Coca Cola Bottlers Japan

Good afternoon. This is Gomi, Head of Investor Relations for Coca-Cola Bottles Japan Holdings. Thank you for joining us today for the third quarter 2020 for Earnings Presentation for Analysts and Investors. Today we have President Karin Jagan, CFO, Beyond Organis, and Coca-Cola Japan CMO, Su Choi, We are also joined by Executive Officer and President of the Little Company, Alex Gondolas, Executive Officer, President of the Food Service Company, and Chief Business Strategy Officer, Maki Kado, Executive Officer, Chief Supply Chain Officer, and Chief Sustainability Officer, Andrew Fallot, and Executive Officer and Chief Human Resource Officer, Yuki Higashi. For unprepared remarks, we will be happy to take questions. Simultaneous interpretation in both Japanese and English is being provided for both today's call and the Q&A. Before we begin, let me remind you that today's presentation contains forward-looking statements and should be considered together with cautionary statements contained in our presentation. With that, I'd like to turn the call over to Kalin Dragan. Kalin, please.

Good afternoon, everyone. This is Kalin Dragan. Thank you for joining our earnings presentation today. First of all, I would like to emphasize that we are strongly committed to the KPI set on Vision 2028 Strategic Business Plan, which we announced in August 2023 and that our business is growing steadily in line with the plan in order to achieve the goals set for 2028. The contents I will present now demonstrate our strong commitment to Vision 2028 and our confidence in the outlook based on our current progress towards achieving this goal. I will start by sharing today's highlights. Please turn to slide number three. Once again, I am pleased to share positive news with everyone once again. Our third quarter results show that our ongoing efforts are steadily bearing fruits. Third quarter cumulative business income was 14.7 billion yen, two and a half times greater than last year's figure and greater than our initial forecast. Given this strong performance, we have raised our full year earnings forecast. we now expect a full year business income of 11.5 billion yen, 5.7 times higher than the previous year. Revenue for the cumulative third quarter rose by 1.9%. Our established growth foundation helped us capture solid summer demand, pushing sales volumes above initial forecasts. In the third quarter, which accounts for the majority of our annual profits, we achieved a business income that surpassed last year's strong earnings. This strong result comes from both top-line growth and effective cost management, driving an accelerated profit increase. Since October, we have focused on the important price revision initiative, which is progressing well. We remain committed to making this revision successful with the goal of enhancing profit levels for this year and beyond. Alongside revising our earnings forecast upward, we have announced a comprehensive shareholder return program that combines multiple return measures. I will share details later, but these measures align with the shareholder value enhancement approach outlined in our strategic business plan vision 2028, and we have decided to implement them ahead of schedule. The program includes several initiatives, including an updated dividend policy with an ambitious plan for dividend increases. This represents the shareholder return on an unprecedented scale. Now, let me hand over to CFO Bjorn Urganes to provide you with detailed results.

