Q3 2023 Coca-Cola Europacific Partners PLC Earnings Call

November 1, 2023

Damian Gammell: We raised guidance with our H1 results. Given our strong year-to-date performance, we are very pleased to be reaffirming our full-year guidance. We're also declaring our H2 dividend of EUR 1.17 per share. This level of dividend maintains an annualized payout ratio of approximately 50%, representing an absolute full-year dividend increase of almost 10% versus last year. This collectively demonstrates the strength of our business and our ability to continue to deliver shareholder value. For the remainder of this year, we expect the NARTD category to return to volume growth, and in October we have seen a return to solid volume growth across our markets. We are now focused on executing our exciting plans as we head towards Christmas, from the summer season in API to the winter season in Western Europe.

First half results.

Given our strong year to date performance, we are very pleased to be reaffirming our full year guidance.

We're also declaring a second half dividend of one euro <unk> 17 per share.

This level of dividend maintains an annualized payout ratio of approximately 50%.

Representing an absolute full year dividend increase of almost 10% versus last year.

Speaker 1: This collectively demonstrates the strength of our business and our ability to continue to deliver shareholder value.

This collectively demonstrates the strength of our business.

At our ability to continue to deliver shareholder value.

Speaker 1: For the remainder of this year, we expect the NA-RTD category to return to volume growth.

For the remainder of this year, we expect the any RTD category to return to volume growth.

Speaker 1: And in October , we have seen a return to solid volume growth to cluster markets.

And in October we have seen a return to solid volume growth across our markets.

Speaker 1: We're now focused on executing our exciting plans as we head towards Christmas.

We're now focused on executing our exciting plans as we head towards Christmas.

Speaker 1: from the summer season in API to the winter season in Western Europe .

From the summer season, and API to the winter season in Western Europe.

Damian Gammell: Looking now to next year, we remain confident in the resilience of our categories despite some of the ongoing macroeconomic and geopolitical volatility. While it's too early to provide detailed guidance, which we will be provided with our full-year results in February, we do expect our top-line growth algorithm next year to be more balanced between volume and price mix compared to this year. There is much to be excited about as we look forward to 2024. Following the Women's World Cup down under this year, we are excited about leveraging the Coca-Cola Company sponsorship of big sporting events next year in Europe, again in our markets, the Euro Football Championships in Germany, the America's Cup in Barcelona, and of course the Olympics in Paris, last held there 100 years ago. A great platform for all our brands, but especially Powerade.

Speaker 1: Looking now to next year, we remain confident in the resilience of our categories, despite some of the ongoing macroeconomic and geopolitical volatility.

Looking now to next year, we remain confident in the resilience of our categories. Despite some of the ongoing macroeconomic and geopolitical volatility.

Speaker 1: Quite, while it's too early to provide detailed guidance, which we will be provided with our full year results in February , we do expect our top line growth algorithm next year to be more balanced between volume and price makes compared to this.

While it's too early to provide detailed guidance, which we will be provided with our full year results in February.

We do expect our top line growth algorithm next year to be more balanced between volume and price mix compared to this year.

Speaker 1: And there is much to be excited about as we look forward to 2024.

And there is much to be excited about as we look forward to 2024.

Following the women's World Cup down under this year, we are excited about leveraging the Coca Cola company sponsorship of Big Sporting events next year in Europe.

Speaker 1: Following the women's world cup down under this year, we are excited about leveraging the Coca Cola company sponsorship of big sporting events next year in Europe . Again in our mark.

Again in our markets the Euro football Championships in Germany, The Americas Cup in Barcelona and of course the Olympics in Paris last held their 100 years ago.

Speaker 1: The Euro football championships in Germany, the Americas Cup in Barcelona, and of course the Olympics in Paris. Last held there 100 years ago. A great platform for all our brands, for the specially parades.

<unk> platform for all of our brands, but especially power rate.

Damian Gammell: From a cost perspective, we are now over 70% hedged for 2024 on our basket of commodities. We continue to work through our plans, though we are seeing significantly higher sugar pricing for next year, in part offset by lower pricing elsewhere. We are excited about what lies ahead. We have fantastic brands in the NARTD category, which we expect to continue to be robust into 2024. We have increasing exposure to the fast-growing ARTD category, and we are already excited about the Absolut Vodka & SPRITE coming to Europe early next year. As you know, we have geographic expansion underway with the proposed joint acquisition of Coca-Cola Beverages Philippines. As a reminder, this will create an even more diverse footprint, support Indonesia's transformation journey while underpinning our mid-term strategic objectives.

Speaker 1: From a cost perspective, we are now over 70% hedged for 2024 on our basket of commodities.

From a cost perspective, we are now over 70% hedged for 2024 on our basket of commodities.

We continue to work through our plans. So we are seeing significantly higher sugar pricing for next year in part offset by lower pricing elsewhere.

Speaker 1: We continue to work through our plans, so we are seeing significantly higher sugar pricing for next year in part offset by lower pricing elsewhere. We are excited.

We are excited about what lays ahead.

Speaker 1: We have fantastic brands in the NA RTD category, which we expect to continue to be robust into 2024. We have a increasing exposure to the fast growing ARTD category, and we are already excited about the absolute vodka and sprites coming to Europe early next year.

We have fantastic brands and any RTD category, which we expect to continue to be robust into 2024.

We have increasing exposure to the fast growing RTD category and we are already excited about the absolut vodka on sprite coming to Europe early next year.

Speaker 1: And as you know, we have geographic expansion underway with the proposed joint acquisition of Coca Cola beverages, Philippine.

And as you know we have geographic expansion underway with the proposed joint acquisition of Coca Cola beverages, Philippines.

Speaker 1: As a reminder, this will create an even more diverse footprint, support Indonesia's transformation journey, while underpinning our midterm strategic object.

As a reminder, this will create an even more diverse footprint support Indonesia is transformation journey.

Underpinning our midterm strategic objectives.

Damian Gammell: We have been working closely with the Coca-Cola Company and the Aboitiz as we continue on finalizing the agreements, and so we remain on track to close the transaction early next year. We look forward to sharing more in due course. To close, I would like to thank our customers, our brand partners, and again our great people whose hard work and commitment mean we are able to go further together for all our stakeholders. Again, thank you for your time. Nick and I would now be happy to take your questions.

We have been working closely with the Coca Cola company.

Speaker 1: We've been working closely with the Coca Cola company and the Boets as we continue on finalizing the agreements. And so we remain on track to close the transaction fairly next year. We look forward to sharing more in due course. To close, we want to do all of this more effectively due process.

Boyd's as we continue on finalizing the agreements and so we remain on track to closer transaction early next year.

We look forward to sharing more in due course.

To close I would like to thank our customers.

Speaker 1: our brand partners and again our great people whose hard work and commitment mean we were able to go further together for all our stakeholders.

Our brand partners and again, our great people, whose hard work and commitments.

I mean, we were able to go further together for all our stakeholders.

Speaker 1: Again, thank you for your time. Nick and I would now be happy to take your questions.

Again, thank you for your time, Nick and I would now be happy to take your questions.

Operator: Thank you. We will now begin the question-and-answer session. As a reminder, we kindly request only one question per analyst. If you would like to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the star 1 and 1 again. Once again, that's star 1 and 1 to ask a question. Please stand by while we compile the Q&A queue. This will only take a few moments. Thank you. We'll now take our first question, which is from the line of Edward Mundy from Jefferies. Please go ahead.

Thank you we will now begin the question and answer session. As a reminder, we kindly request only one question Pat.

Speaker 2: Thank you. We will now begin the question and answer session. As a reminder, we kindly request only one question per analyst. If you would like to ask a question, please press star one and one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star one one again. Once again, that star one and one to ask a question. Please stand by while we compile the Q&A queue. This will only take a few moments.

If you would like to ask a question. Please press star one and one on your telephone and wait for your name to be announced if you wish to cancel your request. Please press star 111.

Again star one and wanted to ask a question. Please.

Please standby, while we compile the Q&A queue. This will take a few moments.

Thank you.

We will now take our first question, which is from the line of Edward Mundy from Jefferies. Please go ahead.

Speaker 2: Well now take our first question, which is from a line of Edward Mundy from Jeffries. Please go ahead.

