可口可樂 (KO) 2014 Q4 法說會逐字稿

Good morning, and thank you all for holding.

At this time, I would like to welcome everyone to The Coca-Cola Company's fourth-quarter 2014 earnings results conference call.

Today's call is being recorded; if you have any objections, please disconnect at this time.

(Operator Instructions)

I would like to remind everyone that the purpose of this conference is to talk with investors and therefore questions from the media will not be addressed.

Media participants should contact Coca-Cola's Media Relations department if they have questions.

I would now like to introduce Tim Leveridge, Vice President and Investor Relations Officer.

Mr. Leveridge, you may begin.

Good morning, and thank you for being with us today.

I'm joined by Muhtar Kent, our Chairman and Chief Executive Officer; and Kathy Waller, our Chief Financial Officer.

Before we begin, I would like to inform you that you can find webcast materials on the Investor section of our Company website at www.coca-colacompany.com that support the prepared remarks by Muhtar and Kathy this morning.

I would also like to note that we have posted schedules under the Financial Reports and Information tab in the Investor section of our Company website.

These schedules reconcile certain non-GAAP financial measures, which may be referred to by our senior executives during this morning session, to our results as reported under Generally Accepted Accounting Principles.

Please look on our website for this information.

In addition, 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 periodic SEC report.

Following prepared remarks by Muhtar and Kathy this morning, we will turn the call over for your questions.

Ahmet Bozer, Executive Vice President and President of Coca-Cola International; Sandy Douglas, Senior Vice President and Vice President of Coca-Cola North America; and Irial Finan, Executive Vice President and President of Bottling Investment will also be available for our Q&A session.

Now I'll turn the call over to Muhtar.

Thank you, Tim, and good morning, everyone.

During our last earnings call, we articulated five strategic actions to reignite our growth and committed to providing you an update on our progress as we move forward and into 2015.

So today, I'm going to start with some highlights from our fourth-quarter performance and then review the progress we've made against our five strategic actions.

For those of you following our webcast, you can see our quarterly performance and our new scorecard on slide 4.

Overall, our performance came in slightly ahead of where we had previously expected.

This was driven by some net positives above the operating income line, slightly offset by higher-than-expected currency remeasurement impacting profit before tax.

At the top line, structurally adjusted comparable currency-neutral net revenues grew 4% in the quarter, driven by a balance between volume and underlying price mix in what was a challenging macro environment.

At the profit level, structurally adjusted comparable currency-neutral operating income grew 7% in the quarter, while we continue to invest heavily behind our media, with double-digit increases in the quarter and full year.

Importantly, there are some highlights for the quarter.

We continued to focus pricing and revenue realization in key developed markets with North America and Europe both delivering positive price mix in the quarter and for the full year.

Our core strategies and our diversified global portfolio enables us to gain global value share in nonalcoholic ready-to-drink sparkling beverages, as well as still beverages in the quarter.

This is a key metric for us, particularly in a challenging macro environment.

As we announced last week, we also continued to strengthen our overall portfolio of billion-dollar brands and, in particular, our still brands.

Gold Peak, a premium tea brand in the United States, benefited from great marketing, strong media, and stepped-up execution to achieve this status.

Furthermore, FUZE TEA, our popular mainstream tea brand -- now available in nearly 40 markets around the world -- reached this status in less than three years, demonstrating the strength of our systems, marketing, and executional capabilities.

Finally, I LOHAS, our innovative water brand in Japan, regained billion-dollar brand status in 2014.

This brings our total number of billion-dollar brands to 20, out of which 14 are still brands.

Just five years ago, we had 14 billion-dollar brands.

Since 2010, on average, we've added more than one new billion-dollar brand each year to the list.

Stepping back from our quarterly performance, I'd like to talk about the bigger picture in 2014, a year of significant change for our Company that will continue in 2015.

Specifically, I want to discuss our five strategic actions to reignite our growth, which are: first, targeting disciplined brand and growth investments; second, driving revenue and profit growth with clear portfolio roles across our markets; thirdly, refocusing on our core business model; fourth, driving efficiency through more aggressive productivity; and fifth, last but not least, streamline and simplify our organization.

While we're making solid progress, we have more to do.

