Q4 2019 Earnings Call
Operator today at this time I would like to welcome everyone to the Coca Cola European partners preliminary results for the full year and fourth quarter ended 30, Onest December 2019 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question. During this time.
Simply press Star followed by the number one on your telephone keypad. If you would like to withdraw your question pressed upon alky. Thank you Sarah Willett VP Investor Relations you May begin your conference.
Thank you and good afternoon Euro owning the U.S. Thank you also joining us today.
Before we begin though if you will not full year 2019, I would like to remind you of our cautionary statements. This call will contain forward looking management comments and other statements, reflecting our outlook. These comments should be considered in conjunction with a cautionary language contained in today's release as well as the detailed cautionary statements fundamentals filed with the UK.
You asked us onshore authorities a copy of this information is available on a new website www Dot Coca Cola 80, Dotcom today's prepared remarks will be made by Damian gammell healthy I. We we'll then open the call feel questions, which is 51 of the past following the webcast a full transcript will be made available as soon as possible.
On your website I'll now turn the call David Celesio Damian.
Thank you Sarah.
Let me thanks to everyone joining us today to discuss our full year from fourth quarter 20, 19 billion marry those as well as our 2020 outlook.
I'm very pleased with 2019 Saar business deliver another really solid full year growth with our journey continuing to be built on three pillars, which we've shared with you previously great people, great service and great beverages.
We delivered.
Solid revenue growth supported by strong focus on innovation as we continue to diversify to become a total beverage company fully aligned with our brand partners.
As well as investing behind innovation that we continue to make the right strategic investment in areas such as a supply chain.
Colors on across our whole digital platform.
During the has importantly, being at great year for progress made on our sustainability. Jennifer. This is forward. All this has led us to delivering robust growth.
And with operating profit of 6% on the back of three and half percent revenue both growth both on a comparable FX neutral basis, excluding the impact of incremental soft drinks tax.
This was also supported by the successful closure of our merger synergy commitments.
All resulting in another year of increase shareholder returns the key focus on the remaining priority for all of those.
And of course, a 20 lithium performance was only possible due to shoot to the continued commitment of our talented 23500 engaged employees and colleagues across CCP.
Now to look at 2019 revenue full year revenue increased by 4% or 300%, excluding the impact of incremental soft drinks taxes, both on an FX neutral basis.
We saw solid growth of 2% in revenue per unit case, excluding the impact of incremental soft drinks taxes as we continue to benefit from our efforts to improve price and mix with growth and priority smallpox and in our away from home channel.
I'm also pleased with volume increased by 1% with strong end market execution on innovation led growth, partially offset by strong low weather driven comparables in the third quarter.
As you'll recall, we had a very good third quarter 2018.
Im, particularly pleased that transactions grew overall by 2% during 2019 critically outpacing volume for the third year in a row, a key strategic priority for CCP.
Given the detailed commentary by geography is provided in the release the key takeaway would be to emphasize that our growth is truly balance across all geographies as we continue to demonstrate to focus on our revenue management growth initiatives. We are benefiting from our efforts to drive priority smallpox more efficient promotional access.
For the alongside wider distribution and the aforementioned innovation.
Now to share with you some additional revenue highlights for 2019.
Critically 2019 was a great year for our customers joint value creation remains a key priority. So there's been great to see the once again, we were by far the largest FMCG value creator in the retail channel across all our territories.
Adding 4.5% more value or an additional 430 million euros versus 2018, according to Nielsen.
In fact, we delivered more than twice the value to our customers that our nearest competitor.
Another brand level. This year, we had five of the leading eight brands for absolute value growth in our portfolio.
Euro panel data also showed at over 20% of our brands were now present in any or to the baskets and 29 team.
Clearly supported by our growing beverage portfolio.
This momentum is also evidenced by our market share, which grew an aura territories. According to Nielsen overall, we gained over a percentage point of value share in any RTD, a 90 basis points of share within sparkling.
Our co trademark portfolio also performed well we saw growth of 100% on transactions growth ahead at 2% within like coal as we again saw another solid year of volume growth of 13% for Coca Cola zero sugar and we will be completely reinvigorate.
The diet Coke and Coke life from the 2020.
With new packaging, new flavors and more marketing.
Flavors again had a great year overall, and we gained 110 basis points of value share during the year According to Nielsen.
This was driven in particular by funded the number one flavors brand across our territories and delivering absolute value growth for our customers. There was also helped by another successful Halloween campaign, featuring our limited edition bottles and cans as well as really innovative Halloween inspired flavors were also especially pleased with our performance in them.
Mixes category.
With our brands Schweppes, gaining a 180 basis points of share in GB across all measured channels.
This is a segment, where we continue to see clear opportunities for further growth and we will continue to differentiate by enhancing the premium nature of our portfolio and continuing to build on the success of newer brands like royalties.
Our swear signature range.
And our Coca Cola's signature of mixers.
From a package perspective, we continue to focus on driving smaller more premium packages for example.
We saw volume growth of 11% of small cans, which clearly contribute pubs positively to our mix and gross margins and also driving transactions.
And finally, we've made some great progress with innovation, which I'll cover in more detail on the next slide.
