Full Year 2020 Coca-Cola European Partners PLC Earnings Call
Your line is.
[music].
Thank you and good afternoon in Europe or good morning in the U S.
You all for joining us today I'm here with Damian Gammell, our CEO next Gen Kiani of CSI the.
Before we begin with remarks from our preliminary results for the fourth quarter and full year 2020, a reminder of our grocery statements. This call will contain forward looking management comments and other statements or accepting of our outlook.
These comments should be considered in conjunction with the cautionary language contained in this morning's release as well as the detailed cautionary statements found in reports filed with the UK U S Dutch and Spanish or priorities.
A copy of this information side of it on our website at Www Dot Coca Cola E T Dot com.
For pets remarks will be made by Damian and Nik on the accompanied by a slide deck. We will then turn the call data show questions. Following the call of full time square can be made available as soon as possible on our website I will now turn the corner of the toss CEO Damian.
Thank you Sarah and many thanks to everyone joining us today two.
2020 was clearly an unprecedented and challenging year for all of us so.
So let me start by saying a huge thank you for everyone of the CCP for their incredible commitment and the <unk>.
Generally as well as their support they provided to our customers consumers and communities throughout the year.
We entered 2020 with good momentum building on the solid performance in 2019 of our strong track record.
Then the pandemic hit our markets and communities.
Responses profit.
And we clearly demonstrated the resilience of our business ever.
Evidenced by another year of market share gains.
I'll talk more about our actions what I am proud of our ability to protect our performance in the short term.
Without compromising the longer term.
We over delivered on our cost mitigation plans of which a significant amount will will not return.
And we launched our accelerate competitive the sufficiency program on our journey to an even leaner future.
And even after our continued investments behind our portfolio of digital and sustainability.
We're able to deliver over 900 million euros and free cash flow.
Standard performance given the year, we have had.
Of this foundation gives us confidence in the future and a fantastic portfolio of brands provides an exciting platform for growth.
The future debt no debt will be digital and green led.
Of course, we have.
Also have the exciting opportunity to acquire Coca Cola Amatil.
While there remains some uncertainty about the duration and the impacts of the pandemic.
The rollout of COVID-19 vaccines brings new optimism.
Our decisive actions during the year have put us in a stronger position to react to the renewed restrictions we are facing in 2021.
We remain confident that we will emerge from this crisis, an even more efficient and sustainable business.
You will have seen this before the.
The message remains the same.
We do come from a position of strength.
We operate in an attractive and valuable category.
We enjoy scale on the market leading position across all our geographies.
We have an exciting portfolio of brands products and packaging.
With the strong future pipeline of innovation.
We continue to create a lot of value for our customers.
Two through the Great service we offer.
Have a solid balance sheet and despite the challenging year, we continue to generate a lot of cash.
And we continue to be strongly aligned with the largest franchise partners the Coca Cola company.
On all of other brand partners.
As you know sustainability is the key priority for us on the pandemic the strengthened our determination to go further and faster in Decarbonizing our business.
And I am privileged to be leaving a strong team of such dedicated.
Talented and engaged colleagues.
In addition to the thanking our employees I would also like to extend my gratitude to all of those who worked hard to keep the safe and well last year.
Safeguarding our people has been our number one priority.
The majority of our office based colleagues continue to work remotely.
Utilizing the digital workplace tools in place across our markets.
And we.
Increased our internal communications on the emotional and mental health support, including the rollout of online while the training modules.
We've worked closely with all of our partners to support our communities together with the Coca Cola Company, we provided substantial aid and where possible we made of logistics and transportation services available to support the emergency relief work.
Securing business continuity has been the big focus on the pandemic has really reinforced the power of the relationship we have with the Coca Cola company and the other brand partners.
We share of collective belief in driving our core brands through our joint investment plans, we were able to react quickly to the sharp changes in consumer behavior.
The widespread closure of away from home assets and low demand for media consumption meant we needed to quickly optimize our pack price architecture of the home channel.
With greater emphasis on our core brands and larger pack sizes.
Reducing the rest of us which at the height of the pandemic were down by over <unk> helped us to ensure product availability and visibility for our customers as well as driving further efficiencies in our supply chain.
This meant we were able to maintain great customer service levels of close to 100%. Despite the challenging backdrop. Some of these skus have of course been reintroduce based on our stringent criteria, but we continue to aim for a permanent 10 per cent reduction with a focus on our core brands.
Key innovation.
We reallocated resource across the business, especially within the field sales from away from home to home to increase coverage and capture revenue opportunities, we pushed extra adjacencies in the home channel such as me of deals and introduce more premium packs, both in store and online to capture some of the away.
From the home dining occasions.
I've moved to the home.
And we successfully leverage our digital capabilities with strong growth in both of our B to B home and B to B business segments.
Importantly, the focus on close collaboration with our customers of brand partners allowed us to gain overall market share.
Fantastic achievement.
And finally, we took bold actions to protect the performance both in the short and long term.
We have been and continue to be extremely disciplined from a cost perspective.
Ensuring all Opex and Capex was limited to what was essential.
We also took actions to protect our cash.
Managing our working capital requirements.
All of this enabled us to generate strong free cash flow and maintain a solid balance sheet.
And finally, we took an important step in our sustainability journey.
By setting a bold ambition to become carbon neutral, which I will come on to mix.
The pandemic has threatened the determination.
To go further and faster all of our integrated sustainability plan.
This is forward.
In December we announced our ambition to reach net zero greenhouse gas emissions by 2040.
Our focus will be on reducing emissions across our entire value chain.
From the raw ingredients, we source and the packaging we used to the drinks we sell.
To support this ambition, we have set an interim target to reduce absolute greenhouse gas emissions across our entire value chain by 30% by 2030.
