BE Coca Cola-2022-Annual-Report[1 X + X File | C:/Users/Hp/AppData/Local/Microsoft/Windows/INetCache/IE/7CP9CWON/Coca%20Cola-2022-Annual-Report[1].pdf . . . I V Draw 2 | | Read aloud + 19 of 108 2 | 09 503 PARTI Item 1. Business. Introduction Coca-Cola Consolidated, Inc., a Delaware corporation (together with its majority-owned subsidiaries, "Coca-cola Consolidated," the "Company," "we," "us" or "our"), distributes, markets and manufactures nonalcoholic beverages in territories spanning 14 states and the District of Columbia. The Company was incorporated in 1980 and, and, together with its predecessors, has been in the nonalcoholic beverage manufacturing and distribution business since 1902. We are the largest Coca-cola bottler in the United States. Approximately 86% of our total bottle/can sales volume to retail customers consists of products of The Coca-cola Company, which include some of the most recognized and popular beverage brands in the world. We also distribute products for several other beverage companies, including Keurig Dr Pepper Inc. ("Dr Pepper") and Monster Energy Company ("Monster Energy"). Our Purpose is to honor God in all we do, to serve others, to pursue excellence and to grow profitably. Ownership As of December 31, 2022, J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, controlled 1,004,394 shares of the Company's Class B Common Stock, which represented approximately 71% of the total voting power of the Company's outstanding Common Stock and Class B Common Stock on a consoli ated basis. As of December 31, 2022, The Coca-Cola Company owned shares of the Company's Common Stock representing approximately 9% of the total voting power of the Company's outstanding Common Stock and Class B Common Stock on a consolidated basis. The number of shares of the Company's Common Stock currently held by The Coca-cola Co ny gives it the right to have a designee proposed by the Company for nomination to the Company's Board of Directors in the Company's annual proxy statement. J. Frank Harrison, III and the trustees of certain trusts established for the benefit of certain relatives of the late J. Frank Harrison, Jr. have agreed to vote the shares of the Company's Common Stock and Class B Common Stock that they control in favor of such designce. The Coca-Cola Company does not own any shares of the Company's Class B Common Stock. Beverage Products We offer a range of nonalcoholic beverage products and flavors, including both sparkling and still beverages, designed to meet the demands of our consumers. Sparkling beverages are carbonated beverages and the Company's principal sparkling beverage is Coca-Cola. Still beverages include energy products and noncarbonated beverages such as bottled water, ready to drink tea, ready to drink coffee, enhanced water, juices and sports drinks. Our sales are divided into two main categories: (i) bottle/can sales and (ii) other sales. Bottle/can sales include products packaged primarily in plastic bottles and aluminum cans. Other sales include sales to other Coca-Cola bottlers, post-mix sales, transportation revenue and equipment maintenance revenue. Post-mix products are dispensed through equipment that mixes fountain syrups with carbonated or still water, enabling fountain retailers to sell finished products to consumers in cups or glasses. The following table sets forth some of our principal products, including products of The Coca-cola Company and products licensed to us by other beverage companies: Sparkling Beverages Still Beverages The Coca-cola Company Products: Barqs Root Beer AHA Peace Tea Cherry Coca-Cola Mello Yello BODY ARMOR products POWERade Cherry Coca-Cola Zero Mello Yello Zero Core Power POWERade Zero Coca-cola Minute Maid Sparkling Dasani Tum-E Yummies Coca-cola Vanilla Pibb Xtra fairlife products Coca-cola Zero Sugar Seagrams Ginger Ale glaceau smartwater Diet Coke Sprite glaceau vitaminwater Fanta Sprite Zero Sugar Gold Peak Tea Fanta Zero Minute Maid Juices To Go Products Licensed to Us by Other Beverage Companies: Diet Dr Pepper Sundrop Dunkin' Donuts products NOSE Diet Sundrop Full Throttle Reign products Dr Pepper Monster Energy products 70 OF O Q Search [P W X O ENG 12:28 PM Cloudy US 7/13/2023BE Coca Cola-2022-Annual-Report[1 X + X File | C:/Users/Hp/AppData/Local/Microsoft/Windows/INetCache/IE/7CP9CWON/Coca%20Cola-2022-Annual-Report[1].pdf . . . I V Draw 2 | | Read aloud + 20 of 108 2 | 09 503 Beverage Distribution and Manufacturing Agreements We have rights to distribute, promote, market and sell certain nonalcoholic beverages of The Coca-cola Company pursuant to comprehensive beverage agreements (collectively, the "CBA") with The Coca-cola Company and Coca-cola Refreshments USA, Inc. ("CCR"), a wholly owned subsidiary of The Coca-Cola Company. The CBA relates to a multi-year series of transactions, which were completed in October 2017, through which the Company anged distribution territories and manufacturing plants. The CBA requires the Company to make quarterly on a continuing basis in exchange for the grant of exclusive rights to distribute, promo rands of The Coca-Cola Company and related products in certain of the Company's distribution territories. In addition to customary termination and default rights, the CBA requires us to make minimum, or meet certain minimum volume requirements, gives The Coca-cola Company certain approval an a sale of the Company or of the distribution business of the Company and prohibits us from producing, manufacturing, preparing, packaging, distributing, selling, dealing in or otherwise using or handling any beverages, b rage products other than the beverages and beverage products of The Coca-cola Company e consent of The Coca-cola Company. We also have rights to manufacture, produce and package c everages bearing trademarks of The Coca-Cola Company at our manufacturing plants pursuant to a regional manu la Company entered into on March 31, 2017 (as amended, the "RMA"). We may distribute these beverages for our own account in accordance with the CBA or may sell them to certain other U.S. Coca-cola bottlers or to The Coca-cola Company in accordance with the RMA. For prices determined pursuant to the RMA, The Coca-Cola determine the prices, that the Company charges for these sales to certain other U.S. Coca-Cola bottlers or to The Coca-Cola Company. The RMA contains provisions similar to those contained in the CBA restricting the sale of the Company or the manufacturing business of the Company, requiring minimum, business, prohibiting us from manufacturing any beverages, beverage components or other beverage products other than the beverages and beverage products of The Coca-cola Company and certain expressly permitted cross-licensed brands without the consent of The Coca- allowing for the termination of the RMA. In addition to our agreements with The Coca-cola Company and CCR, we also have