Edward Mundy: Afternoon, Damian. Afternoon, Nick. My question's really around I think you mentioned in the your opening comments that you're seeing Q4 volumes coming back into growth, but at the same time, you saw a little bit of a shift into own label, and that into discount channels. Is it really a major shift in the consumer environment, or is it just a sort of slightly sluggish environment? And as part of the same question, could you remind us about your toolkit today versus, say, five years ago as you lean into a potentially weaker consumer environment? You know, how do you think about your portfolio, your data analytics, and then also your relationship to your key customers?

Speaker 3: afternoon, Damon, afternoon, Nick. So my question's really around, I think you mentioned in the European comments that you're seeing four to quarter volumes coming back into growth.

Afternoon, gentlemen afternoon Nik.

So my question is really around I think you mentioned in the European comments that Youre seeing.

Fourth quarter volumes coming back into growth.

But at the same time, you saw a little bit of a shift its own label I'm not into the discount channel.

Speaker 3: But at the same time, you saw a little bit of a shift in its own label and that into discount channel. So is it really a major shift in the consumer environment or is it just sort of slightly sluggish environment? And that's part of the same question. Could you remind us about your toolkit today versus say five years ago, as you lean into a potentially we could consume environment? How do you think about your portfolio, your data and analytics, and then also your relationships, your key customers?

It really a major shift in the consumer environment or is it sort of slightly sluggish environment.

And Thats part of the same question could you remind us about your toolkit today versus say five years ago as you lean into a potentially we could consider enrolment and how do you think about your portfolio you will take out and then.

Analytics and then also your relationship with your key customers.

Damian Gammell: That was a good one, question, Ed. You managed to fit in quite a few.

That was good that was a good one question Ed.

Speaker 1: That was a good one question, Ed. He managed to figure it out quite a few. Right by that.

<unk> sufficient quite a few.

Edward Mundy: Tried my best.

Damian Gammell: Yeah, maybe just back to volumes. Yeah, as I called out, I mean, we have seen volumes recover as we come out of the summer. I think if you look, it's really a northern European dynamic, and it was really in July and August, where we saw softer volumes predominantly on the back of really poor weather and also in the context of that 12% comp from last year. I think you gotta look at it in and around. We did see volumes recover in September, and we're seeing volumes recover again in October. From that perspective, that gives us confidence on our volume outlook for the rest of the year and our guidance. Turning to retailer brands, you know, we've continued to gain share.

Speaker 1: Yeah, so maybe just back to volume. So, yeah, so as I call that, I mean, we have some volumes recovered as we come out of the summer. And I think if you look, it's really an order in European dynamic and it's really was really in July and August .

Yeah.

So maybe just.

Back to volumes so.

Yes, so as I called out I mean, we have seen volumes recover as we come out of the summer and I think if you look at is really a northern European dynamic and it's really was really in July and August.

Speaker 1: where we saw softer volumes predominantly on the back of really poor weather and also in the context of that 12% comp from last year. So I think you've got to look at it in the round. We did see volumes recovered in September and we're seeing volumes recover again in October . So from that perspective that gives us confidence on our volume outlook for the rest of the year and our guidance.

Where we saw softer volumes.

With me on the back of really poor weather and also in the context of that 12% comp.

From last year, So I think you've got to look at it in the round, we did see volumes recover in September.

We're seeing volumes recover again in October so.

From that perspective that gives us confidence on our volume outlook for the rest of the year on our guidance.

Speaker 1: Turning to retailer brands, you know, we've continued to gain share. So we do see retailer brands growing, but we're also growing and growing faster in terms of gaining share and value and volume. And so, you know, again, nothing surprising relative to some of the consumer pressures that we've seen in terms of.

Turning to retailer brands, we've continued to gain share. So we do see retailer brands growing but we're also growing in.

Damian Gammell: We do see retailer brands growing, but we're also growing, and growing faster in terms of gaining share, value, and volume. You know, again, nothing surprising relative to some of the consumer pressures that we've seen in terms of cost of living and inflation. We did, on the back of some of the tools that you called out, benefit from having a much broader pack offering in retail than we would have had five years ago, a much better understanding of where the consumers and shoppers who are feeling that pressure live and shop, so we could really make sure we could offer the right pack price architecture. That's been a pretty consistent theme since really the middle of last year. I think that's allowed us to grow our household penetration, which we've done in Europe. It's allowed us to grow share.

And growing faster in terms of gaining share in value and volume.

So again, nothing surprising relative to some of the consumer pressures that we've seen in terms of cost of living and inflation.

Speaker 1: cost of living and inflation. We did, on the back of some of the tools that you called out, benefit from having a much broader pack offering in retail than we would have had five years ago.

We did on the back of some of the tools that you've called out.

Benefit from having a much broader offering in retail than we would've had five years ago.

Speaker 1: A much better understanding of where the consumers and shoppers who are feeling that pressure live and shop so we could really make sure we could offer the right pack price architecture.

Much better understanding of where the consumers and shoppers who are feeling that pressure live and shop. So we could really make sure we could offer the right pack price architecture.

Speaker 1: And that's been a pretty consistent theme since really the middle of last year. And I think that's allowed us to grow our health full penetration, which we've done in Europe . And it's allowed us to grow share. So as we've talked about previously, we have really been mindful of reflecting the pressures on some of our consumers.

And that's been a pretty consistent theme since really the middle of last year.

And I think that's allowed us to grow our household penetration, which we've done in Europe.

And it's allowed us to grow share so as.

Damian Gammell: You know, as we've talked about previously, we have really been mindful of, you know, reflecting the pressures on some of our consumers through our pricing and promotional calendar, and that's held up well. You know, despite that bad weather, we did gain share. The category's growing, so we're very pleased with that. I do think, you know, through our investment in technology, which has been a multi-year journey, it has given us access to those insights, and that data analytics to allow us to continue to tailor our promo pricing and strategy smarter. As I mentioned, you know, just to come back, I think, you know, we have seen a different volume dynamic in Europe in October and September. You know, that's obviously something we're pleased to see.

As we've talked about previously we have really been mindful of.

Reflecting the pressures on some of our consumers.

Speaker 1: through our pricing and promotional calendar, and that's held up well. So despite that bad weather, we did gain share. The category's growing, so we're very pleased.

Through our pricing and promotional calendar and Thats held up well so despite that bad weather, we did gain share the category is growing so we're very pleased with that.

Speaker 1: And I do think through our investment in technology, which has been a multi-year journey.

And I do think through our investments in technology, which has been a multi year journey. It has given us access to those insights.

Speaker 1: It has given us access to those insights and that data analytics to allow us to continue to tailor our promo pricing and strategy smarter.

That data analytics to allow us to continue to tailor, our promo pricing and strategy smarter.

Speaker 1: And as I mentioned, just to come back, I think we have seen a different volume dynamic in Europe in October and September . So that's obviously something we're pleased to see.

And as I mentioned just to come back I think.

We have seen a different volume dynamic in Europe in October and September. So that's obviously something we're pleased to see.

Edward Mundy: Great. Thanks, Damian.

Great. Thanks, David.

Operator: Thank you. We'll now move to our next question. This is from the line of Lauren Lieberman from Barclays. Please go ahead.

Thank you.

Speaker 2: Thank you. Well now move to our next question.

We will now move to our next question.

This is from the line of Lauren Lieberman from Barclays. Please go ahead.

Speaker 2: from the line of Lauren Lieberman from Barclays. Please go ahead.

Lauren Lieberman: Great. Thanks. After Ed asked all the questions, I'm not sure what I was supposed to do. Sorry. One thing that I noticed in the release today was actually some of the constructive commentary and results on non-CSD parts of the portfolio. The strong growth you called out, Fuze, Monster, even the Jack and Coke kickoff in GB. Just curious, maybe in a slightly tougher consumer environment, if you can talk about the role or the allocation of resources towards some of the non-CSD categories, if retailers express more or less interest in these 'cause they tend to be higher price point, but just any thought about that kind of resource allocation and attention paid across different segments of the portfolio outside of CSDs. Thanks.

Great. Thanks, Hey, after Ed asked all the questions I'm not sure why.

[laughter].

Sorry, one thing that I noticed in the release today was actually some of the constructive commentary and results.