Our sustainability initiatives of the core of everything we do with CCP.
This was reflected in the decision to integrate of carbon reduction metric into our long term incentive plan for the first time in 2020, making CCP an early adopter in this space.
Packaging is of course central to our carbon reduction targets and I am pleased that despite the pandemic, we continue to move closer to our 50% recycled plastic target.
Progressing from 30% to 41% since this time last year.
For the journey will not stop there, Sweden became the first 100% recycled <unk> market.
In the first and the Coca Cola system, with the Netherlands, Norway, and Iceland to follow this year.
We are proud that we continue to be recognized for our sustainability efforts. We are one of just for beverage companies to be included in the Dow Jones to say the sustainability indices and recently had a position on the CDP a list for climate of water reaffirmed for the for fifth consecutive year.
We also retained our AAA MSCI ESG rating.
I would now like to hand over to Nick to talk in more detail to the financials.
Nick.
Thank you Damian and good afternoon, and good morning to all of you joining us today, let me start with our 2020 financial summary.
Our revenue declined by 11% on an FX neutral basis, driven by a 10% comparable volume decline, reflecting the impact of the COVID-19, pandemic, which of course I'll come back to in a moment.
The combination of the adverse channel pack in geographic mix resulted in the one 5% decline in revenue per unit case.
You will find our revenue performance by geography in the appendices of this presentation with detailed commentary in the release.
On our Cogs per unit case that increased two five percentage on a comparable and FX neutral basis, mainly driven by an under recovery of our fixed costs given the lower volume combined with adverse mix, mainly due to the higher demand for Ken.
As a reminder of approximately 15% of our Cogs relates to fixed cost.
The manufacturing costs and DNA from.
<unk>, which accounts for a further 25% the mainly favorable in 2020 with lower P T and aluminum prices, partially offset by an increase in sugar prices.
In addition, we benefited from the middle of concentrate costs driven by the decline in revenue per unit case in line with our incidence model.
The sort of breakdown of how causes of acuity in the appendices, while we're not providing 2021 comp guidance. Today. Please note that our commodity exposure is largely hedged for this year as for our multiyear hedging policy.
Given the current level of coverage, we currently anticipate commodities inflation of approximately 1% and we will keep you updated as the year progresses.
Our comparable gross profit declined by 17%, reflecting the decline in revenue and adverse comps per unit case.
Combined with an 11% reduction in comparable operating costs, driven by discretionary opex savings of circa 260 million euros.
This led to a comparable operating profit of $1 2 billion euros down 28, 5% on a comparable and FX neutral basis.
I'll talk about Opex and the discretionary savings of more detail shortly.
Comparable effective tax rate declined to 24%, mainly due to lower corporate tax rates in France, and Belgium, as well as the change in profit mix.
This resulted in comparable diluted earnings per share of one euro <unk> 80 cents down 28, 5% on a comparable and FX neutral basis.
The ICL with free cash flow has been and continues to be a core priority for us here at <unk>.
Spite the challenging backdrop, we delivered strong free cash flow generation of 925 million euros close to our medium term annual objective of generating at least 1 billion euros of yet.
Highlights the strength of our free cash flow generation supported by our Capex and working capital initiatives, which I'll also cover in more detail shortly.
And finally on shareholder returns, we've returned approximately 130 million euros to shareholders via share buybacks for the suspension of our one day mid year program in March last year.
We also pay the full year dividend of <unk> 85 cents per share in December maintaining our dividend payout ratio of circa 50% in line with our dividend policy to which we remain fully committed.
Not just from revenue highlights joint value creation with our customers remain the key priority for it it's great to see that we were the largest creator of retail value and DNA RTD category in 2020, adding an additional 500 million euros versus 2019.
In fact, we delivered nearly twice as much value of our nearest competitor.
At the brand level, we have three at the leading five brands for absolute value growth in our portfolio.
This was driven by smart revenue growth management initiatives, such as optimizing our promotional efficiency.
SKU rationalization and the reallocation of field sales reps into the home channel the.
These initiatives also helped us to take value share.
In the markets during the year, both in store and online.
The share gains would not have been possible without the resilient performance of our core brands.
OCA bullet there of sugar was the number one and the RTD brand for absolute value growth during the year.
And as we pushed edition of Adjacencies and ensure the supply of larger packs in store, we saw solid volume growth in multi pack cans for both the plantar and price.
Energy has also been day resilient with volume growth of 13%. So we are well on track to meet our goal of doubling the size of our energy business.
<unk> was the standout performer with volume growth of 15%.
Covid by new flavors, such as specific punch and a broader multi pack offering in market such as Gd.
Impressively Monster is now the number one energy brand ahead of Red Bull in both Spain and Portugal.
We have embraced the opportunity of digital represents for our consumers and customers.
In fact online grocery revenue growth, 44%, resulting in value share gains of 140 basis points in GB our market share on line, that's actually surpassed that of what's in store, reflecting our dedicated efforts to drive E commerce sales together with our customers.
And as restrictions have limited away from home socializing, we have continued to see.
Strong growth in online food delivery with revenue growth of around 50% during the year.
But our digital momentum goes much further than just online grocery we have the winning <unk> protein with <unk> Dot com now with around 75000 customers using the platform for times more than that at the beginning of the year.
And this number continues to grow the.
We also launched output of the direct to consumer sales platform GB of the pilot Youll Coca Cola and.
And finally, despite the pandemic, we continue to invest behind our core innovation and future revenue streams as we continued to diversify to become a total beverage company aligned with our brand partners.
So now to the impact of COVID-19, you can see on this chart clearly of the monthly volatility in volume mirroring the varying extent of lockdowns outlet closures and restrictions.