Bjorn Urganes Thank you, Colleen. Hello, everyone. This is Bjorn. Please turn to slide five for the third quarter year-to-date P&L. In Q3, we successfully accelerated improvements to our business performance, achieving revenue and profit growth for the third consecutive quarter. Revenue increased by 1.9% year-on-year, driven by higher sales volume, and a series of price revisions, resulting in a continued improvement in wholesale revenue per case across channels. Sales volume grew 2% year on year as we successfully captured the hot summer's increased demand. Gross profits grew by 3%, outpacing revenue growth. Improvements in wholesale revenue per case and improved manufacturing efficiency against the backdrop of rising demand contributed to an improved gross profit margin. Business income increased by 8.8 billion yen year on year, driven by top line growth and cost savings from transformation. The improvement in third quarter business income outpaced gains in the first and the second quarter, further accelerating profit growth trends. Factors contributing to the change in business income are detailed on the next slide. Operating income increased by 11.5 billion yen from the previous year. This was the result of higher business income and the booking of other income from fixed asset sales part of our efforts to optimize the balance sheet. Net income also grew by 6.2 billion yen compared to the previous year. Please turn to slide six for our primary business income drivers. Business income grew two and a half times year on year to 14.7 billion yen, supported by top line growth and transformation savings. On the left-hand side, we have volume, price, and mix. These represent a year-over-year change in marginal profits of 6 billion yen from commercial activities. This improvement comes from higher wholesale revenue per case due to price revisions and increased sales volume. It also reflects the impact of special demand following the Nankai Throf earthquake advisory along with adverse weather in the latter half of the third quarter, including heavy rain and typhoons, which impacted channel and package mix. Transformation benefits amounted to 3.3 billion yen, with initiatives across all areas steadily contributing to profit growth. Marketing expenses increased by 2.4 billion yen from the previous year. This was due to fully leveraging the strong performance of fully renewed IATACA, while also implementing marketing investments to an appropriate level, which has been restrained in the previous years. Next is manufacturing. Higher than expected summer demand led to higher manufacturing volume and improved efficiency. In addition, cost saving measures at our plants were also effective, which led to a reduction in manufacturing costs per case for a 0.9 billion decrease in manufacturing compared to the previous year. Other costs decreased by 0.2 billion yen from the previous year, largely due to lower labor costs. This reduction was achieved even as we maintain necessary spending for sustainable growth and responded to special demand, which increased costs. Commodity and utility costs also decreased by a total of 0.8 billion yen, despite the continuing severe cost environment. Efforts to control raw material and energy costs helped offset the impact of the weaker yen. Please turn to slide 7 for volume performance by channel and category. Cumulative third quarter sales volume rose 2% year-over-year, despite the impact of price revisions. This growth was driven by implementing effective commercial strategies and launching new products, in particular, renewed IATACA. In the third quarter alone, sales volume increased by 3% greater than initial plan due to steadily capturing the increased demand of the extremely hot summer and the special demand in August. Wholesale revenue per case continued to improve in each channel as a result of the series of price revisions. By channel, Volume in supermarkets was down 3% due to impact of price revisions. However, in drugstores and discounters, sales volume grew 6% in the third quarter and 3% year to date, driven in part by market expansion and special demand. In comedian stores, volume increased 4%, reflecting the contribution of new products and effective customer-focused marketing activities. In vending, despite unfavorable weather in summer and price revision impacts, sales volume held flat year on year. This was thanks to our strong market share base and effective digital marketing through the Coke Alm smartphone app. Additionally, price revisions contributed to an improvement in wholesale revenue per case, increasing by more than 50 yen from the previous year. In retail and food service, volume grew 4% year on year, driven by a recovery in restaurant traffic and efforts to expand product offerings per customer. Online sales volume also rose by 17%, supported by a strengthened product lineup and collaborative meshes with customers to capture summer demand. By category, sparkling volume grew 3% year-on-year from increased Coca-Cola sales in restaurants and online, along with a