It's fair to say the 2019 saw step change in the pace and topline contribution from innovation through a combination of new products flavors and brands in fact.
Last year, we launched one and three of the top 15 innovations in Europe. According to Nielsen.
Few see has been a huge success story, we launched this brand in January 20 in all our territories with with the exception of Iberia and just two years on we have overtaken nasty to become the number two ready to drink key brand across most markets and in Germany, I'm very pleased to say that we are now the number.
Hello.
The new recipe for fuze tea brewed with real tea leaves will soon be hitting the shelves across all our markets.
Again energy also had a strong year supported by innovation.
In particular mindell local and the news on some of the new Ultra flavors did really well.
Impressively Monster has no overtaken red bull to become the number one energy brands in Spain.
The recently acquired juice brands tropical is really proving popular with consumers and customers in France.
Doubling its market share since we started distributing the brands like in March 2019.
Monster espresso another fantastic product continues to gain traction delivering 12% of the growth in the home channels ready to drink coffee category across our markets last year and as with all renovation, we are focused on growing category value.
This is clearly demonstrated by higher than average revenue per case metrics.
Coke energy is now available on markets.
And we have exciting plans in 2020 for this brand and finally costs are ready to drink has already proving very buffer in GB achieving 6% value share in just five months.
Importantly, our revenue momentum provides the license to build for the future.
We are continuing to make the right investments now to support long term sustainable growth.
Nearly two thirds of our Capex went into our supply chain and 29 team.
To support our total beverage strategy.
We commissioned 70 lines during the year three can lines three gas lines I want to except decline to support in house capability for products, such as fuze tea.
We're also making the right strategic investments and capabilities, such as our coolers and our field sales team teams. We're also rolling out next generation field sales digital tools, which will not only improved the customer experience.
But critically also increased the productivity and impact of our Salesforce.
Our salesforce remains a huge investment priority for us.
We grew our field sales teams during 2019 with more hires plan for 2020.
In addition, we added around 42000 coolers into a markets as we continue to aim to improve availability of our core products.
In addition to providing this to space to support the expansion of our ever growing portfolio.
I'm also pleased that we all we secured our two first venture investments during the year. These investments will explore head technology can transform the customer experience.
We've continued to strengthen our digital capabilities and our customer portal will continue to support our commitment to make it even easier for customers to do business with us.
We now have around 15000 customer using our portal, helping us to capture over 900 million euros of revenue in 2019.
Hope a very impressive 30% on the previous years.
Finally, and most importantly, as you know sustainability is a key priority for CCP and we've made great progress in 2019, and I would like to cover this in more detail.
As you're aware, we have a bold and integrated sustainability agenda, we're making good progress on carbon water as well as packaging, where we are taking robust action and leading innovation.
We are improving recyclability and increasing the amount of recycled PT and our bottles.
We're working towards a circular economy, where everything is collected and we use.
This will move us closer to our target of zero waste not just for plastic, but also for cans card and loss.
Having already accelerated our 50% recycled plastic target by two years.
It's great to see that Sweden will become our first 100% recycled PC market this year.
Featuring a new on pipe we cycle May campaign.
We're also transitioning brands smart water honest video and Chaudfontaine to 100% recycle PT.
This will be supported by our strategic partnerships with the enhance recycling firms.
We also continue to reduce the amount the plastic used in our second repackaging.
Moving from shrink wrap the cardboard packaging for our can multipacks.
Our progress is being recognized and we're proud to recently being awarded a position on the CDP a list for climate and water.
Im one of only three companies to be awarded both for four consecutive year.
Our sustainability initiatives are at the core of everything we do with CCP.
And I know that our people wanted to be truly embedded within our culture, and how we lead and behave everyday to that end.
We are looking to form incorporate some of our sustainability targets into our next long term incentive plan for our management.
We're very pleased to update you are not in due course.
What's the bill under previous slide I wanted to talk a little bit more about our people strategy and culture at CCP, which is integral to our growth on our shareholder value story, we continue to see progress evidenced by a meaningful seven percentage point increase in our employee engagement during the year 2019.
This firmly positions us as a top quartile of our benchmark group.
Our colleagues are being utilizing the two new annual days of pay volunteering, resulting in over 24000 hours of volunteering last year.
More broadly we received we recently launched new people strategy me as CCP.
Which focuses on the critical areas of wellbeing diversity and inclusion as well as creating a positive environment, where everybody can develop learn and grow.
All supported by a number of new digital platforms, which are rate, which I referenced earlier, making it easier for employees to engage and develop at CCP.
We will continue to focus on culture. This critical area going forward, providing the capabilities and most importantly that culture, we need to continue to grow our business sustainably.
Now I'm very pleased to turn the call over to Nick for more detail on our 2019 financial results and our 2020 outlook Nick.
Thank you Damon and thank you all have taken the time to be with us today.
You will see our 2019 financial summary, and I will focus on some of the areas that Damian has not commented on is yet.
So let's start with our cost per unit case, which increased 4.5% on a comparable in FX neutral basis.
Our 3%, excluding the incremental soft drinks taxes.