Unsurprisingly the most significant impact has been on our away from home channel volumes declined by circa 28%.
While we saw a marked improvement in volume during quarter, three reflecting the easing of initial lockdown measures and capable of whether volumes in the fourth quarter again deteriorated impacted by the renewed restrictions, particularly during November and December.
On the whole trading of the home channel has been more stable with full year volume growth of circa 2% benefiting from the <unk> initiatives as well as the growth in online as I mentioned earlier.
For the resolution of the customer dispute ultra supported home volumes from the second half, particularly in France and Germany.
From the tax perspective on the garden and the consumption was negatively impacted across both channels with volume down maybe 25% future.
Future consumption packs, such as large PDP and multi pack cans perform better, particularly in the home channel.
As a reminder of the away from home channel and immediate consumption typically account for around 40% and 35% of our volumes respectively. You'll find more color on the volume breakdowns in the tendencies of the stack.
The start to 2021 continues to be challenged by the pandemic with January volumes weaker than Q4 impacted by couple of restrictions in most of our markets.
While the considerable uncertainty remains over the depth and duration of these restrictions we anticipate they will remain in place throughout most of the first quarter.
That said, our learnings from 2020 and the way we have adapted our business gives us confidence that we will navigate through any short term challenges effectively.
Moving now to costs importantly, we came into the crisis with the solid understanding of our cost base given the closeout of the merger synergy program in 2019 alongside ongoing work around accelerate the competitiveness of initiatives.
It's enabled us to react even more quickly when the pandemic hit our markets the Dick.
Klein in operating profit the vessel of moderated by robust action on discretionary spend.
In total we delivered opex savings of $260 million.
Head of our guided range of 200 to 250 million euros from.
Cost declined naturally such as seasonal labor, given lower volume as well as incentives travel and meetings and other services like consultancy.
We were also able to reduce our trade marketing expense as we work closely with the Coca Cola company to become more targeted and efficient with our spend.
Keep in mind, though that this is of course scenario, where we will continue to invest as restrictions begin to lift in volumes return.
And as a reminder, we would see roughly two thirds of our total opex.
And the third is variable.
These variable volume related savings are the key bridging items between the 260 million euros of savings and the $315 million reduction in total Opex that you see on this chart.
This was partially offset by some one off costs coming into the business such as bad debt inventory write offs and protective equipment for our colleagues and of course inflation.
We anticipate opex savings of approximately of 115 million euros in 2021, when compared to 2019.
This includes some permanent benefits from the 2020 mitigation programs, such as less travel and more efficient TNF spend as well as the initial benefits from accelerated competitiveness program, which we launched in October.
This program will result in some structure of head count changes as well as the closure of three plants to address duplication increased efficiency and scale and simplify how we work.
We anticipate that around 1200 growth will be impacted across central supply chain finance and support functions.
These are of course difficult decisions to make but of the right ones for our business from the longer term, enabling us to meet the changing needs of our customers.
Importantly, these initial initiatives will have monthly of benefits from the run rate perspective.
And as always we will continue to manage our cost base as we look to become a more structurally efficient business.
I said, it before but I'll say it again, we will not return kind of pre pandemic cost base and as a result, we expect our opex in 2021 day.
Lower than that of full year 2019, despite the inflationary pressures given the actions, we're taking to become a permanently leaner business for the future.
This continued focus gives us the confidence in our ability to return to sustainable growth in 2021 and beyond.
So turning back to free cash flow in more detail of hugely important metric for us.
Despite the challenging backdrop, we generated 925 million euros of free cash flow.
The slide lays out the key components when the pandemic first hit our markets. We look at the to reduce all sources and uses of cash to preserve maximum flexibility.
This included reducing capex by around a third by deferring non critical projects.
Recognizing the importance of continued the positive investments, we still stands for 360 million euros, excluding leases on supply chain digital and other technologies as well of course of equipment.
We will continue to be disciplined with our capex spend in 2021 to ensure that we have the right portfolio and distribution capabilities.
Scale out product to all our customers across all channels.
At this stage, we expect to maintain capex of 2020 levels. The cannot provide any specific guidance today, recognizing the current uncertain environment.
We will however continue scaling up our disciplined investments and anticipate that this bucket will account for about 30% of our spend of <unk>, which compares to about 10% from 2019 and 20% in 2020.
And despite the pandemic, we delivered the working capital inflow of 185 million euros in 2020. Some of this is down to timing so the with us, but reflecting on new multi year focus on driving working capital improvements, we do expect to retain approximately 100 million euros takes.
Taking our cumulative improvements of approximately $750 million since 2017.
This strong performance has all been driven.
<unk> cross functional collaboration as well as solid routines to track and drive the results across the trade payables receivables and inventories.
And finally on the balance sheet as you know we entered this crisis from the position of strength, having de Levered quickly post merger driven by a strong free cash flow generation. We ended 2020 with the net debt to adjusted EBITDA ratio of three two times, reflecting the decline in profit flow into the pandemic.
More than offsetting the reduction of net debt.
We remain fully committed to a strong investment grade rating, we have of balance profile of long term debt maturities as the chart shows the.
Very pleased to secure the additional $1 6 billion euros of funding in the debt markets last year taking.
Taking advantage of favorable market conditions. These proceeds continue to provide us with additional liquidity and flexibility, including the repayment of maturing debt.
We also continue to have access to other sources of liquidity, including currently holding around $1 2 billion euros of cash and one of the Hopkinton Euro sustainability linked Rcs.
Additionally, we have access to the commercial paper market.
During the half billion euro multi currency program.
That said, we currently do not have any of us yet utilization of commercial paper outstanding.
So we have ample liquidity, providing us with financial flexibility and the continued uncertain environment in.
