At this time, I would like to welcome everyone to The Coca-Cola Company Fourth Quarter 2016 Earnings Results Conference Call. Today's call is being recorded. If you have any objections, please disconnect at this time. All participants will be on the listen-only mode until the formal question-and-answer. [Operator Instruction] Participants will be announced by their name and company. I would like to remind everyone that the purpose of this conference is to talk with investors and, therefore, questions from the media will not be addressed. Media participants should contact Coca-Cola's Media Relations department if they have questions. I would now like to introduce Mr. Tim Leveridge, Vice President and Investor Relations Officer. Mr. Leveridge, you may begin.

Good morning and thank you for being with us today. I'm joined by Muhtar Kent, our Chairman and Chief Executive Officer; James Quincey, our President and Chief Operating Officer; and Kathy Waller, our Chief Financial Officer. Before we begin, I'd like to inform you that you can find webcast materials in the Investors section of our Company Web site at www.Coca-ColaCompany.com that support the prepared remarks by Muhtar, James and Kathy this morning. As a remainder, we will be hosting a separate modeling call at 11:30 AM this morning to review our 2017 outlook in greater detail, and allow sufficient time for questions pertaining the guidance. I would also like to note that we have posted schedules under the Financial Reports & Information tab in the Investors section of our Company Web site. These schedules reconcile certain non-GAAP financial measures, which may be referred to by our senior executives during this morning's discussion, to our results as reported under Generally Accepted Accounting Principles. Please look on our Web site for this information. In addition, this conference call may contain forward-looking statements, including statements concerning long-term earnings objectives, and should be considered in conjunction with cautionary statements contained in our earnings release and in the Company's most recent periodic SEC report. Following prepared remarks this morning, we will turn the call over for your questions. In order to allow as many people to ask questions as possible, we ask that you limit yourself to one question. If you have multiple questions please ask your most pressing question first and then reenter the queue in order to ask any additional questions. Now, I'd like to turn the call over to Muhtar.

Thank you Tim and good morning everyone. Today, I’ll cover a few key highlights before handing off to James to provide a more detailed operational review of our performance. We’re committed to transform our Company to a brand-centric organization, leading a great franchise system. This journey began back in late 2014 when we got behind a set of strategic actions design to invigorate growth and increase profitability. Since then, we’ve been advancing on our path to deliver greater long-term sustainable value to our shareowners, associates, partners and stakeholders. We simplified our organizational structure for speed and flexibility. We’re driving aggressive productivity. We're redeploying more and better marketing. We're driving revenues through segmented growth strategies, and embarking also on the biggest refranchising in bottler restructuring in our history. 2016 was a critical year as we continue to make strong progress in transforming our Company while keeping focus on our consumers. We continued to gain momentum in building revenue growth through segmented market roles and disciplined brand investments. Since launching our incremental media investment plan in early 2014, our core business has accelerated top-line performance even with slowing macroeconomic growth. We strengthened our brands and portfolios through better and more marketing innovation and targeted acquisitions. We brought to market more than 500 new products, nearly 400 of which were tea, juices, coffees, waters or other still beverages. We generated over $600 million in productivity for a three-year total of over $1.7 billion, taking a balanced approach in investing in our brands, while leveraging our P&L in 2016. Finally, we continued to strengthen our bottling system. The world's largely independent Coca-Cola bottler based on revenue, Coca-Cola European partners began operations in a market that represents one of our most valuable profit centers. We signed definitive agreements to sell our bottling businesses in China,…