In 2014, we invested significantly in both our brands and in incremental growth opportunities.

We substantially increased our media investments in markets and categories where our media was underfunded relative to the market opportunity, where we had the right price/pack channel architectures, and where we had clear executional alignment with our bottlers.

The quality of our media has been increasing and we intend to approve it even further under the leadership of our new global Chief Marketing Officer, Marcos de Quinto.

We're seeing initial success, as exemplified by North America, where our incremental media investments, coupled with our segmented price/pack strategies, drove revenue growth in our sparkling portfolio through strong 4% price/mix in the second half of the year.

This gives us confidence that when we invest in our brands, align on our system plan, and focus on execution, we do see positive results.

Looking beyond our existing portfolio, we continue to focus on expanding our participation across a range of consumption occasions.

Today, the average household globally consumes 26 beverages per day; and of these 26 beverages, only 1.4 are Coca-Cola Company brands.

Our opportunity to capture more beverage occasions is just immense.

For that reason, we've announced strategic investment in Keurig Green Mountain and Monster Beverage Corporation.

Both of these investments underscore not only our ability to adapt to changing consumer trends, but also our commitment to accelerate innovation.

Next, we expanded our market segmentation, recognizing that each of our markets has a specific role in order to drive sustainable revenue growth.

Some markets focus on price realization, others on volume, and the remainder on a balance of the two.

Importantly, our proxy statement will be coming out in the coming weeks and you will see the revised incentive metrics, which will add revenue growth directly aligned to those market roles.

We also made headway in refranchising our bottling operations, both in the United States and internationally.

In North America, we closed several refranchising transactions in 2014 and laid out a clear path and timeline to refranchise the remaining territories.

Specifically, we refranchised territories representing approximately 5% of the US bottler-delivered business in 2014 and have already signed definitive agreements to continue refranchising a similar amount in the first half of 2015.

These agreements, along with our ongoing work, give us confidence that we will continue to accelerate our rate of refranchising each year and achieve our goal to retain a maximum of about one-third of the US bottler-delivered business by the end of 2017.

And it is our intent to refranchise the remaining territories by 2020 at the latest.

As we reach the end state in North America, these actions will drive higher operating margins, lower capital spending and invested capital, and improved ROIC for our Company.

Outside of North America, we announced two transformative changes to our bottling landscape in critical high-growth markets around the world.

First, in Indonesia, we announced a joint venture in Coca-Cola Amatil Indonesia that will help our system to capture the long-term opportunity in this extremely attractive emerging market.

We also entered into an agreement to rearchitect our African bottling system with the creation of Coca-Cola Beverages Africa, which will serve 12 Southern and East African countries and will be a top-10 global bottler once the transaction is completed.

Importantly, Coca-Cola Beverages Africa will have the scale, resources, and efficiencies to fund the investment required to capture the strong long-term growth potential in Africa.

These markets will be long-term growth engines for our Company, so it is absolutely critical that we invest sufficiently today to prime those engines for decades to come.

In order to reinvest our business and deliver against our long-term financial targets, we embarked upon an expanded productivity plan that will result in a total of $3 billion in annualized savings by 2019.

As Kathy discussed in detail during our modeling call in December, this represents a significant reduction to our addressable spend base, and our efforts are on track.

As you've seen in the press, we've begun work on reducing positions that are no longer aligned to our growth priorities or are deemed redundant as we streamline our operations.

While this is never an easy process, it is absolutely essential to ensuring that our business is wired for greater speed, responsiveness, as well as innovation.

And, importantly, it also frees up the resources we need to reinvest in the business to accelerate our growth.

Fifth and finally, towards the end of 2014, we began the process of streamlining and simplifying our operating model.

We announced the streamlining of group functional layers and began standardizing key processes across our business units.

This will not only reduce our cost structure, but more importantly, will create a more nimble organization that is wired to act swiftly and rapidly in today's dynamic landscape.

In summary, I am confident that these strategic actions are laying the groundwork for accelerated top- and bottom-line growth in the future and delivering the long-term shareholder value you expect.

Looking ahead, we will continue to make progress against our actions to regain momentum.