Comparable and FX gross margins were down 75 basis points. However, excluding the impact of the soft drinks taxes gross margins were down about 40 basis points in line with our plans.
So taking into account our revenue growth the investments, we're making to support sustainable growth, including the step up in innovation and the close out of our synergy delivery operating profit grew by 6% on a comparable and FX neutral basis.
Importantly, our comparable and FX neutral operating margin grew by about 20 basis points. All grew by 35 basis points, excluding the impact of the incremental soft drinks taxes.
Our comparable and FX neutral diluted earnings per share grew 10% ahead of comparable operating profit, reflecting accretion from the now completed one half billion euros share buyback program of which 1 billion euros was executed in 2019.
Our annualized dividend payout ratio remains at approximately 50% reflected in our full year dividend, which was up 17% versus last year.
Next on cash and important metric for us we generated free cash flow of 1.1 billion, which I'll come back to in a moment.
We also increased our ROIC by 65 basis points when adjusting for the impact of adopting IRS 16 closing the year at 10.3%.
On a reported basis wrote increased by 40 basis points and finally, our leverage we finished the year with a net debt to adjusted EBITDA ratio of 2.7 times at the midpoint of our stated objective of two and a half two three times.
So if we now turn back to free cash flow for little more detail. We delivered 1.1 billion of free cash flow as I said in 2019, and this slide lays out some of the key components.
As I mentioned previously IRS 16, the new leasing stand at came into effect on the first of January 2019, requiring us to recognize Paul our leases on the balance sheet.
While our 16 has a noncash adjustment our lease obligations the operating in nature and we now include these cash outflows within Capex as you see here. These amounted last year to about 130 million euros.
In addition to that we spend 590 million on supply chain in cold equipment Capex broken down on the slide as well we continue to be very disciplined around our investments to ensure that we have the right portfolio and distribution capabilities to sell our products to all our customers across all channels.
So in total our Capex last year, including lease payments was 720 million to be clear our future guidance on Capex will include these lease payments driven by this accounting change only.
We retained our focus on driving working capital improvements and delivered approximately 50 million euros of benefits, taking our cumulative improvements to approximately 600 650 million euros since 2017.
This has all been driven through strong cross functional collaboration as well as solid routines to track and drive results.
Cash generation continues to remain a key performance indicator for us and this is evidenced by our Midtown annual objective of delivering at least 1 billion of free cash flow each year with a current free cash flow yield of just under 5%.
Now turning highlighted we are developing a great cultured CCP and im very proud of the progress we've made since our formation three and half years ago.
At the half one 2019, we closed out our merger synergies program by delivering a further 55 million euros or cumulative realized synergies amounting to 313 million representing this successful completion of our merger commitments and in line with our guidance.
These efficiencies have been delivered through a combination of initiatives, including procurement supply chain and central operating functions.
The rationale behind the creation of CCP went beyond merger savings and was about forming a company that can sustainably and profitably grow the top line and ultimately create value for all our stakeholders.
We will continue to look for ways to improve effectiveness and competitiveness of our business. The decisions. We made during the integration we're focused on making it work speed, but now we're making decisions that will make our business, even better driving towards best in class.
This concludes things like the optimization of our cooler fleet as we love to significantly increase the number of placements over the next three to five years.
We will continue to leverage our digital capabilities like our ordering for tools, which are now light and gaining momentum in seven of our markets and more broadly taking a holistic view of our business to find opportunities to harmonize our ways of working and drive end to end processes to ensure that we become and even easier business for our customers to pump.
In wind with.
We'll talk more about these opportunities at the capital markets event in May this year.
Now before I move onto wider guidance for 2020, let me first provide some color on our Cogs outlook, we expect Cogs per unit case to increase by approximately 2.5% to 3%.
Lastly, on commodities, which account for about 25% of our total costs, we anticipate an increase of approximately 1% on a per unit case basis.
This reflects an increase in sugar prices as we roll out of some of our fixed price contracts and higher recycled PT pricing offset by reductions on cans and Virgin TVT.
Please bear in mind that our commodities exposure is largely hedged for 2020.
Secondly, we expect our focus on driving revenue per unit case to increase our 2020 concentrate costs in line with our incidents model.
You can see concentrate in finished goods make up approximately 45% of our cost of goods with about 85% of that being concentrate.
Thirdly mix will continue to drive an increase in Cogs per unit cases, we continue to focus on developing our portfolio through scaling our innovation and driving premiumization by accelerating gloss and small can't format.
Further to this and as Damian mentioned innovation has been gaining traction. So this has been this has required investments in partnership with the local accounts.
While these innovations our revenue accreted to custom manufacturing. These products is higher and so is adversely impacting our Cogs per unit case from a mix perspective in the short to midterm.
However, the right investments to be making for the long term as we gain scale and drive towards becoming a total beverage company.
Examples of this include now a new Asap decline, the Netherlands that Damon referenced earlier, which will enable in house production of products, such as you see and the new line being commissioned in France that will pick up both fuse and tropical volumes for that market in the second half.
20.