Thank you. Good morning everyone. Thanks Muthar. And it will be an honor and a privilege to succeed you as Chief Executive. This is the pivotal time of change by Company, our system and our industry. We’re seeing consumer preferences evolve, technology and ecommerce transform the retail landscape, and of course, ongoing volatile global economic conditions. And the actions we’ve taken over the past few years have set a strong foundation for our Company, and I look forward to steering us through our next phase of growth. I will take you through some of the house when we present at CAGNY in a couple of weeks. So today, let me just cover a few topics; our top line performance for the quarter; a summary of our actions and performance for the whole year; and a little on our expectations for 2017. Then I’ll hand the call to Kathy to walk you through some additional financial details. So, let's start with our top line performance in the fourth quarter. Here, we delivered good organic revenue growth, even allowing for the fact that quarter had two extra days. Clearly, this was driven by 6% price mix, while volume didn’t grow. Mostly, this is a result of what we plan for and expected with a couple of twists. Firstly, those things we expected included our continuing focus on momentum in our developed country markets; for example, North America, which had another very strong quarter; and also, we expected to cycle negative price mix from last year in Asia Pacific, producing a strong number this year. Things we saw occur in the quarter and responded to included; for example, India, where demonetization impacted the whole CTG landscape; our system responded quickly by facilitating digital payments; extending credit to mitigate destocking; and increasing our emphasis…

Thank you, James and good morning everyone. As I look back at 2016, I am pleased with the progress that we’ve made against our strategic initiatives. We drove organic revenue growth; grew segmented market growth and disciplined investments; further embedded productivity into our culture; and strengthened our system in several key markets. Importantly, we delivered our profit target in this tough operating environment and we returned $8.3 billion to shareowners through dividends and net share repurchases. Now, looking at 2017, we have a strong foundation in place, but we still have a lot of assets across the system in motion. In North America, we will refranchise more of this year than we have accumulatively to-date. In addition, China will close and Africa is on track. We have strong plans in place and we recognize this level of change requires a disciplined focus to minimize any potential disruptions. As of any endeavor of this size, it is understandable that timetables may move. So the best way to think about our refranchising is to take both the 2017 and 2018 expected impact together to arrive at the total expected impact to revenues and profit. That way you can understand the dynamics and effectively model what in change in time of this year means for next year. Starting at the top, we expect the global environment in 2017 to be roughly similar to that of 2016 with continued macroeconomic challenges in the emerging and developing world, and continued growth in the developed world. However, there is a significant amount of uncertainty and geopolitical tension, which could results in a changing macro-environment. Therefore, we expect 3% organic revenue growth that more by pricing than by volume growth. And we expect the core business to outpace our consolidated results, consistent with our performance in 2016.…

And your first question comes from Bryan Spillane of BofA Merrill Lynch. Your line is now open.

Hey good morning everybody, and just wanted to offer my congratulations and best of luck to both of you Muthar and to James. I had a question, James, in regarding price mix. And I guess as you’re you kind of looking out over kind of what the environment is like over the next couple of years. Can you just talk a little bit how you’re balancing the desire to get some price mix in with how you think about that relative to volume? And also relative to maybe affordability, especially in some of the emerging markets where the consumer environment is still pretty tough.

Couple of thoughts there, I mean, over the long-term we said we’re looking for a balance between price and volume, well price mix and volume. And that’s certainly our long-term objective. Now, given what’s happening, I think it's almost as we said it's easier to divide the world into the developed and the emerging market. In the developed countries, we’re looking to drive probably a little more price than volume, and you can see that happening in the U.S. marketplace as we focus on smaller packages, as we focus on higher value categories or sub categories. So you see that across North America, Western Europe is a little more balanced, and similarly into Japan. So, that’s our approach for the developed market. In the emerging markets, obviously over the long-term, we expect them to be a bigger source of underlying volume growth, and that will bring the total Company equation into balance. So they would be more volume driven and less price-driven. Now, what’s happening is in some of the markets, say for example Brazil where the micros are really under pressure, I mean, GDP over the last three years in Brazil has probably declined by more than it did in the great recession over the last decade of the 80s. So, there what we focus on is in any moment that we will do those promotional things that make sense and return. So, we don’t over-protect volume, we do what make sense on a quarterly or a monthly basis. And the principle access we act on is trying to reform the packaging strategy to make it more affordable. Whether that’d be small or one-way packaging or more returnable packages backed up by good marketing that really emphasizes with the economic situation, the consumers that are in and obviously great execution by the bottling system. So net-net, likely overtime, developed markets will push, will get more price mix and slightly less volume. And in emerging markets, more volume and slightly price mix with that caveat that those markets that struggled, we have a game plan that we’ve developed over the years and that we find helps us really build a good strong consumer franchise going forward and balances the short-term.