But, as we've said before, 2015 will be a transition year for the Company as we implement our new operating model and our incremental media investments in both 2014 and 2015 take time to pay off in full.

Further, we expect the global consumer environment to remain volatile.

Geopolitical hot spots around the world and potential deflationary environments in Europe, and continued softness in many emerging and developing markets around the world, could be partially offset by an improving environment in the United States.

So, against this backdrop, what remains to be seen is how quickly and to what extent lower oil prices trickle down to impact consumer discretionary spending in both importing as well as oil-exporting nations.

Therefore, we will focus on what we can control.

We will implement our strategies with focus and conviction, investing for the long term in emerging markets, as well as taking advantage of opportunities to solidify our position in the growth markets of today and tomorrow.

While, in 2015, we expect to grow comparable currency-neutral EPS mid-single digits, from 2016 on, we intend to be back to delivering against our long-term targets of high single-digit comparable currency-neutral EPS growth.

We will strengthen our leading brands through incremental media investments and best-in-class marketing campaigns.

We will deliver a step-change in productivity and complete the majority of North America franchising, both of which will drive growth and improve our margin structure.

And, finally, we will continue to enhance our market-leading capabilities to provide our customers and consumers with the innovative and refreshing products they expect from The Coca-Cola Company.

I will now hand the call over to our Chief Financial Officer, Kathy Waller, who will provide you with a more detailed look at our financial performance, as well as an outlook on our business for 2015.

Thank you, Muhtar, and good morning, everyone.

Our performance in the fourth quarter was slightly ahead of our expectations, due primarily to three factors: first, several markets around the world delivered slightly better top-line performance, thanks to a strong finish during the holiday season; second, gross margins came in slightly better than anticipated; and, third, operating expenses were lower than expected, which led to comparable currency-neutral margin expansion.

We are pleased with where the quarter landed.

Structurally adjusted comparable currency-neutral revenue growth was driven by a 3% growth in concentrate shipments and 2% underlying price/mix.

Concentrate shipments outpaced unit cases in the quarter, driven by an extra selling day.

However, for the full year, concentrate shipments were in line with unit cases.

Consolidated price/mix in the quarter was driven by pricing initiatives in North America, Latin America, and Europe.

Importantly, as we've done throughout 2014, we continue to invest behind our brands.

During the quarter, our marketing expenditures grew high-single digits, resulting in mid-single-digit growth for the year.

This increase in annual marketing expenditures was driven by a double-digit increase in media investments, as we continued to drive efficiencies within our overall marketing budget to put against our media spend.

Our fourth-quarter comparable EPS was $0.44, which included a 10-point currency headwind.

On a comparable currency-neutral basis, our EPS grew 5% in both the quarter and the full year.

Items impacting comparability in the quarter were primarily related to the impact of changing the exchange rate used to remeasure our Venezuelan subsidiary's net monetary assets into US dollars; a write-down on the concentrate sales receivables from our bottling partner in Venezuela; non-cash charges related to refranchising certain territories in North America; and costs associated with our previously announced $3 billion productivity program.

Given increased uncertainty and lack of liquidity in Venezuela, we remeasured our bolivar-denominated net monetary assets at the end of the quarter using the SICAD II exchange rate.

We are also using the SICAD II exchange rate to translate our Venezuelan subsidiary's local currency income statement into US dollars, beginning in January 2015.

The receivable write-down was recorded as a result of the revised assessment of the US dollar value we expect to receive.

Despite a difficult operating environment in Venezuela, the Coca-Cola system remains committed to the market and will continue producing and selling our products that Venezuelan consumers enjoy on a daily basis.

As you saw on our scorecard, full-year free cash flow was $8.2 billion, up 3%, primarily due to the efficient management of working capital and cycling incremental pension contributions last year, partially offset by an unfavorable impact from foreign currency exchange rate fluctuations and the deconsolidation of the Company's Brazilian bottling operations in July 2013.

For the year, cash return on invested capital declined 32 basis points, due to the $1.5-billion investment we made in Keurig Green Mountain.

As we look ahead to 2015, we anticipate continued challenging macroeconomic conditions in many markets around the world.

Despite this, we are on track with the actions we laid out during our last earnings call, and we remain confident in the outlook we provided in December.