Now turning to our overall guidance highlights for 2020, we expect revenue growth in the low single digit range with Cogs per unit case growth of approximately two and half to 3% as I just referenced we have now cycled out of any impact of the incremental soft drinks taxes.
We expect mid single digit operating profit growth, reflecting revenue growth alongside further productivity efficiencies.
High single digit earnings per share growth reflects the accretion from the 2019 share buyback program as well as the benefit of the new 1 billion euros share buyback that we will commence next week.
While we are currently do not with while we currently do expected by backup 2 billion euros of our shares in 2020. This is subject to further approval and I'll make a GM and of course will be subject to market conditions and any potential M&A opportunities.
We also guiding to an effective tax rate of approximately 25% in 2020 inline with last year.
We continue to monitor our tax position given changes in a few of our country's corporate tax rates. We will also continue to assess our reserves in both these items may present, some opportunities over the next three years, which we will update you on in due course.
Capital expenditures expects to be in the range of 650 to 700 million euros, which is inclusive of the lease payments on the IRS 16 as previously mentioned.
We revised our mid term capex guidance from approximately 5% of revenue to 6% of revenue to reflect the inclusion of these lease payments in our total capex again, the change just being driven by the accounting change.
And for 2020, we anticipate a further improvement in ROIC of approximately 40 basis points. All of these factors I expect to drive free cash flow of at least 1 billion euros.
We also intend to maintain our dividend payout ratio of 50% alongside the aforementioned 1 billion euro share buyback program.
Ccps moving out of this integration period and into a transformation phase our plans for 2020 will ensure that we are able to invest into capabilities for the future while ensuring that we continue to deliver profitable organic revenue growth underpinned by sustainability action plan.
Our dividend policy in today's buyback announcement are the combination of these plans, which allow us to deliver sustainable growth, while creating a better business future for our business our customers and our planet's.
We have now 320 20 terms with the vast majority of our customers every year, we have customers that for a variety of reasons takes longer to reach agreement with and this year is no exception.
We are still in negotiation with some of our customers as you probably read and in some cases. This has resulted in some temporary disruption.
Importantly, we have long standing and good relationships with them and we have every intention of finding an agreement as quickly as possible.
We will of course provide an update in our Q1 trading update.
This customer disruption will however, likely have some impact on our quarterly phasing this year alongside lapping of some Brexit related stopped bill by our customers in Q1 last year.
Also one final modeling point, please remember that as this year is a leap year, there will be one extra selling days in 2020.
Our priority is to continue leading the category for sustainable value creation for our customers already since 2017, Weve added an incremental 1 billion euros to the FMCG industry three times more than our marriage peer.
So with that I'll hand back to Damian.
Thank you Nick.
So for 2020, we clearly have some really exciting plans in place with our brand partners as we continue to look to build out our portfolio.
We will continue to build our core business, particularly like colors flavors and mixes alongside accelerating the momentum that we have in areas like ready to drink TV energy and ready to drink coffee.
Alongside our brand plans, we need to continue to build our commercial capabilities.
By investing to better serve our customers to further improve or end market execution.
While most importantly, continuing to drive our sustainability journey.
But all of these areas. We're very pleased that we will be able to provide more detail at our upcoming capital markets event in Brussels in may.
2019 on reflection has been another solid year of delivery.
The great successes speak for themselves. So of course, we continue to take away learnings.
For example, Coke energy achieved solid distribution.
What we learned a needed to be reposition closer to the Greco taste that we all know low and thats on its way in 2020, alongside the new and exciting Cherry flavor variance as I touched on earlier, we also made great progress on packaging and 29 team for their agenda goes way beyond that we recognize we much more to do is regions.
Listen to a low carbon circular business, we firmly believe in due to rising from environment on for our communities and we do that all with a fully aligned relationship with our franchise partners.
So with that where we'd now like to open up for questions.
One question at the time please thank you.
Thank you Hi. This time, we conducted our question and answer session in order to ask a question. Please press star one and telephone keypad as reminder, in order to allow for answer any questions as possible. We ask that you. Please limit your questions to one question you May then reenter the queue for additional questions.
Your first question comes from the line of Lauren Lieberman of Barclays. Your line is open.
Great. Thanks, good morning.
On one and learn.
Hi, I just.
Slide.
That's helpful color the like taste.
And I'd love to hear more about that because that would be pretty significant repositioning for diet science in light of course.
If you tested out this packaging.
It really tried it incredibly difference I would just love to hear more about the plan on that.
Any sense across markets are just focused on I'm wondering Kim thanks.
Alright, Tyler and good morning, and.
Yes, we're excited about it won't impact obviously, the diet Coke brand as we noted in GB, where obviously, it's a significant.
Very successful part of our business.
It will be rolled out across all over the markets, where the brand is today Coca Cola life.
We look back over the last number years, we've had fantastic success on our other coke zero sugar.
And we believe that it's a good time now to bring a bit more.
They have a new look and feel to our Coke life franchise with obviously packaging the brand imagery and also some great flavor some of which I think you've already enjoyed in the U.S. So.
That will be going out across all our markets throughout 2020, and I will also be supported by above the line marketing from the co company. So.
It's clearly one of the pillars in our in our color like platform that we're excited about for 2020.