boost from sprites. In tea, the fully renewed Ayataka achieved over 15% volume growth year over year, contributing to an 8% growth in the tea category overall. Coffee and water volumes declined, impacted by price revisions. In the juice category, Minute Maid contributed primarily through restaurant sales. Slide 8 covers market share and retail price trends. Our profitability-focused commercial activities are growing value share and maintaining price premiums. Overall, total channel value share increased by 4.4 points from the previous year. Vendings value share continued to grow strongly, gaining 0.9 points despite the shrinking market. In the OTC channel, new products contributed to market share, though last year's price revisions impacted volume share. In convenience stores, both volume and value shares grew positively. In addition, OTC retail prices for our products continue to maintain a price premium over the industry average. OTC retail prices for large PET bottles continued to show improvements, primarily due to the price revision implemented in October last year. Please turn to slide nine. In the third quarter, our peak demand period, we focused on executing our top-line growth strategy. I'd like to explain three key points here. enhancing portfolio edge, expanding sales space, and profitability-focused commercial activities. In enhancing portfolio edge, we maximized the strong sales of Ayataka, which have remained high since its full renewal in April. This led to a 14% year-on-year increase in the T-category sales volume for the third quarter, with a significant improvement in our market share by value. We also grew sales by leveraging our diverse product portfolio, focusing on label-less products, multipacks, and introducing high-value added items. Next, for expanded sales space, we tailored our approach to the characteristics of each sales space. We focused on securing regular sales space while also obtaining non-regular spots through attractive display racks. We actively pursued new business opportunities, strengthened our approach to growing business categories in food service, and targeted prime vending locations while always assessing profitability. For profitability-focused commercial activities, we optimized marketing efforts and to maximize the benefits of the October price revision. We worked to maintain the increased shipping prices from previous price revisions and engaged in customer negotiations to ensure a swift and consistent implementation of price revisions. This summer saw hot weather at similar levels to last year, driving up demand. We successfully capitalized on this, leading to strong volume growth, and as mentioned earlier, cumulative sales volume exceeded our expectations. Our top-line growth strategy goes beyond capturing volume during peak demand. It's about building a stable revenue base for the mid to long term. As we prepare for the price revisions, it's essential to revitalize sales space and lay a foundation for growth to offset the volume decline due to the price revisions. I'm confident that the results of our efforts to date will become clear in the fourth quarter and beyond. Slide 10. highlights our supply chain initiatives. We responded flexibly to increased demand from the heat wave and its special demand following the Nankai Throf earthquake advisory. At the same time, we made steady progress on initiatives to strengthen our foundation for future profit growth as planned. As part of the local production for local consumption model, in Vision 2028, we introduced a new aseptic production line at our Tokai plant in the Aichi Prefecture this September to boost manufacturing capacity in the Tokai region, with a focus on manufacturing small PET bottles for tea, coffee, and other products. This investment was made with renewing parts of the existing production line, enhancing capital efficiency. Incorporating new sterilization and manufacturing technologies, we expect these advancements to reduce water usage in the manufacturing process by 30% and energy consumption by 15% compared to previous methods. Additionally, These improvements are expected to shorten overall manufacturing time. Additionally, we are advancing collaboration with various partners, including customers, suppliers, and industry peers to build a sustainable supply chain infrastructure. Several initiatives in this area are already underway by the third quarter. In collaboration with Toyota Industries, we have begun field testing Japan's first automated forklift truck to advance supply chain automation. We have started a collaboration with Itoen in non-competitive logistics areas, such as joint deliveries to certain stores. We have also begun manufacturing Georgia using the world's lightest aluminum cans, produced by Toyo Seikan. These new cans reduce material usage by 13% per can compared to traditional options, aiming for both cost savings and resource conservation through weight reduction. For the next slides, I would like to ask Sue from Coca-Cola Japan to share the marketing updates. Sue, please.