And importantly, the no covenants of EBITDA long term debt on the facilities.
For the synergies.
So with that and then hand back to Damian Damian. Thank you Nick.
For our future will be green and digitally led.
We have and continue to increase our investments in digital right across the business.
The pandemic has shown the important role digital platforms of playing for our customers consumers and colleagues and the opportunity we will continue to harness.
We continue to invest in sustainability.
With our now overarching commitment to net zero by 2040.
This alongside continuing to make portfolio of investments skewed to the core.
But also to seed future revenue streams like Costa <unk>.
Tropical on top of the Chico.
All supported and aligned with our brand partners.
We want to continue growing in sparkling and double our already strong energy business.
We're also now building a platform for growth in coffee with Costa.
So we are right the comfort of the bet the future of our business.
Built upon three pillars, great people great service great.
Great beverages.
We will strengthen the workplace culture that embraces wellbeing inclusion diversity and the quality.
And to support our growth platform. We have also launched our new efficiency program with the first savings due to land in 2021.
As we move forward to becoming an even leaner business.
And with that in mind here of some key highlights to look out for 2021.
On the core.
<unk> for the what the fans of the campaign lending itself to the playful nature of the brand.
New co packaging and the new greater tasting Coke zero is the honest way to be sold supported by a major advertising campaign.
The energy space.
<unk> Energy's relaunched in 2020 is underway and true.
And the launch of Coke energy Cherry and.
Monster will drive more innovation and through the new flavors, especially across the ultra induced ranges, including months from you that mix between Ginger brew and <unk>.
Energy.
There will be new flavors for fuze tea like elderberry, Peach and Raspberry Mint.
The new larger pack sizes for the home channel alongside variance launching without sugar.
Tropical enter the Portugal for the first time, this year and with new flavors like Clementine Orange and tropical and of course, the exciting launch of the new low calorie hard Seltzer top of Chico brand is underway with three flavors.
Early days, but customers are enthusiastic on the early feedback is encouraging.
And now onto the Costa.
Building a platform for growth in coffee is indeed, an exciting opportunity.
A large and growing category, we are of a new dedicated team in place.
To manage costs, so within the <unk> EP.
We are busy building our plans with the focus on proud to serve.
The wonderful express machines and ready to drink.
With you various planning this year like the flat white and vanilla last day.
Outside of GB Costco will be launching proud to serve in express and all of our markets.
Starting with Germany, the looks of Norway in 2021.
We look forward to sharing more in due course.
We are progressing with the acquisition of Coca Cola Amatil.
You will no doubt understand the sensitive the sensitivity given this is the license action. So we are limited as to what we can say at this time.
In the meantime, as you'll see.
Recently, we announced receiving approval for the transaction from the Australian Foreign investment Review Board.
In terms of next steps, we are now waiting for amatil to receive the independent expert reports commission by them and then publish the scheme booklet ahead of the screen growth.
The scheme nationally remains subject to other customary conditions.
Including <unk> shareholder approval court approval and the New Zealand foreign investments regulatory approvals.
We look forward to moving ahead of the process and sharing more with you as soon as we kind of.
So our key takeaways from 2020.
2020 was a challenging year like no other but I am proud of how well we managed through such a rapidly changing environment.
The crisis reinforce the power of our relationship with the Coca Cola Company.
And all of our brand partners.
Of our collective belief and continuing to invest in our core brands has served us well.
The crisis did not stop us continuing to do the right thing to position the business for the long term.
We continue to invest particularly of sustainability does.
Digital and of course in our portfolio.
We have adjusted our cost base to a new reality.
Launched the wider efficiency program, so more to come.
On the strength of the free cash flow generation of this business was a real standard.
And as I started by thanking.
My engaged and committed colleagues I wish the land on the same note as we look for the future.
While our business continues to face significant restrictions.
Which we comfortably continue to navigate.
We face the future with optimism and confidence.
We are ambitious and our ability to grow.
Film sustainably for a better share of future.
As we believe more.
More sustainable businesses will ultimately win longer term.
And now I'm very happy that we would like to open up for questions.
Thank you operator.
Thank you at this time I would like to remind everyone in order to ask a question. Please press Star then one on your telephone keypad again, Thats star one to come into the question queue.
And our first question comes from the line.
<unk> Herzog with Goldman Sachs.
Thank you hi, everyone.
Hope, you're all doing well.
I guess the way I was hoping to share just a little bit more detail on the permanent discretionary expense reduction you book.
Scott.
Specifically of your thoughts on marketing spend next year.
I guess I'm wondering if the army samples that you could share with us that give you the confidence that the pullback of reduction.
The assets that I have a negative impact on your top line for instance, and then I know youre not in a position to provide guidance right now but.
Maybe on a high level when when thinking about margin.
The fair then to expect margins to expand.
And next year, given the expense reductions and certainly a new savings program.
Thanks Bonnie.
Good morning kind of maybe.
I'll cover.
Your question around the marketing investment momentum.
And over to make so we feel really confident with the plan for 'twenty. One in terms of the level of investments against the programs for both of them are signed on with the Coca Cola Company.
Throughout the crisis last year, we continued to fully invest the.
The business that was really opening of winning which is retail and online.
We maintained a consumer from a pricing programs because we felt that was critically important and we saw that impact on our share.
And that will flow through the 21.
So I think from a top line growth perspective, the only thing that is going to hold us back in the near term will just be the restrictions of away from all of those.
The continued to see strong growth across our brands all.
In line and then retail I'm clearly we're away from home is open and takeaway of our food to go we're also growing nicely. So.
We feel pretty confident about our investment levels clearly we have taken the opportunity.
Throughout 2020 to just be.
