Executive Summary / Key Takeaways

• Coca-Cola Consolidated (COKE) demonstrates robust financial health, driven by effective pricing strategies and strong performance in its Still beverage category, leading to a 6.9% net sales increase in Q3 2025.
• The company's strategic focus on supply chain optimization, including a $90 million investment in a new Columbus, Ohio facility featuring a semi-automated Vertique system, enhances operational efficiency and customer service.
• COKE leverages its exclusive partnership with The Coca-Cola Company and a digitally-enabled selling platform, MyCoke, to maintain a strong competitive moat and drive consistent revenue growth in a highly competitive market.
• Despite a slight volume decline in the first nine months of 2025, COKE's ability to offset commodity cost increases with price adjustments and its strong cash flow generation underscore its resilience and prudent capital management.
• The company's commitment to shareholder returns is evident through its active share repurchase program and consistent dividend payments, signaling management's confidence in future profitability.

The Enduring Strength of a Beverage Giant

Coca-Cola Consolidated, Inc. (COKE) stands as the largest Coca-Cola bottler in the United States, a testament to over a century of operational excellence and strategic evolution in the nonalcoholic beverage industry. Incorporated in 1980, the company's roots trace back to 1902, establishing a deep commitment to the consumers, customers, and communities it serves across its expansive 14-state and District of Columbia territory. This rich history, marked by significant milestones like the 2017 "System Transformation" that expanded its distribution rights, underpins its current market leadership and strategic direction.

The company's core business revolves around the distribution, marketing, and manufacturing of nonalcoholic beverages, with approximately 85% of its bottle and can sales volume comprising products from The Coca-Cola Company. Beyond the iconic Coca-Cola brands, COKE also distributes products for other prominent beverage companies, including Keurig Dr Pepper Inc. and Monster Energy Company . Its diverse portfolio spans sparkling beverages, such as Coca-Cola, and a growing array of still beverages, including energy products, bottled water, ready-to-drink teas and coffees, enhanced waters, juices, and sports drinks. Sales are primarily categorized into bottle and can sales, alongside "other sales" encompassing transactions with other Coca-Cola bottlers, post-mix sales for fountain machines, transportation revenue, and equipment maintenance.

The nonalcoholic beverage industry is intensely competitive, characterized by continuous new brand introductions, aggressive point-of-sale merchandising, and evolving pricing strategies. COKE's principal competitors include local bottlers of PepsiCo, Inc. products and, in certain regions, local bottlers of Dr Pepper products. In this dynamic environment, COKE's overarching strategy is built on several key pillars: executing its commercial and revenue management strategies, optimizing its supply chain, generating robust cash flow, determining the most efficient route to market, and fostering a digitally enabled selling platform. These strategic imperatives are designed to leverage its foundational strengths and maintain its competitive edge amidst shifting consumer preferences and market demands.

Technological Edge and Operational Excellence: The Engine of Efficiency

Coca-Cola Consolidated's operational prowess is significantly enhanced by its strategic adoption and development of technology, which serves as a critical differentiator in a competitive landscape. At the heart of its digital infrastructure is the CONA System (Coke One North America system), a uniform information technology system developed in collaboration with other North American Coca-Cola bottlers. This system is designed to promote operational efficiency and uniformity across the bottling network.

Building on this foundation, COKE has developed MyCoke, a digitally enabled selling platform. This platform creates a more seamless order and payment experience for certain customers, directly enhancing customer service and creating additional selling opportunities for its sales teams. The strategic intent behind MyCoke is to improve customer engagement and operational fluidity in the marketplace.

Beyond digital platforms, COKE is making substantial investments in its physical supply chain infrastructure. A prime example is the $90 million investment in a new 400,000-square-foot distribution and warehouse facility in Columbus, Ohio. This state-of-the-art campus incorporates a semi-automated Vertique system, which is specifically designed to improve warehouse productivity, efficiency, accuracy, and working conditions. The Columbus facility is projected to handle over 16 million cases of product annually, averaging approximately 75,000 cases per day, demonstrating the quantifiable impact of this technological upgrade on throughput and efficiency. Furthermore, this investment includes infrastructure for future electric vehicle (EV) charging stations, signaling a forward-looking approach to fleet management and sustainability.

For investors, these technological advancements and operational investments are crucial. The CONA System and MyCoke platform strengthen COKE's competitive moat by enabling more efficient market execution and superior customer engagement. The Vertique system and other supply chain optimizations directly contribute to lower operational costs, improved gross margins, and enhanced service capabilities, all of which are vital for sustained profitability and market positioning in the long term. These initiatives underscore COKE's commitment to leveraging technology not just for incremental gains, but as a foundational element of its growth strategy.

