our leading brands our global footprint and our strategic acquisitions .

You will see us building on invasion pipeline which we didn't talk a lot about while driving efficiency to deliver sustainable growth and shareholder value.

Thank you very much in

Ladies and gentlemen, this concludes the Coca-Cola Company fourth quarter 2007 earnings results conference call.

Thank you for your participation.

You may now disconnect.