rights to manufacture and/or distribute certain beverage brands owned by other beverage companies, including Dr Pepper and Monster Energy, pursuant to agreements with such other beverage companies. Our distribution agreements w beverage brands, as well as certain post-mix products of Dr Pepper. Certain of our agreements with Dr Pepper also authorize us to manufacture certain Dr Pepper beverage brands. Our distribution agreements with Monster Energy grant us the rights to distribute certain products offered, packaged and/or marketed by Monster Energy. Similar to the CBA, these beverage approved bottles, cans and labels and the sale of imitations or substitutes, as well as provisions for their termination for cause or upon the occurrence of other events defined in these agreements. Sales of beverages under these agreements with other beverage companies represented approximately 14%, 17% and 16% of our total bottle/can sales volume to retail customers in 2022, 2021 and 2020, respectively. Finished Goods Supply Arrangements We have finished goods supply arrangements with other U.S. Coca-Cola bottlers to sell and buy finished goods bearing trademarks owned by The Coca-Cola Company and produced by us in accordance with the RMA or produced by a selling U.S. Coca-Cola bottler in accordance with a similar regional manufacturing horization held by such bottler. Pursuant to the RMA, The Coca-Cola Company unilaterally establishes fro time to time the prices, or certain elements of the formulas used to determine the prices, for such finished goods. In most instances, the Company's ability to negotiate the prices at which it sells finished goods bearing trademarks owned by The Coca-cola Company to, and the prices at which it purchases such finished goods from, other U.S. Coca-cola bottlers is limited pursuant to these prici cing provisions. Other Agreements Related to the Coca-Cola System We have other agreements with The Coca-cola Company, CCR and other Coca-cola bottlers regarding product supply, information technology services and other aspects of the North American Coca-cola system, as described below. Many of these agreements involve system governance structures that require the Company's management to closely collaborate and align with other participating bottlers in order to successfully implement Coca-cola system plans and strategies. Incidence-Based Pricing Agreement with The Coca-Cola Company The Company has an incidence-based pricing agreement with The Coca-Cola Company, which establishes the prices charged by The Coca-Cola Company to the Company for (i) concentrates of sparkling and certain still beverages produced by the Company and 70 OF O Cloudy Q Search P X O ENG 12:28 PM US 7/13/2023BE Coca Cola-2022-Annual-Report[1 X + X File | C:/Users/Hp/AppData/Local/Microsoft/Windows/INetCache/IE/7CP9CWON/Coca%20Cola-2022-Annual-Report[1].pdf . . . I V Draw 2 | | Read aloud + 21 of 108| | 049 503 (ii) certain purchased still beverages. Under the incidence-based pricing agreement, the prices charged by The Coca-Cola Company are impacted by a number of factors, including the incidence rate in effect, our pricing and sales of finished products, the channels in which the finished products are sold, the package mix and, in the case of products sold by The Coca-cola Company to us in finished form, the cost of goods for certain elements used in such products. The Coca-cola Company has no rights under the incidence-based pricing agreement to establish the prices, or the elements of the formulas used to determine the prices, at which we sell products, but does have the right to establish certain pricing under other agreements, including the RMA. National Product Supply Governance Agreement We are a member of a national product supply group (the "NPSG"), which is comprised of The Coca-Cola Company, the Company and certain other Coca-cola bottlers who are regional producing bottlers in The Coca-cola Company's national product supply system (collectively with the Company, the "NPSG Members"), pursuant to a national product supply governance agreement executed in 2015 with The Coca-cola Company and certain other Coca-cola bottlers (as amended, the "NPSG Agreement"). The stated objectives of the NPSG include, among others, (i) Coca-cola system strategic infrastructure investment and divestment planning; (ii) network optimization of plant to distribution center ructure planning. Under the NPSG Agreement, the NPSG Members established certain governance mechanisms, including a governing board (the "NPSG Board") comprised of representatives of certain NPSG Members. The NPSG Board makes and/or oversees and directs certain key decisions regarding the NPSG. Subject to the terms and conditions of the NPSG Agreement, each NPSG Member is required to comply with certain key decisions made by the NPSG Board, which include decisions regarding strategic infrastructure investment and divestment planning, optimal national product supply sourcing and new product or packaging infrastructure planning. We are also obligated to pay a certain portion of the costs of operating the NPSG. CONA Services LLC Along with certain other Coca-cola bottlers, we are a member of CONA Services LLC ("CONA"), an entity formed to provide business process and information technology services to its members. We are party to an amended and restated master services agreement with CONA, pursuant to which CONA agreed to make available, and we became authorized to use, the Coke One North America system (the "CONA System"), a unifor ational efficiency and uniformity among North American Coca-Cola bottlers. As part of making the CONA System available to us, CONA provides us with certain business process and information technology services, including the planning, development, management and operation of the CONA System in connection v manufacture of products. In exchange for our rights to use the CONA System and receive CONA-related services, we are charged service fees by CONA, which we are obligated to pay even if we are not using the CONA System for all or any portion of our distribution and manufacturing operations. Amended and Restated Ancillary Business Letter On March 31, 2017, we entered into an amended and restated ancillary business letter with The Coca-Cola Company (the "Ancillary Business Letter"), pursuant to which we were granted advance waivers to acquire or develop certain lines of business involving the preparation, distribution, sale, dealing in or otherwise using or handling of certain beverage products that would otherwise be prohibited under the CBA. Under the Ancillary Business Letter, the consent of The Coca-cola Company, which consent may not be unreasonably withheld, would be required for us to acquire or develop (i) any grocery, quick service restaurant, or convenience and petroleum store business engaged in the sale of beverages, beverage components and other beverage products not otherwise authorized or permitted by the CBA or (ii) any other line of business for which beverage activities otherwise prohibited unde threshold of net sales (subject to certain limited exceptions). 