Coca-Cola's Profitability Strengthens

We're maintaining our long-term outlook for wide-moat

Coca-Cola has made substantial strides toward a less capital-intensive operating model over the course of the year, with its U.S. bottling system now fully refranchised. We remain optimistic about the impact of the firm’s bottler refranchising and subsequent shift toward an asset-light model on its profitability, as evidenced the impressive gross margin expansion seen during the quarter. From our vantage point, Coca-Cola’s strong relationships with its bottlers have allowed it to better understand of local market dynamics and remain attuned to consumer preferences. In this vein, we appreciate the firm’s efforts to tailor its fare to regional trends in China (adapting price/pack to accommodate online ordering) and the Europe, Middle East, and Africa segment (focusing on small baskets and pack sizes).

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