The Coca-Cola Company (KO) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Shareowners' Meeting of The Coca-Cola Company. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to James Quincey, Chairman of the Board and Chief Executive Officer of The Coca-Cola Company. Mr. Quincey, I turn the meeting over to you.

Thank you, operator, and good morning to everyone. We are here at the Annual Shareholders' Meeting of The Coca-Cola Company. Our company, your company has been holding annual meetings since 1921, but, of course, this is the first virtual annual meeting in our history. It is another example of how we're all having to adapt in these extraordinary times, learning as we go, and I'm glad to have you all with us today. Let me start, if you will, by addressing the overall crisis that is impacting literally the whole world. I'm reminded that our company has seen many difficult chapters in its 134-year history. As always, we've emerged stronger. And at this moment, of course, our company's deepest sympathies go out to those whose families and friends have been impacted by the pandemic. I'd like to thank everyone fighting on the front lines, including health care and essential service providers worldwide. Also, a special thanks to the employees of The Coca-Cola Company's bottlers, for everything they've been doing to keep our business up and running. We have and always will put the health, safety and security of our people first. Our approach is ground in our company's purpose, which ensures that we will continuously strive to make a difference for people in our communities and in our workplaces. We've taken many major actions to help address the pandemic for our employees and our supply chain. We've implemented a number of measures to increase social distancing within the company. Most of our office-based employees are working remotely, including myself. For those who can't work remotely, we're using enhanced hygiene and sanitation practices in our manufacturing and distribution facilities. At the same time, we've ensured our products can be delivered safely to stores and communities that need them. In doing this, we've added extra precautions to ensure products are handled safely at every step from manufacturing all the way through to customer outlets. We're continuing to provide sick leave, of course, for all the employees in The Coca-Cola Company, and we've opened Coca-Cola Employee Disaster Relief Fund. It supports associates who may need extra help to care for family and loved ones during the pandemic. For our communities, we're supporting the places where we do business. The Coca-Cola system has made contributions to support relief efforts in markets impacted around the globe. The system is committed to contributing more than $100 million. Commitments to date include $40 million from the Coca-Cola Foundation, the philanthropic arm of the company. Our group operations have redirected some of our marketing spend to support community relief programs in markets hardest hit by the pandemic. In some markets, including North America and Asia Pacific, our teams are lending our Coca-Cola brand's social media channels to community organizations. This helps them ensure that important public service announcements get even more reach and visibility. Around the world, local teams are finding ways to redeploy resources to help meet the needs on the front line. For example, in our hometown of Atlanta, Coca-Cola delivery trucks helped transport 6,000 pounds of plastic sheeting from a supplier's warehouse to Georgia Tech, where they created 50,000 plastic surgical shields for health workers. This successful effort is now being scaled across the U.S. And several of our bottlers have used their plants to produce hand sanitizers for health care workers. I'm proud of our people, from our company and all across our bottling systems, for dedicating time and resources to support local communities around the world whilst also maintaining continuity of business operations. Coca-Cola has a history of leadership, of resilience and of doing the right thing, no matter whether times are good or when challenges exist. And this time is no different. Without exception, our business is being impacted by the pandemic. We do expect it to be temporary but significant. However, we went into this crisis from a position of strength. We're coming off solid results in 2019. The progress we've made from a strategic standpoint equips us to thrive in a multitude of macroeconomic environment. We've never been better positioned than we are today to manage through this pandemic and emerge stronger. And my confidence is grounded in history. Our company was founded in 1886, and we grew with a purpose to refresh the world. This became, over time, more than just physical refreshment. It became refreshment in spirit to have a positive impact on the communities we came to serve globally. The Coca-Cola Company's purpose continues to be to refresh the world and make a difference, and it revolves around 3 pillars. Loved brands; we craft meaningful brands and a selection of drinks that people love. We do it sustainably; we use our leadership to be part of the solutions to drive positive change in the world to build a more sustainable future for our planet and for a better shared future. We invest to improve people's lives; from our associates to all those who touch our business systems, from you, our investors, to the broad communities we serve. This purpose has never been more important than it is today. As I've watched our system come together during this time of crisis, I'm reminded of the power of our people to truly make a difference to serve our communities and to help shape a more sustainable future. Just as our purpose guides us in difficult times, it guides our vision for growth in better times. Our performance in 2019 is both a clear reflection and a driver of our purpose. We remain focused on delivering shareholder returns. You, the