north america operating segment -...

The North America operating segment is ourCompany’s flagship business and its largest sourceof total unit case volume. Throughout the year, ourCompany and its bottling partners remainedfocused on maximizing value through a balancedprice and volume approach and on integrating ouroperations into a single unit. Due to a decrease inrestaurant traffic in the early part of 2003 and softperformance in our juice and juice-drink business,operating results came in below our expectations.In 2003, we generated $6.3 billion in net operatingrevenues and delivered unit case volume growth of2 percent as compared to 2002.

Coca-Cola branded beverages continued to outpacethe cola carbonated soft-drink category, achievingincreases in volume share led by full-year sales ofVanilla Coke and diet Vanilla Coke and a strongperformance by Diet Coke. The Company’s newmarketing platform, Coca-Cola “Real,” enhancedthe image of the brand, most notably among teensand young adults—reinforcing an honest, genuineconnection with consumers. Coca-Cola “Real” camealive during 2003 through television advertisingfeaturing real-life connections, our partnershipwith the highly successful second season ofAmerican Idol, and cokemusic.com—where morethan 2 million consumers visit every month tochat, play games, create their own music, bid formusic-related merchandise and read the latest newsabout today’s music.

Sales of Sprite branded beverages increased witha new twist on consumers’ favorite lemon-lime softdrink. Tropical Sprite Remix drove growth andhelped reconnect the Sprite trademark with itsyoung, urban consumer base.

POWERade continued to gain share and deliv-ered strong unit case volume growth of 21 percentin 2003. We created excitement for bottling partnersand retailers by customizing flavors and packagingtied to The Matrix motion picture franchise and tothe National Hot Rod Association.

In the first full year since the creation of our waterjoint venture with Danone in the United States, theCompany began to see benefits from its three-tierwater strategy. Dasani volume grew 16 percent in2003, with the brand maintaining its price premium

relative to the category and competitive brands.As consumers look for more choices and

enhanced benefits from the beverages they choose,our Company is well-positioned to satisfy theirneeds. Simply Orange, our “closest to the tree” not-from-concentrate orange juice, is now availablethroughout the United States. We expanded theMinute Maid Premium orange juice line in 2003 byintroducing the first orange juice fortified with cal-cium and vitamin D across the United States. Wealso introduced Heart Wise—the first orange juicelaunched throughout the United States containingplant sterols, which have been clinically provento help reduce cholesterol. Our bottler-deliveredproducts also continued to experience strong growththrough expanded distribution and through newproducts such as Minute Maid Limeade/Limonadaand Swerve, a milk-based beverage created for theeducation channel.

The North America operating segment continuedto work with its bottling partners to execute packageand price strategies that strengthen their financialresults, deliver value for customers and provideconsumers with choices that meet their needs. Thefunctional benefits brought to consumers by FridgePack, now available in 91 percent of supermarketsin the United States, continue to help build volumefor our brands. And, where available, re-sealable24-ounce six-packs and .5-liter bottles have generatedincremental growth.

During 2003, the Company took significant stepsto create an organizational structure responsive tothe needs of customers and consumers by integratingour North America bottle/can, fountain and juicebusinesses into a single operating unit. This newstructure better reflects the way beverage choices aremade, unifies our procurement and supply chainsystems to increase efficiency and eliminate redun-dancies, and links our go-to-market activities withthose of our bottling partners so that our system candeliver value-added services to our customers fasterand more effectively. The new Retail Sales andFoodservice and Hospitality divisions are alreadyproducing real benefits, including lower systemcosts, better bottler and customer alignment, andincreased ability to provide consumers with value.

30 percent of worldwide net operating revenues. 29 percent of worldwide unit case volume.

North America Operating Segment

:: THE COCA-COLA COMPANY 2003 SUMMARY ANNUAL REPORT10

healthy valueWith its introduction in 2003,

Minute MaidPremium

Heart Wisebecame the first orange juice

to contain plant sterols, which have

been clinically proven to help

reduce cholesterol.

