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 our full-year 2024 earnings presentation for analysts and investors. Today, we have President Colleen Dragan, CFO, Beyond Organics, and Coca-Cola Japan CMO, Sue Choi. We are also joined by Executive Officer and President of the Littler Company, Alex Gonzalez, 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 Fellert, and Executive Officer and Chief Human Resource Officer, Yuki Higashi. For in prepared 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 Kaleen Dragan. Kaleen-san, please.

Good afternoon, everyone. This is Kaleen Dragan. Thank you for joining our earnings presentation today. First, let's go over the highlights of today's presentation. Please turn to slide three. I am pleased to share that 2024 was a great year with many significant achievements. We achieved 12 billion yen in business income, six times higher than the previous year, exceeding the upwardly revised plan during the period. As a year of strong profit buildup, we have achieved a significant increase in profits that continues from the previous year and remain on track to achieve Vision 2028. Revenue grew 2.8%. Sales volume exceeded our initial forecasts, driven by Ataka's success and other factors, leading to strong growth. The series of price revisions improved wholesale revenue per case, and revenue growth outpaced the volume growth. As the October price revision is contributing to earnings growth and confident it will lead to elevate profit levels over the mid to long term. In line with Vision 2028, in November, we announced the Comprehensive Shareholder Return Program. This is an unprecedented shareholder return program, including an ambitious dividend increase plan through 2028, and the share buyback of up to 30 billion yen and shows a major step forward towards maximizing shareholder value as set out in our vision 2028. In 2025, we will continue the profit growth momentum and as a year of achieving both profit growth and strengthening foundation, target 20 billion yen in business income. 1.7 times greater than the previous year. At the same time, we will work to improve profitability and investing growth from a mid- to long-term perspective to build a structure that can generate sustainable and stable profits. As one of the measures to further improve profitability, we will implement further price revisions in major categories within 2025. Now, let's move to the next slide for our full year results for 2024. Before going into the full details, on slide five, I'd like to highlight our progress towards vision 2028. Please look at the graph on the left. Over the past two years, we have achieved an remarkable earnings recovery. In August 2023, we have announced Vision 2028 and delivered significant profit improvements, returning to positive business income ahead of schedule. And in 2024, we further increased profits by 10 billion yen. Despite the raising costs pressures we are seeing now, we have improved profits by more than 26 billion yen over the past two years. And we are very happy about this achievement. It demonstrates that our key initiatives and business performance are progressing steadily, keeping us on track to achieve vision 2028. On the right side of the slide, you will see our key performance indicators for 2024. Business income grew six-fold from the previous year, while ROIC, one of our key metrics, improved by 1.1 points from the previous year. EBITDA, which indicates the profitability that is the source of cash, reached 57.5 billion yen. In addition, Under our comprehensive shareholder return program, we increased dividends for 2024 and executing a share buyback program of up to 30 billion yen. These results demonstrate a strong start towards achieving the goal of Vision 2028 with the focus on profitability and capital efficiency. Now I will hand it over to CFO Bjorn Ullgenes for a detailed review of our results.