Financial Performance: A Story of Resilience and Strategic Execution

Coca-Cola Consolidated's recent financial performance reflects a company effectively executing its strategy in a dynamic market. For the third quarter of 2025, net sales increased by a robust 6.9% to $1.89 billion, compared to $1.77 billion in the third quarter of 2024. This growth was primarily fueled by higher average bottle and can sales prices per unit, which contributed approximately $60 million to net sales, alongside a 3.3% increase in case sales volume. The Still beverage category was a standout performer, with volume increasing by 8.9% in the third quarter, driven by strong demand for brands like Monster, Powerade, smartwater, Core Power, Dasani, and Topo Chico. Sparkling beverage volume also grew by 1.4%, largely due to zero-sugar and flavor offerings.
Looking at the first nine months of 2025, net sales rose by 3.3% to $5.32 billion. The primary driver was a $160 million increase from higher average bottle and can sales prices per unit, complemented by a favorable shift in product mix towards higher-priced Still products such as energy, enhanced water, and protein beverages. While total bottle and can sales volume for the first nine months saw a 1.2% decline, this was partially attributable to two fewer selling days compared to the prior year, which accounted for approximately 0.7% of the decline.

Profitability metrics highlight COKE's operational effectiveness. Gross profit in the third quarter of 2025 reached $748.5 million, a 7.2% increase, with the gross margin improving by 10 basis points to 39.6%. Management noted that annual price increases implemented earlier in the year were effective in offsetting the net impact of increased commodity costs, including the volatility of aluminum import tariffs. For the first nine months, gross profit increased by 3.1% to $2.12 billion.

Selling, delivery, and administrative (SDA) expenses increased by 6.6% in the third quarter and 4.1% in the first nine months of 2025, primarily due to higher labor costs stemming from annual wage adjustments and an additional investment in base wages for front-line teammates. Despite this, SDA expenses as a percentage of net sales remained relatively stable, decreasing by 10 basis points in the third quarter to 26.6%. Income from operations grew by 8.6% in the third quarter to $246.6 million, pushing the operating margin up by 20 basis points to 13.1%. For the first nine months, income from operations saw a modest 1% increase to $708.5 million.

Net income for the third quarter of 2025 increased by 23.1% to $142.3 million. However, for the first nine months, net income declined by 4.6% to $433.3 million. This decline was primarily due to routine, non-cash fair value adjustments to the acquisition-related contingent consideration liability, influenced by changes in the discount rate and future cash flow projections.

From a liquidity and capital resources perspective, COKE demonstrates a strong position. Cash provided by operating activities increased by $15 million to $722.9 million for the first nine months of 2025. The company invested approximately $210 million in capital expenditures during this period, primarily aimed at optimizing its supply chain and fostering future growth. Management projects fiscal year 2025 capital expenditures to be approximately $300 million.

COKE also actively returns value to shareholders, repurchasing $113.8 million of Common Stock in the third quarter of 2025, with $800.1 million remaining under its $1 billion share repurchase program. Dividend payments decreased in the first nine months of 2025 compared to 2024, largely due to special dividend payments made in the prior year. The company maintains a healthy balance sheet, with total assets increasing by $355.4 million to $5.67 billion as of September 26, 2025, and management believes it has sufficient capital to finance its business plan for at least the next 12 months.

Competitive Positioning: Leveraging Scale and Focus

Coca-Cola Consolidated operates within a fiercely competitive beverage market, where its strategic positioning as the largest Coca-Cola bottler in the U.S. provides distinct advantages. The company's primary direct competitors include local bottlers of PepsiCo, Inc. products, and in some regions, Keurig Dr Pepper Inc. and Monster Beverage Corporation .

COKE's exclusive partnership with The Coca-Cola Company is a significant competitive moat, granting it access to a portfolio of globally recognized brands and established distribution channels. This partnership fosters strong pricing power and consistent revenue generation, even in periods of volume fluctuations. While PepsiCo , as a diversified global food and beverage conglomerate, benefits from a broader product lineup and extensive international reach, COKE's focused market positioning in the U.S. allows for specialized operational efficiency and deep regional market penetration. COKE's gross profit margin of 39.83% and operating profit margin of 13.12% (TTM) underscore its ability to manage costs and maintain profitability within its core operations.

