10-K: Coca-Cola's 2024 Annual Report: Navigating Challenges and Charting Future Growth

• The Coca-Cola Company's 2024 annual report provides an overview of the company's performance, strategies, and challenges.
• Net operating revenues increased by 3% to $47.061 billion, driven by price, product, and geographic mix, but offset by foreign currency exchange rate fluctuations.
• The company's worldwide unit case volume grew by 1%, with sparkling soft drinks representing 69% of the total.
• Trademark Coca-Cola accounted for 47% of the worldwide unit case volume.
• The report details strategic priorities including shaping a portfolio of loved brands, transforming marketing and innovation, optimizing the Coca-Cola ecosystem, building talent and capabilities, and enhancing the license to operate.
• The company faces challenges including obesity concerns, evolving consumer preferences, increased competition, product safety and quality, and sustainability matters.
• The report also discusses risks related to operations, consumer demand, the Coca-Cola system, regulatory and legal matters, finance, accounting and investments, cybersecurity and data privacy, and environmental and social factors.
• The company is currently in litigation with the IRS for tax years 2007 through 2009, with a potential aggregate remaining incremental tax and interest liability for the tax years 2010 through 2024 estimated at approximately $12 billion as of December 31, 2024.

Score: 6

Explanation: The document presents a mixed sentiment. While revenue increased, operating income decreased and there are significant legal and economic challenges. The company is taking steps to address these challenges, but the overall outlook is cautiously optimistic.

• Net operating revenues increased by 3% to $47.061 billion.
• Worldwide unit case volume grew by 1%.
• The company is investing in its portfolio of brands, strategic capabilities, and people.
• The company is focused on productivity improvements and efficient business models.
• The company has a strong liquidity position and expects to be able to fund operating activities and cash commitments.
• The company is committed to addressing obesity concerns and evolving consumer preferences.

• The company faces challenges including obesity concerns, evolving consumer preferences, increased competition, product safety and quality, and sustainability matters.
• The company is in litigation with the IRS for tax years 2007 through 2009, with a potential aggregate remaining incremental tax and interest liability for the tax years 2010 through 2024 estimated at approximately $12 billion as of December 31, 2024.
• The company recorded a $760 million impairment charge related to the BodyArmor trademark.
• Fluctuations in foreign currency exchange rates negatively impacted net operating revenues and operating income.

• Unfavorable general economic and geopolitical conditions could negatively impact financial results.
• Increased competition could hurt the business.
• Obesity and other health-related concerns may reduce demand for some products.
• Disruption of the supply chain, including increased commodity, raw material, packaging, energy, transportation and other input costs, may adversely affect financial condition or results of operations.
• Failure to adequately protect, or disputes relating to, trademarks, formulas and other intellectual property rights could harm the business.
• Climate change and legal or regulatory responses thereto may have a long-term adverse impact on the business and results of operations.
• If we are unable to protect our information systems against service interruption, misappropriation of data or cybersecurity incidents, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.

Based on current spot rates and hedging coverage, foreign currency exchange rate fluctuations are expected to have an unfavorable impact on full year 2025 net operating revenues. The company currently expects 2025 capital expenditures to be approximately $2.2 billion. The Companys effective tax rate in 2025 is expected to be approximately 20.8% before considering the potential impact of any significant operating and nonoperating items that may affect our effective tax rate.

The commercial beverage industry is highly competitive, with numerous companies ranging from small to large and well-established. The company competes against PepsiCo, Nestl S.A., Keurig Dr Pepper Inc., Danone S.A., Suntory Beverage & Food Limited, Anheuser-Busch InBev, Kirin Holdings, Heineken N.V., Diageo plc and Red Bull GmbH, as well as numerous regional and local companies.

• PepsiCo, Inc. is a primary competitor in many of the countries in which Coca-Cola does business.
• Other significant competitors include Nestl S.A., Keurig Dr Pepper Inc., Danone S.A., Suntory Beverage & Food Limited, Anheuser-Busch InBev, Kirin Holdings, Heineken N.V., Diageo plc and Red Bull GmbH.
• The company also competes against numerous regional and local companies and, increasingly, against smaller companies that are developing microbrands and selling them directly to consumers through e-commerce retailers and other e-commerce platforms.