owners of our company, believe in our vision for the future and want us to succeed and we're committed to giving you return on your investment. We've seen over a century value creation, and 2019 was no different. We achieved our key financial targets, and we saw several strategic wins, including our highest ever share gains in almost a decade, strong growth in Trademark Coke, transactions outpacing volume and the successful integration of Costa Coffee. We made a number of changes over the past several years to ensure we're well equipped to grow, which will still be true when the current crisis subsides. We've become a true total beverage company through innovation across our portfolio. We've transitioned from a volume-centric model to a value-centric philosophy, and we've shifted our organization from a purely geographic approach to a much more networked model. Even as our business grows, we'll remain focused on reducing our footprint with clear goals around water, carbon and waste. In 2018, we launched World Without Waste, which has 3 fundamental goals, to make our packaging 100% recyclable globally by 2025 and to use at least 50% recycled material in our packaging by 2030. We'll collect and recycle a bottle or can for each one we sell by 2030, and we'll bring people together to support a healthy, debris-free environment. We made significant advances and commitments in 2019, all of which are detailed in our latest business and sustainability report. This was released this morning and is available on our website. For example, we rolled out 100% recycled PET plastic bottles in over a dozen countries and increased our recyclable packaging globally to 88%, up from 85%, in early 2018. And we announced that Sweden will become the first country worldwide where all Coca-Cola plastic bottles will be made from 100% recycled material, a truly circular economy. We're also on track to meet our goal of empowering 5 million women by the end of 2020, and we're continuing to replenish more than 100% of the water used to manufacture our beverages. Finally, in 2019, we celebrated our 100th anniversary as a publicly traded company. I'd like to thank you, our shareholders, for your investment and your continued confidence in our company. Coca-Cola is built for the long term. When we face short-term challenges, we persevere. We build a better future. It's in our heritage. It's what we're doing today. Thank you. So with that, I'm now going to shift over to the business portion of the meeting. And today, we will address 4 business items detailed in your proxy statement. Following that, I will conduct a question-and-answer session in which we'll address questions about any of the items in the proxy statement or other business issues you wish to raise. And let me point out now that you do not have to wait to submit a question for the Q&A. You can submit a question right now. For our shareowners logged into the live webcast today, please submit questions by clicking on the messages icon at the top of the screen, type in your question, then click the arrow icon on the right to submit. And just to be absolutely sure that all shareholders are able to ask questions today, we will also be accepting questions during the live meeting at [email protected]. The meeting procedures and rules of conduct are posted on the virtual meeting platform and on our Annual Meeting website. It's our intention to finish this meeting by 9:30 this morning. Let me first welcome the members of the management team joining me this morning, John Murphy, Executive Vice President and Chief Financial Officer; and Jennifer Manning, Associate General Counsel and Corporate Secretary. And also, I'd like to extend a special welcome to our Board of Directors, who have joined us this morning. Bios for all director nominees are included in your proxy statement beginning on Page 16. We are fortunate to have a very capable group of directors. They are a model for dedicated and effective board leadership. They provide leadership for our company and to me with thoughtful guidance and always with the highest integrity. We are thankful for their service and their dedication to our company and to our shareowners. I do also want to acknowledge Ron Allen's service to our Board of Directors. Ron has decided not to stand for reelection. He has been an important contributor to our success since he was first elected to the Board in 1991, most recently serving as Chair of the Audit Committee. We will truly miss you, Ron. Today, we are also joined by representatives from our independent auditing firm, Ernst & Young. And finally, many of our long-time shareowners as well as our employees and alumni joined the meeting today. I extend a very warm welcome to all of you. Now on to today's voting matters. The agenda for the meeting and our proxy statement are available on the virtual meeting platform. These will serve as your road map to the business items we'll be discussing today, and I encourage you to follow along. There, you will also find our meeting procedures and rules of conduct. Ensuring that this meeting is productive is our top priority. So I also ask you to please follow these rules. They are available by clicking the link that says Meeting Materials. Here's how the meeting will flow. Our Corporate Secretary, Jennifer Manning, will present each of the 3 management proposals. There is also 1 shareowner proposal, which will be presented by the proponent's representative. The presentation of the shareowner proposals will be limited to 3 minutes. Right after each proposal is presented, I will present our Board's point of view and voting recommendation. Just like in our past meetings, after all 4 business items have been presented, I will conduct a question-and-answer session, where I'll take questions from the 4 business items that we are voting on today or on any other appropriate business topics you would like to. Jennifer, will you please bring us the Secretary's report?