Our non CSD parts of the portfolio. So the strong growth you called out fuse you've called out.

Monster.

Even the Jack and Coke kick.

Kickoff in GB So just curious maybe.

In a slightly tougher consumer environment. If you can talk about the role or the allocation of resources towards some of the non CSD categories.

If retailers express more or less interested in these because they tend to be higher price point, but just any thought about that kind of.

Resource allocation and attention paid across different segments of the portfolio outside of Cst's. Thanks.

Damian Gammell: Thanks, Lauren. I think I mean, I think that when we speak to our retailers, particularly, you know, in all our markets really, I think the energy behind the Sparkling category has remained consistent, and, you know, the level of value creation that Sparkling is delivering for us and for our retailers, you know, continues to be really impressive. We've seen that return to Australia, on the back of some of the changes we've made since the acquisition. In New Zealand, it's obviously a very healthy Sparkling and NARTD business. There is obviously, from a resource allocation perspective, you know, with our partners, whether it's the Coke company on Fuze, whether it's with Monster on their portfolio, you know, we have an ambition to grow our portfolio and to diversify, and our resource allocation reflects that.

Thanks Lauren.

I think I mean, I think when we speak to our retailers.

Particularly.

Well in all our markets really I think the energy behind the sparkling category.

Has it remained consistent.

The level of value creation that sparkling is delivering for us and for our retailers.

Speaker 1: You know, continues to be really impressive. And we've seen that return to Australia on the back of some of the changes we've made since the acquisition in New Zealand, obviously a very healthy sparking and an NEO-TD business. And there is obviously from a resource allocation perspective, you know, with our partners, whether it's the co-company on FUSE, whether it's with monster on their portfolio.

Continues to be really impressive and we've seen that return to Australia on.

On the back of some of the changes we've made since the acquisition and.

In New Zealand, obviously, a very healthy sparkling.

<unk> RTD business.

There is obviously from a resource allocation perspective, with our partners, whether it's the Coke company owned fuse, whether it's with monster on their portfolio.

Speaker 1: We have an ambition to grow our portfolio and to diversify and a resource allocation reflects that.

We have an ambition to grow our portfolio and to diversify and our resource allocation reflects that so.

Damian Gammell: We've been investing heavily behind energy now for a couple of years. That's continued into 2023. The innovation pipeline is fantastic. We've had really good early results on Jack and Coke, particularly in GB, so that's a new category. That's a good margin structure for us and our retailers, so there's a lot of interest in our ARTD. We've announced Absolut & Sprite as a potential coming as well. Clearly, we've been more choiceful in stills and really, I suppose, we've exited a number of categories, whether that was dairy, more previously, and focused on Fuze, particularly in Western Europe, where we see, you know, the margin structure of the tea category and our ability to be a relevant player in it stronger. We'll continue to innovate on tea.

We've been investing heavily behind energy now for a couple of years.

Continued into into 2023, the innovation pipeline is fantastic.

We've had really good early results on Jack and Coke, particularly in GB. So that's a new category that is a good margin structure for us and our retailers. So theres a lot of interest in our RTD, we've announced absolute sprite as a potential coming as well.

And clearly we've been more choice full instills in really I suppose we've exited a number of categories whether that was dairy.

Previously and focused on fuse, particularly in Western Europe, where we see the <unk>.

Margin structure of the tea category and our ability to be a relevant player in its stronger.

And so we'll continue to innovate on tea.

Damian Gammell: When you look kind of beyond 2023, I think our resource allocation will continue to invest in our Sparkling portfolio, particularly the sugar-free, continue to drive the energy category with Monster, take more share in the tea category in Europe with Fuze, and then, you know, selectively roll out our ARTD portfolio across Europe. Clearly, we're looking at, you know, Australia and New Zealand as well. I suppose those four pillars, you know, give us a lot of confidence against that mid-term growth algorithm that we've called out. And that's really how we're allocating resources, Lauren.

So when you look kind of beyond 2023, I think our resource allocation will be continue to.

Invest in our sparkling portfolio particular to sugar free.

<unk> continued to drive the energy category with Monster.

Take more share in the tea category in Europe with fuze and.

Then selectively rollout I RTD portfolio.

Across Europe.

Clearly, we're looking at Australia, and New Zealand as well so it's both of those four pillars.

Give us a lot of confidence against up mid term growth algorithm that we've called out so and that's really how we're allocating resource Florida.

Nick Jhangiani: I would just add one more, which is advanced hydration. You know, you've seen Aquarius in Spain, Lauren, that continues to perform very well and POWERADE out in Australia and New Zealand and bringing back a lot of those learnings into Europe as well, which should be great.

And I would just add one more which is.

Advanced hydration, you've seen Aquarius in Spain.

Lauren that continues to perform very well and Powerade out in Australia, and New Zealand and bringing back a lot of those learnings.

Into Europe, as well, which should be great.

Operator: Thank you. We'll now move on to the next question. This is from the line of Bryan Spillane from Bank of America. Please go ahead.

Thank you.

We'll now move on to the next question.

This is from the line of Bryan Spillane from Bank of America. Please go ahead.

Bryan Spillane: Hey, thanks, operator. Good morning, everyone. I wanted to pick up in the press release. You described transactions growing, you know, faster than volume in both segments. Can you just give us a little bit more color on that? Is that a function of mix, meaning, you know, channel mix, or is it a function of consumers maybe, you know, opting for small packs versus larger packs because they're economizing? I guess how we think about that dynamic as we look into 2024. Like, should we be expecting, you know, that there's kind of more of a shift to smaller pack sizes?

Okay. Thanks, operator, good morning, everyone.

I wanted to pick up in the in the press release.

You described transactions growing faster than volume in both segments.

Can you just give us a little bit more color on that is that.

A function of mix, meaning channel mix or.

Is it a function of consumers, maybe opting for small packs versus larger packs because they are economizing.

That we think about that dynamic as we as we look into 'twenty four like would we should we still should we be expecting that.

There's kind of more of a shift to smaller pack sizes.

Okay.

Damian Gammell: Thanks, Brian. I think there's a number of dynamics at play. Clearly, our single-serve business remains very healthy, both in retail and away from home. That clearly drives transactions at a good price for us and our retailers, so that continued. You know, what's interesting, despite some of the consumer challenges, there's still a large cohort of consumers across all of our markets who value premiumization. We've continued to see our smaller packs in retail at a higher price per liter perform well, whether that's our mini cans or multi-pack cans. That's also driving transactions ahead of volume. In large PET, we are seeing our affordability packs, 1 liter and 1.25 liter, doing really well, particularly in the discount channel. Again, that's supporting that transactions ahead of volume dynamic.

Thanks, Brian.

So I think theres, a theres a number of dynamics at play so clearly our single serve business remains very healthy both in retail and away from home so that clearly drives transactions.

At a good price for us and our retailers so that continued.

Whats interesting despite some of the consumer challenges there is still a large cohort of consumers across all of our markets who value premium utilization. So we've continued to see our smaller packs in retail at a higher price per liter perform well, whether that's our mini cans.

Our multi pack cans. So that's also driving transactions ahead of volume.

And in large <unk>, we are seeing our affordability packs one liter of one to five years are doing really well, particularly in the discount channel.

And again, that's supporting that transactions ahead of.

Volume dynamic as we look into next year.

Damian Gammell: As we look into next year, we called out, would see a more balanced mix between volume and price mix. I think, you know, that's really how you should look at it for 2024. You know, it's a combination of doing better with consumers who are under a bit of price pressure on single bottles and smaller packs in retail but not losing that premiumization opportunity 'cause that still exists, and also a very robust away-from-home business where we drive a lot of single-serve. All of that's leading to that transaction growth.

As we call that would see a more balanced mix between volume and price mix.

And I think that's really how you should look at it for 2024 so.

It's a combination of doing better with consumers, who are under a bit of price pressure on single bottles and smaller packs in retail, but not losing that premium amortization opportunity because that still exists.

And also a very robust away from home business, where we drive a lot of single serve so all of that's leading to that transaction growth.

Operator: Thank you. We'll now move to the next question. This is from the line of Mitch Collett from Deutsche Bank. Please go ahead.

Thank you.

Well now move to the next question.

Okay.

This is from the line of Mitch collect from Deutsche Bank. Please go ahead.