Bjorn Ullgenes Thank you, Colleen. Hello, everyone. This is Bjorn. Please turn to slide six for the full year P&L. In 2024, achieved strong growth in revenue and profits following last year. Revenue increased by 2.8% year-on-year, driven by higher sales volume and a series of price revisions, leading to improved wholesale revenue per case across all channels. Sales volume grew 2% year-on-year, successfully capturing increased demand from the heat wave and other factors. Gross profit increased 4.7%, outpacing revenue growth. Improvements in wholesale revenue per case from price revisions and manufacturing efficiency led to an approximate one percentage point improvement in gross profit margin from the previous year. Business income increased by 10 billion yen year on year, driven by top line growth and cost savings from transformation. Factors contributing to this change in business income are detailed on the next slide. Operating income exceeded business income to reach 13.4 billion yen, an increase of 9.9 billion yen from the previous year. This was due to the booking of other income from fixed asset sales as part of our efforts to optimize the balance sheet. Net income rose 5.4 billion yen year on year to 7.3 billion yen. EBITDA was 57.5 billion yen, an increase of 9 billion yen from the previous year. Please turn to slide seven for our primary business income drivers. Business income grew six-fold year on year to 12 billion yen, driven 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 8.5 billion yen from commercial activities. On top of sales volume growth and contribution came from higher wholesale revenue per case following price revisions. Transformation benefits totaled 5.7 billion yen with initiatives across all areas generating benefits as planned. Marketing expenses increased by 4.3 billion yen from the previous year, fully leveraging the strong performance of Ayataka while implementing ROI-focused marketing investments, which had been restrained in the year prior. In manufacturing, higher sales volume led to increased manufacturing volume and improved production efficiency. In addition, cost-saving measures at plants reduced manufacturing costs per case, resulting in a 2.5 billion yen decrease in total manufacturing costs compared to the previous year. Other costs increased by 2.3 billion yen from the previous year. While labor costs decreased due to cycling previous human capital investments, We continued executing necessary growth investments at appropriate levels for sustainable growth. Additionally, rising logistics costs impacted. Commodity and utility costs remained flat year over year, despite the continued challenging cost environments. Some of the raw material and energy cost controls help offset the impact of the weaker yen. Please turn to slide eight for volume performance by channel and category. Sales volume for the full year 2024 increased 2% year on year, driven by the success of IATACA and effective commercial strategies. despite the impact of price revisions. Following the series of price revisions, wholesale revenue per case improved in all channels. In Q4, wholesale revenue per case increased by a double-digit yen or more across all channels following the price revision in October. In supermarkets, volume remained impacted by the decline following the price revisions. In drugstores and discounters, volume increased 4% due to efforts to capture market expansion opportunity. In convenience stores, volume increased 3% driven by new products and effective customer-focused marketing activity. In vending, While price revisions and unfavorable summer weather affected volume, declines were minimized by leveraging a strong market share base and executing digital marketing through the Coke on smartphone app. Price revisions contributed to wholesale revenue per case improvement of more than 50 yen from the previous year. In retail and food service, volume increased 4%, reflecting our response to increased demand from restaurants and tourist locations, along with the steady acquisition of new customers. In online, volume increased by double digits, driven by an enhanced product lineup and measures to acquire recurring buyers through customer collaborations. By category, Sparkling volume grew 3% year-on-year from increased Coca-Cola sales in restaurants and online, along with contributions from Sprite. In tea, Ayataka saw strong volume growth of over 15% year-on-year, contributing to a 9% overall increase in the tea category. Sports, water, and coffee declined due to the impact of the price revisions. Juice growth was led by Minute Maid, primarily through restaurants. Slide 9 covers market share and retail price trends. Our profitability-focused commercial activities have driven volume value share growth and contributing to expanding price premiums. Total channel value share increased by 0.4 points from the previous year. Vending value share continued to grow strongly, gaining 0.9 points. OTC channel value share turned positive in Q4. However, the lasting impact of the previous year's large PET price revisions on the volume share affected the full year value share. OTC retail prices for our products continue to maintain a price premium over the industry average. Following the October price revisions, small PET bottle OTC prices have improved in recent months, while large PET bottle prices have continued their upward trend through the series of price revisions. Slide 10 highlights our sustainability and human capital enhancement initiatives for sustainable growth. As part of our environmental and community efforts, we have worked to develop products that minimize environmental impact, including expanding our label-less product lineup and promoting horizontal recycling of aluminum cans. We also introduced manufacturing lines optimized to reduce water and energy consumption. We focused on initiatives to further strengthen our human capital. Approximately 25% of executive meeting time is allocated to active discussions on human capital strategies. And we ensure steady implementation of these strategies by setting KPIs linked to executive officer bonuses. From the next slide, Colleen will present our full year business plan for 2025.