An updated notice for this annual meeting was furnished to shareowners on April 8, 2020. The proxy statement for this meeting was mailed beginning March 5, 2020, to all shareowners of record as of February 24, 2020. Our inspectors of election from Computershare Trust Company N.A. advised that we have a quorum represented by 85% of the total shares eligible to vote. The polls are now open. There are 4 matters being voted on. Page 3 of the proxy statement lists the voting matters. If you sent in your proxy or have already voted by telephone or Internet, you do not need to take any further action unless you wish to change your vote. Any shareowners who have not yet voted or wish to change their votes may do so by clicking on the voting button on the web portal and following the instructions. At the end of the Q&A session, the ballots will be tabulated by our inspectors of election. That concludes the Secretary's report, Mr. Chairman.

Thank you, Jennifer. Would you please present the first matter to be voted on?

The first matter is the election of directors. The company's by-laws require that every director stand for election each year. Therefore, all of the director nominees listed in your proxy statement are nominated for election for a 1-year term expiring in 2021.

Thank you, Jennifer. We have a very knowledgeable and engaged Board. Our director nominees are highly qualified to represent the interest of our shareowners. Beginning on Page 11 of your proxy statement are details about our directors, including each director nominee's qualifications. There is a recommendation to vote for each nominee. As I explained, I will take questions on this and other matters during the Q&A. Now Jennifer, let's go to the second item.

On Page 45 of your proxy statement is the advisory vote to approve executive compensation. As required, the company seeks a nonbinding advisory vote from shareowners to approve the compensation of the company's named executive officers as described in the compensation discussion and analysis and compensation tables of the proxy statement.

The compensation discussion and analysis in your proxy statement explains how the Talent and Compensation Committee views company performance and how executive pay is tied to performance. We take this say on pay vote seriously, and we'll continue to consider the outcome of the advisory vote when making compensation decisions. The Board of Directors recommends a vote for the advisory vote on executive compensation. Jennifer, would you please present the third item?

Our Audit Committee has appointed the firm of Ernst & Young LLP to serve as the company's independent auditors for the 2020 fiscal year, and this item seeks ratification of this appointment. The Audit Matters section of our proxy statement, which includes this proposal, begins on Page 87.

Thanks. The Audit Committee and the Board believes that our auditors, Ernst & Young, served the company and shareowners well and, therefore, recommend a vote for the ratification of their appointment. Jennifer, would you please present the fourth item?

The fourth and final business item is a shareowner proposal requesting a report on sugar and public health. This proposal and the Board's response begin on Page 93 of your proxy statement. Mr. Rogers will present the proposal on behalf of their proponent. The presentation of the proposal is limited to 3 minutes, the same time limit we use during our in-person meetings. The phone line for the presentation will be open only for these 3 minutes. For the convenience of Mr. Rogers, we will signal when he has 20 seconds remaining. I now ask the operator to open the line.

Mr. Rogers' line is open.

Thank you. Should I begin? Hello?

Yes.

Yes, please.

Yes, please.