70 OF O Q Search O ENG 12:28 PM Cloudy US 7/13/2023BE Coca Cola-2022-Annual-Report[1 X + X File | C:/Users/Hp/AppData/Local/Microsoft/Windows/INetCache/IE/7CP9CWON/Coca%20Cola-2022-Annual-Report[1].pdf . . . I V Draw 2 | | Read aloud + 22 of 108 2 | 09 503 Markets Served and Facilities As of December 31, 2022, we served approximately 60 million consumers within our territories, which comprised five principal markets. Certain information regarding each of these markets follows: Number of Manufacturing Distribution Market Description Plants Centers Carolinas The majority of North Carolina and South Carolina and portions of Charlotte, NC 17 southern Virginia, including Boone, Hickory, Mount Airy, Charlotte, Raleigh, Winston-salem, Green Salem, Greensboro, Fayetteville, Greenville and N Bern, North Carolina, Conway, Marion, Charleston, , Charleston, Columbia, Greenville and Ridgeland, South Carolina and surrounding areas. Central A significant portion of northeastern Kentucky, the major Cincinnati, OH 12 Virginia and portions of southern Ohio, southeastern Indiana and tern Pennsylvania, including Lexington, Louisville and P Kentucky, Beckley, Bluefield, Clarksburg, Elkins, Parkersburg, Craigsville and Charleston, West Virginia, Cincinnati and Portsmouth Ohio and surrounding areas. Mid-Atlantic The entire state of Maryland, the majority of Virginia and Delaware, the Baltimore, MD 11 District of Columbia and a portion of south-central Pennsylvania, silver Spring, MD Roanoke, VA berland. Maryland, Norfolk, Staunton, Alexandria, Roanoke, Sandston, VA Richmond, Yorktown and Fredericksburg, Virginia and surrounding areas. Mid-South A significant porti fal and southern Arkansas and Tennessee and West Memphis, 10 portions of western Kentucky and northwestern Mississippi, including Nashville, TN Little Rock and West Memphis, Arkansas, Cleveland, Cookeville, Johnson City, Knoxville, Memphis and Morristown, Tennessee, Paducah, Kentucky and surrounding areas. Mid-West A significant portion of Indiana and Ohio and a portion of southeastern Indianapolis, IN 10 wn, Evansville, Fort Wayne. Twinsburg, OH Indianapolis and South Bend, Indiana, Akron, Columbus, Dayton, Elyria, Lima, Mansfield, Toledo, Willoughby and Youngstown, Ohio and surrounding areas. Total 10 The Company is also a shareholder of South Atlantic Canners, Inc. ("SAC"), a manufacturing cooperative managed by the Company. SAC is located in Bishopville, South Carolina, and the Company utilizes a portion of the production capacity from the Bishopville manufacturing plant. Raw Materials In addition to concentrates purchased from The Coca-cola Company and other beverage companies for use in our beverage manufacturing, we also purchase sweetener, carbon dioxide, plastic bottles, cans, closures and other packaging materials, as well as equipment for the distribution, marketing and production of nonalcoholic beverages. We purchase all of the plastic bottles used in our manufacturing plants from Southeastern Container and Western Container, two manufacturing cooperatives we co-own with several other Coca-cola bottlers, and all of our aluminum cans from two domestic suppliers. Along with all other Coca-cola bottlers in the United States and Canada, we are a member of Coca-Cola Bottlers' Sales & Services Company LLC ("CCBSS"), which was formed to provide certain procurement and other services with the intention of enhancing the efficiency and competitiveness of the Coca-cola bottling system. CCBSS negotiates the procurement for the majority of our raw materials, excluding concentrate, and we receive a rebate from CCBSS for the purchase of these raw materials. We are exposed to price risk on commodities such as alumit m, corn and PET resin (a petroleum- or plant-based product), which affects the cost of raw materials used in the production of our finished products. We both produce and procure these finished products. Examples of the raw materials affected are aluminum cans and plastic bottles used for packaging and high fructose corn syrup used as a product ingredient. Further, we are exposed to commodity price risk on crude oil, which impacts our cost of fuel used in the movement and delivery of our products. We participate in commodity hedging and risk mitigation programs, including programs administered by CCBSS and programs we administer. In addition, other than as discussed above, there are no limits on the prices The Coca-cola Company and othe concentrate 70 OF O Q Search P X O ENG 12:28 PM Cloudy US 7/13/2023BE Coca Cola-2022-Annual-Report[1 X + X File | C:/Users/Hp/AppData/Local/Microsoft/Windows/INetCache/IE/7CP9CWON/Coca%20Cola-2022-Annual-Report[1].pdf . . . I V Draw 2 | | Read aloud + 23 of 108 | | 09 503 Customers and Marketing The Company's products are sold and distributed in the United States through various channels, which include selling directly to customers, including grocery stores, mass merchandise stores, club stores, convenience stores and drug stores, selling to on-premise locations, where products are typically consumed immediately, such as restaurants, schools, amusement parks and recreational facilities, and selling through other channels such as vending machine outlets. The following table summarizes the percentage of the Company's total bottle/can sales volume to its largest customers, as well as the percentage of the Company's total net sales that such volume represents: Fiscal Year 2022 2021 Approximate percent of the Company's total bottle/can sales volume: Wal-Mart Stores, Inc. 20 % 20% The Kroger Company 12 % 13 % Total approximate percent of the Company's total bottle/can sales volume 32% 33% Approximate percent of the Company's total net sales: Wal-Mart Stores, Inc. 16 % 14 % The Kroger Company 10 % 9 % Total approximate percent of the Company's total net sales 26 % 23% The loss of Wal-Mart Stores, Inc. or The Kroger Company as a customer could have a material adverse effect on the operating and financial results of the Company. No other customer represented greater than 10% of the Company's total net sales or would impose a material adverse effect on the operating or financial results of the Company should they cease to be a customer of the Company. New brand and product introductions, packaging changes and sales promotions are the primary sales and marketing practices in the nonalcoholic beverage industry and have required, and are expected to continue to require, substantial expenditures. Recent introductions include Coca-Cola Creations, Dr Pepper & Cream Soda, fairlife milk products and Minute Maid Aguas Frescas We sell our products primarily in single-use, recyclable bottles and