Thank you, Bjorn. This is Colleen again. Slide 12 outlines our strategic direction for 2025. We have positioned 2025 as a year to achieve both profit growth and strengthening our foundation. Building on the strong performance and achievements of 2024, we will promote simultaneously both profit generation and strengthening our foundation for sustainable growth, aiming to achieve vision 2028. Based on this direction, we will focus on profit growth driven by top line expansion and accelerated further transformation. Our 2025 targets include a 1.5% revenue increase and business income of 20 billion yen, 1.7 times higher than the previous year. For top-line growth, we will execute a strategy centered on maximizing profits with a mid- to long-term perspective. On the transformation front, We aim to generate 5.2 billion yen in total cost savings this year. And we will also leverage technology and establish new business processes to help build the foundation for sustainable profit growth. We will continue to improve capital efficiency this year by optimizing our balance sheet and appropriate control of CapEx. To enhance shareholder value, We plan to increase the 2025 annual dividend by 8% under our progressive dividend policy. Slide 13 presents the P&L for the full year 2025 plan. Our goal is to continue increasing both revenue and profits year on year. We expect revenue to grow by 1.5 percent year-on-year, supported by profitability improvement measures, including price revisions, which will raise the wholesale price revenue and the revenue per case, while sales volume is expected to grow by 0.5 percent. Our sales volume plan also accounts for the cycling of the last year heat wave and price revision impact on volume. A key takeaway is that the revenue growth is expected to outpace the volume growth and gross profit growth is projected to exceed the growth rate of revenue. While cost pressures remain this year, we are committed to improving profitability despite these challenges. Business income is forecasted to reach 20 billion yen, about 1.7 times higher than the previous year. Factors contributing to this change in business income are detailed on the next slide. We also expect operating income and net income to increase for the year, reflecting the improvement in our business income. Please refer to slide 14 for the primary drivers of business income in 2025. We aim for 8 billion yen in year-over-year profit growth. On the left, you will see volume, price and mix. While we expect price revisions to be the main driver of profit growth by improving wholesale revenue per case, we are also factoring in channel mix impact for an improvement of 12.7 billion yen year-over-year. Furthermore, The effects of further price revision scheduled to be implemented in major categories within 2025 are factored in at a certain level. Cost savings from transformation will be generated in all areas, including commercial, supply chain, back office and IT, with a target of 5.2 billion yen in total profit contributions. Transformation initiatives are progressing as planned towards our Vision 2028. DME is planned to increase by 4.5 billion yen from the previous year. To achieve Vision 2028, we will strategically invest in marketing focused on ROI, driving meat to long-term growth, and further strengthening our growth foundation. In manufacturing, we expect to reduce costs by 0.2 billion yen to improve the efficiency and cost management at production sites. Other costs are projected to increase by 2.5 billion yen. Overall costs will raise as we invest at an appropriate level to support further profit growth. Logistics costs are expected to increase due to factors such as raising per unit costs, though we have partially controlled this through various initiatives. We expect commodity and utility costs to worsen by 3.1 billion yen year on year, mainly due to raising raw materials and package prices. This includes the slight cost increase due to the depreciation of the yen and rising energy prices. And by working with the Coca-Cola system, global procurement organization, and leveraging our own unique procurement strategies, we believe we can partially control this cost increase. However, we will continue to monitor the situation and take measures to minimize external impacts on our business. The severe cost environment is expected to continue in 2025, but our profit level remains on track with the vision 2028 plan. We will continue to drive efforts across all areas to ensure we achieve our business income targets. Now slide 15 outlines our commercial strategy for 2025. In commercial, we will implement a top-line growth strategy centered on maximizing profits. Our commercial strategies are enhancing portfolio edge, further vending transformation, and profitability-focused commercial activities, and strengthening customer management. And from the next slide, details of the commercial strategy will be shared. Sue from Coca-Cola Japan Company will explain enhancing portfolio edge. Sue, please go ahead.

