Thank you for being here. It is a little bit cozy.
We deliberately wanted to host you at our offices for two reasons. I think it's great for our people to see you here, and it's also a lot cheaper than London hotel prices at the moment. We felt it was a better use of our cash. A little bit cozy, but we'll take plenty of breaks.
We hopefully will get a chance to get to a good Q&A session at the end of today. Big welcome on behalf of everybody at CCEP.
What I'm going to talk about today and all of my colleagues is really represented by over 30,000 really engaged and passionate employees at our business
It's great to be the messenger, but clearly that's built on a lot of people who are with us today in spirit, but frankly, they're out making, selling and moving all of our great brands as we tell our story today.
Just to the agenda, I'm sure you've seen our Q3 results, so I'll spend a little bit of time on that this morning, or this afternoon. Then we've got quite a lot to cover.
We deliberately took the view that we haven't been with you for quite a while, and a lot has happened and a lot is happening, and we felt it was really good to get into some good detail around what we're passionate about as a business, but also for you to meet a lot of our colleagues who are running our business and driving a lot of the great results that we'll talk a little bit later. Who will you meet today? I'll shortly hand over to our great chair, Sol Daurella, for some opening remarks. You'll meet a lot of our team at CCEP. I'd like to particularly thank Manolo. Where's Manolo? He's the Chief Marketing Officer of The Coca-Cola Company.
Has taken time out of a very busy agenda to be with us today, so thank you for that, Manolo.
Clearly, we're joined by a number of advisors in the room.
Thank you.
Some of our banks have joined us. Particularly I'm very pleased for our shareholders that are here today.
Thank you for being with us.
We're going to cover a lot. As we go through, each of the team will introduce themselves and tell you a little bit more about our CCEP story.
Before that, I'd like to just hand over to Sol for some opening remarks. Thank you, Sol.
Well, thank you very much for joining this capital markets day.
I want to join Damian in welcoming you all to this event. I can't imagine a better way of starting this day than with a market visit, where I'm sure you've seen our great execution and also, very important, met some of our most talented frontline people. It is thanks to them that all that we're going to explain to you today really happens. They are the ones that make all this happen. It's important for us that you also met them. I am very proud of this business and what we have achieved since the formation of CCEP in 2016 for all the value creation we have achieved.
With this track record as well as with the acquisition of API, I feel very confident in the future of our business, in spite of the uncertain times we have ahead of us. Of course, led by a great management team that most of you have already met, but some of them you're going to continue to meet today. With this, I pass on back to Damian, and I hope you enjoy the meeting.
Thank you, Sol. The good news is Sol will be with us all evening and till late at night with Nik, I think is the deal that we struck.
Not happening.
Thank you, Sol.
Just on to our Q3. I'm sure you've all had a chance to digest what was really another great quarter for CCEP. We're really pleased with the results we could post today. On top of that clearly it's a milestone to also take up our full year 2022 guidance. I mean, really across all of the performance indicators of our business, we've really had a very strong first half of the year, and indeed, that continued into Q3, which obviously gives us confidence as a management team to post a brighter outlook, for the full year 2022, raising our guidance on the top line, bottom line, and certainly myself and Nik's favorite topic, raising our free cash flow guidance as well, which we're particularly happy with.
Clearly a great foundation for a capital markets day. I did note that, and it could be in the room, but someone wrote that you got to expect good results on the day of a capital markets day. Sarah, correct me if we're wrong, I think we set the date for this a year ago.
As good as we are, we didn't really predict that we were going to come out with such a strong quarter, and we certainly didn't predict that we'd be operating with some of the volatility that we'll talk about as we go through today. Overall, really happy with the Q3 results.
Great foundation for another great year at CCEP, and clearly gives us the confidence as we've laid out a bigger and bolder set of targets in the midterm, which we'll talk a little bit later. Right across the board, strong revenue momentum, great profit momentum, and clearly great free cash flow. It kind of goes back to what Sol talked about. As a business, we've got a very rich history. I know a lot of you have been with us for a lot of that journey.
It really goes back to the fifties to the genesis of our business with the Spanish bottling operations and the families who remain really committed shareholders today in our business, all the way through a number of milestones, which obviously was the CCE deal.
Obviously we looked at the creation of Coca-Cola European Partners. As Sol mentioned a really great deal at a great time, and I'm really happy Peter's here to represent that deal, the acquisition of API. Around that, as you can see in this slide, a number of other very important milestones, particularly in the area of sustainability, and also starting with a new journey which starts today at our first capital markets day since 2019.