cans, in varying package configurations from market to market. For example, there may be up to 26 different packages for Diet Coke within a single geographic area. Total bottle/can sales volume to retail customers during 2022 was approximately 51% bottles and 49% cans. We rely extensively on advertising in various media outlets, prima online, television and radio, for the marketing of our products. The Coca-cola Company, Dr Pepper and Monster Energy make substantial expenditures on advertising programs in our territories from which we benefit. Although The Coca-cola Company and other beverage companies have provided us with marketing funding support in the past, our beverage agreements generally do not obligate such funding We also expend substantial funds on our own behalf for extensive local sales promotions of our products. Historically, these expenses have been partially offset by marketing funding support provided to us by The Coca-cola Company and other beverage companies in support of a variety of marketing programs, such as point-of-sale displays and merchandising programs. We consider the funds we expend for marketing and merchandising programs necessary to maintain or increase revenue. In addition to our marketing and merchandisi ising programs, we believe a sustained and planned charitable giving program to support the communities we serve is an essential component to the success of our brand and, by extension, our net sales. In 2022, the Company made cash donations of approximately $37 million to various charities and donor-advised funds in light of the Company's financial performance, distribution territory footprint and futur pany intends to continue its charitable contributions in future years, subject to the Company's financial ance and other business factors. Seasonality Business seasonality results primarily from higher unit sales of the Company's products in the second and third quarters of the fiscal year, as sales of our products are typically correlated with warmer weather. We believe that we and other manufacturers from whom we purchase finished products have adequate production capacity to meet sales demand for sparkling and still beverages during these peak periods. See "Item 2. Properties" for information relating to utilization of our manufacturing plants. Sales volume can also be impacted by weather conditions. Fixed costs, such as depreciation expense, are not significantly impacted by business seasonality. 70 OF O Q Search [P X O ENG 12:28 PM Cloudy US 7/13/2023BE Coca Cola-2022-Annual-Report[1 X + X File | C:/Users/Hp/AppData/Local/Microsoft/Windows/INetCache/IE/7CP9CWON/Coca%20Cola-2022-Annual-Report[1].pdf . . . I V Draw 2 | | Read aloud + 24 of 108 2 | 09 Competition The nonalcoholic beverage industry is highly competitive for both sparkling and still beverages. Our competitors include bottlers and distributors of nationally and regionally advertised and marketed products, as well as bottlers and distributors of private label beverages. Our principal competitors include local bottlers of PepsiCo, Inc. products and, in some regions, local bottlers of Dr Pepper products. The principal methods of competition in the nonalcoholic beverage industry are new brand and product introductions, point-of-sale merchandising, new vending and dispensing equipment, packaging changes, pricing, sales promotions, product quality, retail space management, customer service, frequency of distribution and advertising. We believe we are competitive in our territories with respect to these methods of competition. Government Regulation Our business is subject to various laws and regulations administered by federal, state and local government agencies of the United States, including laws and regulations governing the production, storage, distribution, sale, display, advertising, marketing, packaging. labeling, content, quality and safety of our products, our occupational health ar onal health and safety practices and the transportation and use of many of our products. We are required to comply with a variety of U.S. laws and regulations, including, but not limited to: the Federal Food, Drug and Cosmetic Act and various state laws governing food safety; the Food Safety Modernization Act; the Occupational Safety and Health Act; the Clean Air Act; the Clean Water Act; the Reso y Act; the Comprehensive Environmental Response, Compensation and Liability Act; the Federal Motor Carrier Safety Act; the Lanham Act; various federal and state laws and regulations governing competition and trade practices; various federal and state laws and regulations governing our employment practices, including those related to equal employment y, such as the Equal Employment Opportunity Act and the National Labor Relations Act; and laws and regulation As a manufacturer, distributor and seller of beverage products of The Coca-cola Company and other beverage companies in exclusive territories, we are subject to antitrust laws of general applicability. However, pursuant to the United States Soft Drink Interbrand Competition Act, soft drink bottlers, such as us, are permitted to have exclusive rights to manufacture, distribute and sell soft drink products in a defined geographic territory if that soft drink product is in substantial and effe nk product is in substantial and effective competition with other products of the same general class in the market. We believe such competition exists in each of the exclusive geographic territories in the United States in which we operate. In response to growing health, nutrition and wellness concerns for today's youth, a number of states and local governments have regulations restricting the sale of soft drinks and other foods in schools, particularly elementary, middle and high schools. Many of these restrictions have existed for several years in connection with subsidized meal programs in schools. Additionally, legislation ha been proposed by certain state and local governments to limit or restrict the sale of energy drinks to minors and/or persons below a specified age and/or to restrict the venues in which en an be sold. Restrictive legislation, if widely enacted, could have an adverse impact on our products, sales and reputation. Most beverage products sold by the Company are classified as food or food products and are therefore eligible for purchase using supplemental nutrition assistance program ("SNAP") benefits by consumers purchasing them for home consumption. Energy drinks with a nutrition facts label are also classified as food and are eligible for purchase for home consumption using SNAP benefits, whereas energy drinks classified as a supplement by the United States Food and Drug Administration (the "FDA") are not. Regulators may restrict the use of benefit programs, including SNAP, to pu everages and foods currently classified as food or food products. Certain