Thank you, Colleen. This is Sue Choi from Coca-Cola Japan Company. Today, I'm pleased to share our key marketing strategies and highlights, underscoring how we are enhancing our portfolio edge. Our core strategies revolve around three key pillars. For striving our core categories, developing strategic and purposeful innovation, and connecting with their consumers through technology and data-driven experiences. Starting with building the core categories, last year Coca-Cola trademark experienced strong growth thanks to a focused effort on core priorities. As we move forward, our goal is to reinforce this growth by attracting new users, particularly through meal occasion. We're evolving our successful Coke with Meat campaign into the Coke with Chicken campaign named Coke Chew Blue, implementing it through a comprehensive and holistic approach to build consumer habits. For Ayataka, following a complete brand renewal last year, Ayataka's trademark continues to build momentum. In its second year, we aim to strengthen the brand edge and solidify our portfolio to attract new users. Georgia coffee, our top priority in the coffee category, is an ongoing enhancement of Georgia to ensure it provides the best possible brand and product experience. The brand focuses on recruiting and engaging coffee lovers, especially during the winter season, to drive profitable growth in this category. In strategic and purposeful innovation, We have launched and upgraded several products to meet the growing health and wellness needs of our consumers. First, Yakon Koi Barley Tea. This product launched last year. It includes ingredient for body fat reduction and addresses daily hydration needs. And Aquarius ORS launched last June. We've renewed the packaging and communication for Aquarius ORS which now carries an official Food for Medical Use label catering to health-conscious consumers. To connect deeply with our consumers, we initiated a new campaign carrying ayataka with onirigi, a popular Japanese soul food, to drive greater consumption of the refreshed ayataka. For continuous improvement in digital engagement, we'd like to share that our Coke On app has surpassed 60 million downloads as of January. We remain committed to evolving this platform to offer value, convenience, and funds for consumers. And we'll continue to enhance our platform for better consumer experience. In summary, we continue to prioritize driving core category growth, implementing strategic innovation, and leveraging technology to connect deeply with their consumers. Thank you for your attention.

Thank you for your presentation, Sue. This is Bjorn again. Slide 17 covers further vending transformation. We will advance our vending business by leveraging technology and improved processes. For top-line growth, we will further utilize the Coke On app to attract loyal users. In addition, we will implement usability improvements, such as expanding QR code payment options and enhancing the digital capabilities of vending machines, creating more sales opportunities. Furthermore, we will optimize our vending machine assortment with profitability focus. Until now, our product assortment strategy measures focused on revenue growth, but going forward, we will adopt the balanced approach that considers both revenue and operational efficiency to drive profit growth. While aiming to increase revenue, we will also improve visit frequency and product filling rates at vending machines, leading to higher route productivity. We will make this initiative a reality by leveraging technology, including AI, and fundamental review of our processes. Additionally, we will further improve efficiency of our vending business and enhance capital efficiency. We will improve productivity through end-to-end process transformation. Our efforts include optimized vending machine lifecycle costs, strategically placing vending machines with a focus on ROI, and expanding online connectivity based on effectiveness. We will work to improve investment efficiency and capital efficiency. We will also ensure that the commercial activities remain profitability focused and accurately assessing the profitability of each location and optimize costs accordingly. Through these efforts, we aim to improve route productivity by more than 15% year-on-year in 2025 while also growing our value share. Slide 18 covers profitability-focused commercial activities and strengthening customer management. We will implement the profitability-focused growth strategy for each channel while also reinforcing our future growth foundation. To achieve sales volume growth and improve product mix, we will expand sales space by strengthening core products and categories. Additionally, we will develop products and packaging tailored to consumer needs for each channel and customer. aiming for profitable sales volume growth. In previous years, we will follow a flexible pricing strategy to maximize profits. Given the current cost environment and our profitability, we will implement further price revisions in major categories within 2025. We will apply learnings from past price revisions to strengthen profitability. In addition, we continue to explore further measures, including additional price revisions to improve profitability. For growth investment and marketing expenses, we will prioritize ROI-driven investments with a mid- to long-term perspective. At the same time, we will optimize costs to improve profitability. A marketing strategy will shift towards digital channels with a high return on investment, such as app-based promotions and retail media. We will also refine profit management accuracy at the account level to support better decision-making in marketing activities and cost assessments. We will implement these initiatives through strong partnerships with our customers. Our products, pricing, and marketing strategies will be tailored to the characteristics of each customer. Through a cross-functional commercial structure, we will provide comprehensive solutions to customers and build lasting partnerships. Slide 19. shows our supply chain initiatives for this year. We will continue to further optimize our end-to-end supply chain network by leveraging technology and building more advanced data-driven processes through DX. This year, we will continue to advance the local production for local consumption model, manufacturing products at farms near to areas of consumption. Our sales and operational planning process is running smoothly, and we will further improve its accuracy to ensure a stable, cost-efficient supply while optimizing and reducing product inventories. This year, we will launch a new integrated distribution center, allowing us to further enhance inventory consolidation and optimal product placement, to move forward with further strengthening our logistics network for the future. The Integrated Distribution Center, or IDC, is a large-scale distribution facility with a hub warehouse function offering capabilities beyond traditional distribution or delivery centers. By strategically locating IDCs in optimal areas, we can integrate multiple sales and distribution sites streamline inventory management, reduce transportation distances, add number of touches, and improve end-to-end processes. In logistics especially, we will strengthen our collaboration with other companies, implement cost savings, and address issues facing the logistics industry as a whole. Through these initiatives, we aim to ensure a stable and cost-efficient supply while improving Key measures include consolidating locations, maximizing the use of existing facilities, and optimizing product inventory management. Slide 20 highlights our back office and IT initiatives. We are implementing various measures to achieve further data-driven management as set out in Mission 2028. In 2025, we will further accelerate the fundamental review of our operations, standardized business processes, and expand automation by leveraging technology. We will reduce operating costs by making appropriate use of the capacity created through increased operational efficiency and bringing outsourced work in-house where appropriate. Strengthening collaboration with our partners is also key to promoting transformation. One example is NeoARC, a joint venture with Accenture, established in January 2024. Its initiatives are progressing as planned. By combining our knowledge and experience with Accenture's expertise, we aim to further increase efficiency through a strong collaborative framework. Through these initiatives, we expect to generate 1.5 billion yen in benefits from the transformation of our back office and IT functions in 2025. In addition, initiatives are also underway to strengthen our digital infrastructure for the mid to long term. Alongside efforts to strengthening development of digital human resources, We are working to integrate various IT systems and data across the company and are building a new technology foundation that will lead to sustainable growth. Slide 21 outlines our initiatives to improve ROIC and increase shareholder value. In 2025, we plan to invest 35 billion yen keeping it within the range of depreciation as stated in Vision 2028. With a focus on return on investment and ROIC, we will prioritize investments that drive mid- to long-term profit growth. This includes a 5.3 billion yen increase from the previous year, mainly from sales equipment and IT-related areas. We remain committed to optimize our balance sheet We will achieve optimal product inventory allocation and reduction and fixed asset reduction through transformation. We will also work to make effective use of existing assets. We will appropriately allocate the cash flow generated through commercial activities and balance sheet optimization to growth investments and profit returns. Towards increasing shareholder value, we will strengthen shareholder returns based on the comprehensive shareholder return program announced last year. For dividends, we plan to increase for the second consecutive year. This year, the planned annual dividend per share will rise 4 yen to 57 yen. Our share buyback program has been progressing as planned since the November announcement. By the end of January, we have repurchased 7.4 billion yen in shares, and the remaining 22.6 billion yen will be acquired by the end of October 2025. As part of our comprehensive shareholder return program, we have decided to introduce a shareholder benefit program. By using Coke on drink tickets, We will provide shareholder benefits at the lower cost, controlling shipping fees. We will work to increase our corporate value by expanding our investor base and attracting more fans to our company. Colleen will now share his summary. Colleen, please.