Next question comes from Steve Powers of UBS. Your line is now open.

So just -- and congratulations from me as well, to both of you. Just following on Bryan's question on price mix when have a great price mix quarter like you did here in Q4, I guess the question that is in my mind is why aren’t we seeing more flow-through to the bottom line. Because in a vacuum you think 5 or 6 points of pricing mix would be significantly margin accretive. So, I guess, is it the case that what maybe mix-accretive, on the revenue line is actually margin or even penny profit dilutive on the bottom line? And I am thinking here really about the structural shift from sparkling to stills, but perhaps some of the packaging changes and geographic shifts in the balance of your overall business may play role as well. Can you just talked about that, why we are not seeing more profit flow-through on the price mix?

Sure. Well, I think you saw lots of flow-through actually in the fourth quarter. Operating income currency neutral structure was up 18% after gross profit of 8, so there was 10 points of leverage. So, we got a lot of leverage coming through. The reason I didn't translate from operating income to PBT is more about other factors, like interest or other corporate items. So, the underlying operation, actually when I talk about PBT growing at 8% in '16 and what we've guided in '17, actually the underlying operating income performance is actually even better than that. And then we've got a bit of a headwind in interest in some of those other items. So, there’s actually a lot of leverage coming through from the operation as we focus on segmented revenue, as we focus on higher value category, as we focus on smaller packages, we're getting a lot of operating leverage between that revenue line and the operating income line. Some of it's getting that is often a headwind. So it is there, in the fourth quarter. Just to make the point, 6% is not projectable going forward. You will see in the numbers, for example, we were recycling a big negative in Asia Pacific from last year, so we've got big positive this year. We have some very good results and improvements where we own bottling operations, like China, which was very much richer in the first half. So there is some oddities in the fourth quarter. I would encourage everyone to look at maybe the full year '16, look through to the core operation where we were growing 4%, 8% PBT, bear in mind the interest headwinds at the higher operating income growth, lots of leverage. This is the game plan for 2017.

And our next question comes from Dara Mohsenian of Morgan Stanley. Your line is now open.

So, James, in your prepared remarks, you touched on plans to reinvigorate sparkling growth. Can you give us more detail on where you think you stand currently in terms of the areas you mentioned, effectiveness of marketing, you shift to long-tailored products, et cetera, and any big changes you’re planning going forward to drive improved trends? And then you also mentioned tuck-in M&A. So, how big a role should we expect diversification into other sub-categories to play-out over the next few years for your Company? Thanks.

Sure. Of course, I'll say some things for CAGNY. So, let me start with, the sparkling business is growing revenue, it grew revenue in 2015, it grew revenue in 2016. Momentum is rebuilding. If you look at the U.S., sparkling was up 1% in the fourth quarter in the U.S., in aggregate, in volume and obviously much more in revenue. So, there is -- the sparkling category is growing revenue. Let me, another piece on to that just take a couple of examples. In this quarter and last quarter as well, total -- if you take the combination of Diet Coke, Coke Light and Coke Zero, they came into robust growth in the back of the year, the growth of those altogether, so no calorie colas, exceeds the growth of the sparkling actually exceeds the growth of that total portfolio and most of our other categories. So, there is robust growth as we press into zero sugar colas, we're getting the growth. And in North America and some of the other places where we're pushing smaller packages, we're getting the good growth. Smaller packs in the U.S. grew almost 10% in the fourth quarter. So the game plan out there of smaller packages, zero sugar, re-engagement with the sparkling category, is driving the revenue growth and we believe it will continue to do so. And the shape and the quality of that, in terms of the suitability, is looking better overtime. Obviously, tough on M&A won't be sparkling related. We have consistently done a few things this year. Hopefully, we’ll do a few in '17. We’ll do those that make strategic sense, financial sense, and where we find willing partners.