Your next question comes from the line of Robert side with Evercore ISI you are allowed to ask with one question with one related follow up Robert Your line is open.
Robert sign if you hear me. Please unmute your line is open.
Hi, This is actually you Tom on for Robert.
Could you just give us an idea of your energy drink study and your interaction between Monster rain and Coca Cola energy. Please.
Sorry could you just.
Repeat the first part of that question for me.
Update us on your energy drink strategy. Please okay, sorry, yeah. So.
Obviously, it's a very big and relevant category for us and we've enjoyed a number of years of great growth.
But clearly on average our market share is in a range of 15% to 20% on the market.
Depending on which country APIC. So we believe having a multi brand strategy is right for the future. So obviously, a monster rain will play a role in that although we haven't launched at yet in Europe that something we're looking at going forward and clearly Coke energy gives us another.
Platform and in that category. So we will work across all of those areas. We also have burn which is a significant brand for us, particularly in the area. So going forward. We believe the multi brand approach given the size of the category the competitive structure on the different needs space is something that will support.
Not just long term revenue growth, but also a profitability going forward. So I'm very excited about the flavors on Coke energy.
And clearly we got great distribution of our brands. So would we would see that playing a bigger role going into 2020.
We like what we hear about rain coming out of us. So again with monster, we're excited to bring that to European consumer so.
And finally dimension on the core Monster range.
We've got some fantastic innovation coming again in 2020, so we will be another viber year frozen to hold energy category.
Hey, Thanks, and just doesn't just to highlight revenue today is.
Energy contributes about just under 4% of our revenue growing double digits as Damon sets us an exciting category for us.
Great. Thanks, and just a follow up are you I know it's early days are you seeing the we formulation of Coca Cola energy, having any impact right now.
It's too early we haven.
Abroad.
And to market, although we've been very pleased with the consumer testing et cetera, but that has led to show jet, yes, it'll has probably towards the end of Q1.
Great. Thank you.
And as a reminder, if you would like to ask a question. Please press Star then the number one on your telephone keypad. Please limit your questions to one question with one related follow up you made that reenter the queue for additional question. Your next question comes from the line of Nicole Vonn Sacco Park with Liberum becomes your line is open.
Hi, there good morning, or good afternoon, guys. Just quick question on the small pack format. So volume growth was 11%, but revenue was only one can you talk a little bit about.
Our price mix evolves and for what the key drivers are.
Wide gap thanks.
Yes, Hey, anyway, so I think.
For us the the volume growth overall continues to be a strong driver that.
In terms of our overall mix that's coming through on the revenue side. It's a combination of of various factors in terms of our total numbers of revenue growth. So.
Happy to pick that up with some more details offline.
Okay.
Thanks.
Your next question comes from the line extension Ryan with Jpmorgan. Your line is open.
Good afternoon, gentlemen, just in terms of your guidance for free cash flow for next year I Wonder could you go through some of the moving parts, particularly as regards working capital.
And as well I was expecting as the restructuring costs fall away that we should see.
Further and improvement in free cash notwithstanding the lease payments can you sort of explain from the other moving parts. Please.
Sure. So I think yes, the lease payments are really just a gross up so it's not really impacting the free cash flow number.
What you're looking at is if you take a look at our three year trajectory. We had some tremendous success as I highlighted in terms of working capital improvements, which obviously going forward, we we'll probably see some growth in our working capital operating working capital as the business continue.
Used to grow as well so I think.
A lot of what we could do to manage through.
Both on terms and conditions as well as internal processes in terms of payables and receivables, we done a great job and Thats really unlocked a lot of value. So going forward that kind of falls away to your question around broader cash spend on restructuring, while we have definitely come out.
Out of what we have called the synergy delivery phase, we will continue to look at ways of optimizing our business, which may or may not entails more cash outflows.
In relation to that as we continue to do that so as we indicated we're very comfortable with the at least a billion and we will continue to update you as things evolve during the course Leah.
Great and sorry, just as a follow up conceptually is it fair to say that along with the investments in marketing behind your innovation new products is that would be or is it fair to say the growth in those products is also working capital investments required as well.
Yes, they definitely we'll be working capital investments required, but I wouldn't necessarily called those out to separately from the rest of the overall.
Business growth that we will continue to see that will clearly have an impact given that we've now kind of got a good baseline on our working capital.
Great very clear thank you.
Your next question comes from the line of Andrea Pistachios with Deutsche Bank, Andrew Your line is open.
Yes, hi, good morning, good afternoon.
Our Q3, you had called out the difficult consumer environment in GB and on France, the leaving aside temporary disruptions from customer negotiations can you can you update as a bit on on how you see the consumer in these two markets. Please.
Yes, I mean, we we as you've seen from our results we enjoyed.
A really strong finished the year in both of those markets in terms of.
Our revenue growth and we continue to see solid share gains so.
Both markets continue to perform well.
Clearly JV has has come through a lot of volatility on a macro level with Brexit into general election, but in some ways has now settled down. So we continue to to see the category growing low single digit in GB as we go through 2020 and also in France.
And with the changes, we're making both in our portfolio.