Real Impact

Coca-Cola “Real” debuted in 2003,combining the strengths of multimediachannels, partnerships and Web sites,as well as traditional advertising.

• Named one of the top five advertising campaigns of 2003 by the Wall Street Journal

• Named one of the top tenadvertising campaigns of2003 by USA Today

11NORTH AMERICA OPERATING SEGMENT ::

2

1

1 Retail Sales 70%

2 Foodservice and Hospitality 30%

Total Unit Case Volume

Net Operating Revenues percent

in millions 2003 2002 change

North America 2% 2% 4%

United States 2% 2% 4%

NorthAmerica $ 6,344 $ 6,264 1%

Tropical Sprite Remix—

named by Ad Age as one

of the most successful product

launches of 2003—helped drive

retail sales volume of

Sprite branded beverages up

7%in north america

in 2003

North America

Population: 330 million

92 brands are sold inNorth America.

2003 per capita consumption: 414Less than 50 servings 50-149 servings 150-249 servings 250+ servings

Unit Case 2003 vs. 5-year 10-year

Growth Rate 2002 CAGR CAGROur Leading Brands

1

2

3

Hawaii

Together, The Coca-Cola Company and its 40bottling partners constitute the largest single privateemployer in Africa. Coca-Cola was first bottled inAfrica in 1929 and today the Company marketsmore than 80 brands, with local beverages such asSparletta, Hawai and Splash complementing corebrands including Coca-Cola, Fanta and Sprite.

In 2003, the “Real” integrated marketing plat-form launched in 55 countries and territories. The“Real” campaign and new packaging options con-tributed to net operating revenues of $827 million,an increase of 21 percent compared with 2002. Totalunit case volume increased 5 percent and carbonatedsoft-drink unit case volume also increased 5 percentversus 2002.

South Africa, our Company’s largest profit andvolume country on the continent, experiencedstrong growth in 2003. The introduction of the“Real” campaign, a successful summer promotionand solid marketplace execution by our bottlingpartners helped increase total unit case volume by8 percent in 2003. Trademark Coca-Cola beveragesand brand Coca-Cola volumes were up 11 percentand 8 percent, respectively, in 2003.

The continent’s most extensive distribution systemcontinued to provide opportunities to expand theCompany’s array of noncarbonated beverages.The African bottled-water category experienced15 percent compound annual volume growth from2001 to 2003. In response to these needs, we success-fully introduced Dasani on the African continentin 2003. In Ghana and Kenya, Dasani marketinghas focused on local priorities such as the safety andpurity of bottled water. Including Dasani, 2003 non-carbonated unit case volume growth of 9 percentwas realized from products such as Bonaqua, Play,POWERade, Miami and Bibo.

In Nigeria, our second-largest profit and volumecountry in Africa and home to one in sixAfricans, the Coca-Cola system’s price realizationstrategy yielded strong revenue growth in 2003.Additionally, Coca-Cola Nigeria was awarded“Best Use of New Media” and “Best Use ofOutdoor Media” by Brandfaces, Nigeria’s leadingmarketing trade magazine.

Strong marketing of brand Coca-Cola and Fanta,together with bottler restructuring and alignmentof priorities, contributed to a solid year in northernAfrica. In Morocco, unit case volume grew 7 percentin 2003 compared with 2002.

Throughout the year, the Africa operating segmentcontinued to increase efficiency by centralizingadvertising, innovation and development, and pur-chasing. The Company leveraged its scale throughCoca-Cola Popstars, the African version of AmericanIdol, which airs in six countries. In 2003, Coca-ColaPopstars received an award for “Best Sponsorship ofMusic” from Business & Arts South Africa, a jointinitiative between the government and the businesssector focused on stimulating the arts industry inthat country.