The more choice for around where we spend the TMA that is released from savings to our bottom line, we feel good about that so.
Very much looking forward to our markets fully reopening on the well place to fully fund debt as we move forward. So.
Over to you Nick if you want to just go for.
The broader question on cost.
Yes, sure. So Bonnie if you look at what we did in.
2020.
$260 million.
The largely for buckets that we've got the P&A spend you've got things on incentives.
Travel meetings et cetera.
Discretionary spend.
And I communicated the 150 that we believe we can definitely retain versus 2019.
It's really back to that point the data and just made we actually looking to reinvest back in <unk> and hence you see that number coming down but thats. All true then supported by the fact that we've got some new programs that we've initiated that will deliver savings in 'twenty, one and in the years beyond.
So I think combined with what we're looking at we feel confident the decisions.
What is going to definitely be saved in the P&L.
And is there more investment that needs to happen in <unk>, that's already what we've accounted for so it's almost like this is the base for 2021, and then for the outgoing years, we actually have some of the continuing benefits of the programs that we've announced.
In the in late 2020, so clearly if you look at that mathematically we would expect despite the.
The <unk> shopper of investments that reduction against the revenue, we would expect to see rate improvement as well as mix improvements.
Coming in on the top line.
You can see I've talked about the Cogs on the commodity perspective, clearly obviously, if you look at the elements around volume coming back, which we clearly expected war.
That will have a positive impact versus 2020 in terms of our overhead recovery.
So both of the growth margin level, and then supported by what I. Just described in terms of the Opex savings.
The operating profit margin level, we would expect that the expansion and give you a number.
But clearly there will be expansion versus the numbers that you see for 2020, so hopefully that helps.
Yes, I really appreciate that that was that was helpful. Thank you both.
And our next question is going to come from the line of Lauren Lieberman with Barclays.
Great. Thanks, good morning.
I was curious if you can talk a little bit about <unk>.
Showed recovery comes faster than expected.
How do you make sure you are prepared for that outcome as well.
And then secondly, I was curious about the cooler placement conversation you share Nick how much of your Capex budget was allocated to coolers are approaching the equipment in 'twenty and I was curious how you're thinking of that for for 'twenty, one and again, particularly as the mobility hopefully the increases sooner rather than later.
Hi.
Sure.
Thank you.
Yes.
Our fully prepared for a faster recovery and obviously with the <unk>.
Very much look forward to that outcome I think what Nick kind of highlighted in our financials from 2020 and something.
I think we manage well was that while we rebased our cost base, including <unk> to Bonnie's earlier question that we also were conscious to continue to spend money.
Against the opportunity in the future. So we continued of Nick called out to invest in digital.
Obviously continue to invest in sustainability, but we also closed out of a number of kind of the.
Supply chain projects that.
Particularly on some packaging like cans that we know is going to be a key driver of our future growth. So certainly from a capacity perspective, we're well placed to recover clearly we've protected the muscle of the business so well.
When we talked about restructuring which was necessary.
We did retain the most of the business the frontline.
We redirected the asset.
Two home market given the circumstances book, we've retained our coverage in away from home.
On the phone line capability. So, yes, we're well placed and we're continuing to make the right decisions as we see that recovery hopefully moving forward.
That gives us confidence that we can capture more of than our fair share of that recovery because of security one of our goals is to beat the market and we've done that.
I think we continue to generate a lot of cash and profit for our customers. So we've come into 2021 and the good place with our customers both on pricing and rates.
And that was something we were conscious of as well to give us the solid foundation. That's in place. So really the variable that we're managing against US as these restrictions lift of the market reopens.
We're ready to go with speed.
And that's what we'll do.
That's great. Thank you and then the cooler question that was the end of pilot.
So on the day. It makes you want to take a look at.
Sure.
All of Hong cooler is if you look at our Capex we spent.
Like we said.
$360 million in 2020, but the was a little more weighted towards the digital as well as some of the <unk>.
<unk> chain.
Next that we were kind of midstream on.
If we look at 2021, we feel.
This level would be about the same but we are definitely a cooler investment there and clearly of the business is recovering and coming back faster than I would have no issue, putting more into coolers and moving with speed on that so.
Clearly committed to continue to invest in the market and be focused around faster recovery.
Great. Thanks, so much.
And as a reminder, if you would like to ask a question. Please press Star then one on your telephone keypad to withdraw the question first of the pound key once again star one to queue.
And our next question is going to come from the line of Richard with again with Kepler.
Okay.
Yes, good afternoon all.
Thanks for the question.
On the sustainability you you have the 250 million of investments in.
In the 2000, 22022 periods, which possibly will goes through the P&L and parts for Capex. So I was wondering how much of these investments will be incremental to your cost base.
Much of it's already gone through the P&L in 2022.
So just.
Just to give you a quick on the P&L piece in particular, the biggest element of really what we're doing from a perspective of investing in areas such as our patch.
<unk> gone in from an angle of.
Shrink the board conversion et cetera.
So that's included in our comp number in our P&L.
That's included in the two 5% Cogs per unit case, we don't break out that number separately.
And then as we look forward I mean, obviously, there's a fair amount from the base you will continue to see the investments going in back in the commodities numbers that I've given you of circa 1% inflation that includes additional cost for our sustainability investments again linked to the same elements of that.
Talk to you back so you can see despite our investments in sustainability, we are managing to keep our commodity inflation very much in check and in line and it provides thing to do longer term for our business and our brand equities.
Thanks, Dan.
Sorry, sorry.
Sorry, Richard just a follow up to the mixed comments I mean, yes I think.
Actually this morning, I had to look at a new campaign that will be rolling out with the Coca Cola company around our sustainability investments because clearly we see that as an investment rather than the cost.