jurisdictions in which our products are sold have imposed, or are considering imposing, taxes, labeling requirements or other limitations on, or regulations pertaining to, the sale of certain of our products, ingredients or substances contained in, or attributes of, our products or commodities used in the manufacture of our products, including certain of our products that contain added sugars or sodium, exceed a specified caloric count or include specified ingredients such as caffeine. Legislation has been proposed in Congress and by certain state and local governments which would prohibit the sale of soft drink products in non-refillable bottles and cans or require a mandatory deposit as a means of encouraging the return of such containers, each in an attempt to reduce solid waste and litter. Similarly, we ar ware of proposed legislation that would impose fees or taxes on various types of containers that are used in our business, as well as proposed legislation around new recycling regulations and the reduction of single-use plastics. We are not currently impacted by the policies in these types of proposed legislation, but it is possible that similar or more restrictive legal requirements may be proposed or enacted within our distribution territories in the future. 70 OF O Q Search P X O ENG 12:28 PM Cloudy W US 7/13/2023BE Coca Cola-2022-Annual-Report[1 X + X File | C:/Users/Hp/AppData/Local/Microsoft/Windows/INetCache/IE/7CP9CWON/Coca%20Cola-2022-Annual-Report[1].pdf . . . I V Draw 2 | | Read aloud + 25 of 108 2 | 0 We are also subject to federal, state and local environmental laws, including laws related to water consumption and treatment, wastewater discharge and air emissions. Our facilities must comply with the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act and other federal, state and local laws regarding handling, storage, release and disposal of wastes generate -site and sent to third-party owned and operated off- site licensed facilities. We do not currently have any material commitments for environmental compliance or environmental remediation for any of our properties. We do not believe compliance with enacted or adopted federal, state and local provisions pertaining to the discharge of materials into the environment or otherwise relating to the protection of the environment will have a material adverse impact on our consolidated financial statements or our competitive position. Human Capital Resources At Coca-cola Consolidated, our teammates are the heart of our business and the key to our success. As of December 31, 2022, we employed approximately 17,000 employees which we refer to as "teammates," of which approximately 15,000 were full-time and approximately 2,000 were part-time. Approximately 13% of our workforce is covered by collective bargaining agreements. While the number of collective bargaining agreements that will expire in any given year varies, we have been successful in the past in negotiating renewals to expiring agreements w and management considers teammate relations to be good. Purpose and Culture We believe a strong and clear purpose is the foundation to a strong culture and critical to the long-term success of the busin ss. At Coca-Cola Consolidated, we strive to fulfill our Purpose - To honor God in all we do, to serve others, to pursue excellence and to grow profitably. As a waypoint to help guide us Coca-cola Consolidated Team, consistently generating strong cash flow, while empowering the next generation of diverse servant leaders. At the core of our culture is a focus on service. We want teammates to recognize and embrace a passion for serving each other along with our consumers, our customers and our communities. Through our Coke Cares program, we provide opportunities for our teammates to be involved in stewardship, charitable and community activities as a way to serve our comm We recognize the personal challenges and difficulties facing our teammates each day, and how it may be difficult for them to discuss their struggles with other teammates. Through our corporate chaplaincy program and our employee assistance program, we provide resources for our teammates to engage with a third party in a personal and confidential manner to discuss their personal challenges. These programs are administered by third parties and are valuable resources to help enhance emotional wellness, reduce stress and increase productivity. Talent Acquisition, Development and Retention The success and growth of our business depend in a large part on our ability to execute on our talent strategy which is to be a purpose driven organization that attracts, engages and grows a highly talented, diverse workforce of servant leaders enabling our growth and performance. To meet our talent objectives, we utilize key strategies and processes related to recruitment, onboarding and learning development. Through our Total Rewards Progr nsation, benefits and services to our full-time teammates, including incentive plans, recognition plans, defined contribution plans, healthcare benefits, tax-advantaged spending accounts, corporate chaplaincy and employee assistance programs and other programs. Management monitors market compensation and benefits to be able to attract, retain over and its assoc In recent years, the Company has faced periods of high teammate turnover, periodic labor shortages and wage inflation in our front- line workforce due to tight conditions in the labor market. The Company responded to these challenges by making certain investments in our teammates to reward them for their contributions in achieving strong operating results and to remain competitive in the current labor environment. We are a learning organization committed to the goal of continuous improvement and the development of our teams and teammates. To empower our teammates to unlock their potential, we offer a wide range of learning experiences and resources. Our teammate onboarding experiences involve online learning, job-specific training and on-the-job development to learn about our Company, our products and our industry. Job-specific training includes activity-based classes that focus on how teammates can safely and efficiently sell, merchandise and display our products. After on cipate in num offered by the Company to help them develop and improve the apabilities to advance in their careers, including at one of our two dedicated experiential learning centers where teammates can develop and grow their skills through a hands-on experience. We provide a leadership program designed to challenge aders through a series of learning experiences, including on-the-job training, mentorship, peer coach . This program focuses on developing 70 OF O Q Search P O ENG 12:28 PM Cloudy X US 7/13/2023BE Coca Cola-2022-Annual-Report[1 X + X File | C:/Users/Hp/AppData/Local/Microsoft/Windows/INetCache/IE/7CP9CWON/Coca%20Cola-2022-Annual-Report[1].pdf . . . I V Draw 2 | | Read aloud + 26 of 108 2 | 09 leadership skills, building cohesive teams and strengthening business acumen to prepare teammates for a leadership position at Coca-cola Consolidated. An important part of attracting and retaining top talent is teammate satisfaction, and we conduct an annual engagement survey administered and analyzed by an independent third party to assess teammate satisfaction and engageme gagement and the effectiveness of our teammate development and compensation programs. In 20 es participated in the survey. This survey provides valuable insight to our leaders about how our teammates experience the Company and how we can better serve them and improve job performance, satisfaction and retention. Our executive officers review the survey results and develop and implement specific action plans to address key areas of opportunity. Additionally, leaders across our pany discuss the results with local managers to develop additional action plans to best address teammate feedback in different market units and functional areas. Health and Safety One of our top priorities is protecting the health and safety of our teammates. We are committed to operating in a safe, secure and responsible manner for the benefit of our consumers, customers, teammates and communities. We sponsor a number of programs and initiatives designed to reduce the frequency and severity of workplace injuries, incidents, risks and hazards, including safety committees, Company policies and procedures, coaching and training, and awareness through leadership engagement and messaging. Diversity and Inclusion We strive to cultivate diversity in our workforce and believe teammates with diverse backgrounds, experiences and viewpoints bring value to our organization. We have a diversity task force comprised of diverse teammates from across the organization and led by our President and Chief Operating Officer wi g diversity at Coca-cola Consolidated. This task force developed a diversity framework focused on four pillars - co unication, accountability, empowerment and partnerships. The task force and discussion groups led by our senior executive leadership team strive to enhance Company-wide engagement on diversity and inclusion, provide opportunities for nates to discuss diversity and inclusion, develop initiatives to support our diversity framework and monitor progress across these initiatives. Exchange Act Reports Our website is www.cokeconsolidated.com and we make available free of charge through the investor relations portion of our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to these reports, as well as proxy statements and other inform ts are available on our website as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the United States Securities and Exchange Commission (the "SEC"). The information on our website or linked to or from our website is not incorporated by reference into, and does not constitute a part of, this report or any other documents we file with, or furnish to, the SEC. We use our website to distribute information, including as a means of disclosing material, nonpublic information and for complying with our disclosure obligations under Regulation FD. We routinely post and make accessible financial and other information regarding the Company on our website. Accordingly, investors should monitor the investor relations portion of our website, in addition to our press releases, SEC filings and other public c The SEC also maintains a website, www.sec.gov, that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Item 1A. Risk Factors. In addition to other information in this report, the following risk factors should be considered carefully in evaluating the Company's business. The Company's business, financial condition or results of operations could be materially and adversely affected by any of these risks. Risks Related to Our Business The Company's business and results of operations may be adversely affected by increased costs, disruption of supply or unavailability or shortages of raw materials, fuel and other supplies. Raw material costs, including the costs for plastic bottles, aluminum cans, PET resin, carbon dioxide and high fructose corn syrup, are subject to significant price volatility, which may be worsened by periods of increased demand, supply constraints or high inflation. International or domestic geopolitical or other events, including armed conflict or the imposition of tariffs and/or quotas by the U.S. government on any of these raw materials, could adversely impact the supply and cost of these raw materials to the Company. In 70 OF O Q Search P W O ENG 12:28 PM Cloudy US 7/13/2023BE Coca Cola-2022-Annual-Report[1 X + X File | C:/Users/Hp/AppData/Local/Microsoft/Windows/INetCache/IE/7CP9CWON/Coca%20Cola-2022-Annual-Report[1].pdf . . . I V Draw 2 | | Read aloud + 27 of 108 | | 09 recent years, the COVID-19 pandemic resulted in certain raw materials not being available at commercially favorable terms or at all, and future pandemics or other events causing widespread supply chain disruption may also have such an effect. In addition, there are no limits on the prices The Coca-cola Company and other beverage companies can charge for concentrate. If the Company cannot offset higher raw material costs with higher selling prices, effective commodity price hedging, increased sales volume or reductions in other costs, the Company's results of operations and profitability could be adversely affected. Limited suppliers for certain of the Company's raw materials could have an adverse effect on the Company's ability to negotiate the lowest costs and, in light of the Company's relatively low in-plant raw material inventory levels, has the potential for causing interruptions in the Company's supply of raw materials and in its manufacture of finished goods. For example, during 2022, the Company experienced intermittent shortages of carbon dioxide supply that caused work stoppages at certain of its manufacturing facilities. These work stoppages were offset by increased production at other facilities, but similar stoppages in the future could adversely affect the Company's results of operations and profitability. The Company uses significant amounts of fuel for its delivery fleet and other vehicles used in the distribution of its products. International or domestic geopolitical or other events could impact the supply and cost of fuel and the timely delivery of the Company's products to its customers. Although the Company strives to reduce fuel consumption and uses commodity hedges to manage the Company's fuel costs, there can be no assurance the Company will succeed in limiting the impact of fuel price increases or price volatility on the Company's business or future cost increases, which could reduce the profitability of the Company's operations. The