Helping build and maintain healthy communitiesis an important part of our business. Our Companysupports a number of charitable and communityinitiatives, in both human and financial terms. In2003, The Coca-Cola Africa Foundation continuedto focus on healthcare, education, the environmentand poverty. It supported orphanages in SouthAfrica, purchased schoolbooks in Ivory Coast andsponsored the construction of classrooms in Ghanaand Benin. The Foundation also helped establish achildren’s cancer hospital in Egypt and deliveredpotable water to impoverished areas of South Africa.Following the earthquake in Algeria and floodingin Mozambique, it provided disaster relief to thosecommunities in need. Among many other initiativesin 2003, the Foundation also provided famine reliefin Zimbabwe.

As part of its health benefits package, the Africastrategic business unit offers employees, spousesand dependents HIV/AIDS prevention and treat-ment, including access to antiretroviral drugs. In 2002,the Foundation began to provide funding for theprogram to our African bottling partners, as needed.Approximately two-thirds of bottler employees hadcompleted prevention and awareness programs bythe end of 2003.


Africa Operating Segment




Total Unit Case Volume Unit Case 2003 vs. 5-year 10-year


Africa 5% 6% 7%

North &West Africa 6% 5% 8%

Southern &East Africa 5% 7% 6%

Africa $ 827 $ 684 21%

1

2

3

::AFRICA OPERATING SEGMENT 13

Local Taste

Dasani makes its debutin Africa, answeringconsumer needs for safeand pure bottled water.Dasani’s marketingpresence is tailored tolocal preferences.

2 1

1 Southern & East Africa 53%

2 North & West Africa 47%

Innovativemarketingin nigeria

Brandfaces AwardsCoca-Cola Nigeria

2003 Best Use of

New Mediaand

2003 Best Use of

Outdoor Media

Africa


81 brands are sold in Africa.


Seychelles

11%8%INCREASE IN COCA-COLA TRADEMARK VOLUMEINCREASE IN TOTAL UNIT CASE VOLUME

Real Growth in South AfricaThe “Real” campaign was launched in2003, helping increase unit case volumein South Africa, our largest profit andvolume country on the continent.

With more than half of the world’s population andmore than 40 countries, Asia is a constantly evolvingregion with unique opportunities and challenges.Our 2003 results reflected this diversity as well asthe region’s ever-changing environment.

Net operating revenues in our Asia strategicbusiness unit were $5.1 billion in 2003, with unitcase volume increasing 4 percent in 2003 comparedwith 2002. Results were particularly strong inChina, India and Thailand where core carbonatedsoft drinks—particularly single-serve packages—performed well, and noncarbonated beverages, suchas Qoo, continued to accelerate. Results in Japanand Philippines were less than expected.

With an extended economic slump and anunusually cold and wet summer, Japan was particu-larly challenging for the beverage industry in 2003.In this environment, the Company’s focus on long-term results led to a strong re-launch of our green teabrand Marocha 120, along with Diet Coke withLemon and Canada Dry. Additionally, followingthe September launch of the new GEORGIA mar-keting campaign, sales of the highly profitable smallGEORGIA coffee cans posted strong increases.Volume grew 8 percent in the fourth quarter, com-pared with 4 percent and 3 percent growth in thethird and second quarters, respectively. In October,the new advertising campaign was voted number oneby CM Data Bank, an independent research companyspecializing in marketing campaign evaluation.

In September, Coca-Cola Japan announced theformation of the Coca-Cola National BeverageCompany. This initiative is the first phase of anintegrated supply chain management process that isintended to centralize procurement, production andlogistics operations for The Coca-Cola Companyand all 14 of its bottling partners in Japan.

In China, the Company successfully respondedto the Severe Acute Respiratory Syndrome (SARS)outbreak, restoring pre-SARS sales momentum by

quickly adapting national sales and marketing pro-grams. For the year, our Company’s sixth-largestvolume country worldwide recorded double-digitprofit growth as well as double-digit carbonatedsoft-drink and noncarbonated beverage volumegrowth. Coca-Cola branded products were particu-larly strong, with the “Seize the Feeling” marketingcampaign, new graphics and packaging innovationcontributing to 13 percent volume growth and recordsales in 2003. The noncarbonated beverage segmentalso continued to gain volume. Qoo, a juice drinkoriginally introduced in Japan in 1999, experiencedunit case volume growth of more than 70 percentin China in 2003. Qoo unit case volume in China isnow higher than in any other country.