This is a slide I'm particularly pleased with because as we laid it out, I think it tells a really good story about how quickly we've grown as a business. But more importantly, the value creation that is really at the essence of our culture at CCEP.
We're firmly focused on creating value for our shareholders, our customers, and clearly doing that in a sustainable way. If you look back, and again, I'd point back to June 2013, quite a while ago in some ways, but in the history of the Coke system, quite a short period of time. Very big and bold moves by the Spanish bottlers to consolidate what was already probably held up as one of the best Coca-Cola businesses in the world.
Now, those families came together to form Coca-Cola Iberian Partners. That took a business that was already in great shape to an even higher level, and really was the catalyst for a bigger and bolder vision for Western Europe.
That vision really came together with the formation of Coca-Cola European Partners, which took us to 13 countries with the consolidation of CCE and the German business, which has been a fantastic success as well as we look back on CCEP. EUR 11 billion revenue, EUR 1.9 billion EBITDA, and over 24,000 colleagues. We all know what the last couple of years have thrown at us as a business, as people, as families, and we've all got through that together. During that period, we thought it was a great idea to make this business even bigger.
Clearly, acquisition of API may have caught some of you by surprise at the time.
As we'll demonstrate today, and as you'll hear from Peter a bit later, a fantastic acquisition for CCEP, and has really changed the footprint of our business, not just in terms of our geography and our results or EPS, but also in terms of our culture. I think that's something we're excited about sharing a little bit more. A fantastic journey. Where does it leave us today?
Thank you again, Manolo, for joining us.
Maybe this is why he's here.
We are clearly the largest bottler by revenue, so over EUR 14 billion in revenues. It's not really about that number.
For us, what it does bring is a really strong alignment with the Coca-Cola Company, and that leads to investment decisions, innovation decisions, and clearly gives CCEP a good seat at the table and allows us to have a great dialogue and continue to challenge ourselves on both sides of the relationship to make this system stronger across all of our markets. As we lay out today, we've got a very clear strategy.
This goes back to our board meeting in the summer, where we took a couple of days out with all of our directors to really step back and look at where do we go now with CCEP.
That followed on with a board meeting in Indonesia, which you'll hear a little bit about today from Peter, where we really wanted to expose all of our directors to the opportunity and to some of the challenges that we see in our Indonesian business. That led through to our last board meeting, which was in Heidelberg in Germany. A great meeting where we signed off, and we talked a little bit about what we want to do strategically, leading to today's meeting, where we obviously will share with you. It's part of a journey. Next week, we will have, I think, Nik, about 1,000 of our suppliers.
We'll have a supplier day. As you'll hear throughout this afternoon, suppliers are a critical part of our journey. The next audience we'll share this story with will be our suppliers next week.
Clearly, we've high expectations of how they will help us achieve our goals. Then at the end of November, in London, we'll have approximately 150 of our senior leaders globally coming together to spend two days together to really work on how we bring this into action into 2023 and beyond. As we look at our strategy, it'll clearly make us more diverse.
I'll talk a little bit about that later.
We've committed to a more accelerated top and bottom line growth in the midterm. You'll hear from Ana today about how we're continuing to make our business more sustainable. We've a lot to do, but we are leading in that space. We have even greater relevance, as I talked about with the Coca-Cola Company, but also with our great partner in Monster.
We are very committed to returning more value to our shareholders, and Nik is going to talk about that at the end of today. I think it's a good way to finish. Clearly, you're going to see and hear from, well, I'm very lucky to lead a great group of diverse, talented, and inclusive leaders. All of that gave us the confidence to lay out today a more ambitious midterm objective.
From a revenue perspective, taking it up to that 4% number, profit 7%. Again, free cash flow, I think a great number, EUR 1.7 billion minimum. We're committed to our deleveraging. We've been very consistent about that before the API deal and after the API deal. We have raised our target on our ROIC.
Clearly, our CapEx is an important driver of our business, but we're very comfortable in the range of 4%-5%. Nik will talk a little bit about that later. As always, progressive dividend policy, which we maintain at 50%, which I think is great news for all of our shareholders. That's the context in which I'll just share a little bit more about why do we believe in that ambition, and where do we see that coming from in terms of value creation.
It's a great category, and I think Manolo will talk a little bit about that later. On the backbone of that, I just wanted to come back on some of the commitments we made to you and to all of our shareholders in 2016, when we created CCEP.
Now, clearly, we laid out that we believe diversification of our portfolio and of our geography was a key value creation enabler. That led to a lot of value, which we'll talk about later, being returned to our shareholders. We took some bold decisions early on, whether that was on promo pricing in places like Belgium, France, or here in GB.