Company uses a combination of internal and external freight shipping and transportation services to transport and deliver products. The Company's freight cost and the timely delivery of its products may be adversely impacted by a number of factors which could reduce the profitability of the Company's operations, including driver shortages, reduced availability of independent contractor drivers, higher fuel costs, weather conditions, traffic congestion, increased government regulation and other matters. The Company purchases all of the plastic bottles used in its manufacturing plants from Southeastern Container and Western Container, two manufacturing cooperatives the Company co-owns with several other Coca-Cola bottlers, and all of its aluminum cans from two domestic suppliers. The inability of these suppliers to meet esult in the Company not being able to fulfill customer orders and production demand until alternative sources of supply are located. The Company attempts to mitigate these risks by working closely with key suppliers and by purchasing business interruption insurance where appropriate. Failure of the plastic bottle or aluminum irements could negatively impact inventory levels, customer confidence and results of op es levels and profitability. The Company continues to make significant reinvestments in its business in order to evolve its operating model and to accommodate future growth and portfolio expansion, includ timization. The increased costs associated with these reinvestments the potential for disruption in manufacturing and distribution and the risk the Company may not realize a satisfactory return on its investments could adversely affect the Company's business, financial condition or results of operations. The reliance on purchased fi Company's profitability. The Company does not, and does not plan to, manufacture all of the products it distributes and, therefore, remains reliant on purchased finished products from external sources to meet customer dem , the Company is subject to incremental risk, including, but not limited to, product quality and availability, price variability and production capacity shortfalls for externally purchased finished products, which could have an impact on the Company's profitability and customer relationships. Particularly, the Company is subject to the risk of unavailability of still produ g to an inability to meet consumer demand for these products. In most instances, the Company's ability to negotiate the prices at which it purchases finished products from other U.S. Coca-Cola bottlers is limited pursuant to The Coca-cola Company or certain elements of the formulas used to determine the prices, for such finished products under the RMA, which could have an adverse impact on the Company's profitability. hanges in public and consumer perception and preferences, including concerns related to product safety and sustainability, artificial ingredients, brand reputation and obesity, could reduce demand for the Company's products and reduce profitability. Concerns about perceived negative safety and quality consc ences of certain ingredients in the Company's products, such as non- nutritive sweeteners or ingredients in energy drinks, m uality of the Company's products, whether or not justified. The Company's business is also impacted by changes in consumer concerns or perceptions surrounding the product manufacturing processes and packaging materials, including single-use and other plastic packagi environmental and sustainability impact of such manufacturing processes and packaging materials. Any of these factors may reduce consumers' willingness to purchase the Company's products and any inability on the part of the Company to anticipate or react to such 70 OF O Q Search O ENG 12:28 PM Cloudy US 7/13/2023BE Coca Cola-2022-Annual-Report[1 X + X File | C:/Users/Hp/AppData/Local/Microsoft/Windows/INetCache/IE/7CP9CWON/Coca%20Cola-2022-Annual-Report[1].pdf . . . I V Draw 2 | | Read aloud + 28 of 108 2 | 09 changes could result in reduced demand for the Company's products or erode the Company's competitive and financial position and could adversely affect the Company's business, reputation, financial condition or results of operations. The Company's success depends on its ability to maintain consumer confidence in the safety and quality of all of its products. The Company has rigorous product safety and quality standards. However, if beverage products taken to market are or become contaminated or adulterated, the Company may be required to conduct costly product recalls a product recalls and may become subject to product liability claims and negative publicity, which could cause its business and reputation to suffer. The Company's success also depends in large part on its ability and the ability of The Coca-Cola Company and other beverage companies it works with to maintain the brand image of existing products, build up brand image for new products and brand extensions and maintain its corporate reputation gements by the Company's executives in social and public policy debates may occasionally be the subject of criticism from advocacy groups that have differing points of view and could result in adverse media and consumer reaction, including product boycotts. Similarly, the Company's sponsorship relationships and charitable giving program could subject the Comp perceived views of organizations the Company sponsors or supports financially. Likewise, negative posting cial media or networking websites about the Company, The Coca-cola C Coca-cola Company or one of the products the Company carries, even if inaccurate or malicious, could generate adverse publicity that could damage the reputation of the Company's brands or the Comp The Company's business depends substantially on cons stes, preferences and shopping habits that change in often unpredictable ways. As a result of certain health and wellness trends, including concern over the public health consequences associated with obesity, consumer preferences over the past several years have shifted from etened sparkling beverages to diet sparkling beverages, tea, sports drinks, enhanced water and bottled water. As the Company distributes, markets and manufactures beverage brands owned by others, the success of the Company's business depends in large measure on the ability of The Coca-Cola Company and other beverage companies to develop and introduce product innovations to meet the changing preferences of the broad consumer market, and failure to satisfy these consum Company's profitability The Company's business and results of operations may be adversely affected by the inability to attract and retain front-line employees in a tight labor market. In recent years, the U.S. economy has experienced a challenging labor market as the supply of available workers frequently fell short of the number of workers