Australia reinforced its leadership position incarbonated soft-drink marketing and innovation in2003 with the “You Know You Want It” marketingcampaign for brand Coca-Cola. Cherry Coke anddiet Coke with Vanilla were launched in 2003, onthe heels of the successful 2002 introduction ofVanilla Coke. In November, more than 3 billionfans tuned in for the quadrennial Rugby World CupTournament held in Australia. Coca-Cola Australiamade the most of this opportunity with its unique“Thrill Seeker” promotion, which used satellite anddigital technology to award consumers cars, cashand Rugby World Cup match tickets.

Thailand recorded another outstanding year in2003, with double-digit volume growth and salesdriven by exceptional marketing and productinnovation, including the Coca-Cola “Zah DoanSa” (“Creative Spirit”) campaign and the rollout ofthe 15-ounce “Pi Big” (“Big Brother”) returnablepackage. Unit case volume growth of 14 percent in2003 was the highest growth rate for trademarkCoca-Cola beverages in Thailand in 10 years.Also, Vanilla Coke made its southeast Asia debut inThailand in 2003, along with Fanta Blueberry Splash.


Asia Operating Segment


China Volume Leaps Forward

In response to the effects of SARS onits business, Coca-Cola China adaptedswiftly using vigorous sales and marketingprograms to produce another year ofrecord volume.

16% UNIT CASE VOLUME INCREASE IN 2003





Asia $ 5,052 $ 5,054 –

::ASIA OPERATING SEGMENT 15

Thailand Thinks BigA new 15-ounce “Pi Big”Coca-Cola bottle and theaccompanying marketingcampaign helped drive14% volume growth fortrademark Coca-Colabeverages in 2003.

Valuable ReturnsIn 2003, our systemestablished a returnable-glassaffordability strategy in Chinaand India. In one year, thisinitiative has allowed us toexpand our consumer baseby 90 million.

Asia

Population: 3.3 billion

175 brands are sold in Asia.


Asia 4 % 7% 8%

Australia 3 % 3% 4%

China 16 % 11% 20%

India 22 % 18% 53%

Japan (3)% 2% 3%

Philippines (1)% 7% 10%

Thailand 14 % 5% 5%

6

24

7 1

3

5

1 Japan 25%

2 China 18%

3 Philippines 18%

4 India 9%

5 Australia 7%

6 Thailand 5%

7 Other 18%

1

2

3

The Europe, Eurasia and Middle East strategicbusiness unit achieved strong results in 2003, bothin core brands and in new beverages.

Net operating revenues increased a strong25 percent to $6.6 billion, due in part to favorableforeign currency trends. Unit case volume increased5 percent compared with 2002, driven by innovation,strong marketing strategies and favorable summerweather, and despite the impact of the Germandeposit law on nonreturnable packages. We madesignificant progress in the highly profitable imme-diate consumption packages, resulting in volumegains and increased retail dollar share.

In 2003, we successfully launched Vanilla Cokein 14 countries. We introduced Diet Coke vanillain Great Britain and Coca-Cola light lemon ineight countries.

Powerful marketing programs for Coca-Colawere led by “Chihuahua,” a highly integrated mar-keting platform that began in Spain in 2002 andspread quickly throughout Europe in 2003.Televisionpartnerships, DJ tours and packaging promotionscombined to catapult the Chihuahua song to the top40 in 11 countries, including seven “number ones.”

In Spain, the Company’s Coca-Cola “Movimiento”Web site reached more than 850,000 consumers,each spending an average of 45 minutes a daygaming, networking and competing for prizes.

The Diet Coke/Coca-Cola light family of brandsexperienced compound annual volume growth of12 percent between 2001 and 2003, tapping thestrong consumer trend for low-calorie products.Marketing efforts have focused on brand and packageinnovation, entertainment communication, tailor-made promotions and engaging consumers withunique beverage sampling experiences.