And your next question comes from Ali Dibadj from Bernstein. Your line is now open.

I’ve couple of questions on guidance, especially in the context James of your focus on EPS growth, going forward. So, for 2017, very helpful in line with our thought process, at least; except why only 3% organic sales growth? For 2018, it seems like your EPS would be barely ticking up based on assumption of high single-digit comparable currency neutral income growth before tax, or so. So 2017 like based to growth. So 2018, looks like its growing EPS very much at all. Does that sound right on 2018, and why? Or is your statement in prepared remarks suggesting that looking 2018, we’re going to things like incremental cost cutting, we’re going to do things to really grow the EPS. And then I can't resist have to throw this one as well, slightly different. But why does the total gross structural PBT headwind look like something like 9% to 11% versus what you said CAGNY at 7.5%? So, thanks for throwing all those. Thanks.

I’ll start, may be and then Kathy, if you feel like jumping in it, let me know. The 2017, 3%, I think we see a similar year in 2017 in terms of micros that we did in '16. And I think we’re making a prudent call that given everything that’s going on in the world, on a consolidated basis, we’re expecting a similar outlook and a similar number for the total Company. Obviously, as Kathy said, we’d like to see the core business grow above that as we did in 2016, where the consolidated was 3% and the core was 4%, which is the bottom end of our range and then that obviously lots of operating leverage. So, that’s how we’re seeing, and we just see the way the world is going. In terms of 2018, obviously, we’re not providing guidance on 2018. We’re just providing some of the elements that we know are important from a modeling perspective. So, obviously, 2018 conversation will have to wait. But we wanted people to understand the structural pace, because obviously the timing of when we sell those transactions makes a big difference. And so as timing varies, the structural adjustment can move backwards and forwards between 2018. So we just wanted to give people a total perspective. I don’t know Kathy about number three. I am not sure we have the thing in front of us, Ali.

So the bridge of total structural versus what we’ve shown at CAGNY. The part of what, I think is misunderstand stood in structural adjustments is, as we -- and particularly in this year, we talked about 5% to 6%. The two additional things you need to factor-in in your structural adjustments, the CCR business is not kind of standing still. It's continuing to grow, as well as the fact that they are taking out stranded costs. Now, we think of stranded costs a lot like productivity if you will. And so we have embedded those, and that’s why I said in my prepared remarks to be at 2 point of productivity, of 2 points of stranded costs that are coming out as well in our numbers. But the stranded costs are more like productivity. In that they don’t just transfer with the territories, we did work to do to get them out. And for some reason if they don’t transfer, they’re part of our business, and we have do work to get them out long-term. So the stranded costs, we treat that as part of the business. And you can choose to net those and that to understand the short-term impact. But that's how they represent themselves in our numbers. And again, we're not getting any other underlying growth guidance for 2018 at this point.

And our next question comes from Bill Schmitz of Deutsche Bank. Your line is now open.

Could you guys just give a little bit more color on, what sounds like a little bit lower advertising spending next year? I think, you mentioned in the prepared comments. So is it something that, like you've realized that maybe the advertising efficiencies and there’s much. And how that -- like what the numbers are, is it going to be lower as a ratio and in dollars? And then it seems like there is a probably lot of initiatives you can support next also. And so like the plan was getting Coke Zero Sugar out beyond Europe, if that's also in the plan for the next year. So I tried to wrap two questions in one. But the absolute and ratio of advertising spend in rationale for reducing it and then if you do as that plan to take Coke Zero Sugar to other markets outside of Europe? Thanks.