necessary to fill all available jobs. As a result, the Company experienced difficulty in attracting and retaining front-line workers and faced periods of high turnover. Tight labor markets and a lack of available workers has led, and may lead in the future, to increased labor costs in the form of higher salaries, increased overtime and other compensation adjustments to remain competitive in a challenging labor market. If the Company cannot retain adequate front-line employees to produce and deliver its products, its business operations may be ac costs have had, and may have in the future, an adverse effect on our results of operations. Changes in government regulations related to nonalcoholic beverages, including regulations related to obesity, public health, artificial ingredients and product safety and sustainability, could reduce demand for the Company's products and reduce profitability. The Company's business and properties are subject to various federal, state and local laws and regulations, including those governing the production, packaging, quality, labeling and distribution of beverage products. Compliance with or changes in existing laws or regulations could require material expenses and negatively affect our financial results through lower sales or higher costs. The production and marketing of beverages are subject to the rules and regulations of the FDA and other federal, state and local health agencies, and extensive changes in these anges in these rules and regulations could increase the Company's costs or adversely impact its sales. The Company cannot predict whether any such rules or regulations will be enacted or, if enacted, the impact that such rules or regulations could have on its business. In response to growing health, nutrition and wellness concerns for today's youth, a number of states and local governments have regulations restricting the sale of soft drinks and other foods foods in schools, particularly elementary, middle and high schools. Many of these restrictions have existed for several years in connection with subsidized meal programs in schools. Additionally, legislation has been proposed by certain state and local governments to limit or restrict the sale of energy drinks to minors and/or persons below a specified age and/or to restrict the venues in which energy drinks can be sold. Restrictive legislation, if widely enacted, could have an adverse impact on the Company's products, sales Legislation has been proposed in Congress and by certain state and local governments which would prohibit the sale of soft drink products in non-refillable bottles and cans or require a mandatory deposit as a means of encouraging the return of such containers, each in an attempt to reduce solid waste and litter. Similarly, the Company is aware of proposed legislation that would impose fees or 70 OF O Cloudy Q Search P X 0 ENG 12:28 PM US 7/13/2023BE Coca Cola-2022-Annual-Report[1 X + X File | C:/Users/Hp/AppData/Local/Microsoft/Windows/INetCache/IE/7CP9CWON/Coca%20Cola-2022-Annual-Report[1].pdf . . . I V Draw 2 | | Read aloud + 29 of 108 1 | 09 taxes on various types of containers used in its business, as well as proposed legislation around new recycling regulations and the reduction of single-use plastics. The Company is not currently impacted by the policies in these types of proposed legislation, but it is possible that similar or more restrictive legal requirements may be proposed or enacted within its distribution territories in the future. Concerns about perceived negative safety and quality consequences of certain ingredients in the Company's products, such as non- nutritive sweeteners or ingredients in energy drinks, could result in additional governmental regulations concerning the production marketing, labeling or availability of the Company's products or the ingredients in such products, possible new taxes or negative publicity resulting from actual or threatened legal ainst the Compa companies in the same industry, any of which could damage the reputation of the Company or reduce ould adversely affect the Company's profitability. The FDA occasionally proposes major changes to the nutrition labels required on all packaged foods and beverages, including those for most of the Company's products, which could require the Company and its competitors to revise nutrition labels to include updated serving sizes, information about total calories in a beverage product container and information about any added sugars or nutrients. Any pervasive nutrition label changes co of one or more of the Company's major products. Most beverage products sold by the Company are classified as food or food products and are therefore eligible for purchase using SNAP benefits by consumers purchasing them for home consumption. Energy drinks with a nutrition facts label are also classified as food and are eligible for purchase for home consumption using SNAP benefits, whereas energy drinks classified as a supplement by the FDA are not. Regulators may restrict the use of benefit programs, including SNAP, to purchase certain beverages and foods currently classified as food or food products. The Company relies on The Coca-cola Company and other beverage companies to invest in the Con in the Company through marketing funding and to promote their own company brand identity through external advertising, marketing spending and product innovation. Decreases from historic levels of investment could negatively impact the Company's business, financial condition and results of operations or profitability. The Coca-Cola Company and other beverage companies have historically provided financial support to the Company through marketing funding. While the Company does not believe there will be significant changes to the amount of marketing funding support provided by The Coca-cola Company and other beverage companies, the Company's beverage agreements generally do not obligate such funding and there can be no assurance the historic levels will continue. cases in the level of marketing funding provided, material changes in the marketing funding programs' performance requirements or the Company's inability to meet the performance requirements for marketing funding could adversely affect the Company's business, financial condition and results of operations or profitability. In addition, The Coca-cola Company and other beverage companies have their own external advertising campaigns, marketing spending and product innovation programs, which directly impact the Company's operations. Decreases in advertising, marketing and product innovation spending by The Coca-cola Compar s, or advertising campaigns that are negatively perceived by the public, could adversely impact the sales volume growth and profitability of the Company. While the Company does not believe there will be significant changes in the level of external adve