Thank you, Bjorn, and Colleen here again. Let me conclude today's presentation, and please turn to slide 22. Once again, 2024 was a great year for us. Many key initiatives delivered results, and we achieved business income six times that of the previous year. This was a major step forward in reaching our profit targets for Vision 2028. This year, we will further progress towards our goals for Vision 2028. As a year for achieving both profit growth and strengthening foundation, we will build on the achievements and strong results of 2024, aim to generate 20 billion yen in business income while further reinforcing the foundation for sustainable profitable growth. And as part of this effort, we will implement further price revisions in major categories within the year. Beyond short-term business improvements, We focused on sustainable, profitable growth through strengthening our growth foundation, driving transformation, and implementing measures to improve profitability, such as price revisions. Furthermore, we now have structures to allocate management resources to measures aimed at improving capital efficiency and strengthening shareholder returns. This represents steady progress in our efforts from a mid- to long-term perspective. We stay fully committed to achieving the Vision 2028 profit targets, which emphasize profitability and capital efficiency. We will continue this trend beyond 2025 and increase confidence in reaching our goals and taking further steps towards maximizing shareholder 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, Karin-san. This Q&A session is for analysts and investors. For members of the media, please refrain from asking questions at this time, as we will have a separate session later today. Simultaneous interpretation will be used, so please be sure to ask questions in the language of the participating line and one question at a time. Now I would like to start the Q&A session. Operator, please begin. If you would like to raise requests for the question, please press Hush 7. If you press Hush 7 once again, you are going to cancel your request, so please be careful. During the Q&A session, you can press hash 7 to raise your question request at any time. With that, I would like to invite the audience to press hash 7 for your question request. I have one request, so we would like to move on to the Q&A session. I will call out the person's name. Please state your name and the company name before your question. The first person, I will unmute the first person.