And in our execution.
We we would continue to see us participating on growing share in that growth. So.
Overall, DNA or TD and in particular sparkling category in both fronts in GB.
Remains very vibrant.
On a lot in innovation, we're bringing on indeed, our competitors to those categories is stimulating a lot of growth.
I suppose the good news looking back at 20, Ninee 29 team is that we took a larger shared our growth than anybody else, which is great. So.
Overall positive as we as we move into 2020.
If I if I may as a follow up on on on a different market. Please on Germany. So from the first of January I think you've taken over from Carlsberg contract for the for the German Danish border is there any way in could you could quantify the benefit but also how how are you integrating this.
Additional volume into your German production footprint should we expect.
Move process or could it creates any short term disruption.
Yes so.
That business has been around for quite awhile. So.
It's basically quarter dynamic.
Group of customers. So when you refer to kind of one contracted it's really a very normal commercial situation.
Coming into 2020, we have secured some of that business.
Going forward.
To see we're pleased with us.
We're still looking at what that means for the full year, but clearly it will allow us to.
Source some of that product from our existing capacity within CCP on if needed clearly we've got partners that we can access short term capacity through if we require going forward. So.
It's something that is happening reasonably smoothly.
But again, it's a business that the German urge our businesses have been involved in before.
But obviously, we're happy to get a bit more revenues. We go into 2000 2020, and it's something that clearly as we move looking towards April.
We'll have a little bit more insights on how that business is performing well be happy to update to them.
Great. Thank you.
And as a reminder to ask a question. Please press Star then the number one on your telephone keypad. Your next question comes from the line of nickel fonts Taco Burke with Liberty caller. Your line is open.
Hi, there it bit of an awkward question because I'm asking.
The management about their KBR, but.
You mentioned potentially incorporating sustainability into the incentive planning and you probably given some thought to this rather keep you guys that you feel particularly aligned with value creation and if so could you maybe explain that for me. Thanks.
Yes, 12 picked up May go may not something we're excited about and it's obviously something that we will go through the governance process with our Ram corner full board, but clearly they.
They support the idea of incorporate what we believe is a critical.
If you metric for for not just management of the whole business. So.
That will be in around the area of Sidoti remission.
Waste and plastic.
We are actually looking at those metrics currently and and seeking some external views on us and also trying to look at what other companies.
Our doing but I think we will be an early mover in this space, which we're very proud about.
We see a completely consistent with our value creation model.
In fact, we know that our customers are consumers other employees in particular value that move and when they see it as a tangible commitment to making towards a better place.
That has a halo effect of our company on our brands on other relationships and I think all of those lead to a longer term stronger value creation level.
And Thats the way, we're looking at it a lot of the initiatives are already underway. So clearly in some ways our incentive changes catching up with the moves we've been making since we created CCP.
So, it's probably coming a little bit later than some of the actions that we've shared around water energy use and packaging.
It's something we've tested with our management.
Honestly owes really really surprised at how well combing they were to have that in our metrics because they're very passionate about it and as we've seen in our short term metrics. We created CCP, we took the decisions into free cash flow.
You've all seen the power of that so what gets measured generally gets done before really really really passionate about sustainability, we think it should.
The in there or whatever metric so we'll share more obviously on the specific metric and the targets and we're aiming to try and probably do that by the mid year.
And.
We will be able to give a bit more color around what we're measuring and what are the targets for the next three year cycle, but overall.
An exciting commitment on behalf of our board and the management to sign up to that.
Thank you.
Your next question comes from the line of Matthew for kind of sleep Matthew Your line is open.
Hi, it's actually a spongy have from from credit Suisse, not just couple of questions. Firstly.
Are you talking little bit about Oh, great break down the the growth that you've seen between the the home at the away from home channel just.
To give a sense of how if at all accretive the away from Channelinsight appreciate you've made a lot of investments in.
Sales force et cetera over the last couple of years.
This question.
Hi, Sundries.
I mean on a strategic level, there you're right I mean thats been a priority since we created CCP was to grow smallpox greater large pacsun and also to grow out a retail faster than retail and we've been delivering another across all our markets and also in 2019 and as appropriate.
For us going into 2020.
So you you will see is continuing to benefit from the investments made in earlier years in terms of product distribution volume and revenue in our away from home channels.
And we've also move some more segmented structure, which we've shared previously and Thats unlocking a lot more growth.
Clearly as we explore brands like cost of.
Build on the ready to drink platform and moves out more into at work and Hurricanes that is another example of where a brand innovation.
Clearly fits with our objective of diversifying our revenues.
Across more segments are more channels. So it's working.
Clearly.
We're pleased that packs like glass and cans and away from home continues to drive more value frozen or customers.
We're also pleased to see that new brands are playing a bigger role in that channel going forward as well so.
Overall I'd expected continued 2020.
And it's something that we're pleased with but also focused on going forward.
Hey, just keep in mind, if you're looking at the numbers you might see that the home channel grew faster than the away from home, but a lot of that has to do with the comps that we had particularly in GB, Germany in northern Europe from last year, where we had a really good Q3. So that clearly has an impact in terms of to base.