Therefore, we expect our comparable currency-neutral EPS growth in 2015 to be mid-single digits, roughly in line with our growth rate in 2014.

As you will recall from our modeling call in December, there are many puts and takes to our P&L in 2015.

With the exception of currency, these have not changed.

Therefore, I will not go into detail on this call, but you can see the various line items on slide 13.

After considering our hedge positions, current spot rates, and the cycling of our prior-year rates, we now expect an approximate 5-point currency headwind on net revenues, with a 7- to 8-point headwind on profit before tax for the full-year 2015.

This is a stronger headwind than the previously communicated 5 to 6 points for profit before tax, due primarily to the effect from translating our bolivar-denominated profit at the SICAD II rate and to the recent decline in several emerging market currencies, which we do not hedge.

In terms of coverage, we are fully hedged on the euro, yen, and sterling for 2015.

We also have near-term coverage in place across several other major currencies.

There are a couple of phasing items you should consider when modeling the first quarter.

Due to our fiscal calendar, there are six additional days in the first quarter of 2015 as compared to the first quarter of 2014.

Although that will benefit revenue, variable costs such as marketing, sales, and distribution expenses will also occur to a much greater degree in the first quarter.

We expect the Venezuelan pricing provisions will continue to negatively impact our net revenue and operating income in the first quarter of 2015, as we began to recognize the impact in the second quarter of last year.

And we expect structural items, primarily related to North America, to be a headwind in the first quarter.

Taken together, we expect structural adjustments and the Venezuelan pricing provisions to be an approximate 2-point headwind on net revenues and an approximate 3-point headwind on our profit before tax.

In addition, we will cycle the timing of expenses in the first quarter of last year, when we had 4 points of operating leverage.

Therefore, we expect that comparable currency-neutral operating leverage will be negative in the first quarter.

Finally, we currently expect currency will be an approximate 6-point headwind on net revenues and an approximate 8-point headwind on profit before tax in the first quarter as we cycle more favorable rates from the prior year.

We currently anticipate closing the transaction with Monster Beverage Corporation at the beginning of the second quarter.

Note that this is slightly later than our initial expectations of the first quarter, due to various closing considerations.

At this stage, we do not anticipate any material changes to our structural impact guidance from December.

But, of course, we will update you along the way if there were to be a change.

In closing, we are confident in our strategies and in the actions we have already taken to regain our momentum.

2015 will be a transition year as we implement significant change in our Company and continue to reinvest in our business.

We absolutely believe that The Coca-Cola Company is best positioned to capture growth in the nonalcoholic beverages and to continue to deliver long-term value to our shareholders.

Operator, we are now ready for questions.

(Operator Instructions)

Bryan Spillane, Bank of America.

I've got a question about -- Muhtar, in your prepared remark, you mentioned the consumer environment remaining volatile in terms of your expectations for 2015.

Can you talk a little bit about what range of volatility you might have embedded in your plans for 2015?

Maybe talk a little bit more specifically about the consumer environment, both in Europe and Latin America, where since those are really two important markets for the Company and where it seems volatile?

Finally, just maybe how that might affect your decision to spend more marketing in those markets this year given the volatility?

I know there's a lot there, but thanks.

First, just at a very high level, 10,000 feet, 2015, we expect the macro environment to even become a little more volatile versus 2013 and 2014, as the microeconomic vagaries get worse in certain parts of the world.

Rate of interest, currency, certainly, will add to the volatility.

Growth gap will -- in some part versus other parts -- are going to grow.

Take, for example, the United States and Great Britain, two large western economies, starting the year 2015 strong, whereas the eurozone, Japan, and most of the emerging world starting the year slower.

So there is this gap and some catching up to do.

We're gaining share across the world in sparkling juices, important categories.

The industry -- we see some evidence that there's some things that are working for us, but we need to be cautious and take it quarter-by-quarter.

That's really important.

As far as Latin America is concerned, Colombia seems to continue to do really well as an economy.

There's some more lifting to do in Mexico and Brazil and south cone, but I was recently in Latin America, and our business there continues to -- we have a fantastic group of bottling partners investing for the short- and long-term growth and we continue to gain share.