So, firstly, the aggregate amount of marketing spend is slightly below gross profit, you are correct. Now, what is super important to know within that is we will continue to increase what we would call working spend of the marketing ahead of revenue, but we are driving material productivity in the way we organize and produce the marketing to become much more efficient. So, we are able to grow media, if you like, in all its different forms ahead of revenue. But with the extra productivity initiatives, we are actually growing total spend less than revenue, that's how that dynamic is working. So, we'll be out to do much more in the marketplace in a more efficient way. And then secondly on Coke Zero Sugar, absolutely you should expect this to move around the world things that are successful, and that had a great start in GB in the backend of 2016 was growing double-digits, very good start. We're rolling out in Europe. It just launched in Australia. So, you can absolutely expect this to push it into those markets where we think it can be really effective, including Latin America soon, so absolutely. And I think that is part of why you're now seeing the continued acceleration of Coke Zero Sugar each year. We grew several points faster in volume in '15 than '14, and we grew several points faster in '16 than with the rate we were growing in '15. And as I said, aggregate no calorie colas, is in good mid-single digits growth as we exited the year.

And our next question comes from Judy Hong of Goldman Sachs. Your line is now open.

Thank you good morning and my congratulations to both of you as well. So first just a follow-up on price mix, specifically in North America. Obviously, we've all learned that the Nielsen data is not perfect. But there it seems to be a pretty big disconnect between, particularly in the fourth quarter where you’ve got the 4% pricing versus softer pricing that we’ve seen in the data. So, if you can just elaborate on that as a follow-up. And then James I'm just wondering if you can talk a little bit about how much of a priority in '17 is really a shift towards still, if I look at '16 performance, 3% growth that you got. And still it seems like it could be much stronger in the context of a lot of the categories that seems to be growing at a faster rate. So, can you just talk about, either on the innovation front or investment front, how much of that focus would really that you’ll look towards in '17 on the still category?

Sure. I mean, clearly, there’s disconnect. I mean the Nielsen University is a much smaller piece of our total business. Obviously, when you look at the aggregate of North America, fountain is very important to us, it's almost a third of the volume in North America. And that’s not going through Nielsen. And obviously, there is a lot of warehouse business there where we sell some of the still categories directly. But we have not deviated from our strategy. We talked on previous quarters that sometime the pricing will be at least the risk that the apparent pricing in Nielsen will look little softer or a little better. The important message is we have not changed our strategy. We continue to focus on realizing pricing intelligently and through packaging and pricing in the sparking category, and focusing on those, the other categories that we believe have value in terms of revenue and profitability. And so, every now and again you will see this disconnect between Nielsen and our total results. But no, that our strategy has not changed, and we plan to continue to pursue it into 2017. And then in terms of the other categories, absolutely, we continue to innovate and invest there. I think the underlying trend is even better than what it jumps out in the volume, bearing in mind the strategy is to participate in those categories as the highest value to us, both in revenue and in terms of profitability. So, for example, if you went to China and you look at what was happening some of the stills categories, maybe water, you see a growth rate of X. But what you don’t see in the volume is actually we’re selling less of the cheap water and more of the higher value waters recycle and re-innovate our business to drive the positioning and the premiumness through different brands and reset the way we attack some of these categories. So, we’re asked to driving consumer franchise that’s about incidence of consumers the number of times they drink our beverages, even if that’s a smaller package and about competing from value on the top and the bottom line.

And our next question comes from Nik Modi of RBC Capital Markets. Your line is now open.

Thanks, and congrats guys from me as well. Question, James, I guess is when we look at North America, numbers have looked pretty good relative to I think most people's expectation going back about a year and half. A lot of the initiatives that you have put in place have started in North America. So I am just wondering if you can help us map out how to think about what’s happened in North America, and the applicability to the rest of the world? And that would be helpful. Thanks.