After a decrease in volume growth, partially dueto the implementation of a deposit law on non-returnable packages in the first quarter of 2003, ourbusiness in Germany began to post quarterlyimprovement. New packages and initiatives con-tributed to growth in the remainder of the year anddemonstrated the ability of the Coca-Cola system

to adapt quickly to changing conditions. The newdeposit law has created a difficult environment forthe industry, but the Coca-Cola system remainswell-positioned to respond to German consumers’preference for returnable packaging.

Noncarbonated unit case volume increased 31 per-cent in 2003 compared with the previous year, withexpansion into new categories and the profitableacceleration of growth in the Company’s existingbusiness. First launched in Europe in late 2001,POWERade unit case volume increased 78 percentcompared with 2002, and is now the number-onesports drink in Europe. It has gained strong credibil-ity through high-level sponsorships, including theWorld Athletics Championships in France, theRugby World Cup and The Matrix Reloaded movie.

Nestea, re-launched in 2001, enjoyed a 35 per-cent growth in unit case volume in 2003 andachieved leadership in the highly profitableimmediate consumption channel, with new flavorsand stylish packaging.

The operating segment’s juice strategy continuesto progress, following the re-launch of the Cappyand Minute Maid brands in 2002. And Qoo, alreadyhighly successful in Asia, established itself as thenumber-two youth juice drink in Germany in 2003.

The Company’s water strategy made significantgains in 2003, with regional and local brands growingin the most profitable immediate consumptionchannels. Turkuaz achieved category leadership inTurkey, and Bonaqua became one of the leadingwater brands in Russia. In 2004, plans call for theCompany to launch Dasani in Great Britain,France and Germany.

Along with ongoing steps to strengthen ourbrands, an organizational restructuring across Europepromises greater efficiency for the business throughcloser alignment with our bottling partners andalready has helped reduce costs. The new structurehas been adapted to meet the future needs of ourbusiness, and we believe it is well-positioned tosupport our continued success.

Europe, Eurasia and Middle East Operating Segment



EUROPE, EURASIA AND MIDDLE EAST OPERATING SEGMENT



franceDeliversStrong, locally tailored

marketing and the appealof new flavors led to a

6%increase in unit casevolume during 2003.

60%of this incremental growth

was in the especially profitable diet/light category.



Europe, Eurasia& Middle East $ 6,556 $ 5,262 25%

Europe, Eurasia& Middle East 5% 4% 6%

Eurasia &Middle East 9% 1% 14%

France 6% 5% 7%

Germany –% (1)% 1%

Great Britain 4% 12% 8%

Italy 8% 3% 3%

Spain 5% 6% 7%

A Half-century in SpainIn 2003, the Coca-Cola system celebrated 50 years in Spain witha successful year.

4%CARBONATEDUNIT CASE VOLUME

28%NONCARBONATEDUNIT CASE VOLUME

:: 17

1 Germany 16%

2 Great Britain 12%

3 Spain 11%

4 Eurasia & MiddleEast 10%

5 France 7%

6 Italy 7%

7 Central Europe & Russia 5%

8 Belgium 3%

9 Netherlands 3%

10 Other 26%

Germany Turns to RefillablesAdapting to new government regulations, our German businessshifted its packaging strategies in2003. While refillable packagingcomprised 66% of volume just one year ago, our system nowdistributes more than 91% of itsvolume in refillables.

2002 2003

(refillable packaging usage, in percent)

66% 91%

Europe, Eurasiaand Middle East

Population: 1.2 billion

121 brands are soldin Europe, Eurasia andMiddle East.


7

2

46

1

3

5

9

101

2

3

Marketing Is a Hit

The “Chihuahua”marketing campaignhelped contribute to5% volume growthin this operatingsegment.

5%

8

In 2003, the Latin America operating segmentadapted to the region’s changing economic and mar-ketplace needs, re-affirming our commitment to thecommunities we serve. The success of this strategywas demonstrated by the unit’s overall results.