Mitch Collett: Thanks. Good afternoon, Damian, Nick, and Sarah. My question is on COGS. You said that you're 70% hedged for 2024. I think at the H1 stage, you said that the element of COGS where you were a bit less hedged was sugar. You also said in your prepared remarks that sugar is one of the inputs that has gone up. Can you give us at this stage, you know, your best estimation of the COGS headwind or tailwind for 2024? I think you said at H1 that you thought it would be slightly up and therefore slight headwind. Thank you.

Thanks, Good afternoon, Damian Nik Sarah.

My question is on Cogs He said.

But you are 70% hedged for 2024, I think of the one eight states you said that the element of Cogs by you were a bit less hedged was sugar and you also said in your prepared remarks that sugar is one of the inputs that has gone up so can you give us at this stage your best estimation of the.

Coke's headwind or tailwind for 'twenty four I think you said at <unk> that you thought it would be slightly up and therefore, a slight headwind. Thank you.

Nick Jhangiani: Yeah. I mean, I think from an angle of the overall hedge coverage at 70% that Damian talked about in the prepared remarks, that's across both Europe and API. When you look at sugar in particular, I would say it's slightly over that number, so probably around 75% coverage. Obviously, that coverage, though, will still be a headwind versus where we were for 2023 and 2022, and that's probably offsetting the gains on the other areas that we would see. Again, we will, you know, as the year progresses, continue to finalize that and give you all some more color. Just again, as a reminder, COGS, commodities is about 30% of our total COGS. The other elements are really back to concentrate, which will be in line with our revenue growth.

Yes, so I mean, I think from an angle of the overall hedge coverage at.

70% that Damian talked about in the prepared remarks.

Thats across both Europe, and API and when you look at sugar in particular, I would say, it's slightly over that number to probably around 75% coverage, obviously that coverage, though will still be a headwind versus where we were for 'twenty, three and 'twenty two and that.

Probably offsetting the gains on the other areas that we would see so again we will.

As the year progresses continued to finalize that and give you some more color.

But just again as a reminder, cogs.

Commodities was about 30% of our total Cogs. The other elements are really back to concentrate which will be in line with.

Nick Jhangiani: As Damian talked about, you know, you would expect to see a more balanced return on volume and rate mix, versus what you've seen in the last few years. You know, on manufacturing costs, while we continue to see salary inflation, clearly, our strong focus has been around our Accelerate Competitiveness program. We've laid out some new targets. Clearly, a lot of that will be offset by those benefits coming forward. Again, probably a headwind, but we'll give you some more color on that as we close out the year.

Revenue growth and as Daniel talked about you would expect to see a more balanced return on volume and.

Right mix.

Versus what <unk> seen in the last few years and then on manufacturing costs, while we continue to see salary inflation.

Clearly our strong focus has been around.

Accelerate competitiveness program, we've laid out some new targets.

Clearly a lot of that.

Will be offset by those benefits coming forward.

So again, probably a headwind, but we will give you some more color on that as we.

<unk> closed out the year.

Mitch Collett: Got it. Thank you.

Got it thank you.

Operator: Thank you. We'll now take our next question. This is from Bonnie Herzog from Goldman Sachs. Please go ahead.

Thank you, we'll now take our next question.

And this is from Bonnie Herzog from Goldman Sachs. Please go ahead.

Lauren Lieberman: All right. Thank you. Good morning. I had a quick follow-up on Bryan's question. Could you clarify if transactions were positive in the quarter and if they accelerated versus Q2? On pricing, you recently implemented, you know, additional price in Germany and the Netherlands. Could you touch on how that's been received, you know, any pushback from consumers? Thanks.

Alright, Thank you and good morning.

I have a quick follow up on Brian's question could you clarify if transactions were positive in the quarter, and then say accelerated versus Q2.

And then on pricing you recently implemented additional pipe, Germany, and the Netherlands. So could you touch on how that's been received any pushback.

Salary.

Nick Jhangiani: On that clarification, depending on the market, so if you look at volumes being down 4%, what we're saying is that transactions was lower than that, as in a decline. The transactions outpaced volume growth. To your question around was it in positive territory in some markets, like in Iberia and in Germany, calling out two of those, they were positive, in terms of our transaction growth even though volumes were down. Obviously, that's a mixed across our markets depending on the mix of packs, etc., you know, because you are seeing where you would see a lot more of that volume growth, in large PET, as Damian referenced to. There might be single packs as opposed to multi-packs based on, again, what people are putting into their basket but maybe coming back more frequently, right? That's the clarification on that.

So on that clarification, depending on the market. So if you look at volumes being down for what we're saying is our transactions was lower than that.

And then a decline so the transactions outpaced volume growth and to your question around was it in positive territory in some markets like in Iberia, and the Germany, calling out two of those they were positive.

In terms of our transaction growth, even though volumes were down.

But obviously that's the mix.

Mixed across our markets, depending on the mix of packs et cetera.

Because you are seeing where you would see a lot more of that volume growth.

In large PETN Damian reference to there might be single pack as opposed to multi packs based on again, what people are putting into that basket, but maybe coming back more frequently right. So.

But thats the clarification on that.

Mitch Collett: I'm sorry, Bonnie. A question on pricing. Sorry, could you repeat that for me, please?

I'm sorry, Bonnie a question on pricing sorry could you repeat that for me. Please.

Lauren Lieberman: Yeah. Sure. Just asking about, you know, the additional pricing you put in Germany and the Netherlands recently. Just hoping to hear a little bit of color on how it's, you know, been received, any pushback from consumers, and quite frankly, thinking about ability to put through rate next year. Thanks.

Sure Hey, just asking about the additional pricing you put in Germany, and the Netherlands recently, so just hoping to hear a little color on how it then.

And then we see any pushback from consumers and quite frankly thinking about ability to put through rate next year.

Mitch Collett: Yeah. We've been pretty pleased with our overall pricing in 2023 and it set us up well for 2024. Like anything, I suppose there's one or two customers that we're still closing out some of those conversations with, particularly in the Netherlands, but across all of our other markets, including Germany, we're well in line for a you know a strong finish of the year in Q4. Clearly, a lot of what we've done in 2023 brings a benefit into 2024, particularly the later year pricing, so we'll get the full year benefit next year. Yeah. Again, we're pretty confident that you know we'll be able to take price again in 2024. That's some of the work we're doing at the moment.

Yes, so where we.

We've been pretty pleased with.

Our overall pricing in 2023 and set us up well for 2024.

Got anything I, suppose theres, one or two customers that were still closing out some of those conversations with particularly in the Netherlands, but across all of our other markets, including Germany, where.

In line for a strong finish to the year in Q4, clearly a lot of what we've done in 2023 brings a benefit into 'twenty for particularly the later year pricing. So we'll get the full year benefit next year.

And again, we're pretty confident that we will be able to take price again in 2024, and that's some of the work we're doing at the moment and let's suppose reflecting I think that overall balance of.

Mitch Collett: I suppose reflecting, I think, that overall balance of, you know, generating value for our customers, but also making sure that we continue to be relevant for some of our consumers and shoppers that are probably more value-focused, just giving some of the macros. That's really Western Europe. You know, I think Australia, New Zealand, you know, continues to be very robust as we head into summer. Again, in Indonesia, you know, we've seen our business, you know, starting to turn a little bit, so we're pleased with that as well. Yeah, overall, we're in good shape on pricing as we head into the end of the year.

Generating value for our customers.

But also making sure that we continue to be relevant for some of our consumers and shoppers that are.

Probably more value focused just giving some of the macros, so thats really western Europe.

I think Australia New Zealand.

To be very robust.

As we head into summer and <unk>.

And in Indonesia, we've seen our our business starting to turn a little bit. So we're pleased with that as well. So overall, we're in good shape on pricing as we head into the end of the year and just to break it out by market for U. Upon as Damian said, we took pricing in GB in June and then <unk>.

Nick Jhangiani: Just to break it out by market for you, Bonnie, I mean, as Damian said, we took pricing in GB in June, and then you've got Germany and Netherlands that's come through in September, October. As Damian said, that really positions us well 'cause you get that full year of benefit. The two main markets in which you'll see pricing that Damian referred to is Iberia and France in Q1. Again, just to remind you, I think you're gonna see a much more balanced type of approach, relative to pricing, from what we've had in the past years, which is positive as well in terms of managing both our customers but also from an angle of consumer and shopper dynamics.