Absolutely, North America has had a great run. The team has done a good job. The strategy is working. The numbers in '15 and '16 that put us at the top end of CPGs in terms of revenue growth with our customers, we’re very pleased with that. I think what you see in the North American strategy, which is absolutely likely what you should expect is a fusion. And what I mean by that is things that they have done, they have taken from other parts of the world successfully. And they have blended it with new ideas and things that are relevant for the North American market, and that’s what turned into the wining plan they put in place, and they’ve executed, and it's doing well. And so, you should expect us always to be taking ideas from one place, applying the learnings in another place. And fundamentally, I think North America is a great example of where we reinvest marketing behind the right strategy and a balanced portfolio with execution by the bottling system. And I underline that, the importance of the execution by the bottling system and our own fountain and what wholesale business is during a time of tremendous change through the refranchising.

And our next question comes from Robert Ottenstein of Evercore. Your line is now open.

Two questions, first, to the extent that you're able to talk about it. I’d love to understand the thought process about not purchasing by, which Dr. Pepper ended-up buying. It seemed to check a lot of boxes. Is it the product, is it the timing? Any color on that. And second, could you discuss whether all the franchising, and particularly in Africa, has caused any disruptions in the business, any headwinds through that process. And a little bit more on the timing, you'd expected timing on Africa. Thank you very much.

Sure. I don't think it will be appropriate to comment on the M&A process of by, so I am going to skip that one, if I may. Refranchising in Africa, I think there has been a very robust process. And I think the management team of the bottler, both prior to the closing of SAB transaction under ABI on the board as well and ongoing. The management team has remained focused on doing the right things in the marketplace to a creditable performance by the management team in conjunction with the local business unit. So, we see no disruption there. And I think everything is going well. The refranchising itself as Muthar commented and as you've seen, we've reached agreement with ABI at the close of last year, and with the rest of the process is ongoing, both from a regulatory process point of view and a selection and determination of the partner from those that will be strongest in those that are interested.

Next question comes from Bonnie Herzog of Wells Fargo. Your line is now open.

Good morning and congratulations to both of you. I was hoping you guys could drill down a little further, on headwinds and the consumer, in some of your key emerging markets. And then, how has the overall category been performing in these markets? And really how is it been holding up given some of the headwinds and pressures on consumer spending, and whether you're taking share. And then, specifically in China, things seem to be accelerate in the second half last year. So could you guys talk a little bit more about current trends, whether that’d be near-end and long-term outlook for China. Thank you.

Sure. I mean I think the emerging market is a very mixed tag. I mean there are some, which was doing well. I called out some, like Nigeria, which had a very strong year even in the close of the year as the currency came under pressure, places like Mexico. There are number of emerging markets, South Africa, which we did well in. Now, there are others where the macros were tough, whether that’d be Venezuela, very tough, Argentina, Brazil, and there we applied our strategies, a combination of what's the right tactical use of promotions to balance the system. We don’t want the scale, but we don’t want to overinvest in promotions, while resetting the pack price architecture to really drive long-term affordability. So, it's very much a mix bag across the world. Obviously, India is something a lot of people have commented on. I am not sure any more I can add on the India example. In terms of China, I think China is a great example where you see us executing the game plan, I talked about for Brazil. So the China back-end of '15 coming into the first and the second quarters of 2016 was a very rough year to CPG, a rough year for beverages in China. We went for our game plan, exactly what I said about Brazil, we started to do some promotional things. And then we reset some of the pack price architecture. We’ve focused on the right package sizes and the right brands, doing the marketing in the right way, and a reset of what was important in terms of execution, where you should execute, in terms of channels and focus to the city. So, in the case in China, the markets are actually doing pretty well in the top tier cities. There was lots of growth, look more like the strategy of focus on the value-end, focus on the premium end of the business and then in the more rural and lower tier cities, really affordability and smaller package sizes. And then in the second half of 2016, China rebounded. We grew in both the third and the fourth quarter in volume terms and in revenue terms in China. So, the game plan works. Obviously, it's not instantaneous but we know what to do when markets get into trouble if we focus on understanding the consumer, understanding the customer, and getting organized as a system.