The first question is from Ihara-san, UBS Securities. Please go ahead, Ihara-san. Well, thank you very much for the presentation. This is Ihara from UBS Securities. Thank you. Hello, Ihara-san. Thank you. So I have one question to ask 2025 and your sales strategy is what you have explained. And this year, what are you going to do to win? That's my question. And from my perspective for your company, I think this year is going to be a really important year and you must win. And looking at the competitors, You know, they are dealing with the commodity challenges. That's all their challenges. And it's very difficult for them to invest in the marketing and market itself. But different from the other companies, I think you have the procurement ability and you are able to deal with those issues but also invest in the market as well. In 2023, 2024, you have increased your share. But 2025, if you're able to increase your share again, I'm sure that, you know, everyone, like investors, everyone thinks that, oh, the company has really changed. Therefore, so what are you going to be the strategy for this year in order to grow your share? And what is your pillar in your sales strategies? That's my question. Thank you. Thank you, Ihara-san. So this year, the sales strategy and how we're going to deal with the growing shares, I would like to ask Alex to respond.

Ihara-san, Alex here. As relates to the 2025, certainly is a year of building balance growth of total land wealth building and strengthening our foundations. Our strategy largely remains driving profit growth anchored in the four pillars that were outlined in the prepared remarks. We will continue to enhance portfolio edge Second one will continue to drive our vending transformation. We will further drive profitability-focused commercial activities. And lastly, strengthening customer engagement and customer management. The strategy largely is behind accelerating our profitable growth while strengthening our foundations.

Maybe Ihara-san, it's Bjorn, just a quick build on that. You will also see from our prepared remarks and the waterfall, we are rightly, as you say, investing in commercial strategies focused around the pillars that Alex just laid out. So we believe investing now for the future, especially from a customer and consumer standpoint, will pay off according to our mission 2028.

Ihara-san, that is our response. Yes, thank you. And may I continue? Go ahead. So what is the type of investment are you going to make? And what is the return that you're going to enjoy? I want some specifics. And this year, in order for you to grow your share, I think one is Ayataka, but Other than Ayataka, you need to be able to enjoy growth. But can I ask about the brand strategy? How are you going to increase your share with, like, which brand growth? Well, thank you for your additional questions. So what is the investment, the type investment? And also, what is our brand strategy to capture share? So Sue would like to answer.

Juniara-san, starting with Ayataka, As you know, we had a strong growth of Ayataka in 2024, and the growth momentum is continuing in 2025 as well, too. And we do have holistic and strong plans in place to continue the growth of Ayataka, starting with one, which is to continue the brand edge growth of Ayataka, but at the same time, to build habit with the consumers, providing Ayataka with onirigi, as a ritual to drink Ayataka together with the soul food of Japan, which is Oniriki. So by creating habit, we not only recruit new users, but we also build habit for long-term sustainable growth. So that's the plan against Ayataka to maintain the strong growth momentum. At the same time, we have identified our top categories we will continue to focus further to support the non-Nyataka brands such as Coca-Cola. Coca-Cola is definitely our competitive edge as a company and will continue the growth momentum on Coca-Cola through doing two things, which is building meals occasion and building Uplift as a brand credential to give consumers reason to drink Coca-Cola. So that's our second big priority in our top categories. And then also in coffee is a category where we have the right to win and will continue to focus on the growth of coffee through Georgia. I hope that answers your question.

Thank you very much.

We'll be interested. Thank you, Haru-san, for the question.