Germany, and Netherlands that come through in September October so as Damian said that really positions us well because you get that full year benefit. So the two main markets in which you will see pricing that Damian referred to is Iberia and France in the first quarter.

And again just to remind you I think youre going to see a much more balanced.

Of approach.

Relative to pricing.

From what we've had in the past years, so which is positive as well in terms of managing both our customers, but also from an angle of consumer and shopper dynamics.

Lauren Lieberman: Okay. Makes sense. Thank you so much.

Okay makes sense. Thank you so much.

Operator: Thank you. We'll now take our next question. This is from Eric Serotta from Morgan Stanley. Please go ahead.

Thank you we will now take our next question.

This is from Eric <unk> from Morgan Stanley. Please go ahead.

Eric Serotta: Hi. Good afternoon, everyone. Damian, hoping to get some color from you in terms of the promotional lift or the consumer response in areas where you have had to or chosen to increase your promotions a little bit. Obviously, your promotional toolkit is a lot sharper and more honed than it's been in the past. How have consumers responded versus your expectations and versus sort of the history? Separately but somewhat related, in reaction, you did call out some consumer shift to store brands in some categories. What have you seen in terms of retailers changing shelf space in response to or in anticipation of that?

Hi, good afternoon, everyone. So damian hoping to get some color from you in terms of.

Promotional list or the consumer response and areas, where you have had two or chosen to increase your op promotions a little bit obviously your promotional toolkit is a lot.

A lot sharper and more homes than it's been in the past.

Tumors, who responded.

Versus your expectations and versus sort of the history and then.

Separately, but somewhat related.

In.

You did call out some consumer shift to.

Store brands in some categories.

What are you seeing in terms of retailer is changing shelf space.

And our response to or are in.

The anticipation of that.

Damian Gammell: Thanks, Eric. I suppose on a fairly top-line level, I think the metrics that we're pleased with is we've gained value share. That promo strategy is leading to a higher share of value in most of our markets. We've gained volume share ahead of value. You know, I certainly think in a high-pricing inflation environment, you've gotta look at your volume because I think that's a stronger reflection of your consumer franchise. Clearly, we wanna retain our shoppers and our consumers. I think we called out that our household penetration has also gone up. I think they're the two metrics that give me confidence that more advanced promotional analysis tools and mechanics are really landing well with our consumers and also with our retailers.

Thanks, Eric.

So I suppose on a fairly topline level I think the metrics that we're pleased with as we've gained value share.

So that promo strategy is leading to a higher share of value when most of our markets and we've gained volume share ahead of value. So.

Certainly think in a high pricing inflation environment, you've got to look at your volume because I think thats a stronger reflection of your consumer franchise.

And clearly we want to retain our shoppers on our consumers and I think we called out that our household penetration has also gone up so I think they're the two metrics that give me confidence that the.

More advanced promotional.

Analysis tools and mechanics are really landing well with our consumers and also with our retailers.

Damian Gammell: I think getting to your second comment, I think that's, you know, continuing to support us maintaining our shelf share or growing it across our retail footprint. You know, we have seen retailers across many categories allocate some more space. We haven't seen that in beverages. We have seen more focus on leaflets. Clearly, some of our retailers are promoting that as part of a basket of retailer brands, which is normal when you get into times of purchasing pressure with shoppers. We haven't seen that impact our space. In fact, we're growing our space on floor through more displays, more ready-to-sell displays. We've got more listings, particularly in the discounter channel. We're very conscious of that because we think protecting our space and growing it is critical.

And I think getting to your second comment I think that's continuing to support us maintaining our shelf share are growing it across our retail footprint. So we have seen retailers across many categories.

Allocate some more space, we haven't seen that in beverages, we have seen.

More focus on leaflets clearly some of our retailers are promoting that as part of a basket of retailer brands.

Which is normal when you get into times of purchasing.

Purchasing pressure with shoppers, but.

But we haven't seen that impact aerospace in fact, we're growing our space on floor through more displays more ready to sell displays.

We've got more listings, particularly the discounter channel.

So we're very conscious of that because we think protecting our space and growing it is critical.

Damian Gammell: I think as long as we're gaining value and volume share and generating more profit for our retailers, it's also in their interest to protect, you know, our brand portfolio because clearly, it generates significant value. We keep a close eye on it. It hasn't changed dramatically in the last six months. I mean, this is something we've talked about coming out of 2022. We were conscious of it. I think we've talked about it on every call. We've continued to gain value and volume share. Retailer brands have gained as well, but clearly not at our expense. I think that's the most important thing for us. Thanks, Eric.

And I think as long as we're gaining value and volume share and generating more profit for our retailers. It's also in their interest to protect.

Our brand portfolio, because clearly generate significant value. So we keep a close eye on it.

Hasnt changed dramatically in the last six months I mean, that's something we've talked about coming out of 2022, we're conscious of it I think we've talked about on every call.

And we've continued to gain value and volume share and retailer brands have gained as well, but clearly none of their expense. So I think that's the most important thing for us. Thanks.

Thanks, Eric.

Yeah.

Operator: Thank you. We'll now take our next question. This is from Charlie Higgs from Redburn Atlantic. Please go ahead.

Thank you, we'll now take our next question.

Yes.

This is from Charlie Higgs from Redburn Atlantic. Please go ahead.

Charlie Higgs: Hey, Damian and Nick. Hope you both well. I've got a question on Australia, please. I was just wondering if you could provide maybe a little bit more color on the Q3 performance. I know you said volumes are up 2.5% year to date, which implies a pretty strong performance despite trimming the water brands and a pretty tough comp last year. Just any color on Coca-Cola No Sugar, you know, how the sparkling flavors are performing after they've been repositioned, and then maybe just how you think about Q4 with that upcoming deposit return scheme in Victoria coming in. Thank you.

Hey, Damian cope you're both well.

Question on the Australia. Please I was just wondering if you could provide maybe a little bit more color on the Q3 performance. I know you said volumes were up two 5% year to date, which implies pretty strong performance. Despite trimming the water brands at a pretty tough comp last year. So just any color on coconuts sugar sparkling.

Sparkling flavors are performing off they've been repositioned.

And then maybe just how you think about Q4 with the upcoming deposit return scheme in inventory come again. Thank you.

Damian Gammell: Thanks, Charlie. Maybe just to the second part. I think we're well, along with the rest of the industry, well set for really the last big state in Australia to move on to the container deposit system. Plenty of experience there now. I don't expect that to have any significant impact in Q4. Actually, once we're through it then, I think we're, you know, really well laid out in Australia. Nothing to call out on the scheme. Generally, in our Australian business, I'm really happy, I have to say. I think the changes we made on our flavor portfolio, with the company on the back of the acquisition has really worked. We're gaining share in flavors. Both, you know, our Kirks Fanta brands are doing well. That's helping us.

Thanks, Charlie So maybe just to the second part so I think we're well along with the rest of the industry well set for the really the last big statement, Australia to move on to the container deposit system. So plenty.

Plenty of experienced there now so I don't expect that.

And a significant impact in Q4.

Once we're through it then I think we are.

Really well laid out in Australia, so nothing to call out on the scheme January in our Australian business.

I'm really happy I have to say I think the changes we've made on our flavor portfolio.

With the company on the back of the acquisition.

Really work, we're gaining share in flavors, both our kirk's front the brands are doing well, so that's helping us.

Damian Gammell: Predominantly in Australia, what you're seeing on the kind of top numbers is based on the learnings out of Europe, you know. We have taken the decision to exit some very low-value water packaging, brands, and bulk water. When you strip those out, our volume growth looks really healthy in Australia, and our share performance. Yeah, overall, well set coming into the summer as we head into Q4. Coke Zero continues to do really well. I think, you know, we're looking forward to a great summer both in Australia and New Zealand. Yeah. On the CDS, Charlie, I think it's the last big one. We'll be through it, and then we'll have a more normalized environment as we head into 2024.

Imminently in Australia, what Youre seeing.

On the top numbers is.

Based on the learnings out of Europe, we have taken a decision to exit some very very low value water packaging and brands and bulk water.

