Coca-Cola Europacific Partners plc

Thank you all for joining us today. I'm here with Damien Gamble, our CEO, and Nick Gianghiani, our CFO. Before we begin with our opening remarks, a reminder of our cautionary statements. This call will contain forward-looking management comments and other statements affecting our outlook. These comments should be considered in conjunction with the cautionary language contained today, as well as the detailed cautionary statements found in reports filed with the UK, US, Dutch, and Spanish authorities. A copy of this information is available on our website at www.cocolaep.com. prepared remarks will be made by Damian. We will then turn the call over to your questions. Unless otherwise stated, metrics presented today will be on a comparable and FX neutral basis throughout. Following the call, a full transcript will be made available as soon as possible on our website. So I will now turn the call over to our CEO, Damian.

Thank you, Sarah, and thank you to everyone joining us today. I'm very pleased that 2023 continues to be a strong year for CCEP. We've delivered year-to-date revenue growth of 8.5%, reflecting solid growth in revenue per unit case as we continue to drive price and mix through our smart and successful revenue growth management strategy. Excluding our strategic portfolio alignment choices primarily in Indonesia, but also the exit of bulk water in a number of markets, underlying volumes also grew around 0.5%. And again, we grew transactions ahead of volume in Europe, Australia, and New Zealand. Following a strong first half, we achieved top line growth of 4% in the third quarter, with solid revenue per case growth of 9%, reflecting positive headline price across all markets, and our continued focus on promotional spend optimization. Favorable RAM mix also contributed, led by the outperformance of our monster portfolio. Volumes in Europe declined by 4%. As previously flagged, we were cycling a strong summer, with volumes up 12% last year. This was largely driven by the weather, which was mixed across Europe, most notably in GB, northern France, and northern Europe across the key summer months of July and August. We saw improved performance in September, and on a two-year stack, volumes in Europe in Q3 were up around 7.5%. In API, the solid momentum in Australia and New Zealand continued with both markets and volume growth. This reflected continued solid execution supported by fantastic Women's World Cup activation focusing on trademark Coca-Cola and Powerade. Australia's volume growth was achieved despite strategic delistings within our bulk water portfolio as we flagged at the half year. Excluding this, Australia volumes would have been up around 2.5%. This volume growth was, however, offset by Indonesia, with API volumes overall declining by 7%. As highlighted previously, consumer spending in Indonesia remains under pressure, impacted by wider market inflation and the reduction in fuel subsidies. And as you all know, we are in the early stages of our long-term transformation journey in this really exciting market. We have successfully executed our portfolio rationalization plans, We now have a much tighter portfolio focused on winning and sparkling and ready to drink tea. This rationalization of a significant number of our SKUs started late last year and so continue to impact this year's third quarter. As you expect, we are fully aligned with the Coca-Cola company on our brand priorities in Indonesia. A good example being the recent launch of Coca-Cola Zero, Sugar and Sprite Zero. A really great opportunity for the future and off to a promising start. Beyond the brand portfolio, we are executing our wider playbook. We are currently preparing a new price-packed channel strategy for 2024, incorporating a deeper understanding of the Indonesian consumer sensitivities and affordability. This alongside working on building out new drinking occasions across the calendar. And we are starting to take the right decisions to re-engineer both our cost base and route to market to be fit for the longer term, which we'll be starting to roll out in Q4. Early days. Despite all of this change, we're beginning to see progress. We will share more detail on our transformation journey in due course. Now to the NARTD category overall year to date. It remains resilient, growing in value terms by 7% in Europe and 9% in API. Within the category, we've delivered value share gains both in-store and online and volume share gains ahead of value. And in Europe, around 75% of households purchased from our NARTD portfolio, up 50 basis points versus last year. We again retained our position as the largest value creator for our retail customers within FMCG in Europe, delivering over 600 million euros of absolute revenue growth year-to-date. And within NARTD in Australia and New Zealand, we were also ranked number one supplier in the FMCG Retail Customer Advantage Survey results in six of our markets this year. However, we are not complacent. Although consumer spending has held up reasonably well, we fully understand that some of our consumers are feeling the pressure. We are seeing some shifting into retailer brands across a few categories, less in colas and flavors, and more shopping in discounters. This channel has been and will remain a core focus for CCEP, where we continue to grow and gain share. Our consumer-centric approach remains focused on maintaining affordability and relevance for all consumers. We have great brands, which our consumers love, across a broad pack price architecture, which enables shoppers to access our products across a wide spectrum of price points. It is essential, now more than ever, that we continue to balance premiumization for those that seek it with more affordable packs for those that need it. For example, in France, we activated additional promotional activity across our large PT Zero range of Coke, Fanta, and Fuse Tea over the summer months. We continue to invest in our brands, Coca-Cola Zero Sugar being a great example. We delivered fantastic activation for the Women's World Cup, as I mentioned just now, and launched an AI-generated limited edition Coke Creations. Volume in the third quarter for Coca-Cola Zero Sugar was up 1% and gained value share of 50 basis points. Monster continued to outperform in the third quarter, driving overall energy volume growth of 12% versus last year. Fantastic innovation continues to help drive recruitment and distribution, including securing Monster and Burger King and GB from November. We also launched Monster Green Zero Sugar. This has been well received and soon to be launched across all our markets. In fact, So advanced are today's low sugar reformulations, I challenge you to try it alongside your original and see if you can tell the difference. As you know, Jack Daniels and Coca-Cola was launched earlier in the year and has enjoyed great momentum across a number of markets. In GB, it is now the number one value brand in the alcohol ready to drink segment. On sustainability, I wanted to share the recent news that CCB's carbon emission targets have been validated by the science-based targets initiative across all of our markets, including API. This includes both our 2030 30% greenhouse gas reduction and our long-term 2040 net zero targets, thus confirming that our company-wide climate ambitions are in line with the latest climate science, and crucially, in line with SBTI's 1.5 degree pathway. A couple of examples of how we continue to reach our carbon footprint are provided in today's release. Onto our great people. Earlier this year, I mentioned we were recognized as one of Australia's best places to work for 2023 from over 700 nominated organizations. Last month, we were also recognized as a top employer in Europe by the Top Employers Institute. So I'd like to take this opportunity to thank all of my great colleagues at CCEP for their hard work and dedication to our customers and to our business. Now, on to the full year. We raised guidance with our 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 our second half dividend of €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 NAR2D category to return to volume growth. And in October, we have seen a return to solid volume growth across our markets. We're 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. Looking now to next year, We remain confident in the resilience of our categories, despite some of the ongoing macroeconomic and geopolitical volatility. Whilst 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. 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's 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. 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 lays ahead. We have fantastic brands in the NARTD category, which we expect to continue to be robust into 2024. increasing exposure to the fast-growing ARTD category, and we are already excited about the Absolute Vodka and Sprite coming to Europe early next year. And 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. We've been working closely with the Coca-Cola company and at Boyd's 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.

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.