Good morning. I am privileged to represent Harrington Investments to introduce the shareholder proposal on sugar and public health. Being a world leader in promoting mass consumption of liquid sugar to its products and knowing the colossal health problems created worldwide by such consumption, The Coca-Cola Company is fast becoming synonymous in medical circles with the likes of Philip Morris and British American Tobacco. The coronavirus pandemic is placing a spotlight on how dangerous to health Coke sugar-laden products are, especially in light of the company's irresponsible marketing practices. One of the sad facts being exposed in the coronavirus pandemic is how populations and communities of color, major marketing areas for Coca-Cola, have much higher percentages of people contracting and dying from the virus. People in these communities are more vulnerable because their immune systems and overall health have already been seriously compromised due to their high rates of obesity, hypertension, diabetes and heart disease. All these chronic diseases have been linked to the overconsumption of liquid sugar found in Coca-Cola's flagship beverages, which the company continues to aggressively market worldwide to children and communities of color. Evident by the shameful low scores Coca-Cola receives in the ATNI index, it is clear that Coca-Cola executives, Board members and large institutional shareholders like billionaires Warren Buffett of Berkshire Hathaway and Larry Finkel of BlackRock, simply don't care as long as profits keep rolling in. Coca-Cola will eventually pay a high price for refusing to adequately address the sugar health issue, especially as it relates to undermining children's health as Corporate Accountability notes in its report Partnership for an Unhealthy Planet. And let us not forget the use of illegal hazardous child labor in the dangerous harvesting of sugarcanes by Coca-Cola sugar processors and Coca-Cola's complicity and deadly violence against union leaders and family members in Colombia and Guatemala. When you look at Coca-Cola's proxy statement, it's sickening the many pages dedicated to justifying the outlandish compensation paid to its money-grubbing executives and Board members, whose policies are making the world sicker and fatter. Our products, irresponsible marketing policies and the junk science and political interference we deploy through groups like ILSI should cease being leading causes of the worldwide health crisis. Our company should work with real, not…

Mr. Rogers, you have 20 seconds remaining.

In diet and nutrition to help effectively address the health prices due in large part to Coca-Cola's fueling the obesity and related diseases epidemics. This proposal requests that the Board issue a report on sugar and public health with support from a group of independent and nationally recognized scientists and scholars providing critical feedback on our company's sugar products to its market -- marketed to consumers, especially those folks...

Mr. Rogers, you have reached the 3-minute mark. Please take...

So Mr. Buffet, Mr. Fink (sic) [ Mr. Finkel ] and other large institutional shareholders, sure you have a conscience and support this resolution. Thank you, and I hope you all stay well.

Thank you. Operator, please close Mr. Rogers' line.

His line is closed.

Thank you, Mr. Rogers, for presenting that proposal on behalf of the proponent. Let me explain the Board's positions on this shareowner proposal. This proposal requests that the Board issue a report on sugar and public health, with support from a group of independent and nationally recognized scientists and scholars. However, the Access to Nutrition Foundation, our respected, independent, not-for-profit organization based in the Netherlands, already produces reports covering our company that encompasses sugar and public health, and which addressed the essential objectives sought by this proposal. This work, just like the proposal request, is independently funded by groups like the Bill & Melinda Gates Foundation, the Dutch Ministry of Foreign Affairs and the Robert Wood Johnson Foundation. The Access to Nutrition reports provide analysis on efforts by leading food and beverage companies to improve access to nutritious foods and beverages. These reports are used by different stakeholder groups, including academia and civil society organizations. The additional reporting, as requested in this proposal, would provide no usable information not already covered in the Access to Nutrition reports. All of this is fully detailed in your proxy statement beginning on Page 95. Let me also say that this proposal might lead you to believe that our company is not a responsible player in this area. This is simply not the case. We absolutely recognize the role our company must play in addressing health challenges. We fully understand that people should not consume too much sugar. So we are taking specific meaningful actions to help consumers more easily control the consumption of added sugar. Everything we do in this regard is disclosed on our website. And thank you. And that concludes the voting matters. Now since all voting matters have been presented, that concludes the business portion of our meeting. The polls will close at the end of the question-and-answer session. Any shareowner who has not yet voted or wishes to change their vote may do so by clicking the Cast Your Vote link on the virtual meeting page. Shareowners who have already submitted a proxy or have voted by telephone or Internet and do not wish to change their votes do not need to vote again. Before we begin our question-and-answer session, I will ask Jennifer for the preliminary voting. Jennifer?

Thank you. The following vote is preliminary. If you voted today, your vote will be tallied this afternoon and included in our final vote. And as James said, the polls will close after the Q&A. The inspectors of election report that each nominee for election as director has received at least a majority of the votes cast in favor of their election. Therefore, all of the director candidates have been elected to serve as a director until 2021. The advisory vote to approve executive compensation has been approved with an affirmative vote of 97%. The management proposal on the ratification of Ernst & Young as auditors has been approved with an affirmative vote of 96%. The shareowner proposal regarding a study on sugar and public health did not pass and had an affirmative vote of 7.79%. That concludes the preliminary vote report.