Thank you, Bjorn. Hello, this is Sue Choi from CCJC. Allow me to take you through a review of third quarter of 2024 and highlights of our marketing initiatives for fourth quarter of this year. On slide 12. In the third quarter of 2024, the business outperformed the market with notable increase in value share within the soft drink segment. Key categories and robust renewal strategies contributed significantly to recruiting new users and driving product trials. Key highlights include first with Ayataka campaign, over the summer, launched a comprehensive campaign featuring tour tickets for Hikaru Utada-san, our new brand ambassador. This initiative successfully accelerated Ayataka's growth and attracted more consumers to enjoy the renewed Ayataka. Coca-Cola's Coke with Meat summer campaign, which spanned media exposure to in-store promotions, was aimed at expanding our user base by capturing the family meal occasion during the peak season. Aquarius ORS renewal in June renewed the packaging and communications for Aquarius ORS after gaining approval for official Food for Medical Use labeling. This effort helped address consumer concerns about heat stroke and dehydration. Fanta Yoga Rush Marble Orange launch expanded the Fanta brand into the lactic segment. This innovative beverage combining real yogurt and orange-flavored jelly successfully penetrated the lactic SSD market due to its unique dairy-based mildness. During the 2024 Paris Olympic and Paralympic Games, we capitalized on the excitement surrounding the Olympics and Paralympic Games through a new portfolio promotion. This initiative enabled up to 10 million winners to receive exclusive Coca-Cola Olympics and Paralympic merchandise, thereby maximizing our sales and market share during the peak summer season. On slide 13, as we enter the fourth quarter of 2024, we're pleased to share our key initiatives designed to sustain growth and deepen consumer engagement across various segments. First, we have introduced the Coca-Cola Winter Campaign, featuring a package promotion that offers winter gifts. The initiative aims to expand drinking occasion during the winter season and enhance brand visibility. To drive greater consumption of the new ayataka, we are focusing on the popular Japanese soul food, onigiri. Our autumn campaign promotes the pairing of ayataka with onigiri. Consumers can participate by scanning a quote under the bottle cap using the Coke On app, providing them the chance to win related prizes. For Georgia, we have launched a dynamic promotion featuring a live tour by renowned artist Kenji Yonezu-san, our brand ambassador. This campaign is aimed at engaging our younger audience and increasing brand incidents. Additionally, we are driving sales of our hot products to cater to seasonal preference, thereby boosting our market presence during the winter months. Leveraging the key asset of Samurai Japan, we have conducted full portfolio promotion. Through the Kokon app, the consumers who purchased our product have the opportunity to win tickets to the WBSC Premier 12 Tournament, exclusive Samurai Japan merchandise, and other attractive prizes. This promotion is designed to drive portfolio incidents and captivate sports fans. Thank you for your continued support and attention. Now I hand it over back to Colleen.