In a very challenging economic and politicalclimate, net operating revenues for Latin Americawere $2.0 billion, reflecting negative foreign currencytrends for the year. However, our Latin Americabusiness experienced strong growth in 2003 withunit case volume increasing 4 percent versus 2002.By consistently investing in the region’s 41 countries,and by continuing to focus on strategy, executionand the introduction of new packages and pricingmodels, we believe the Company is well-positionedto benefit as the region regains stability.

In Mexico, home to the highest per capita consumption of Company products, total unit casevolume grew 10 percent in 2003 and carbonatedsoft-drink volume increased 3 percent. Double-digitvolume growth in flavored carbonated soft drinkswas driven by brand extensions and package initia-tives surrounding Fanta, Sprite, Lift and Fresca.Trademark Coca-Cola growth was supportedprimarily by the “Real” marketing platform as wellas effective channel management and the continuingexpansion of the 2.5-liter refillable package. In 2004,we plan to pursue further growth of brand Coca-Colaby executing agreed-upon strategies together withour bottling partners and customers. We also planto continue our immediate consumption packageand channel efforts on Ciel, the leading water brandin personal packages.

In Brazil, the Company had strong double-digitearnings growth in 2003 as it worked closely withits bottling partners to offer new packages, in both

refillable and one-way presentations. This allowedthe system to provide greater choice to consumersand to tailor customer options based on channelstrategies to drive revenue and profit growth. Unitcase volume declined 6 percent during the year as aresult of both weak economic conditions and thegreater focus on balancing volume growth withmargin expansion. Among other plans for 2004, weintend to focus on the Coca-Cola, Fanta and Kuatbrands through innovative marketing and packagingoptions as we seek to achieve healthy volume andprofit growth.

After the country’s economic crisis and a double-digit volume decrease in 2002, unit case volume inArgentina grew 13 percent in 2003, allowing theCompany and our bottling partners to increasemarket investments and value-building initiatives.We focused on the needs of consumers and customersby enriching our marketing with local insights,andby offering new packages and brands and reposi-tioning existing ones. We differentiated our mediamessage and innovated in non-traditional marketingby working with the local entertainment sector. Weimplemented revenue growth strategies across everybusiness function. As a result, we witnessed strongrecuperation in Argentina in 2003, with brandCoca-Cola reaching record-high consumer preferenceand consumption.

In Chile, carbonated soft-drink volume growthof 7 percent contributed to total unit case volumegrowth of 6 percent in 2003 compared with 2002.Through effective market segmentation, new packageintroductions and successful consumer promotions,the Coca-Cola system reinforced its leadership,gaining both volume and retail dollar share.


Latin America Operating Segment


Earning Our Place in 2003

• For the second consecutive year,Coca-Cola Chile was rated the most reputable corporation,according to La Tercera, a daily Chilean newspaper.

• Coca-Cola Argentina rankedsecond in the best corporate image category, according to a survey conducted by PrensaEconómica, a leading business newspaper in Argentina.

LATIN AMERICA OPERATING SEGMENT

Growth Amid Uncertainty in Argentina

The Coca-Cola system’s determination andhard work during Argentina’s economiccrisis delivered strong results in 2003. Aswe remain positioned for long-term growth,we increased unit case volume.

COCA-COLA TRADEMARK VOLUME GROWTHTOTAL UNIT CASE VOLUME GROWTH





LatinAmerica $ 2,042 $ 2,089 (2)%

Latin America 4 % 4% 6%

Argentina 13 % 1% 4%

Brazil (6)% 2% 6%

Chile 6 % 3% 7%

Mexico 10 % 7% 7%

:: 19

Latin America


103 brands are sold inLatin America.


Single-serve Success

In Mexico’s fast-growingwater category, Ciel unitcase volume grew 48% inthe profitable single-servewater packages.

chile springsforward

Coca-Cola Chile partneredwith 10 of its leading customersto launch one of the country’s largest consumer promotions.

5 millionconsumers participated.

14

2

5

3

1 Mexico 48%

2 Brazil 21%

3 Argentina 7%

4 Chile 5%

5 Other 19%

1

2

3

48%

19%13%

north america operating segment -...

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