Thank you, Jennifer. We will now turn to the question-and-answer session. We are taking questions from those who are attending virtually today, and we also have questions to address that was submitted in advance to our 2020 Annual Meeting website. For our shareowners logged into the live webcast today, please submit questions by clicking on the messages icon at the top of the screen, type in your question and then click the arrow on the right to submit. And to be absolutely sure that all shareowners are able to ask questions today, we will also be accepting questions during the live meeting at [email protected]. So that's how you ask the question. We would like to answer as many of your questions as we can during the meeting. The best way you can help us to do that is to keep your questions succinct and to the point. We welcome questions or comments about any of the voting items we just covered or the general business affairs of the company. Questions regarding personal matters, employment matters, product issues, suggestions for product innovations and, importantly, questions that personally disparage someone will not be presented a response. Jennifer, can you please present the first question?

This question is from [Patricia Skylar]. Once we're on the other side of COVID, is there a new normal for the soft drink business? If so, what does that look like? More specifically to this, can you talk a little about e-commerce in Coca-Cola's business?

Of course. Of course, COVID is affecting us, and we talked a little about that on our first quarter earnings release and call and some of the media. Clearly, it's a crisis that's affecting the business, particularly our away-from-home business. We are seeing -- in the midst of all this, while there is a significant impact globally on the way from home business, we are -- we do see a surge in e-commerce. And so we are seeing a doubling in the rate of sales. So we've got a still single-digit percentage of our business globally, but growing very quickly. We think that as we get through the COVID crisis, as we move from the lockdowns to a graduated series of reopenings, we don't expect it to be an overnight one shot reopening. We expect to see a graduated series of reopenings in phases around the world. We do expect to see this e-commerce trend being an enduring part of what the new normal looks like post COVID. We also anticipate that the away-from-home channels will recover. It's not to say that everything that was true about our business and the way people behaved and consumed beverages before this crisis will be the same. But we are fully of the view that it's very human to want to congregate, to do things together, whether it be for entertainment or socializing or any other form of leisure activities. There will be new behaviors, but we are sure that there will be a very strong away-from-home business in the future. We will be able to adapt to it. The e-commerce will be a stronger part of it. And we will still not see that much, because at the end of the day, whilst there are many unknowns at this point in time due to the crisis, there are a few knowns going into the future that we, at The Coca-Cola Company, can be -- have in our hand as very important. One is that it has been absolutely true that as you look across the world, the leading edge of consumer trends has been to see a growth in commercial beverages. Consistently, all the time, what comes with that is a more diverse desire for a wider choice of beverages. Beverages and packages is an occasion. So we are absolutely convinced that there will be a vibrant beverage business, a vibrant total beverage business post the corona crisis. It will be attractive to invest in from a return on capital point of view. And Coca-Cola, we are -- as the industry leader, are best positioned to be able to emerge stronger, as we have done from every crisis, every crisis that has hit this company since its beginning 134 years ago. Whether a military crisis, an economic crisis or a pandemic, we have always emerged stronger. So we are very confident and believe in our future post COVID. Jennifer, will you now give us the next one?

This question is from [Jack Arogeti]. Some public companies have announced dividend suspensions resulting from the COVID-19 crisis. What impact, if any, has the coronavirus had on the Coca-Cola Company's plans for [ quote ] dividends that you and the Board now envision?

Yes. Thank you. Great question. We have, of course, as a Board, followed very closely what's been happening with the crisis and have had the Board has had weekly written updates, and we've had some phone calls to go over all the important parts of the business and the aspects of the business that are being impacted and the new risks we see. And in doing so, we have kept in mind very clearly how each of the stakeholders in the business, what is the priority in terms of that stakeholder group? I mean, in the end, we have always talked about, in terms of our sustainability strategy, we need to have a vibrant community so we can have a vibrant business. And actually, in this case, it's the other way around. We need a vibrant business to be able to have all the stakeholder groups participate in it. So for the employee group, we focus very much on job security, even where we furloughed people, predominantly the cost of baristas, in the U.K. So we have been very clear on what we're trying to do with the employee group. Similarly with the shareholder group, we have wound down our share repurchases. We have used our capital allocation approach. So we've wound down the shareholders, which was the fourth priority in our capital allocation. We have set out an expectation that while there might be interesting assets at interesting prices, we don't see a material amount of M&A. And we will be very judicious about thinking about whether to do anything. And then we're left with the dividend and investing in the business and a bit like the employees and other stakeholders, we're very clear on the importance of the dividend to our shareholders. And certainly, we can't guarantee everything in the future, but we're very clear on the priorities. And we are focused on managing the business to deliver the best result for the shareholders each week, each month, each quarter with a view to the long run, with a view to emerging stronger from this crisis, as we've always done before, to ultimately protect the long-term value of the Coca-Cola business. Jennifer, could we go to the next question?