Operator, can we move on to the next question, please? I will unmute the next person. From JP Morgan Securities, Fujiwara-san is on. Good afternoon. This is Fujiwara from JP Morgan. Thank you. So I have a couple of questions. First question is about the achievement of Vision 2028. So you are planning to hit the 20 billion yen. So you have to fill the gap in coming three years. So I believe that you can ensure the cost reduction through the transformations. But not only this year, but going forward, you are likely to get through those like channel mix deterioration. So from next year onwards, 20 to 35 billion yen gap is to be closed by which kind of driver and strategy is the kind of things that we would like to understand. Thank you, Fujiwara-san. In order for us to achieve the vision 2028, I would like Kaleen-san to explain about which kind of driver we have to fill that gap.

Kaleen-san, for the question and the continuous interest in our business. Before going to talk about the future and the continuation of our vision 2028, I just want to say a big thank you to the shareholders that trust in us, and as well I want to say a big thank you to the people who understand and appreciate our business performance today. I just want to remind everyone, and I'm sure that our shareholders appreciate that, is the fact that this business 36 months ago was making minus 15 billion yen loss, while we are targeting now a plus 20 billion. So it's a swing of 35 billion in 36 months, which I think is an unprecedented exponential recovery for any type of business, let aside beverage business in Japan. This is a A trajectory which make us extremely, extremely proud and it gives us confidence that we are working and we are leveraging the right things. On our journey towards our vision 2028. Now going on for our vision 2028, we lay down a plan going up to 45 to 50 billion yen. So yes, there is a journey to go through it and I just This vision, we are fully committed to it, and it's our north star. It's our guiding route every moment and in every action that we are performing. So we have various levers to drive growth. We definitely bet, if you want, the future, because we consider that it's very healthy for the industry. We bet on pricing. we are seeing our consumer willing to pay the price for bottled beverages as an industry. Industry is facing challenges from yen devaluation, from commodities pressure, energy as well. So it's only logical that pricing, it will be a tool to mitigate and to create value within the industry, not only for this year, but for the years to come. And we announced this at the beginning of our journey on this Vision 2028, that pricing is an important element. The second big element of it, it is the portfolio edge, which is mentioned explicitly in our uh plan for 2025 that will stay for the following years of the vision and in close collaboration with ccjc we will drive that uh pillar as an extremely important element of our journey i just want to remind everyone that coca-cola system in japan have generated billion-dollar brands, as we call them, over decades, and is sustaining the pace of innovation and as well the growth. And an example being Ayataka, which we launched last year. We have as well announced further transformation. And we have moved from just simple reorganization of the 12 bottlers or if you want to call it more than 100 legal entities containing that bottling system in the past, we are moving from capturing synergies in that segment to capturing now real value and growth from transforming from a good bottler, to call it like this, to a world-class bottler. So all what we're working on is on commercial processes re-engineering, on supply chain processes re-engineering, on back office processes re-engineering, all of them supported by digitalization and investment in technology. And you can see that explicitly, and we are happy to share our mix of investments in technology and our commitment to it to be used in the future. Uhm, let aside the pillars for growth of the business, I would want to highlight our continuous focus on. Returning value to our shareholders. We have started this year and we have announced for the journey of Vision 2028 dividend progressive dividend policy, which will significantly add value to our shareholders as well for this year. share by back program of about 30 billion yen, which is in a full swing of execution this year. So that's something that we are considering for the future as one of the tools. And we are going to keep an eye continuously to make sure that we are returning to shareholders as we are progressing the business. Very happy to say that. Having in mind our recent track record, we are very confident with our future and again in the closure. I want to say thank you to all of you for the interest in our business and of course looking forward working together for the years to come of our vision 2028.

Thank you very much. I have one follow-up question. With regard to the Vision 2028, by 2028, you said you are going to achieve more than 5% in LOIC, but in recent days, as you rightly put it, you have reinforced the shareholders' return program. So I believe that you are on that track. But in 2028, How about ROE? The ROE target, what will be the target value of the ROE? Thank you for a follow-up question. Your question is about the thinking behind the ROE for the 2028. So, Byung, would you like to pick it up, please?

For the question? Yes, you're absolutely right. In our Vision 2028, we aim to deliver ROIC of plus 5%. And the plus is very important. As you heard Colleen and me say many times over in these calls, Vision 2028 is a milestone, but we as management do not aim to end there. We want to continue pushing the whole concept of return on investments for everything we do. Return on equity is also important. We're not setting specific targets for that externally. We are solely focused on the invested capital to drive, again, returns, whether that is marketing investments, vending investments, manufacturing investments, or people investment for that matter. Hope that answers your question.