Most of the away from home growth.
On the flip side, you know in Iberia, we had the benefit of better weather.
And then France, obviously, you would expect to see that the home market would grow faster given the fact that we were cycling through the let CLEC dispute. So all those would have had an impact the two damien's point our strategy is unchanged in turn to how we will continue to see.
The.
Our away from home growing faster than our home business with us more acts focus.
So that helps.
Yeah.
Very helpful. Just a follow from that can you just remind us when you start lapping the dislike benefit and the rest of your friends business, though.
How disruptive as the conventional been.
If I am sorry, what was the last part of your questions.
The Inklings regulation that we've seen.
Okay, Yes, so were more or less through the third so thing. So I think you're you're looking at a comparable performance in France, though so thats behind us.
I think the changes that were made probably had a bigger impact on other categories and suppliers the loss we did.
Already if you recall back I think 2017 made some big changes in APAC pricing architecture in France.
We did actual ends of value creation for our customers were quite quickly on the back it out that new law came in so we were slightly ahead of other categories.
And we've been benefiting from that in 18 19.
Obviously absent an occurred disruption.
And as you can see in our Q4 numbers.
Our French categories, performing really strongly for our customers.
And driving a lot of revenue so.
The Kirk is through and.
Those changes have been positive for us on I think for for most of the French retailers.
Alright, thank you.
Your next question comes from the line of Charlie heads with Redburn Challenge. Your line is open.
Hi, Chris rock on.
But my question.
On.
Zero can you give us might their distribution looks like now for Tech Center overseas.
Classic more you'll sort of targets are on our own on some of them probably a view.
And that is going for a follow up.
Within the cost of goods guidance, how much are we starting to see the cost inflation coming in from more sustainable packaging is not a is that an element the cogs guidance and should we expect that.
Continue to work through as you head towards your targets. Thanks.
Hi, Chris our own Coca Cola zero.
Broadly its distribution now as a priority with Coca Cola classic so.
No I.
I would put one caveat on that and if you live among them you know what I'm going to say in GB, we're not quite there yet.
Generally we have got always to coal is available in GB.
Definitely co classic and then depending on the account it could become zero or diet coke given the size of diet Coke in GB.
So broadly speaking the distribution is probably.
So at a 100% for sugar free and the classic variety in GB as well is just you'll probably find a bit more diet coke in GB than you will coke zero, given the strength of our brands.
But across all of our markets now.
We broadly enjoy priority distribution on Coke zero.
With cult classic and Thats, something thats, driven by 13% plus growth on that brand over a number of years, we still see opportunities. So clearly not just brand available LIBOR pack availability.
Uncertainty on Coke zero.
The lowest point earlier on our new Coca Cola light or taste and diet Coke, we still see a lot of opportunities for some of the smallpox varieties, particularly retail more premium some glass as well, which we're rolling out and so brand distribution I think we're in good shape, what's still some upside for some package distribution, which we're going.
After in 2020 and beyond.
And Chris on your question on the Cogs guidance, Yes, you do see an on costs from the recycle PT, but then on the flip side, you're also seeing a downward trend at least for 2020 on the verge in PT.
But going forward I would also expect over.
The mid town with more availability of recycled PT in the markets that will also hopefully moderate those prices. So all in all have like we said our commodities will be up roughly about the 1%, which I think.
This is the basket of the variety moving parts, but no.
We need to track that and if the right thing to do for our business is being in talks about when we think about what customers want what our consumers want from us and over time, we do believe that will create more sustainable business focused on having the right availability of the right type of packs on a variety of different consumers.
And just add to that I mean, I think it's an important mindset I mean, we view that as an investment of brand value rather on the cost.
As clearly we know the consumers and customers value brands that are sustainable more than those that are not so while it flows through the Cogs is ultimately is a driver brand value.
Overtone, we'd expect that will protect our existing value proposition for the may also overtime allow us to extract more value.
Well thats something clearly as we prioritize some of the packaging innovations.
It may well allow us to continue to protect but also grow value and some of those brands.
So we clearly are conscious that we need to manage our profit and cash delivery in that environment that we're doing that.
We're also you know really looking at that as an investment.
In the future of our brands.
Rather than just the cost.
Okay. Thanks, very much okay.
Your next question comes from the line of Simon Health with Citi.
Your line is nothing.
Hi, Thanks afternoon, Jen Hsun I'm wondering if you could just talk a little bit more by the performance suffer sweats into the year end clearly still getting good distribution and should again I'm just interested in how you see that developed as we move through Twentytwenty, what you're seeing in terms of repeat purchase and generally competitive dynamics.
Hi, Simon.
It's been a long time coming on trend still open us up kept us caveat.
We are there we had a few years, where we were challenged on that Brandon.
As we've shared with you on a number of called we've taken some great initiatives coming into 2018 into 2019 around.
Packaging and some of the new labeling flavors, obviously, a more premium proposition.
And we really saw the benefit of that coming through the second over 2019.
We'd expect that to continue.
Clearly, we have still got distribution opportunities from some customers that moved away from that Brown, and 16, and 17 sourcing some customers consumers coming back.