And it's fair to say that we probably haven't leveraged out as much as we could but I was happy to see.
A new direction around how we're going to get the message even closer to our consumer and tourist shopper.
<unk>.
Compared to two three years ago, even in Europe.
I'm continually surprised of how much of our customers are now leaning into the sustainability debate on really value of what we're doing so yes.
Yes, it's the cost, but it's only a cost of we don't turn it into an investment and that's really what we're focused on sorry Richard.
Yes, yes, that's what I'm sorry of the Dania.
Maybe as a quick follow up.
You gained market share overall in 2020 can perhaps give some color on the markets, where you did really well in the waters, where he was actually the highest the terms of market share.
Yes, we did really well across all of our markets.
I have to say we do.
Definitely had some challenges with customer groups. So I think when we look at market share I think it's probably easier to look at.
Specific.
Challenges that lots of a bit longer we talked about it during 2020, particularly with some of the buying groups, so that impacted markets like Germany, and Belgium, but that was more a function of the customer.
<unk> universe, rather than the markets outside of our buying group challenge we gained share.
Across all of our countries.
Across.
Our customers.
So really was more of a customer of group challenges rather than any specific market.
But obviously the markets that were affected by the longer than expected negotiations with <unk> from the scale perspective, definitely Germany and Belgium.
But overall.
And we saw our share recover very nicely in the latter part of the 2020.
As we reached an agreement with that particular buying groups. So.
Yes, very positive move on share of both on any RTD, sparking was slightly impacted by.
Of our buying group of negotiations, but <unk>.
Overall, our all our markets and pretty well up to say.
Alright, great. Thank you.
And our next question is going to come from the line of Edward Mundy with Jefferies.
Okay.
Hi, David Hi, net.
Two from me please officially.
Appreciate the normal flight you can say on kick off until the <unk>.
But you've probably noticed for instance from quite good results recently does that change the opportunity is there any update you can give at this stage.
The drop the financing you think you might be of can sheet on the deal.
The second again, probably more of a flow.
The accounting sort of electronics get anyway.
Chris I think in 2021 is kind of dependent to a large extent on how quickly. The reopening takes place of in Europe I appreciate that of Crystal ball I mean, Robert.
For a quite volatile.
I was wondering whether you're able to share what you think for how much of the lost revenue. In 2020, you think you might be of to get back on a good reopening scenario.
Relative to lets say about reopening or late <unk> from Florida.
Yeah.
Great.
So.
In relation to share.
Let me take that second one for us in terms of the reopening of its clearly when we look at our business.
We are expecting Q1 to probably be the most challenged and I think you'll probably see restrictions.
As.
We hear in the market starting to ease towards hopefully the end of Q1 of the vaccine rollout happens et cetera.
So I mean, I think if we look at the recovery to think about it from the mangled that Q2 with our work to the quarter last year. So clearly <unk> seen a strong recovery in that quarter.
That's because there is not going to have that for the level of lockdowns that we saw.
And then the second half of the year, you've seen the results of their business strong results for cleaning, we believe there's upside, particularly given the fact that in Q for the away from home was clearly challenged again because of those things.
I think in a.
Downside scenario, if you look at it in terms of that going longer youre looking at maybe from.
Period into Q2, the clearly we see second half should be lots from the end of Q2.
The relatively.
Even in a week.
The lockdown situation you can see that stronger so we feel good about everything that we're doing that's within our control to be focused on what we can do from a better execution perspective brand.
The focus we've got grapes.
<unk> chain capabilities to be able to ramp up very quickly. So we feel good about that from from an angle of.
<unk> for the company should hopefully become Boston sharpness of assuming things start opening up for.
Our perspective on the transaction I think a couple of things.
To say firstly, if I start with the first question around.
The the better share trading.
The better trading update from Anatol, clearly we were expecting that.
As you can see even in our results of <unk> seen that.
So Damian said, we're now waiting for and the total we see the independent ex would report, which the commission.
And then publishing of.
15 booklet ahead of the scheme book, So we'll update you on that going forward.
In terms of the cost of financing I mean again, you saw we were able to raise.
Great.
Money towards the end of last year.
Both in terms of the recap.
For $250 million, where we had an effective Cooper.
Coupon of about 60 basis points and then we did a 750 million 80 of deal where we had a coupon of 20 basis points now clearly the magnitude of what we would be looking at going forward for the transaction would be significantly higher but I think if we look at it from <unk>.
Angle of where we are I would view those as benchmarks.
And if you look at particularly the recap we should be very comfortably be able to do that.
Moving that.
Quantum that I, just referred to in terms of the deal size.
That helps a little bit okay.
Great. Thanks, Mike.
And our next question is going to come from the line of Rob The Aten Stein with Evercore ISI.
Great. Thank you very much.
Congratulations on a very strong performance in the most challenging times.
One of the things that I was wondering you mentioned.
That you were going to reduce 1200 roles.
To meet the changing needs of customers if I may.
You called that correctly can you talk about sort of the ongoing changes I mean are these changing needs given COVID-19 or changing needs as you see them developing in the post Covid world. So that'd be my first question and then the second question just if you can.
Talk to us a little bit about what you've learned about costa ready to drink and how thats been received in 2020. Thank you.
Thank you Robert.
Yes, the changes that we made are really focused on the future. So I mean, they obviously support our journey through COVID-19, but theyre very much anchored in a in our view of the post COVID-19 consumer and customer environment in Europe.
They're quite broad those roles.
Some of them come from our SKU rationalization of the efficiency that the that's driving some of them come from businesses that we're exiting so a number of water brands that we felt.
We're not going to contribute to our.
Shareholder value story going forward.