• The company's performance impacts shareholders through stock value and dividend payments.
• Employees are affected by compensation, benefits, and job security.
• Customers are impacted by product availability, pricing, and quality.
• Bottling partners are affected by the company's strategies and financial health.
• Communities are impacted by the company's sustainability efforts and social responsibility initiatives.

• The company intends to assert its claims on appeal and vigorously defend its positions in the ongoing tax litigation with the IRS.
• The company will continue to monitor developments related to the OECD's Anti-Base Erosion and Profit Shifting project.
• The company expects to repurchase shares to offset dilution resulting from employee stock-based compensation plans during 2025.
• The company will continue to monitor the fair value of the BodyArmor trademark in future periods.

• The Company is involved in various litigation claims and legal proceedings in the ordinary course of business, including, but not limited to, those arising out of our advertising and marketing practices, product claims and labels, competition, distribution and pricing, personal data protection and privacy, intellectual property and commercial disputes, tax disputes, and environmental and employment matters.
• The Company is currently in litigation with the IRS for tax years 2007 through 2009, with a potential aggregate remaining incremental tax and interest liability for the tax years 2010 through 2024 estimated at approximately $12 billion as of December 31, 2024.
• On June 20, 2024, the Mayor and City Council of Baltimore filed a lawsuit against the Company and several unrelated parties in the Circuit Court for Baltimore City, Maryland, concerning the environmental impacts of plastic packaging on the citys lands and waterways.
• On October 30, 2024, Los Angeles County Counsel filed a lawsuit against the Company, Reyes Coca-Cola Bottling, LLC, as well as other unrelated parties in the Superior Court for the State of California for the County of Los Angeles concerning the environmental impacts of plastic packaging on coastal areas and waterways.

• 1886: Beverage products bearing our trademarks, sold in the United States since 1886
• September 1919: The Coca-Cola Company was incorporated in September 1919 under the laws of the State of Delaware
• 1970 to 1981: The Company owned Aqua-Chem from 1970 to 1981.
• 1987 through 1995: To resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arms-length methodology
• 1996: To resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arms-length methodology
• 1996 through 2006: The IRS audited and confirmed the Companys compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006.
• December 20, 2002: On December 20, 2002, the Company filed a lawsuit (The Coca-Cola Company v. Aqua-Chem, Inc., Civil Action No. 2002CV631-50) in the Superior Court of Fulton County, Georgia
• September 17, 2015: On September 17, 2015, the Company received a Statutory Notice of Deficiency (Notice) from the IRS seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009.
• March through May 2018: The trial was held in the Tax Court from March through May 2018
• November 18, 2020: On November 18, 2020, the Tax Court issued the Opinion in which it predominantly sided with the IRS
• November 2021: In November 2021, the Company acquired the remaining 85% ownership interest in, and now owns 100% of BA Sports Nutrition, LLC (BodyArmor)
• November 8, 2023: On November 8, 2023, the Tax Court issued a supplemental opinion siding with the IRS
• August 2, 2024: On August 2, 2024, the Tax Court entered a decision reflecting additional federal income tax of $2.7 billion for the 2007 through 2009 tax years.
• September 3, 2024: With applicable interest, the total liability for the 2007 through 2009 tax years resulting from the Tax Courts decision is $6.0 billion, for which the IRS issued the Company invoices on September 3, 2024.
• September 10, 2024: The Company paid those invoices (IRS Tax Litigation Deposit) on September 10, 2024, which stopped interest from accruing on the additional tax due for the 2007 through 2009 tax years.
• October 22, 2024: On October 22, 2024, the Company appealed the Tax Courts decision to the U.S. Court of Appeals for the Eleventh Circuit.
• February 20, 2025: The following are the executive officers of our Company as of February 20, 2025