This question is from Kevin Chuah, a shareowner representing ShareAction. With rising levels of obesity in the world, it's important that businesses create healthier products and adopt responsible marketing practices. With sugar taxes being present in more countries than carbon taxes, leading companies have an opportunity to stay ahead of further regulation while capitalizing on changing consumer preferences towards healthier products. It's encouraging to see Coca-Cola increasing the availability of low- and no-sugar products, but more effort is needed. Over the years, Coca-Cola's performance in the Access to Nutrition Global Index, which you referred to in your response to shareholder proposal #4, has not improved. In fact, the company scores 3 out of 10 for its efforts in addressing nutrition challenges and has fallen in the ranking from number 12 to 13. In this context, I want to ask, what is Coca-Cola planning to do to improve its performance in this area and capitalize on the financial opportunities it brings?

Thank you for your question. We certainly agree that too much sugar isn't good for anyone. And that's why we've been taking steps throughout the world to help people reduce the amount of sugar they consume for products. Leading health authorities have been clear. They recommended that individuals shouldn't consume more than 10% of their calories from added sugar and we've embraced that recommendation. In recent years, we've been aggressively changing our recipes around the world to reduce added sugar, promoting low and no-calorie beverage options and making smaller packages more available to enable portion control. In fact, just in 2019, we removed 350,000 tons of added sugar on an annualized basis to approximately 275 product reformulations. And about 42% of our sparkling brands are now available in 250 ml or 8 ounce -- 8.5 ounces or less. In North America, these mini cans saw approximately 21% growth in 2019. We've also been expanding our range of beverages, including water, coffee, tea, dairy, fruit juices and plant-based options, all while trying to develop the next generation of sugar alternatives. Also, to address your comments about the Access to the Nutrition Global Index, they don't just provide us with a score. They recognize the good work we're doing and they offer suggestions for ways we can improve. We take all the feedback from the global index very seriously, and we take it in the spirit that it's given, which is to say in the spirit of continuous improvement. We do recognize there's still much more to be done, and we have been accelerating the work I've just described to make sure that we can continue to improve as we look into the future. Thank you. Jennifer, would you give us the next question?

This question is from [ Serena Harrison ]. Will COVID's effect on the business have any impact on company's ability to meet its sustainability commitments? Is it possible that some sustainability initiatives emerge as more of a priority than they were in the past?

Yes. Thank you. Look, there's nothing about the COVID crisis that means that we are going to focus less on our sustainability initiatives. The COVID crisis will be temporary. How temporary, we're not sure yet, but it will be temporary. The important underlying sustainability issues that were present and led us to set our goals on sustainability, whether it be around water or waste or female empowerment, those structure issues will still be there after COVID has been solved. And so we are going to continue to focus on those sustainability initiatives. We are confident we'll hit the 5 million female entrepreneur empowerment objective by 2020 by the end of this year. We are absolutely committed to our water objective of being water neutral in what we use in our manufacturing. Actually, we're already water positive. And we're looking about how we can not just be water positive globally, but make sure we are absolutely there in terms of the water positivity in each of the stressed regions. And the World Without Waste initiative, most notably, the most recent one, we have absolutely got that goal in sight. Yes, some locations in the U.S. in the short term have suspended bottle, can return programs, which will affect the collection rates and the availability of recycled PET and aluminum for new bottles. Some cities and countries in Latin America have asked recyclers to stop collecting empty packages during this pandemic. So there will be some short-term pressure, but it remains our goal to collect and recycle 1 bottle and can for every 1 we produce by 2030 and reuse half of that content back in our packaging. And while this suspension and recycling collection may affect us in the short term, we absolutely believe this will be a temporary challenge, and collection will resume. Maybe we'll have to make adjustments to the process, it will resume. And therefore, we will be able to focus again on how do we have to find a path to meeting those objectives. We are committed to making a difference and playing our part in addressing the problem of plastic waste. Jennifer. Next one, please.