So when you strip those out.

Our volume growth looks really healthy in Australia, and our share performance. So, yes, overall, well set coming into the summer.

As we head into Q4.

Coke zero continues to do really well.

And I think we're looking forward to a great similar both in Australia, and New Zealand. So yeah on the Cds, Charlie I think it's it's the last big one so we'll be through it and then we'd have a more normalized environment as we head into 'twenty four.

Charlie Higgs: Great. Thank you.

Great. Thank you.

Operator: Thank you. We'll now take our next question. This is from the line of Simon Hales from Citi. Please go ahead.

Yeah.

Thank you, we'll now take our next question.

This is from the line of Simon Hales from Citi. Please go ahead.

Simon Hales: Oh, thank you, Hial. I wonder if I could just ask you a little bit more about Indonesia, again, Damian. I mean, clearly, we know the Q3 volumes were weak given the SKU rationalization. I mean, could you just talk a little bit more about some of the underlying trends there you're seeing at the consumer end? A number of companies have been flagging some weakness in the consumer in Southeast Asia, maybe less so in Indonesia. I'd just be curious on what you're seeing there and how you think about the outlook from a consumer offtake standpoint. Just to clarify in relation to that, you mentioned that you are gonna be re-engineering the cost base in Indonesia starting in Q4. Does that mean a cost reduction or incremental costs going in or just a reallocation of existing costs?

Thank you Hum.

I Wonder if could just ask you a little bit more about Indonesia again, Damien I mean, clearly we know the Q3 volumes were weak given the SKU rationalization, but could you just talk a little bit more about some of the underlying trends that you're seeing at the consumer end.

A number of companies would be flagging some weakness in the consumer in southeast Asia, maybe necessarily easier, but I'd just be curious.

On what Youre seeing there and how you think about the outlook from a consumer uptake standpoint.

Just to clarify and related to that you mentioned that you all can we reengineer the cost space in Indonesia, starting in Q4.

Does that mean, a cost reduction or incremental costs going into just a reallocation of existing costs.

Damian Gammell: I definitely hope it means a cost reduction, Simon.

Definitely help it means a cost reduction Simon.

Simon Hales: Where do I?

Damian Gammell: We're probably slightly ahead of our expectations. We had a restructuring initiative in Q3 in Indonesia where effectively we downsized the organization. That was something that we were working towards. I think we've laid out a transformational plan in Indonesia that started with our brands portfolio first. That was critical because as we've talked previously we were trying to do too many things across too many categories. That led to SKU rationalization. About 70% of our volume reduction in Indonesia has been on the back of that. The remainder touches on what you've called out, which is a bit of a weaker macro environment for the consumer. That's really challenged, you know, the affordability. That's really on the back of, you know, fuel, rice, and just general cost of living. We have seen that improve slightly.

Where do I wait.

Yes, so we've actually we're probably slightly ahead of our <unk>.

Expectation, so we had a.

A restructuring initiative in Q3 in Indonesia, where.

Effectively we've downsized the organization.

It was something that we were <unk>.

Working towards I think we've laid out a transformational plan in Indonesia that started with our brands portfolio first.

And that was critical because as we've talked previously we were trying to do too many things.

Across too many categories.

Led to SKU rationalization, so about 70% of our volume reduction in Indonesia has been on the back of that so the remainder touches on what you've called out which is a bit of a weaker macro environment for the consumer.

And that's really challenged the affordability.

And that's really on the back of few rice, just general cost of living.

We have seen us improve slightly so I would say coming out of September and.

Damian Gammell: I would say coming out of September into October and as we look at the rest of the year, it is improving. That's good news. Clearly, affordability will remain a key pillar of our strategy in Indonesia. One of the things that we're finalizing and ready to move on is a different pack price architecture for 2024. We'll share more of that with you later. That's clearly on the back of some of the learnings that we've seen in 2023 around that affordability and the importance of price points. I mean, overall, the macros look really good for Indonesia. If you look at, you know, GDP, population growth, per caps, massive opportunity for us when you look at the size of our category. That doesn't change our mid to long-term ambition.

October and as we look at the rest of the year and it is improving so thats good news.

Clearly affordability will remain a key pillar of our strategy in Indonesia. So one of the things that were.

<unk> finalizing and ready to move on is a different pack price architecture for 2024, we'll share more of that with you later.

But that's clearly on the back of some of the learnings that we've seen in 'twenty three around that affordability and the importance of price points.

Overall, the macros look really good for Indonesia, if you look at <unk>.

GDP population growth.

Per caps massive opportunity for us when you look at the size of our category.

So that doesn't change our mid to long term.

Damian Gammell: Clearly, it's been a slightly tougher shopper environment this year, getting better, as I said, towards the end of the year. Our transformation journey will then move to its next phase, which we're starting to execute, which is a new route-to-market model. We weren't feeling confident that the model that we had would unlock growth for the long term. On the back of the restructuring, we've also started to roll out a new route-to-market. That's exciting. That will transition through 2024, which is great. We continue to challenge ourselves around the role of different pack formats. We'll continue to look at refillable glass. We've got two lines now in Indonesia.

Ambition, but clearly it's been a slightly tougher shopper environment this year.

Getting better as I said towards the end of the year.

Our transformation journey, we will then move to its next phase, which we're starting to execute which is.

A new route to market model, so we wouldn't.

We werent feeling confident that the model that we had on <unk>.

<unk> growth for the long term and.

So on the back of the restructuring. We've also started to rollout a new route to market. So that's exciting.

And that will transition through 'twenty, four which is great and we continue to challenge ourselves around the role of different different pack format. So we'll continue to look at refillable glass.

We've got two lines now in Indonesia, So we look at how we could potentially.

Damian Gammell: We'll look at how we could potentially, you know, use that pack, which is a big success in markets like Philippines, to help us unlock some of that growth. Lots happening. I think the results in 2023 probably don't fully reflect the amount of change that the team have driven in Indonesia. I give them full credit for that. We've had a massive change agenda. I think the good news for them and for us is that we start to see that paying off as we come into Q4. That's good news. Actually, myself and Nick are heading down there on Sunday. I look forward to seeing it on the streets of Jakarta next week. Thanks. Thanks, Simon.

<unk> Dot tech, which is a big success in markets like Philippines to help us unlock some of that growth so lots happening.

The results in 2003, probably don't fully reflect the amount of change that the team have driven in Indonesia. So I give them full credit for that we've got a massive change agenda.

The good news for them and for US is that we start to see that paying off as we come into Q4, So thats good news and actually myself and Nick are heading down there on Sunday, So look forward to seeing it.

On the streets of Jakarta next week. Thanks, Thanks Aman.

Simon Hales: Brilliant. Thanks for the color.

Simon Hales: Brilliant. Thanks for the caller.

Brilliant thanks Niccolo.

Operator: Thank you. We'll now take our next question. This is from Robert Ottenstein from Evercore ISI. Please go ahead.

Thank you, we'll now take our next question.

This is from Robert <unk> from Evercore ISI. Please go ahead.

Robert Ottenstein: Great. Thank you very much. Two quick follow-ups and then my main question. Just to follow up, can you be any more specific, in terms of Europe, September, October on volumes? I know it's picked up nicely. But can you be any more specific in terms of the volume growth? Also, can you be any more specific in terms of the actual pricing you got in Germany? Those are the follow-ups. You know, the main question is, can you please give us a sense, to the extent you can, of any new learnings in terms of the Philippines, how that business is looking now, so how, you know, as you get it next year, you know, what sort of momentum there is in that market and what the competitive dynamics look like there? I know you've got an extremely strong position there.

Great. Thank you very much two quick follow ups and then my main question just to follow up.

Can you be any more specific.

In terms of Europe September October on volumes I know it picked up nicely but.

Can you be any more specific in terms of the volume growth.

Also can you be any more specific in terms of the actual pricing you got in Germany. So those are the follow ups and then the.

The main question is.

Can you please give us a sense.

To the extent you can have any new learnings in terms of the Philippines, how that business is looking now so how as you get it next year.

What sort of momentum there is in that market and what the competitive dynamics look like there I know you've got an extremely strong position there but is there a private label.

Robert Ottenstein: You know, is there private label? You know, what are the competitive dynamics? Thank you.