We clearly have an opportunity in retail we're not participating yet in some of the pipe formats that are competitors.
Our offering that some of them we aim to close as we move through 2020.
We are working on a new comes platform with the co company around the brand.
And we'll continue to explore new flavors as well so great to see the brand responding.
Great to see the share coming back.
But clearly we're not back to where we were a number of years ago solo we're enjoying the success.
We want us to continue we are.
Cognizant that we are catching up for some lost ground earlier.
Yes, so that gives us momentum into 2020 in that category, we also royal Bliss outside the GB.
Which again gives us an excellent brand and not just in Liberia, but something that we're going to look across or the market. So.
Overall, good news and Schweppes.
But more to come.
Got it.
And just separately on another note is of course, a follow up can you just to ask around the then the new share buyback program just from a technical standpoint are you able to going to market in the meeting execute well start executing against that already before we perhaps sort to say you in the open market buying back stock.
Yeah as I said, Simon we will actually initiate that program next week, so you'll see us.
Back in the market and we'll probably do that pro rata through the course of the obviously subject to AG and approval and the other caveats I put out before.
Got it Mr mechanic. Thank you.
Your next question comes from the line of Robert I signed with Evercore ISI. Robert Your line is open.
Hi, Thanks for taking my question again.
I'm not just in terms I'm looking into 2020 could you give us some color on the innovations that you're most excited about and also any changes in consumer trends that you're seeing.
So on the innovation side.
I think a lot of it will be building on momentum that we created in 2019, so clearly by category.
We're excited about innovation on our core sparkling brands. So from the flavors continue to perform well, we've recently moved stride into clear PT and given up brand and update so thats, an exciting innovation and on our core.
Coca Cola trademark will continue to see innovation on packaging. So that's something that we will see a lot of as we go through 2020 on the brands side clearly as I talked about on my comments will bring more.
More to fuze tea.
We'll see more and really cool brands coming across the energy segment, obviously, Coca energy and Coke energy Cherry.
Monster innovation pipeline looks great we've got cost the coffee.
So you know, we really have got a rich portfolio of innovation.
But you know has delivered a 29 team, but will also supported growth into 2020.
On the consumer.
Again as as I mentioned earlier, we see.
Robust growth in the category and we see consumers responding well to innovation and choice.
We see them responding well to some of our low sugar free varieties.
You know they continue to look for new and exciting beverages I think as I. Just mentioned, we've got a long list of those coming. They also are looking for more sustainable credentials, we talked about that on the call. So we see that growing in importance.
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And clearly you know they continue to respond well to promotions as we look into 2020, we've got some big assets from the Olympics.
And from the euros on the football side. So that's something that we know consumers in Europe always.
Enjoyed participating in so overall solids category growth expectations on the back of a solid consumer environment.
But thats something obviously, we'll keep close on as we go through 2020.
Great. Thank you.
Your final question comes from the line as we close on Safra never on Nico Your line is open.
Great. Thanks, I want to ask about new products on on the call core feature mixtures could you give me a rough feel for how successful have spent so far and also quite curious about.
It seems like it's predominantly and on trade product that you can get it on E Commerce, but can you tell me a little about how you think about advertising and marketing and activating the brand for sure I guess in short what sort of percentage of an NPV go.
Sales do you spend on future mixers and as a as another question Mike get it isn't there a little bit Cheekily is you expect are hard to come to.
Two VP in the foreseeable future.
Apart from the states, it's it's the Portland water that's cabinet. Thanks.
No.
So on Coke signature mixers, I mean that that was a.
A really cool innovation on the co trademark that we brought to market last year. So it's very early.
We predominantly focused as you said on a number of on trade outlets to learn and drive trial.
We haven't really rolled it out in retail.
Although you can find and some select accounts in GB.
We don't really disclose the amount of AMC or on a brand level.
What is very small Nicole I mean, it's something that we will continue to trial.
We are in 2020 see if it's going to get scalable we've got some very positive customer consumer feedback.
But overall, excluding GB the mix or segment is quite small anyway.
And within that dark mixers are starting to develop at least in our view, that's the REIT space to be in with Coke signature mixers.
But again very small and really at the beginning of.
Of exploring the opportunity on that brand and format.
On a higher again, we have a very.
Engaging collaborative process with the co company, where we look at the brands, but they have that don't exist in our territories.
We have a basically every two months, we sit down and we view that as leadership team.
I will include.
In our you know deliberations on his other brand that could work in Europe or not.
Well, we do that across hundreds of brands with the co company I mean, the great thing.
For us as they bring a lot of brands.
Globally to Europe that we can.
Just test and see if the respond well here another we'll do the same with.
Excellent. Thank you guys I appreciate it.
Thank you Nicole so again I'd like to thank you on behalf of certain economic for taking the time to join us today.
That's been really great to share with you.
Another great year results.
For CCP and 29 team and most importantly share with your guidance on some color on how we see our business developing and 2021.
We look forward to our call in April and most importantly, we look we'll look forward to our capital markets day May where would again, we will take to turn to page on our business and also shows your perspectives on what is a very exciting future for all the shareholders of TCV. Thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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