Thank you.

Thank you very much for your answer. Thank you for your question. So please move on to the next person.

I'll unmute the next speaker. SMBC NICCO Security Takagi-san, please go ahead. Hello, this is Takagi. Can you hear me? Yes, we can. Please go ahead. So my first question. Talking about the price division, in your case, you already mentioned that you are going to implement another price hike this year, but talking about profitability, What is the likelihood of achieving the price division that comes with profitability or achieving higher profitability? Do you think that you will aim for higher profitability? Because over the past three years, Japan has been experiencing inflation. So I think you have various data points about the price division impacts and analysis and so on. So I think that your next price division will be based on all those insights you've accumulated over the past three years in a number of price divisions. And I think, do you have an aim to take leadership in price division in the industry? Do you want to become an industry leader in price division? While you aim for higher profitability, do you think that you will be able to increase profitability with another price division? Byun-san, please take this question.

Thank you, Taragi-san, for the question. Let me start, and then I'll hand it over to Alex for some more details on it. But overall, price is implemented for two reasons, as we said very clearly in our vision 2028. One, to make sure we cover inflation, inflation including, for instance, commodity increases. And secondly, to improve margins for us and hopefully also for the industry. So everything we do around pricing is targeted around profitability. It will vary by channel. It will vary by customer. It will vary by package. But all is aimed to increase profitability and 100% consistent with what we set out in our Vision 2028 strategy to improve profitability. the different initiatives as such. I'll hand that quickly over to Alex to help add a little to that. Thank you.

Thank you, Vera. Just probably want to go back to obviously pricing. When you look at the particular last year, I think pricing is progressing as we expected. looking at 2024 Q4, shipment prices are going with a new wholesale price. So we are able to drive wholesale price increase. Our volumes are positive for the quarter, which is I think it's a positive thing. We need to remember that we are cycling a low base of volume from last year. Nevertheless, I think, as I said, the wholesale revenue per case is increasing. We're driving revenue ahead of our volume. And we have done so for the last three years. So that gives us confidence on our ability to drive a price increase. We are taking and we have announced further price increases in 2025 across major categories. And we believe pricing is one of the levers to shape healthier industry dynamics in Japan. And so I hope that answers.

Thank you very much. And what I would like to know is about the future. I think that I would like to know your confidence level of profitability or better profitability with another price division. From this year and beyond, what is your confidence level in profitability while you implement pricing?

Thank you so much for your continuous interest in our business. Well, let me be bluntly honest and straight to you. Well, we have included with our best knowledge and best experiences in the past, the forecast of pricing for the following years of 2028. But this is billions and billions of dollars question, as it said in English, meaning we, We don't know what the future would bring to all of us because of the macroeconomics realities, global uncertainties. So it's very hard to don't say impossible to predict things like forecast, commodity pricing, and we are not gambling. What we can say is that we are committed to do for this year for sure and for next year as well, all the right measures that are healthy for the industry and for our business. And we believe that pricing in Japan, it can be a continuous tool for a healthy environment, not only for the beverage industry, but for the economy in general. Hence, assuming that the Japanese economy will improve and move to a healthier pacing for the future, It's to be assumed that this is a very healthy tool and a fair assumption to say that this is going to be around. Now, about our commitment and ask your question that if we take leadership into pricing, well, let me just remind you that we were the first one to put the prices up in 2019 in May in future consumption packages And unfortunately, nobody in the industry at that time followed. We have continued with our commitment a couple of years later when the corona crisis was over. And finally, I think the entire industry moved to better senses and understanding of the reality, probably responding to the new pressures in the market. And now we are able to have a healthy pricing environment. We believe that we are a rational industry. We are making rational decisions for our companies and for the future. But speaking about our company, we are staying committed to our vision 2028 journey, which we remind everyone that we are on track and in some aspects over delivering. I hope that answers the question. Thank you so much and looking forward to seeing you around.

Thank you very much. Thank you for your question. So that's all we have for the question. And now we would like to close the Q&A session. And the contents of today's earnings calls will be posted on our website. And if you have further questions, please contact the IR team of the company. Thank you very much for your participation.