Thank you, Sue, for your presentation. This is Colleen again. Starting from slide 15, I will go over our full year earnings forecast, which we have revised upwards. We have raised our full year earnings forecast for 2024, factoring in the strong business performance through quarter three, which surpassed our initial plan, and the benefits of the October price divisions. As a result, we are now targeting a business income of 11.5 billion yen for the full year of 2024, 5.7 times last year's figure. I want to highlight that the key driver of our progress so far has been our ability in the third quarter to accelerate profit growth through strong top line growth and careful cost management. As a result, cumulative business income has exceeded our initial plan. Looking at the situation up to the third quarter, sales volumes exceeded our initial forecasts, particularly in quarter three, bringing cumulative total 2% above last year. In addition, initiatives such as price revisions and transformation are progressing well, strengthening our foundation for mid- to long-term profit growth, while productivity improvements and cost savings efforts also added to controlling costs more effectively than originally planned. In the fourth quarter, We will focus on elevating profit levels by effectively implementing the price revisions that started in October. Although it's still early to evaluate the price revisions, as it has only been one month since implementation, it is progressing smoothly as planned, with retail prices gradually increasing. In October, despite the impact of the price revision on demand, Sales volume increased by 5% year-on-year, supported by the growth foundation we have built to date. Revenue is also increasing at a pace that exceeds the volume growth rate. While we need to monitor factors such as channel and product mixed trends, we will remain focused on profitability and are committed to precise market execution to maximize the benefits of the price revision. With these efforts, we plan to achieve our full year business income target of 11.5 billion yen. Slide 16 shows the P&L for our revised full year earnings plan for 2024. Compared to the initial plan, we now expect a higher revenue and profit. For the full year, we forecast revenue of 188 billion yen, up 2.2% year-on-year, which is 5.6 billion yen above our initial plan. Sales volume increase of 1% year-on-year is based on a stronger than expected cumulative quarter tree results, as well as assuming the impact of the October price revision, as well as aiming to for revenue growth faster than volume growth with the expected wholesale revenue per case improvement benefits with the October price revisions. In addition, full-year business income is projected to increase by 9.5 billion yen year-on-year to 11.5 billion yen. While the initial target of 10 billion yen was ambitious, we are now aiming for even higher profits The factors behind this increase in business income will be covered on the next slide. Operating income and net income have also been revised upwards to reflect this increase in business income. Slide 17 shows the primary business income drivers for our revised forecast. For the full year of 2024, we are targeting a business income of 11.5 billion yen 5.7 times that of the previous year, representing a 9.5 billion yen increase over the previous year. This growth is driven by building up profits with top line growth as the primary source. Volume, price and mix on the left side reflects volume growth exceeding initial expectations, along with the benefits of the October price revisions. Taking the current mixed trend, into account, the forecast stands at 9.7 billion yen. Recurring cost savings from transformation efforts are expected to add 5.7 billion yen to profits. While some benefits from these initiatives will be realized next year, they remain largely in line with the original plan. We expected a 5.2 billion yen increase in marketing expenses as we resume investments at appropriate levels following last year's restrained approach. Although this is higher than our original plan, we are advancing these marketing investments with a mid- to long-term perspective to support profit growth from next year onwards. In manufacturing, we expect a 1.4 billion yen profit contribution due to improved efficiency. This increase comes from higher manufacturing volumes and cost savings measures implemented at each plant, exceeding our initial plan. Other costs are projected to raise by 1.9 billion yen. While we continue to strategically invest in future profit growth, these costs are expected to be lower than initially planned. and utility costs are expected to worsen by 0.4 billion yen versus last year due to currency impact, even though raw materials and utility costs are expected to remain controlled. However, compared to the original plan, this impact is expected to be limited. These are the main reasons for the changes in business income for the revised plan. Please turn to slide 19. As I mentioned at the start of today's presentation, we are implementing a comprehensive shareholder return program to enhance shareholder value. This initiative aligns with our strategic business plan vision 2028 and includes four key measures. With the upward revision of this year's earnings forecast, we have decided to implement these measures ahead of schedule based on our outlook for future earnings and cash generating capacity. First, we will revise our dividend policy to make it more ambitious. The target dividend payout ratio will increase from the previously planned 30% or more to 40% or more. we are introducing DOE as a new target indicator, aiming for a DOE of 2.5% or more in 2028. During the period of Vision 2028, we will implement progressive dividends, ensuring dividends are maintained or increased each year. With these measures, we aim to achieve a dividend of 74 yen per share in 2028. This ambitious plan represents a 24 yen increase per share compared to last fiscal year, 50 yen per share, aiming for a roughly 1.5 fold increase in dividends. In addition, to improve future earnings per share, we will conduct a share buyback of up to 30 billion yen or 20 million shares. We also plan to cancel 23 million treasury shares currently held, which is approximately 11% of total shared issues. Furthermore, as an initial step towards our goal of paying a 74 yen dividend per share by 2028, we will plan to increase this year end dividend by 3 yen per share. This will bring the total annual dividend plan for 2024 to 53 yen per share. I'm very pleased to announce this comprehensive shareholder return program of unprecedented scale, which reflects our strong progress towards achieving Vision 2028. We will continue enhancing capital efficiency and strengthening shareholders' returns to drive the mid- to long-term growth in shareholder value that we are targeting in Vision 2028. Please see slide 20 for a summary of today's presentation. As the first year of our Strategic Business Plan Vision 2028, we have focused on building up strong profits, and I'm confident that the positive results we have achieved, along with the upward revision of our earnings forecast, reflect the effectiveness of our profit-focused activities, which we have sustained even in challenging conditions. In the fourth quarter, We will maintain this positive momentum and advance key initiatives, including the October price revisions, to achieve our target business income of 11.5 billion yen, a level 5.7 times higher than the previous year. Business income is progressing steadily, right on track with the vision 2028. In 2025, we will continue to steadily and sustainably grow profits, building on the results we have achieved to date. I'm also very pleased and consider it a major achievement that we could announce a new shareholder return measures aimed at enhancing shareholder value over the mid to long term as outlined in Vision 2028 ahead of schedule. I would like to emphasize once again our strong commitment to the objectives of Vision 2028 which emphasizes profitability and capital efficiency and the steady progress we are making towards achieving them. We will continue to drive key initiatives with a mid to long-term perspective and aiming to achieve the goals of Vision 2028 and maximizing shareholders' value. That concludes our presentation today. Thank you very much. Now I would like to invite Gomi-san back to take us through the question and answer session.