We have a very strong package product channel segmentation and architecture in pricing, competitive, but at the same time, great revenue growth management strategies working there.

Europe, as per the last quarter, quarter four, which we are just reporting on, the southern European countries continue to be challenged.

Germany, our business was very much in the positive.

Northern Europe was a better environment for us than the south and Eastern Europe is again challenged by some of the macro volatility that spills over across from the east.

So that's how we would see them.

Asia, we're still very bullish, and Africa.

You see the actions we've taken related to reorganizing our bottling structure to even better suit the growth potential and the opportunities, there, in both Indonesia, the fourth most populous nation in the world, as well as the very dynamic 1 billion-plus consumers in Africa.

Fair to say that you've got a wider range of volatility or contingencies for that type of volatility built into the 2015 plans?

Just maybe the normal, just since it's such a volatile environment?

Yes.

When you look at LRB or nonalcoholic ready-to-drink beverages, Bryan, what you would see, probably, is maybe 100 basis points less growth versus the previous years, but, it's again, anybody's guess as to how quickly some of these economies are going to come back.

We have definitely those contingencies built in.

Maybe I can refer to Ahmet to give you a few more snapshots of the world in terms of micro and macro picture?

Ahmet?

Thanks, Muhtar.

Bryan, the only thing I would add to Muhtar's characterization is that volatility comes on top of a slowdown, but what's working for us, is that we are getting more and more traction on our plans and programs working with our bottlers.

I was in about four or five different countries over the last couple of weeks.

Even though we witness economic volatility or uncertainty, even in even in Northern Europe, yes there is quantitative easing, yes, there is lower oil prices, but it is uncertain yet whether the consumer will really benefit from that.

But even within that, our plans that address the right pricing and packaging and the right level of media investments and our alignment with our bottling system, is giving us confidence that we could actually weather this volatility in line with the guidance that has been provided.

There are a couple of bright spots, too.

I was in India, probably one country where there is a lot of optimism inside the country in terms of economic development.

As you know, we have an incredible momentum in India over the last seven or eight years, especially last year.

Our plans continue to build on each other from year-to-year.

I was in Brazil.

Again, a similar story.

After the elections, there was some cautious optimism and that caution side of that continues.

There's still a bit of optimism, but we do continue to deliver our results despite that environment.

As you know, Brazil had a mid-single-digit growth over the end of the quarter.

Yes, it was cycling better numbers from last year, but we've also had very strong share gains in Brazil.

So I would say that is our story.

There is volatility on top of a slowdown, but we do have traction with our plans and programs in the marketplace with close alignment with our bumpers.

Bryan, last thing I would add to what Ahmet and what I had said earlier, to your question about does it make sense to invest in media and marketing, and the answer is, absolutely, yes.

When we are able to target our investments in media and the way we are doing it, segmenting them by the different countries and the different regions of the world and improving not just the quantity but also the quality of the media, that's one of the main important factors that we see driving a better revenue number, a better price mix number.

So the two are really connected and that's what I really want to -- gaining share, improving on the top line through all the actions we're taking, of which targeted media, increased and improved quality media, is one of those.

All right.

Thank you for that.

I look forward to seeing you next week down at CAGNY.

Judy Hong, Goldman Sachs.

My question is really relating to the strong price mix that you saw North America in the quarter.

Obviously, you've been focused on getting mix impact and rational pricing.

Can you just speak to how much of the improvement was mix-driven, as opposed to maybe cycling some of the heightened promotional environment last year, and as you think about 2015 and beyond, just thinking about some of the mix acceleration potential and the pricing side in North America?

I'll let Irial answer that question, and then also, Sandy will add flavor to that, too.

Good morning, Judy.

The most important thing is, four quarters ago, Sandy and I spoke on the topic and we reiterated our belief in having balanced price mix volume growth in North America.

We've delivered on that in every quarter this year and our plan is to deliver again next year in the same way.

In terms of your question on mix and headline price, it's a balance approach.

Yes, in the fourth quarter last year, we were trending some lower numbers where we had some promotional activity, but when you look over the half-year, as Muhtar said, we grew pricing 4%.

So we feel very good about the actions we are taking.