Obviously, we've been investing a lot of the technology since we created <unk> there was always.
Going to be the opportunity to become more efficient.
Productive through that so some of those changes become come on the back of our technology investments. So it's quite broad.
Sets us up very well for the future.
I'm clearly is on the back of decisions, we made for a Covid era.
I'm sure you hear a lot of Ceos, saying this book.
It has allowed us to accelerate some of the changes that we were going to do anyway, so very much.
Future future based.
On Costa.
We're seeing a ready to drink.
Portfolio in the UK do very well the brand is well known.
We're excited about rolling that out across Europe, I think Nick highlighted that in his comments.
We're going to do it on a holistic level with some of our other propositions around proud to serve.
And also the cost express machines, which are fantastic. So.
We are we're very excited about that it's a growing category and charity of the cost of Brian gives us a great platform to win in ready to drink outside of the U K. So.
That's how we're looking at Tulsa.
The echo what makes it so.
Some of the decisions. We made in 2020 were to continue to invest in our capital program for Costa as well.
What's share to get us ready, which share did you get for ready to drink in the UK.
And I think we're just over 4% net Roberts.
So just just over 44, 5% share.
So from a from a quick start so we're pleased with that as well.
Terrific. Thank you very much.
And just one last point to build I'm, sorry, just one last point to build on the comment around cost of then said in the Kelly we accelerate of that so the 150 that I talked about.
<unk> for 2021.
Elements of those savings as well as the mitigation continuing but then if we look forward because of those announced programs. If you look out for the next three of 22 to 24.
As a case of another 50 to 75, just based on the programs that are announced and the run rate so in the play.
<unk> strongly focused on our cost base.
Great. Thank you very much.
And our next question will come from the line of Simon the House with Citi.
Prudent expense.
Thank you for the question on the hard to fight the.
Nick maybe just following up on the must comment the around the one from 50 million.
The issue on a go ahead can I just sort of clarify the in the 150. This year that includes some of the ongoing savings you'll be getting particularly in Q1, given the tough backdrop.
We're certainly facing at the moment for you or are they set for us and on top of the 150.
Sorry, I didn't get to your questions in Q1 of 'twenty 'twenty, one 'twenty 'twenty, one, but I'll give you for the amounts due.
Yeah, I was just wondering about going out through the growth three separate buckets of liquid.
The 150 of savings of prototypes retention of loss.
Your savings, but as we've come into 2021 for you that the trading backdrop is still very challenged people still aren't traveling of the way. The we hope the ultrathin six for nine months ago is the 150 encompassing all of the Opex savings in sort of towards 'twenty. One all of US there's still some ongoing cost of litigation in the short term given the second wave of Lockdown.
On top of class.
Since the got it so I think if you look at the $1 60, what I've talked about clearly it is more weighted towards the first half of the year and keep in mind as we talked about earlier I think with Lauren's question.
Would we be able to move and invest faster than the business. We have planned for the company in light of investing clearly that's not coming out almost day. This $1 50 is our baseline savings and do the drive more.
So.
But that $1 50 is definitely more.
The one weighted than half two weighted.
I would say more Q1 weighted then within half one so that's that's the way I would look at it and then as I just said to Robert's question. This is obviously, what we have for.
2021, you would see some of the ongoing programs that we've announced deliver savings in 'twenty two to 24 as well in the $50 million to $75 million range. In addition to that 150 that would be in our base that the 19. So hopefully that helps yet that's for thank you of us much.
And our next question is going to come from the line of Charlie Higgs with Redburn.
Alright. Thanks.
Thanks for the question.
The the first one is just.
Kind of in the way of working maybe post pandemic.
People are working from acquiring more in areas of the sustained shift too.
Yeah, Sam of other things that you can see in retail to improve.
Rates from price mix of about essentially been ongoing for.
Mix headwind.
And then the second question is very very strong reduced the growth.
To maybe give you a bit more color of what that means for the business I mean is that.
Posted the margins maybe better for the working capital sort of any more color not for use with this.
Thank you Charlie.
Yes, I mean, we see price mix improving going forward, we have adapted quickly to some of the need the dynamics around working from home.
We've had exponential growth with with food Aggregators I mean, we were doing well with the pre crisis, because they were winning anyway.
So we had a good platform, but as their business is accelerating we've accelerated with them or we'd be changing pack formats.
With them as we see.
Transaction sizes growing.
Obviously people are having family meals from maybe names that they were celebrating out of the home at home. So that's working very well.
We're also.
Continuing to look at driving profitability, even faster than retail.
We changed a lot of our pack formats based on the first experience of Lockdown.
Where we saw obviously people shopping slightly less frequently.
Using more home delivery.
Obviously that points to being able to offer larger pack sizes or special packs in and outs, which we really enjoyed success in in the second half of last year. So we expect a lot of those trends will remain.
We're obviously.
Prepared for the eventuality of also restaurants bars and travel reopening when that happens clearly as people go back to the restaurants and bars, even if it's slightly less than previously that's kind of the of price mix.
Again for us and so we're excited about seeing that happening there's a lot of speculation about whether people will have plenty of blowouts in the eating out will become even bigger or not.
We are prepared for both of eventualities.
I'd say, even in the current restrictions, which we believe are getting closer to an end across Europe.
Our investments with food Aggregators.
Our platform for takeaway is really helping us our online business to your last point.
And they will clear the air on our online business was predominantly through our retailers. Therefore.
Is basically.
Something that doesn't drain our margins because we work with our retailers to their home delivery platforms of <unk>.
Again, the other served as well so we have got a small trial of direct to consumer in the U K.
And clearly that's something we're excited about.
But obviously very conscious of that is gonna be.
A good initiative for our margins as well going forward. So that's how we're looking at at the moment.