What are the competitive dynamics. Thank you.

Damian Gammell: Thanks, Robert. You also did a good job, like Eric, of getting four questions in. Just on the Philippines, I mean, clearly, we haven't closed that. I think it's probably a topic that we'll come back to once we've closed. I think the questions you've raised will be better positioned to kind of get into the detail of that once we've closed the transaction. As I said, we're targeting that very early next year. Clearly, we'll give a bit more color on how we see those topics from competitive landscape, you know, retailer brands, etc. Obviously, it's too early for us to comment specifically on that. Other than to say what we've said already, we think the Philippines is a fantastic Coke business in Asia, and, you know, demonstrates a great opportunity for both CCEP and the Aboitiz Group together once the deal closes.

Thanks, Robert you also did a good job like Ed we're getting.

Okay.

Just on the Philippines, I mean, clearly we havent closed that so I think it's probably a topic that will come back to once we've closed I think the questions you've raised will be better positioned to kind of get into the details of that once we've closed the transaction as I said, we're targeting that very early next year and clearly we'll give a bit more color on how we see.

Those topics from competitive landscape retailer brands et cetera, but obviously, it's too early for us to comment specifically on that.

Other than to say, what we've said already we think the Philippines is a fantastic coke business in Asia.

And demonstrated great opportunity for both CCP and the avoids group together once the deal closes. So if you can.

Damian Gammell: If you can, you know, give me a few more months, and then I'll come back. Happy to get into the detail on the Philippines. As I said, better to do that once we've got the transaction closed. On the earlier questions, I mean, we're not gonna give specific numbers on volume and pricing. All I can say is that we're pleased that we've seen solid volume growth back in Europe, both coming out of September and even more in October. I think that's good news. On the pricing, I think, you know, we've landed it in Germany. We feel, as I've talked earlier, it's, you know, sensible pricing in the context of our cost pressures, which are real and we continue to deal with, but also in terms of protecting that consumer franchise and shopper base.

Give me a few more months and then I'll come back and happy to get into the detail on the Philippines, but as I said better to do that once we've got the transaction closed.

The earlier questions I mean, we're not going to give specific numbers on volume and pricing. All I can say is that we're pleased that we've seen solid volume growth back in Europe.

Both coming out of September on even more in October So I think thats good news.

And on the pricing I think we've landed it in Germany, and we feel as I talked earlier.

Sensible pricing in the context of our cost pressures, which are real and we continue to deal with but also in terms of protecting the consumer franchise and shopper base. So again as we close out the full year. We talk again in February we'll give a bit more color on how that looks for 'twenty four.

Damian Gammell: Again, you know, as we close out the full year and we talk again in February, we'll give a bit more color on how that looks for 2024. What I need to say, both on volume and pricing, you know, we're pretty pleased with where we've ended up coming out of the summer and into Christmas in Europe. Thanks, Robert.

But needless to say both on volume and pricing were pretty pleased with where we've ended up coming out of the summer.

Into Christmas in Europe. Thanks, Robert.

Operator: Thank you. Just as a reminder, if you do have questions, you can press star one and one on your keypad. We'll now take our next question. This is from the line of Brett Cooper from Consumer Edge. Please go ahead.

Thank you just as a reminder, if you do have questions you've compressed all one and one on your keypad.

I'll now take our next question.

This is from the line of Brett Cooper from consumer edge. Please go ahead.

Brett Cooper: Thank you. If we look back a few years and look at retail data, it would seem that retailers have taken more price on your products than you've gotten out of those. That may not be the case in all categories across consumer staples. I was hoping you could offer some insights into where retailer margins sit on your products today, if there's any significant deviations by market, and then just any insights into how that positions you into 2024, and beyond. Thanks.

Thank you if we look back a few years and look at retail data.

Jean <unk>.

Retailers have taken more price on your products, So Dan you've gotten out of those and that may not be the case in all categories across consumer staples.

Was hoping you could offer some insight into where retailer margins on your products. Today. If there is any significant deviations by market and then just any insights into how that positions you into 'twenty or <unk>.

Beyond thanks.

Damian Gammell: Thanks, Brett. That's a good observation. I mean, we've seen and again, I'll talk in a kind of general rather than specific by market. We have seen across our developed markets in particular, so Australia, Western Europe, and New Zealand, that retailers have taken pricing ahead. We have seen margin expansion. That's a conscious, you know, decision of the retailers. Clearly, it's up to them to set the retailing price. It's something that we've seen have a number of benefits. I think one, now you look at them, we talk about it quite often, the size of CCEP's value creation for our retailers, both in terms of revenue transactions but more and more in terms of profit.

Thanks, Brett that's a good good observation I mean, we've seen and again I'll talk in that kind of general rather than specific by market, but we have seen.

Across our developed markets in particular, so Australia.

Listen Europe, New Zealand that retailers have taken pricing.

Heads so we have seen margin expansion.

It's a conscious decision of the retailers clearly it's up to them to set the retailing price, but it's something that we've seen.

Have a number of benefits I think one now you look at them, we talk about it quite often.

The size of Ccp's value creation for our retailers.

Both in terms of revenue.

Transactions, but more and more in terms of profit.

Damian Gammell: I think if you go back, you know, probably more than two years, Brett, you know, and I think it was one of the catalysts for the success of CCEP when we created the business back in 2016 that we acknowledged that the Sparkling category, particularly in Western Europe, you know, needed to start growing, and that was our first priority but also needed to create more value for our customers, and that was our second priority. You know, our pack pricing architecture allowed our customers to take a little bit more pricing on shelf than we did. That led to margin expansion.

If you go back probably more than two years Brett.

And I think it was one of the catalysts for the success of CCP. When we created the business back in 2016 that we acknowledged that the sparkling category, particularly in Western Europe.

Needed to start growing and that was our first priority, but also needed to create more value for our customers and that was our second priority.

So our pack pricing architecture allowed our customers to take a little bit more pricing.

On shelf than we did so that led to margin expansion and I think thats put the category and obviously CCP in a better place in terms of growth and focus on prioritization, whether that's in store in terms of space on leaflets promo space online.

Damian Gammell: I think that's put the category and obviously CCEP in a better place in terms of, you know, growth, focus, and prioritization, whether that's in-store in terms of space, on leaflets, promo space, online. You know, we think we've reached across all of our markets. Our retailers have reached a really good margin percentage on our brands. You know, and they'll probably continue to take a little bit more. Like us, they'll obviously be conscious about what that means for the shopper and consumer. Yeah, spot on. They have expanded margins, probably a couple of points ahead. I think that's been good, Nick. I don't know if you wanna.

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And we think we've reached.

Across all of our markets are really good.

Our retailers reached a really good margin percentage on our brands.

And they will probably continue to take a little bit more looks like us that will obviously.

We'll be conscious about what that means sort of shelf for consumers. So.

But they have expanded margins probably a couple of points ahead.

And I think thats been good Nick I don't know if you want to no I was just going to say just building on <unk> point I think Brett.

Nick Jhangiani: No, I was just gonna say, just building on Damian's point, I think, Brett, you know, it's actually good from an angle that, if you then think about what we've been able to do this year, is effectively land pricing. You can see, obviously, what the impact is when you think about our revenue per case growth, without disruption, right, which also says that they realize the margin and the profit and the cash flow from our category is solid and strong. I think, as Damian's also said, we manage the spectrum of pricing, including what we do on promo, on those that are more price-sensitive packs or ones where the consumer feels the elasticities a little bit more. You know, I think that's all helping them. That should actually position us well as we go into 2024 as well.

It's actually good from an angle that.

If you then think about what we've been able to do that.

This year.

Is effectively land pricing and you can see obviously, what the impact is when you think about our revenue per case growth.

Our disruption right, which also says that they realize the margin and the profit and the cash flow from our categories is solid and strong.

I think as Damian has also said we manage the spectrum off of pricing, including what we do on promo on those that are more price sensitive pax or ones, where the consumer feels the elasticity is a little bit more so I think that's all helping them and that should actually position us well as we go.

Into 24 as well.

Robert Ottenstein: Yeah. I think the other dynamic is that we've continued to invest behind the brands with The Coca-Cola Company. I think if you look at our absolute marketing investment, it's increasing year on year. The quality of that, I believe, is improving online and in traditional. Clearly, that's driving more brand relevance for the consumer. That supports that slightly higher margin for our customers. I think that investment piece is critically important as well. Thanks, Brett.