We're feeling very good about how the trade is reacting and more importantly, we are feeling very good that our marketing and our execution are coming together in a way that really adds incremental value to our system.

I will maybe ask Sandy to add to that.

Sandy?

Good morning, Judy.

As Irial said, it's a consistent strategy.

The strategy is [born] of where the consumer wants us to go.

The consumer is buying smaller special packages of our sparkling beverage brands and accelerating that purchase and we're seeing the kind of mix benefit from that, that you describe.

But that couples with a disciplined approach to rate and volume.

Because in the end, what we're trying to do is expand the value and usefulness of our brands and create value for our customers.

Through the consistent execution of that strategy, we are seeing, in 2014, a solid year, but a year of improving performance through the year, and we will continue to pursue that disciplined strategy in 2015.

Got it.

Okay.

Then Kathy, if I could just have a quick follow-up on just in terms of the commodities in 2015.

What have you locked in, in terms of your exposure are there?

As you think about different commodity complexes that are turning more favorable, how much of that could we expect to see drive some of that margin improvement, particularly markets like North America?

Okay, Judy.

Our commodities environment for 2015, commodities we expect really to be benign for us, right?

There are some that are absolutely favorable, but then we have other challenges, and depending on -- not a North America, but outside of North America, we also have impact of secondary exchange embedded into our commodities.

So we really anticipate it being more of a benign commodity environment for us versus having any significant benefit from it.

Understood.

Okay.

Thank you.

John Faucher, JPMC.

Wanted to follow up a little bit on, Muhtar, on your comments on Europe.

Obviously, it's been a difficult market over the past couple of years.

What's the right way to think about a glide path getting back to growth there?

Is it something where QE works and we start to see the economy come back, do you think you can get back to consistent growth?

What are some realistic ranges of expectations for 2015 and potentially into 2016?

We're all going to watch what's happening with quantitative easing, John, in Europe, 18 months of the planned amount, EUR60 billion a month kicking in, whether that will have an impact or not, we will watch and see.

Stability is the keyword for Europe, as we go into 2015, so not getting much worse, and in some areas, continued volatility.

South Europe is going to continue certainly to be challenged, so I don't think there's going to be suddenly a lifting of the cloud for the consumers in the southern belt of Europe.

German -- the current exchange rates will help exporting countries, for sure.

How soon will that trickle in related to Germany, related to other export markets from Europe?

But that's a positive.

Quantitative easing is a positive.

The notion that most consumers now are used to this environment and feel that it is not going to get much worse; it may get a little better because of the QE.

So we'll have to see.

But we think that it will continue to be challenged, and then you've got, of course, the whole political environment to, basically, weave into the equation.

That political environment is something that is an unknown for us all.

That's how I would see.

As far as growth, yes, there will be pockets of growth in Europe and there will be continued pockets of challenges.

What we see -- we have very strong plans in place with our bottling partners for growth in Europe and we will see how -- we have all kinds of contingencies built into the plan in Europe, also, and we're going to take it quarter-by-quarter.

Great.

Thanks.

If I could ask one follow-up to Kathy.

Kathy, you talked about your FX coverage on translational for 2015.

Obviously, what this can lead to sometimes is a year or two year impact.

Any thoughts on 2016 and how you'll manage what could potentially be some FX headwind there as the hedges roll off?

Sure, John.

For 2016, we are also hedged on our major currencies at this point, and also have some on other currencies, as well.

So we will manage the impact and we are at pretty good rates at this point with our hedging, so basically we don't think that there is a relative issue at this point.

Great.

Thank you.

Steve Powers, UBS.

One quicker clarification question, then a slightly more thematic one.

First, obviously there are a lot of moving parts driving price and mix in the quarter, globally.

I wondered if you could just focus in on rate increases and talk about trends there because my guess is that rate lagged overall price mix in North America, which you talked, but Europe, the bottling investment, Latin American, and then rate was probably stronger than price mix in Eurasia, Africa, Pacific, and across the whole Company.

Any help there would be great, just parsing out overall rate trends?

Then more broadly, it sounds like your productivity targets remain unchanged from last fall, which isn't really surprising as it has only been a few months.

