Coca Cola 2015 Annual Report Download - page 54

Net Operating Revenues by Operating Segment
Information about our net operating revenues by operating segment as a percentage of Company net operating revenues is as follows:
Year Ended December 31, 
2014
2013
Eurasia & Africa 
5.9%
5.9%
Europe 
10.5
9.9
Latin America 
10.0
10.1
North America 
46.7
46.1
Asia Pacific 
11.4
11.5
Bottling Investments 
15.2
16.2
Corporate 
0.3
0.3
Total 
100.0%
100.0%
The percentage contribution of each operating segment fluctuates over time due to net operating revenues in certain operating segments growing at a faster
rate compared to other operating segments. Net operating revenue growth rates are impacted by sales volume; acquisitions and divestitures; price, product
and geographic mix; and foreign currency fluctuations. For additional information about the impact of foreign currency fluctuations, refer to the heading
"Liquidity, Capital Resources and Financial Position — Foreign Exchange" below.
Gross Profit Margin
As a result of our finished goods operations, which are primarily included in our North America and Bottling Investments operating segments, the following
inputs represent a substantial portion of the Company's total cost of goods sold: (1) sweeteners, (2) metals, (3) juices and (4) PET. The Company enters into
hedging activities related to certain commodities in order to mitigate a portion of the price risk associated with forecasted purchases. Many of the derivative
financial instruments used by the Company to mitigate the risk associated with these commodity exposures, including any related foreign currency exposure,
do not qualify for hedge accounting. As a result, the changes in fair value of these derivative instruments have been, and will continue to be, included as a
component of net income in each reporting period. The Company recorded losses related to these derivatives of $206 million, $8 million and $120 million
during the years ended December 31, 2015, 2014 and 2013, respectively, in the line item cost of goods sold in our consolidated statements of income. Refer
to Note 5 of Notes to Consolidated Financial Statements. We do not currently expect changes in commodity costs to have a significant impact on our 2016
gross profit margin as compared to 2015.
Year Ended December 31, 2015 versus Year Ended December 31, 2014
Our gross profit margin decreased to 60.5 percent in 2015 from 61.1 percent in 2014. The decrease was primarily due to the impact of acquisitions and
divestitures and the unfavorable impact of foreign currency exchange rate fluctuations, partially offset by positive price mix and slightly lower commodity
costs. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information related to acquisitions and divestitures.
Year Ended December 31, 2014 versus Year Ended December 31, 2013
Our gross profit margin increased to 61.1 percent in 2014 from 60.7 percent in 2013. The increase was partially due to the deconsolidation of our Brazilian
bottling operations in July 2013 as well as lower commodity costs, primarily in our North America finished goods business, and favorable geographic mix.
Refer to Note 2 of Notes to Consolidated Financial Statements for additional information regarding the impact of the deconsolidation of our Brazilian
bottling operations.
The favorable geographic mix was primarily due to growth in emerging markets. Although this shift in geographic mix has a negative impact on net
operating revenues, it generally has a favorable impact on our gross profit margin due to the correlated impact it has on our product mix. The product mix in
the majority of our emerging and developing markets is more heavily skewed toward our sparkling beverage products, which generally yield a higher gross
profit margin compared to our still beverages and finished products.
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