Okay.
And our next question is going to come from the line of <unk>, Ryan <unk> with J P. Morgan.
Good afternoon mixed from Daniel Thanks for.
For the questions just two for me please and the most of your in your portfolio.
Along from here.
Hunter Youre right the cost of expansion.
ROE life.
Dr. Chang you see there could you quantify in terms of your Opex and Capex for the next few years much of the Incrementals should we see strength, particularly in regards to the actual cut for rollout of the cost of expressed from the sheets.
Should these become sort of the means for line item on your cash flow statement that youre seeing with the cold drink equipment.
And then secondly, just referred to your sort of long term targets of double your energy business I'm wondering could you give some more color around how you see that the balls in terms of category growth market share opportunities for you to take specifically.
What you've done already in Spain, and Portugal.
And again do you see any risk the further growth within the energy portfolio in many ways Cannibalized.
The sparkling flavors on current orders, but just wondering sort of trend of credit Suisse.
Got it.
Thank you Vincent.
Maybe deal with the second part of your question and then they can come with them on capital and cost of <unk>.
So we've had them.
A great success story and energy, particularly led by months or over the last number of years and we've got Coke energy coming in so it's been the best performing category throughout 2020.
We've been able to enjoy the growth of the category at a little bit more.
Our absolute category share depending on the markets you look at.
It's still in the Twenty's, so when we look at that.
The opening of the business.
If you compare that share to what we enjoy in our other mainstream categories like Cola, our flavors, it's still well below what we enjoy so we believe we can participate in the market growth and take some share.
And I think we've demonstrated that as you called out of Spain, Portugal, where the great business across Europe.
The GB as being the strong market for a while so.
We're excited about that being.
The quality.
Both for us that doesn't impact the rest of our portfolio.
And I think the pipeline of innovation from both the Coke company of Monster in this space combined with what we've already done that gives us confidence in the opening of the business.
Really we're challenging ourselves.
To do it as quick as we can but in effect, what we've done over the last three or four years.
We still see a lot of headroom for growth of its profitable.
Got it.
It's a great category and I think we're well set up for for taking out more than for our share of it. So.
Yeah excited about the other Mick do you want to comment on the Capex.
Yes, so I mean, I think as Dan said, it's the great category.
Growing category and it's profitable category as we choose to play in it so.
We talked about the ready to drink, which clearly.
We will continue to bring back and do that and how the if the right time, so there'll be some investments there, but it's a good revenue per case and good margin product for us.
And then you've got the practice of of the cost of express that we continue to be excited about so in the numbers that I've indicated for you to you for 'twenty 'twenty one.
And as I indicated Lauren with the pool of Sp's. We've included in that obviously, our rollout of machines as we look at the priority markets really being Germany, and Belgium in Norway, as we're rolling out with Costa.
And what we would plan to do is winding out of five year plan with the cost of the team and.
The senior leadership team that came in the form two and at the appropriate time, we'll actually share with you a separate business view on cost including margins.
The capex investments et cetera, but for 2021 that's included in the number.
Recoveries Foster and we wanted to go faster on that again that will not be the limiting factor for us.
Great for sure.
I appreciate the color okay.
And our last question for this morning will come from the line of Sean King with UBS.
Alright, thanks for the question.
With the hearing a lot more and more about our sustainable packaging, which is coming out of cost you mentioned that your customers are getting behind these initiatives any evidence of consumers being willing to pay more for sale for sustainable packaging or is this just really the out of price to play in the industry. Thank you.
Yeah.
Thank you Sean good great question.
Currently.
We haven't seen.
The consumer preparing to pay more and I think thats a function of a number of factors.
Clearly our brands are.
Pretty well premium price already.
It is something that we havent factored into our modeling.
But obviously, it's something that we'd look to be able to extract more value on.
So certainly getting back to the comp on the made earlier we are working on.
A function of the willingness to pay is the understand the value and I think we have now built the platform that's going into 'twenty. One 'twenty two we can talk.
More directly to consumers about the benefits of sustainability the benefit of our packaging and how we're managing it.
And over time that could translate into certainly more brand love, we can see that.
And over time that may translate into more pricing power in the market.
So that's something we're excited about that we haven't factored that in so we clearly see that as being upside to our invest in the case.
It's logical I think the brands that are seen Jenny wants you to be more sustainable will be more valuable I think that's definitely true.
The ability to translate that into shelf pricing I think it's something we're going to keep exploring and testing it certainly giving us more engagement with our customers around the space in store aligning to their green agenda.
On partnering partnering with them around reducing carbon footprint. So the.
The win on the engagement side with the customers definitely increasing brand value grew.
Great opportunity as you as you raise to see if we can extract a higher price of the back of that.
More to come on debt.
Thank you very much.
Thank you I will now turn today's conference over to Damian Gammell for closing comments.
Okay.
So first of all of it again, a big thank you to everybody for joining us today.
As you will have heard we've had a very resilient performance.
We realize that certainly in Q1, we still face restrictions.
We're gaining dealing with that as we move forward, we are continuing to line of business right across innovation sustainability of.
Of our digital agenda, we're also delivering on costs, we've adjusted our cost base strategically.
To a new reality and there is more to come the strength of our free cash flow continues to be of standup and we're very very excited about 2021, both from a core innovation on some the news coming on our Coca Cola brand top of Chico Costa and of course amatil.
The direction is progressing and we look forward to moving forward in the process and sharing more with you as soon as we can so with that I'd like to thank you again and close our call and I hope everybody continues to stay safe and well. Thank you very much.
Thank you for participating in today's conference call for once again, we appreciate your participation and ask that you. Please disconnect.
Right.
[music].
Net.
[music].