But at the same time, we've already seen announcements of headcount reductions that likely were not envisioned prior to your October update.

I'm wondering why we are not seeing more incrementality sooner on that front, or perhaps we are, it's just being absorbed by the macro headwinds?

If you could clarify that, that would be great?

Steve, this is Muhtar.

Good morning again.

As far as the rate versus mix, it's basically completely dependent on the country and the environment and the region.

There's no trend globally.

This is, on average, this much rate and this much -- it all depends on our price/pack channel architecture, our position in our market, the strength of our brand, how effective is our marketing driving the results that we need, which is all work in progress.

So it all depends, and I will let Sandy comment on the United States on that, but it's very much dependent on the region and dependent on the country and dependent on the circumstances.

That's really what I would say.

Sandy, you want to just address the United States part of that question?

Sure.

Our strategy in the US is, again, as Irial said, very consistent.

We view there to be a significant upside pricing opportunity in the sparkling beverage category.

We are driving that with significant investments in brand building and execution of a bright package architecture that will expand margins for our system and also for our customers.

That involves a very healthy rate program.

But at the same time, we are executing with a tremendous amount of energy, multiple proprietary and other small packages that the consumer is buying at accelerating rates.

For example, mini cans increased by 15% in the fourth quarter and that's us following the consumer to smaller package sizes of the brands they love.

That combination of rate and mix is creating a good balance with volumes to a healthy top-line growth picture.

Steve, just on your question on productivity, I would say to you that the reorg and how we are flattening the Organization and the number of announced cuts were all part of the program, totally part of the program, so, there's nothing that has it's just been executed.

That's all.

We stand by what Kathy said in the modeling call in December.

We are on track with the $500 million-plus piece of the productivity program for 2015 and we are on track with that.

But just to emphasize, all of what you see, what you hear, what you read, was part of the program.

Okay.

Just two points of clarification, just to follow-up on those answers.

Thank you very much.

On the price mix, maybe just Kathy, specifically to Eurasia, Africa, where I'm assuming rate pricing in Russia, for example, is quite positive, should we be expecting this negative mix trend to persist in 2015?

This is one follow-up on pricing.

Then Muhtar, to your point on the part of the plan, does that mean that the headcount reductions, for example, that were announced, was that part of the original $1 billion or was that part of the additional $2 billion that was announced last fall?

Just quickly on the last piece of your question, it was part of the initial $2 billion.

Then, as far as the rate increases, I'll defer to Ahmet if you want to just refer to that part of the question.

On markets like EAG, we price in line with inflation.

We may be slightly below inflation, slightly ahead of time.

You should expect to see consistent rate increase more or less in that range.

Fourth quarter for EAG was a bit of an anomaly.

There was a geographic mix impact that was driven by cycling of [jobend] shipments, so if you look at full-year price mix realization at EAG, it's a healthy 4 point, so, I wouldn't look at Q4 to draw any conclusions.

Thanks.

Ali Dibadj, Bernstein.

Given the pressure that currency is placing and all this macro volatility, do you anticipate or can you, actually, accelerate anything around your cost-cutting plans to offset this or do you plan taking even more pricing in places like Europe, Eurasia, Africa, or Asia-Pacific, where it does not look like you are offsetting your currency moves as much?

Ali, just on a broad-based answer to your question, it's really critical that we balance the needs in the marketplace and the need for us to be healthy in the marketplace on a both medium- and long-term basis.

That's why we hold accountable all our business unit presidents for local currency.

We're very happy with our progress so far, with what we are doing with our productivity initiatives and what the current results are for those productivity initiatives, so far.

Early days.

But we certainly are looking to do more where it makes sense.

But one thing you will not see us is taking, basically, actions in the marketplace that weakens our position for the medium and long term.

That's the critical piece that I want to stress.

So in other words, we shouldn't anticipate more pricing as FX continues to be a negative pressure?

If you can answer that, also, in the context of the benignness of commodities in 2015, and if that is a limit on your ability to take pricing, again, to offset FX and in the broader price context?

We work with all the different levers that are available to us, how our better marketing, more marketing is working, driving results, how the investments are working, that we're putting in the marketplace with our bottling partners, our basic brand strength in the marketplace.