GOMI- Thank you, Colleen. The following Q&A session is for analysts and investors only. Members of the media are asked to refrain from asking questions at this time as we are having separate media Q&A session later today. Simultaneous interpretation is provided. So please limit your question to one at a time. Now I would like to start the Q&A session. Operator, please begin. If you would like to ask a question, please press Hush 7. Please note that if you enter Hush 7 twice, your question request will be canceled. You can also request a question by pressing Hush 7 any time during the Q&A session. We will now start to take your question requests. Please press Hush 7 and wait for a little while.

We have received questions and we would like to move on to the Q&A session. I will call your name. Before you ask a question, please state your company name and your name. We will now welcome the first person with the question. I will unmute you. UBS Securities, this is Ihara-san. Please go ahead. Thank you very much for the presentation. This is UBS Securities, Ihara speaking. Hello, Ihara-san. I have two questions. My first question is, From October, you have revised your price. In the future, are you going to raise the price even more? And for the price revision you have executed in October, what is the progress in each channel? And also from October, Do you have 5% in volume growth, even though you have increased your price? So what does this situation mean to you? And also, you mentioned that the impact from price revision will be 7 to 10 billion for the year. Is there any chance that you can increase that contribution amount? And looking at the food industry right now, there are lots of inflation in the wage increase. And we have seen lots of news on it. So how do you understand the present situation? And is there a possibility to increase the price once again for the beverage industry? Well, thank you for the question. So let me summarize. Your first question was, we have revised the price from October. So you want to know the buy channel situation. And this will be from Alexa.

Thank you. This is Alex. Let me take you. So far in October, the price revisions, as we know, the first month is the implementation month of the price increases. So far, I think the positive volumes that we're seeing in October are impacted by favorable weather with warmer temperatures throughout the month for the most part. And that is certainly impacted in a positive way, our volumes. At this point, it's premature to assume that volumes are reflecting the price increase thus far. And we will continue to monitor. At this point, this is our appraisal of the situation.

Thank you for that. And your next question was on the inflation. And in the beverage industry. What is the impact inflation to the beverage industry as a whole. He got some. We like to answer so sorry I made a mistake no no sorry. So my on the question is do you have any plans to do another press revision. And the impact as well the accent.

So I think we have reiterated in the past, pricing and price increases is one lever of our revenue growth management algorithm, and we will continue to consider pricing as part of our growth strategy going forward for profitable expansion.

And another question was the contribution from the price You mentioned $7 billion to $10 billion for the year. Is there any change to that?

Hello, Yahara-san. It's Bjorn. Thanks for the question. As you said, yes, we forecasted an impact of $7 billion to $10 billion net profit from Wave 6 price increases that we effectuated now as of the beginning of October. The implementation is going well, as you heard Kaleen said in the prepared remarks. So at the moment, there's no reason for us to adjust the estimate. So not for now.

Thank you.

And about the inflation situation, is that going to be impacting the price increase for the beverage industry?

Bjorn again, Ihara-san. So inflation is, as you said, taking hold in Japan, and we will continue to monitor the impact of the price increases we have taken and evaluate as we're going forward the need for further price increases. But as you heard us say repeated times, Ihara-san, we remain strongly committed to use price

in the beverage market in japan and as you have seen we have lead led many of these price increases so far thank you is this your first question and what is your second question yes i have another question my second question is about the share buyback And the payout ratio, you have reviewed it. I fully understand where you're going for that. But for the share buyback, what is going to be your policy in the future, I want to ask? Because next year on, the free cash flow level will go up, and there's going to be a transition phase probably. So is there anything you can share on your share buyback policy? Thank you, Yuhara-san. So about the share buyback, what is our policy for the future? What is our position? This will be answered by Beyonce.

Thank you, Harassan. Bjorn here again. As you rightly said, we have or we will be implementing an up to 30 billion share buyback now for our stock. Share buybacks remain part of the total shareholder return toolbox. And as you have seen in the revision of our capital policy and our focus on total shareholder returns now, We are progressively increasing the dividends, and we're doing share buybacks and cancellation of the Treasury stock. When it comes to future share buybacks, there's no plans for now, but we will, of course, continue to monitor this as we progress in our performance.

Thank you.

So, Ihara-san, that was the answer. I would like to move on to the next question.