In comparison to Keurig Dr Pepper (KDP), which often emphasizes convenience and single-serve formats, COKE's full-service bottling model and extensive direct store delivery (DSD) network provide a broader reach across various retail channels. This comprehensive distribution capability, supported by investments in systems like the Vertique automation, enhances customer loyalty and ensures efficient product delivery. Against Monster Beverage (MNST), which specializes in energy drinks, COKE benefits from its existing distribution of Monster products while also offering a wider array of still beverages, diversifying its exposure within the growing non-carbonated segment.

COKE's strategic initiatives, such as the increasing use of Alternative Routes to Market (ARTM) for post-mix and certain bottle and can products, aim to enhance profitability and customer service by leveraging third-party distributors or customer supply chain infrastructures. In the first nine months of 2025, nearly two-thirds of post-mix gallons and less than 10% of bottle and can volume were delivered through ARTM, demonstrating a flexible approach to distribution. The MyCoke digital platform further strengthens its competitive stance by streamlining ordering and payment processes, improving customer experience, and creating more selling opportunities for its frontline teams.

Despite these strengths, COKE faces vulnerabilities, notably its reliance on The Coca-Cola Company as its primary supplier for concentrates and syrups. This dependency could expose the company to risks if supply disruptions occur or if terms of agreements change. However, COKE mitigates this through long-standing relationships and its integral role within the Coca-Cola system. While competitors like PepsiCo (PEP) benefit from greater diversification, COKE's focused strategy and operational efficiencies allow it to maintain strong margins and a resilient financial profile within its specialized domain.

Outlook and Risks: A Clear Path Forward with Vigilance

Coca-Cola Consolidated's outlook is anchored by its ongoing strategic initiatives and disciplined financial management. The company anticipates capital expenditures for fiscal year 2025 to be approximately $300 million, reflecting continued investments in supply chain optimization and future growth. This includes projects like the new Columbus, Ohio facility, which is expected to enhance production and distribution capabilities. Furthermore, the company projects annual acquisition-related sub-bottling payments to be in the range of $50 million to $80 million for the next five years, providing a clear forecast for a significant recurring expense.

Management's confidence in its commercial and revenue management strategies, coupled with ongoing supply chain enhancements and the expansion of its digitally-enabled selling platform, underpins its forward-looking assumptions. The ability to implement effective price increases, as demonstrated in the first nine months of 2025, is crucial for offsetting cost pressures and maintaining profitability.

However, the company faces several pertinent risks. Inflation and increased costs for raw materials, fuel, and other supplies remain a significant concern. A 10% increase in the market prices of key commodities (excluding concentrate) could cumulatively increase costs by approximately $66 million over the next 12 months, assuming no change in volume. While COKE has shown an ability to offset these increases through pricing, there is a risk that consumers may reduce purchases if price increases are too steep, potentially impacting sales volume.

Changes in the fair value of the acquisition-related contingent consideration liability also pose a non-cash risk. A 10-basis point change in the underlying risk-free interest rate used to estimate the company's Weighted Average Cost of Capital (WACC) could result in an approximate $6 million change to this liability, impacting reported net income. Additionally, shifts in consumer preferences towards healthier options or changes in government regulations regarding nonalcoholic beverages could influence demand and operational requirements. The company also monitors its credit ratings, as a downgrade could lead to higher borrowing costs and reduced access to capital markets.

Conclusion

Coca-Cola Consolidated stands as a compelling investment proposition, characterized by its deep-rooted history, strategic operational excellence, and a clear vision for sustained profitability. The company's ability to consistently deliver strong financial results, marked by robust net sales growth and improving margins, even amidst fluctuating volumes and rising input costs, speaks to the effectiveness of its commercial and revenue management strategies. Its continuous investment in supply chain optimization and advanced digital platforms like MyCoke and the Vertique system are not merely incremental improvements but foundational pillars that enhance efficiency, improve customer service, and solidify its competitive advantages.

While the nonalcoholic beverage industry remains intensely competitive, COKE's exclusive partnership with The Coca-Cola Company (KO) provides an enduring moat, allowing it to leverage iconic brands and an extensive distribution network across its vast U.S. territory. The company's disciplined approach to capital allocation, evidenced by its share repurchase program and consistent dividends, further reinforces its commitment to shareholder value. Despite inherent risks such as commodity price volatility and shifts in consumer preferences, Coca-Cola Consolidated's proactive strategic responses and operational agility position it for continued success, making it a noteworthy consideration for discerning investors seeking a blend of stability and growth in the consumer defensive sector.