We took a lot of cost out. I'll talk a little bit about that later. Clearly it led to the Amatil deal being possible, both from a relationship perspective, but also from a funding perspective, and a belief in the management team that we could really extract value out of the Amatil business. Just on diversification clearly if you go way back, we were quite a narrow footprint in Western Europe. The business wasn't growing. We turned that around.
That gave belief across the system and at the Coca-Cola Company to allow us to get bigger. Now if you look at our geographies, you've got a nice mix of obviously key profitable European markets, Australia, great business, New Zealand, a great business, and Indonesia, which we see as a fantastic mid to long-term opportunity for significant growth and value creation. Below that, we've expanded our portfolio and our categories and our packs.
Both of those are represented on this slide in volume. Clearly, if you look at it in revenue, it looks even more diverse as our smaller packs generate more revenue, and some of those categories, particularly energy, contributed a lot more in revenue than they do in volume. We remain a very balanced bottler. Pre-COVID, we were probably more in the 50/50 range of revenue between retail and away from home.
That's coming back, and we've seen that come back very strongly in the second half of 2022. Obviously, we're a much more diverse company now, adding in the great markets of API, leading to over 30,000 engaged and committed employees. A very nice, diverse and growing business. What has that achieved in terms of shareholder value creation? 50% TSR, EUR 5 billion in cash returns, and very pleasingly, a consistent 10% EPS CAGR. On the left of the slide, you can see what I talked about starting back with our European journey. Pre-2015, Western Europe was in revenue decline.
Those of you who followed the creation of CCEP will remember that one of our commitments was we return Western European markets to growth.
Let's say there was a bit of skepticism about that in the room at the time, and probably quite rightly so. We addressed that and with great momentum coming into 2020. Obviously, we dealt with the COVID situation, and a big thank you to all our employees who navigated that extremely well. We're seeing our growth returning. Obviously, the comps help, but back ahead of 2019, and I think that's critically important.
That led to very good earnings per share progression, free cash flow, which we're very passionate about, and obviously significant shareholder returns over time. That's something obviously we're committing to as we go forward. I talked a little bit about some of the decisions we took.
I mean, we could spend a long time going through everything, but I just wanted to call out some of the bold decisions that unlocked that shareholder value creation and that top-line growth. We exited a lot of underperforming categories, particularly bulk water.
We got rid of a lot of loss-making SKUs. José Antonio will talk a little bit about that later. We got much smarter around making more money in the home channel. Nik will touch on that a little bit later. Clearly, when COVID hit, we quickly realized as a bottler who had a fantastic away from home business at 50% of our revenues, that for a period of time we were going to be a retail-only bottler. It was very different for us to digest. None of us expected that it would last that long.
We quickly pivoted, got all of our leadership together and said, "Okay, we're going to be a home market business." We thought for six months, let's be honest. No one expected it was going to go on that long. That really helped us to extract a lot more value out of our retail business and for our customers to extract a lot more value.
As we sit here today, the profitability mix between retail and away from home is much more balanced than we saw pre-COVID, and that gives us a lot of confidence going forward. Clearly, with the Coke company, we went back to where we make money. Double down on sparkling, much more selective around innovation and getting back to what we know drives long-term value around immediate consumption.
More premium and small packs, increasing in our mix considerably over that, at that time. Clearly, as you'll hear from Peter later, some of the learnings from our European journey we shared with Australia, allowing us to do something that certainly when I was working in Australia was unheard of, which is to take down our promotional intensity. That's worked, and Peter will talk to that a little bit later. We continue to create value for our customers, recognizing that we do operate in quite a challenging environment, particularly with some of the new buying groups.
Yes, we've navigated that well. It has led to some disruption, but clearly, our eye is on the mid to long-term value creation, and sometimes you've got to get into those difficult and challenging conversations, and we did that.
When you look at where that lands in our P&L, one of the key metrics for us was clearly to drive our revenue per unit case. I'm particularly happy that even when we lost a lot of our away from home revenue and volume. We could come out of COVID with significant unit case growth. That clearly has supported a lot of our bottom line growth and is built on the back of those small packs, premium packs, and sparkling and energy categories, and tea, where we know we can drive that margin.
It wasn't all about the top line. We've undertaken a number of structural changes in our European business in particular. We've delivered on multiple commitments around cost savings, whether that was on the back of the original CCEP transaction, or most recently on the API transaction.