I will unmute the next person. SMBC NICCO Securities, Takagi-san, please go ahead. Hi, this is Takagi. I hope you can hear me. Yes, we can hear you clearly. I have one question about top line growth. I know you are always highlighting on the top line growth. So there's not many years where we see Coca-Cola waters outperform the market or the competitors. So can you continuously outperform from years to come? And if you are confident that you can outperform the trend, what is the background to it? So I would like to understand whether you are structurally in a better position in terms of competitive uh compatibility thank you very much so you would like to ask about the top line growth uh we have all outperformed the trend of the market this year but your question is whether or not we can continue to do so so alex would you like to pick it up please thank you this is alex um look i think we when you look at the performance um so far this year we're very very pleased

with our top line performance with volumes and revenues expanding on the back of healthy and focus on the core portfolio. We're extremely encouraged about our sustained performance behind IATACA renewal that for the third quarter drove significantly high double digits. revenue growth. So this is extremely positive as back to the strategy of enhancing portfolios. So this we will continue to focus on driving sustained focus on the portfolio and we're confident on our ability to continue to do this.

Thank you.

So I would like to understand why Because you are having a great performance in this quarter. I understand you did outperform the trend. But what is the reason why you are confident that you can continue outperforming the trend? What are the kind of measures and actions that you are going to take? So I thank you very much. Your follow-up question is that what is the reason behind this strong performance and why we are confident that we can continue to outperform the trend? So, Kaleen, would you like to pick it up, please?

Mr. Takagi-san, Kaleen speaking here, and thank you so much for continuous interest in our business over the years. Well, I I felt the need to interfere and answer. Try to answer your question since we are working together for a number of years. So you are observing our business and and I was convinced that over the number of years we were able to build credibility, at least on number of areas. We have. always explain during these interactions that Coca-Cola Bottlers Japan have engaged on a fundamental transformation on the way how we're operating. We are coming from a background of 12 bottlers here in Japan, which was very fragmented approach, which fragmented processes, which fragmented systems, as well with probably very fragmented cultures. Over the years, We have transformed the business. We have transformed the processes. We improved significantly the culture in the company, and we massively invested in technology. I think the results coming today are not coming by accident. These are coming as a result of all this transformation over the years. I just want to say that another absolute strong element It's our partnership with Coca-Cola Company here in Japan. We cannot forget the fact that we are benefiting for a large number of what we are calling billion-dollar brands, which were built here in Japan over the number of years. And I have to say that Coca-Cola bottles in Japan have led the market for a number of years. Now, for the recent years, which were affected by by the corona, by the number of particular issues, we have had ups and downs in the industry, which we think that we are over right now and we are going through a more stable path. Looking forward, our conviction is that our strong brands and our capacity to execute, plus the fundamental change in the way how we are operating and improved our business are strong reasons to believe that we are going to lead the market. And of course, growth for us is fundamental. Our opinion is the growth in the industry is the key lever for future health of the businesses. Nevertheless, we have declared as Coca-Cola Bottles Japan our absolute commitment to profitability improvement and to total shareholder returns. And as you notice on today's communication, we have made the fundamental step of communicating improved annual results in line with our strategic plan, Vision 2028, as well a comprehensive and unprecedented scale for our company total shareholder returns program. Now, I hope that this will give you the answer and as well some confidence on the progress of our business over the framework of our vision 2028. That's all from me.

Thank you very much. Thank you, Takagi-san. Operator, please put through to the next question.

I'm muting the next speaker. Morgan Stanley, MUFG. Miyake-san, please go ahead. Thank you for taking my question. This is Miyake from Morgan Stanley. I have two questions. Firstly, when I look at slide number eight, And this shows the trend or transition of market share. And I can see the increase in VM and as well as growth in OTC. And share increase rate slightly different between the volume and the price. So I'd like to know where these differences come from. That's the first question. Thank you, Miyake-san, for your first question. So your first question is that overall your market shares are growing. However, the rate of growth between the value and volume are different. So where do these differences come from? Alex, please take this question.

Thank you, Mia. Alex here. We're seeing, I think, first of all, very positive attraction on value share growth, as you say. we continue to drive growth within vending channel, particularly year-to-date 0.9 and in the quarter 3 of 1.6, which is showing a testament of the commitment of driving profitable value share expansion. Particularly on the OTC, we are seeing a very solid momentum as well, in CBS, primarily on the expansion of new products, as well as the Ayataka renewal. And particularly when it comes to SMDD, we were impacting in the full year on the back end and on the front end of the year with large PET volumes impacted on competitors not following prices, but that has been able to stabilize towards the third quarter. So we're very confident on the momentum and the sequential momentum of value share expansion across the channels.