All of those things.

Essentially, in terms of commodities, again, that's something that is very volatile in the world that we live in.

Four or five months ago, if someone said we'd be looking at current price of oil, no one would have believed is.

So everything is changing very rapidly and we are remaining flexible and what we can achieve to the best of our ability, both in pricing, both in terms of investing for the future, as well as making sure that our investments are targeted and our segmentation works.

There is not one solution.

The segmentation is really driving better results than we have anticipated when we put that program into place.

Okay.

I'm just trying to understand.

We could anticipate, if the consumer is ready to do it and if the segmentation suggests, we could see more pricing align with inflation because of currencies being so negative.

Is that fair of what you are saying?

I will just leave it at what I said.

Okay.

Thanks.

Mark Swartzberg, Stifel Financial.

Just a quick one, Kathy, a technical question.

The six additional days in the first quarter, is there some level of give-back later in the year?

Do we see a reversal of that in the fourth quarter, for example?

Based on our 4-4-5 calendar, the six additional days get pushed into the first quarter, but they come out in the fourth quarter.

Okay.

Fair enough.

That's all I've got.

Thank you.

Bill Schmitz, Deutsche Bank.

One is a housekeeping question.

Can you just tell us what the pricing would have been in Latin America if you were at SICAD 2 for this year and last?

That's all local currency.

So it is what it is.

What we talk about is all pricing in terms of the local currency we take.

Whether we measure that in SICAD 1 or 2, it will be the same number.

Okay.

I was just trying to get at what impact Venezuela had on the price, just for modeling for year, if there was a Venezuelan anomaly this quarter that might have take that pricing down next year?

For next year, the impact of fair pricing law will continue in Venezuela.

That is what actually impacts our revenue in Venezuela.

It caps our ability to take revenue.

That does continue.

Obviously, it starts over in 2015, but it will not be a structural item because we cycle it as of the second quarter.

So, then, yes, we also do have an impact to our revenues from a different exchange rate and that would be considered currency.

Okay.

That's very helpful.

Thanks.

Just on Asia-Pacific, it came in a little lighter than our expectations.

It was one of the lowest volume outcomes in a while.

In your prepared comments, it seems like you are fairly sanguine about that segments, so was there an anomaly this quarter that took the volume a little bit softer and the price mix, so negative?

I know there was a mix element there, but any comments on that would be very much appreciated?

Bill, this is Ahmet.

I will try to address that.

One big thing was the timing of the Chinese New Year, but I wouldn't conclude my comments without saying that the market in China, especially the food and beverage market, has been weakest in the last 10 years.

But I would also say that we've been consistently applying our strategy that we have covered with you guys a number of times before and resulting in fairly significant share gains in China.

As you know, in Japan in the middle of last year, there was an increase in taxes and we're continuing to see the effect of that, but, still delivering almost close to flat but not that close.

It's minus [1%].

But the biggest item there was the timing of the Chinese New Year, as well as continued industry headwinds in China.

Great.

One quick last one, if I could.

Just to gauge the progress of the productivity program.

Is a good metric to look at the Corporate unallocated line on the segment data?

Does that come down as the restructuring savings come through?

The Corporate unallocated line.

Yes, that is one place where you will be able to see the restructuring come through, but as Muhtar said, we are on track and with everything that we have announced to date.

Great.

Thank you guys so much.

I would now like to turn the call back to Muhtar Kent for closing remarks.

Thank you, Kathy, Ahmet, Sandy, Irial, and Tim.

In summary, we are moving quickly to reignite revenue growth while simultaneously driving costs out of our business through an aggressive productivity plan.

While we've already made progress against our five strategic actions to regain our momentum, we are just beginning.

2015 will be a transition year, as we rewire our operating model for growth amidst an uncertain global consumer environment.

While the macroeconomic environment remains challenging in the near-term, we are confident in our ability to return to sustainable growth as the long-term dynamics of our industry remain promising, our brands and our global system are unparalleled, and we are fully dedicated to strengthening our position as the world's leading beverage Company.

As always, we thank you for your interest, your investment in our Company, and for joining us this morning.

Thank you.

This does conclude today's conference.

You may disconnect at this time.