Yes, I’ll just add one point just to complement what James said is that this was the 38th consecutive quarter for us in gaining value share, 38th. And then in sparkling, in NARTD, and in sparkling, this was the 12th consecutive quarter of share gains. And then in North America, importantly, 27th consecutive quarter of share gain. So, we continue to gain share as we implement this playbook that’s really working, and the business is getting stronger over a much, much bigger base than any one of our competitors going forward. So, I just wanted to add that.

And your next question comes from Mark Swartzberg of Stifel. Your line is now open.

Thanks. Good morning everyone, and my congratulations as well, James and Muthar. I wanted to, if we could do tail of three countries here, James. And what I mean by that is Mexico, your results, the Asia's results, Walmex, Antab retail data. It seems that the consumer is doing rather fine there, and of course there is a lot of concern about Mexico, since November 8th. So, in Mexico specifically, could you just give us the feel for what you’re seeing in terms of broad consumer behavior since November 8th? And then with Brazil and India, with the pricing you have taken some of the invisible, if you will, because of what you’re doing with price pack architecture. What's the level of confidence you have in those markets that the elasticity that you experienced will not be worse than what you have actually -- that you have a an adverse elasticity impact, greater than what your model say?

Sure. Well, Mexico, I think the -- honestly, I am sure the Mexican consumers in terms of what happened in the marketplace, the purchasing pattern, really changed that much pre and post that date. I think the Mexican economy there has been a lot of focus on it. There was a reform. So, I think it performed well. And we have a great business in Mexico. I think our system there has been innovating, it's truly one in the places where we’ve been most innovative and most creative across the total portfolio where we compete in almost every category, and they've done a really robust job of building a good business. And I think that that is what you see in the Mexico results, and may continued to build on a strong 2015 with a stronger 2016. And I think it's a wonderful operation down there, and they did a very creditable result. And I think hopefully that will all continue into 2017. Certainly, where we think that our system is up to the challenge come what may in Mexico. In terms of Brazil and India, I think they’re two very different examples. India, it was -- it certainly it's really one-off event. I mean, the demonetization effectively drained liquidity. I don't think that's about price elasticity, I think that's about the current shock to the circulation and liquidity. Clearly where the view that a formalization of the economy helps the formal players and I think it will work, it will be good in the medium term and the long-term. We expect the short-term disruptions to mitigate to tail-off as we come into 2017, though not from January 1st. And I think what we just need to see is some stabilization there. And we will be out to then come…

And our next question comes from Bill Chappell of SunTrust. Your line is now open.

Just a quick question on commodities, maybe I missed it. But the net exposure, as we look forward to this year in terms of headwind-tailwind, and then also maybe help us understand how that changes with the refranchising, I mean do you have less exposure to certain things or is it really unchanged?

So, this year, the commodity environment was relatively benign and we anticipate that next year is the same time. As we said, next year will be the largely the same as what we’ve seen in 2016. We do anticipate that with the refranchising, our exposure to commodity, it goes down significantly. As we talked about, I think last CAGNY, so there is -- and we'll give you some more flavor of this, I think in the modeling call. But there is a significant change in the impact to the Coca-Cola Company is related to commodities.

And now, I would like to turn the call back to Mr. Kent for closing remarks.

Thanks James, Kathy and Tim. Last year, we made significant progress as we accelerated the transformation of our Company into a higher margin business, while keeping focus on consumers. With the strong foundation set now is a time for a seamless leadership transition. And I have every confidence that James is the best person to take us through the next phase of our sustainable growth. There is no question that this phase will look different than the past driven by a broad consumer-centric portfolio across all categories, while enabling consumers to control their intakes of added sugar. And this is going to require a change to some of our strategies, many of which have already begun and now need further scale in regions all around the world. As always, we thank you for your interest, your investment in our Company and for joining us this morning.