Thank you very much. So it's a minor difference, but in order to understand the rate difference, I understand that you mentioned that it's partly impacted by the mix. So additional question. So to understand the difference in the rate, does it include the impact in mix? Yes, your understanding is correct. And next, slide 24. In the OTC channel share, sell-in, sell-out could have different data points. But in the OTC channels, particularly strong is drugstore. It's showing a very strong growth, particularly on the supermarket. Convenience are a big market as well. So compared with the market where you particularly outperform And volume share is flattish. So there could be some inferiority against the market. So that's something I would like to know. In addition, inconvenience, I could see some decrease in July to September. So I like to understand the background. So by channel growth difference, especially drugstore is showing the stronger growth. which channels particularly are performing against the market and which channels are particularly struggling slightly against the market average. So, Alex, please take this question.

So, particularly when it comes to SMDD in supermarket and drug discounters, our volume and market share were positively from May as competitors follow our price increases on large VAT. Particularly to the question on convenience on the Q3, there was a cycling effect of a large impact on non-recurrent promotions that we decided to curtail on the back of profitable growth in the channel. Nevertheless, in the full year to date, we're still growing value share and driving profitable expansion in the channel.

And you also mentioned that the unit price in convenience or the price per case seems to have decreased in Q3 alone. So the wholesale price per case.

Thank you. And this is just a reminder of, as we called it out last call, The effect of the pricing drop that you're seeing is on the back of the expansion onto new SKUs that are adding, particularly on MIDI PET water that is, again, generating incremental transactions and revenue, but then affecting a wholesale price or mix into that. We are not concerned on that because we are, in the end, driving value growth and profitable expansion, and as a consequence, has a negative effect on me. But that will eventually fade away.

Thank you. Thank you very much. So this year, in both volume and wholesale price per case, you are focusing on both of them. You are working to grow both of them.

I will unmute the next question. From Mizuho Securities, this is Sachi-san. Thank you. I have one question to ask. And about the recent trend, the cost is going up. And people, the consumers, are trying to economize. They're trying to save their spending. That is threatening as a trend. And looking at the channel mix, I think people are going to like these discount channels. Vending is not growing. And maybe they're shifting towards the discount store channels. And there is some negative channel mix impact, I think. And at this timing, you have done this price revision when this trend is happening. But looking at the latest market trends and next year, what is going to be your channel strategy? that you have in mind based on the trend that you're seeing right now. Thank you. Well, Sarisan, thank you very much for the question. Your question was, right now, the consumers are becoming cost-oriented, and it seems that they're buying more from the discount channels. And at this timing, we did the price revision. But what is going to be your future channel strategy? So, Alexan, please.

Thank you, Sarisan. This is Alex. Let me just go back. The recent performance and the recent trend that you're seeing across the channel, you're seeing OTC growing faster than vending. Particularly with vending, it may appear flat. However, let's just remind ourselves that I'll benefit the channel. I'll be benefited by the heat wave. It was significantly offset by the typhoon 10, which was long and a strong effect in Honshu, which eventually took the wind a little bit on the channel. Nevertheless, despite this, we have been able to expand value share strongly in Q3 in the channel and into the year of 0.9. So we continue to see a very strong momentum. Going forward into the future, we will continue to leverage on our co-con platforms to continue to drive traffic in the channel, and we reinforce our commitment to drive vending as a profitable growth driver for us at CCBI.

I think it was a good question.

Yes, so the latest trend is like a downtrend, I think, but any comments on that? Well, thank you for the additional questions. So the latest trend is your question. And due to this, you know, market situation, is there any change in the channel strategy for next year? Alex, please.

What we're seeing is a faster growth in OTC channels than vending. That doesn't mean, and that's causing the effect on mix. Going forward, we'll continue to drive traffic into the channel. We'll continue to drive top-line and profitable growth by executing against a very disciplined strategy by channel.

Okay, thank you very much. Thank you. So those were all the requests that we have for questions. And we are close to our closing time. And we would like to finish the Q&A session. The contents of today's presentation will be available on our website following the presentation. If you have any questions or feedback, please contact our team. Thank you very much for joining the call today.