This statement and question is from Sue Longley, IUF General Secretary. COVID-19, Coca-Cola putting lives at risk in the Philippines. In light of the COVID-19 pandemic currently affecting 213 countries and territories, and noting TCCC's claim that the safety of Coca-Cola assisting its employees as their highest priority, why are TCCC national managers in the Philippines refusing to respond to concerns about COVID-19 safety measures, raised by the IUF-Affiliated Federation of Coca-Cola Unions, FCCU, and its local affiliates? This refusal to engage with FCCU has significantly increased Coca-Cola workers' concerns about the risks they face in the workplace as well as putting the health and safety of their families and communities at greater risk. At the San Fernando bottling plant, union members refused to work on the basis that a safe workplace could not be guaranteed. For 1 week, therefore, they did not report to work whilst continuing to demand a meeting with management to discuss the classification of the plant as essential and the COVID-19 measures that should be put in place. The company's only response has been, to date, to file charges against [ serving ] union leaders and members, including Alfredo Marañon the FCCU National President, for economic sabotage. Several workers and Coca-Cola operations in the Philippines are currently under observation as suspected COVID-19 cases and are quarantined. They are being forced to use their annual leave and have been informed that once their leave allocation is exhausted, they will not be paid if they do not work. How does this comply with TCCC claims that it is doing its part to help prevent the further spread of the virus while also supporting the needs of our customers, consumers, employees and communities?

Let me start by reiterating that we are deeply grateful to people throughout the world who have been providing essential services to keep us safe, take care of us and ensure we have access to food, medicine and many other goods we need for our daily lines. This includes many of our own workers, who are making and distributing beverages for our customers and our consumers. I don't believe the annual meeting of the shareowners is an appropriate venue for addressing traditional labor issues. And I know that both our global and local workplace rights and human resources teams are working directly with the team in the Philippines to address the concerns the IUF has raised. I do want to make, however, a few comments about our employees' safety because I don't want anyone to go away with any misunderstanding about our position and what we are doing to help protect our employees. We have always put people first, our own people, our bottlers, our partners, people, our consumers, our customers, our suppliers and our shareowners. Everyone's safety is paramount for us. Throughout the world, everywhere we operate, we have helped to ensure that our system employees remain safe while making and delivering the beverages our communities need. To do that, our teams have adjusted the way they work. In the Philippines, for instance, we have provided employees with face masks. Delivery personnel are provided with hand sanitizer, disinfectant and paper towels. Support functions are working in staggered shifts. Social distancing is in place. Employees' temperatures are taken daily at facility entrances. Hand sanitizers are available throughout the facilities, and cleaning routines have been increased. We are adapting and evolving as the situation changes, just as we are for the employees throughout the world. Jennifer, will you go to the next question, please?

This question is from [ Ned Montag ]. Will the crisis impact the company's capital allocation strategy as it relates to share buybacks? Will the company be limiting or suspending share buybacks?

I think I sort of answered this one on the previous question about the dividend. We have, over the recent years, been reducing the amount of capital we allocate to share repurchases. To refresh everyone's memory, the capital allocation we model, so once we generate this free cash flow from our ongoing operations, our prioritization in terms of using capital is, firstly, to reinvest in the business, in organic business opportunities that offer attractive returns on capital. Secondly, to support dividend; third, for accretive strategic mergers and acquisitions moves; and lastly, for share repurchases. Share repurchases has always been the fourth priority in our capital allocation. And we have, in recent years, brought that down just to more or less cover dilution or through the equity programs' incentives. And we have been aiming in recent changes to manage that degree of dilution over time and not necessarily programmatically. So we will not -- we don't expect to have any material degree of share repurchases at the moment. Right. Jennifer, another question, please.

This question is from [ Tim Hogan ]. What is the plan for Costa Coffee in the United States?