And I think the other dynamic.

Is that we've continued to invest behind our brands with the Coca Cola company.

So I think if you look at our absolute marketing investment, it's increasing year on year the quality of that I believe is improving online and in traditional and clearly that's driving more brand relevance for the consumer and that supports that slightly higher margin for our customers. So I think that investment piece is critically important as well.

Thanks, Brett.

Operator: Thank you. We'll now take our last question. This is from the line of Charlie Higgs from Redburn Atlantic. Please go ahead.

Thank you.

We will now take our last question.

This is from the line of Charlie Higgs from up on Atlantic. Please go ahead.

Speaker 14: Oh, hi. Thanks for the follow-up, Damian. I wonder if you could just comment on Germany. I mean, 9% FX neutral growth, the strongest in Europe in the quarter. I mean, the Monster volume's up 42%. Can you maybe just talk about what the team is doing differently there and what the scope is for the energy drinks portfolio ahead? Maybe just a broader comment on, you know, the category and the pack mix opportunity left in Germany. Thank you.

Charlie Higgs: Oh, hi. Thanks for the follow-up, Damian. I wonder if you could just comment on Germany. I mean, 9% FX neutral growth, the strongest in Europe in the quarter. I mean, the Monster volume's up 42%. Can you maybe just talk about what the team is doing differently there and what the scope is for the energy drinks portfolio ahead? Maybe just a broader comment on, you know, the category and the pack mix opportunity left in Germany. Thank you.

Hi, Thanks for the follow up David I Wonder if you could just comment on Germany.

9% FX neutral growth was strongest in Europe in the quarter.

I mean, the month to volumes up 42% can you maybe just talk about what the team is doing differently, there and what the scope is to be the energy drinks portfolio Hyatt and then maybe just a broader comment.

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Caf degree.

Pack mix opportunity left and in Germany. Thank you.

Speaker 15: Yeah. German businesses had, you know, a number of really strong quarters. I think you quite rightly called it Q3, the energy performance. Just a couple of perspectives. I mean, the energy category is large in Germany. It's growing. You know, our share still has an opportunity to get higher. We've identified that as a key market with our partners at Monster. I think in Q3, you saw the benefit of innovation coming through in Germany. We have a really strong pipeline of innovation. We've also looked at some of our pricing and our promo pricing. We've seen the benefit of that coming Q3. I mean, the numbers, you know, are very high in the quarter.

Damian Gammell: Yeah. German businesses had, you know, a number of really strong quarters. I think you quite rightly called it Q3, the energy performance. Just a couple of perspectives. I mean, the energy category is large in Germany. It's growing. You know, our share still has an opportunity to get higher. We've identified that as a key market with our partners at Monster. I think in Q3, you saw the benefit of innovation coming through in Germany. We have a really strong pipeline of innovation. We've also looked at some of our pricing and our promo pricing. We've seen the benefit of that coming Q3. I mean, the numbers, you know, are very high in the quarter.

Yes, So German business has had.

A number of really strong quarters, I think quite rightly called out Q3, the energy performance.

So just a couple of perspectives I mean, the energy category is large in Germany.

It's growing so.

Our share.

Still has an opportunity to get higher.

<unk> identified that as a key market.

With our partners at Monster I think in Q3, you saw the benefit of innovation coming through in Germany. So we have really strong pipeline of innovation. We've also looked at some of our pricing and our promo pricing and we've seen the benefit of that come in Q3.

The numbers are very high in the quarter I would probably just look more to year to date numbers to get a better reflection of the trend.

Speaker 15: I'd probably just look more at the year-to-date numbers to get a better reflection of the trend, which is still really impressive. You know, we continue to be a great challenger in that category in Germany, on the back of innovation. I think those new price points definitely helped us unlock some more growth, and some more share. Yeah, please.

Damian Gammell: I'd probably just look more at the year-to-date numbers to get a better reflection of the trend, which is still really impressive. You know, we continue to be a great challenger in that category in Germany, on the back of innovation. I think those new price points definitely helped us unlock some more growth, and some more share. Yeah, please.

And which is still really impressive so we continue to be.

A great challenger in that category in Germany.

On the back of innovation and I think those new price points definitely helped us unlock some more growth and some more share. So yes. Please.

Nick Jhangiani: Yeah. Just calling out specifically in Germany, clearly, we benefited from a recovery in Edeka. If you recall, last year, we did have a disruption there. This goes back to my point. This year, we've landed pricing and actually had no disruption, which is a very positive story. Then we've also been supported by some new listings in Kaufland as well. Both of those are definitely positive drivers of that volume growth in Q3 in energy in Germany.

Just calling out specifically in Germany, clearly we benefited from.

Recovery Erica if you recall last year, we were.

We did have a disruption that and this goes back to my point. This year, we've landed pricing and actually had no disruption, which is a very positive story and then we've also been supported by some new listings and cough land as well. So both of those are definitely positive drivers.

That volume growth in Q3 in energy in Germany.

Speaker 14: Thanks, Nick and Damian. Thanks, Charlie.

Charlie Higgs: Thanks, Nick and Damian. Thanks, Charlie.

Thanks Nicole.

Operator: Thank you. I would now like to hand the conference back over to Damian Gammell for his closing remarks. Damian, please go ahead.

Thanks, Charlie.

And I would now like to hand, the conference back over to Damian Gammell for his closing remarks Damien. Please go ahead.

Speaker 16: Again, a big thank you to everybody for joining us, this afternoon and this morning. As you've heard from both myself and Nick, you know, another strong year, 2023, for CCEP. Very pleased with our reaffirming guidance. You know, we are continuing to grow our share and volume ahead of value. Our whole organization now is very much focused on the remainder of the year. You know, as I've called out, we're pleased to see, particularly in Europe, you know, volume growth returning, as we've come out of the summer. Really excited about next year. Great pipeline of innovation, both in terms of product, packaging, but also, you know, a year of great asset activation, particularly in Europe with the America's Cup, the Olympics, and the Euro Football Championship. A lot for our teams and our customers to get excited about.

Damian Gammell: Again, a big thank you to everybody for joining us, this afternoon and this morning. As you've heard from both myself and Nick, you know, another strong year, 2023, for CCEP. Very pleased with our reaffirming guidance. You know, we are continuing to grow our share and volume ahead of value. Our whole organization now is very much focused on the remainder of the year. You know, as I've called out, we're pleased to see, particularly in Europe, you know, volume growth returning, as we've come out of the summer. Really excited about next year. Great pipeline of innovation, both in terms of product, packaging, but also, you know, a year of great asset activation, particularly in Europe with the America's Cup, the Olympics, and the Euro Football Championship. A lot for our teams and our customers to get excited about.

So again, a big thank you to everybody for joining us.

This afternoon this morning.

As you've heard from both myself and Nick.

Another strong year 2023 for CCP very pleased we're reaffirming guidance.

We are continuing to grow our share and volume ahead of value.

Our whole organization now is very much focused on the remainder of the year.

As of call that we were pleased to see particularly in Europe volume growth returning as we've come out of the summer.

Really excited about next year, great pipeline of innovation, both in terms of product packaging, but also.

Year of great asset activation, particularly in Europe with the Americas. The Olympics on the Euro Football Championship. So a lot for our teams and our customers to get excited about and we very much look forward to talking to you again in February when we can.

Speaker 16: We very much look forward to talking to you again in February when we can, you know, share with you how the year ended and, more importantly, you know, how we see 2024, on the back of a very, very resilient NARTD category. Thank you. Have a great rest of day.

Damian Gammell: We very much look forward to talking to you again in February when we can, you know, share with you how the year ended and, more importantly, you know, how we see 2024, on the back of a very, very resilient NARTD category. Thank you. Have a great rest of day.

Share with you how the year ended or more importantly, how we see 2024.

On the back of a very very resilient and aortic <unk> category. So thank you and have a great rest of the day.

Operator: That concludes our conference for today. Thank you for participating. You may all disconnect.

That concludes our conference for today. Thank you for participating you may all disconnect.

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Q3 2023 Coca-Cola Europacific Partners PLC Earnings Call

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