Costa, yes, we're rolling out our plan to expand and leverage the platform across around the world. In doing so, it's important to take account of how we are approaching the coffee market and how we see our approach is competitive versus other players, different strategies. We have chosen to invest in a brand and a capability that has some routes in stores, but also has a big business in terms of vending or automatic dispensing, Barista quality fresh milk, automatic coffee. And we've seen an opportunity to provide beans and machines to someone else's outlet as well as to do ready-to-drink coffee offerings. So we see ourselves having a series of ways of playing into coffee market. Clearly, most of the stores that we have are in U.K., Europe and Asia. We don't see stores as the predominant strategy for markets like the U.S. We do have others -- other parts of the platforms already in U.S. Of course, they're now closed, given the lockdown, but we have started implementing what's called the Costa Express machine, which is really a Barista-quality, fresh milk, cappuccino espresso machine in an automated format. And it's great for being placed in someone else's location. So it's great for universities. One had gone in the Smithsonian. Some have gone into the Smithsonian Museum. So we see the opportunity in U.S. to drive a lot of placement of the Express machines across the U.S. Of course, those plans are going to be slowed down materially in 2020 due to the virus. And we will look ultimately. We see the opportunity in the U.S. is to be a better total beverage provider. Obviously, we're already a very large nonalcoholic, ready-to-drink [ cola ] provider, but to complement that with coffee and be a total beverage solution within other people's locations. Next one, Jennifer?

This question is from [John Azlet ]. Does the Coca-Cola company see the need to take on additional debt to maintain needed financing levels due to the COVID-19 outbreak?

Thank you. We took the opportunity in the debt market to issue a series of bonds a few -- a number of weeks ago. We raised $5 billion in debt. And that gives us not just a strong balance sheet, but even stronger balance sheet should there be any further disruption in the debt market in the rest of the year. So the company is well capitalized. Obviously, we may take the opportunity to issue further debt. We have a large commercial paper program. So we're always looking to look and see what is the right mix of debt instruments we have in the marketplace. But we absolutely have a strong balance sheet. We have a very substantive amount of cash on hand. We have also a substantive amount of liquid marketable securities. So we feel we have an adequately strong balance sheet at this stage for what's ahead of us in 2020. Jennifer, do we have any more? Do we have a last question? How are we doing?

We do have another question. This is from [Robert Foster]. Has there been any consideration of a voluntary reduction in executive compensation in response to the present challenges of COVID-19?

Sure. We have considered all elements of our business. And ultimately, our approach is grounded in our company's purpose, where we're always looking to make a difference in communities. And in these unprecedented times, context of the company -- for each company is very important. So we're looking very hard at all aspects of our spending. We're focused on preserving jobs and roles in our company. We have the right talent. We want to have the right talent in place as we emerge from this crisis. We haven't announced any changes in compensation at this stage, and we have not canceled or reduced any of the benefit plans that are critical to ensuring everyone gets the help we need. While I've already noted the value we place on talent, travel limits and work-from-home policies have enabled us to limit our discretionary operating expense. I would also note that a large part of executive compensation is linked to business performance. Depending on how the situation evolves and how the business is impacted, executive conversation would be impacted to be commensurate with business performance. So this is a very dynamic situation. And as I mentioned, we're continuing to look at all aspects of our spending. Jennifer, can we take the last question?

Yes. This is from the Park Foundation. Coca-Cola has been lauded for the steps it has taken to be more transparent about its political giving and involvement, the charities it funds and its funding of science. But this disclosure has failed to give shareholders a clear sense of what the corporation is spending in the broader global arena. Given the corporation's commitment to transparency, when will it provide full disclosure of its political giving, charity and science in every one of the countries it does business in and in every U.S. state and city?

Great. Well, thank you for recognizing our work to be more transparent in regards to our political giving and our research. In 2015, we made a commitment to publicly disclose our financial support of health and well-being related scientific research and partnerships. We have kept that promise, and we continue to publish regular updates on our online searchable database. We do include local, state and even global contributions. But if there's more we can do, we're certainly opening -- open to listening to your point of view. And we're happy to have further discussions with your group on steps that we're taking to ensure the highest degree of integrity in our research and our lobbying effort. Okay. I think that concludes our question-and-answer session. The polls are now going to be closed. I would like to take -- I'd like to thank everyone who took time today to participate virtually. That concludes our shareholder meeting for this year. Thank you very much. Stay safe, and have a great rest of your day.

This concludes the meeting. You may now disconnect.