Clearly in our midterm guidance, we've also set out another ambition to continue to help make our company more efficient and more productive as we look at investing for growth over the mid to long term. Just some numbers OpEx in Europe only, they are down close to 25%. Clearly, as a percentage of revenue overall, we continue to target that below 25%.
Where does it come from?
Clearly we've taken some big steps in Europe, particularly in markets like Germany. We've got smarter using data and analytics to drive down our trade marketing expenses. Clearly, COVID taught us all that we don't have to get on a plane at least five days a week. We've cut a lot of our unnecessary OpEx.
Procurement has been a big driver of value, and Ralph and the team have done a wonderful job leading that, and that flows into that meeting next week with our suppliers. We're going to keep using procurement as a key value driver at CCEP. As you'll see a little bit later from José Antonio, across our supply chain, again using mainly technology tools, becoming a more efficient and productive operation. Just on to Coca-Cola Amatil. A great deal at the right time.
A challenging time to pull off a deal of that scale, from a virtual perspective, but with great belief in the fundamentals of Australia and New Zealand, and we've a great belief in the opportunity of Indonesia.
We were very fortunate that we had great leadership in place pre-deal, particularly with Peter and his team, that gave us confidence that even in a virtual world, we could start, act very quickly to extract value from the Coca-Cola Amatil deal, and you'll see that coming through in our results. It gave us a stronger position with the Coca-Cola Company, a multi-geography bottler, now global, with a big Asian market. Structurally, a higher growth platform built on higher GDP population growth. obviously as we looked at it gave us access to emerging markets.
It was immediately value creating for our shareholders, and we had a lot of confidence that we could pay down that debt quite quickly, and Nik will touch on that a little bit later. A great deal at the right time, and more to come on that later today.
We are delivering value within a great category, a growing category, and a category with good, solid structural margins. It's about EUR 130 billion of revenue opportunity when we look at our particular geographies. Europe is growing about 3%, and API is growing about 8%. So when you compare to a lot of categories in the CPG world, it is dynamic, it's growing, it's profitable for us, and most importantly, it's very profitable for our customers.
I'll talk a little bit about that later. It's outpacing the rest of FMCG, so it is a leading category, and that's driven by Sparkling. That's on the back of a lot of innovation, whether it's zero sugar, some of the packaging innovation I talked about earlier, stronger marketing and investment from the Coca-Cola Company.
Clearly, it's also driven by energy on the back of a fantastic franchise with Monster. Huge innovation, great products, and again, a great online activation base. It's also interesting when you compare it to some other categories, beer, wine, spirits, snacks, which have had a good run. It's a super resilient category and continues to outpace most categories in CPG. As we look at our success, one of our benchmarks is, are we creating more value for our customers, not than our competitors, but than any other category?
That's a benchmark we've held ourselves to since we created CCEP, and we continue to do so.
We're not only generating revenue within our category, we're generating more revenue than any other category across our customers, particularly true in Europe, particularly true in Australia and New Zealand, and it will be true in the future in Indonesia. That really makes us very strongly positioned as we look forward. We're pretty consistent around the pillars of our strategy. It's great beverages, great service, great people, and critically, done sustainably for a better shared future. I'll just quickly touch on some highlights under each of these areas.
On great beverages, we've consistently diversified our portfolio. Talked about that earlier, particularly around low and no sugar. We've had a number of headwinds in Europe around sugar tax, which we've navigated probably quicker than we expected, and returned the category to even higher growth.
Clearly that no sugar proposition is bringing people into the category. As you'll hear from Manolo later, we're blessed to have the world's best portfolio of brands, and we've got a lot more that we can choose from that are not currently present in our markets in Europe today. We've a very strong share, and I think that really differentiates CCEP from a number of other businesses. Our Sparkling share is just over 58%, so that gives us real relevance with our customers. Our share online is higher than in store.
You'll hear from David later, who will explain how we make that happen and why we're confident that will continue. Unlike most CPGs, we sell everywhere. We've got a very diverse route to market, covering all channels from at work, hotels, eating and drinking, on-the-go, transportation, discounters, retail, online, offline.
This category, unlike, I think any other category, is pervasive in more opportune occasions than any other business. Clearly, that supports a broader pack price architecture, which is critically important in the volatile environment we operate today. Because our business is not built on one or two packs, it's not built on one or two brands or one or two channels.
As we look forward at some of the pricing opportunities, some of the risks we see potentially in down trading, some of those concerns we have around the macro environment, we have got a stable of brands and packs that will allow us to navigate that and clearly deliver on that new, more ambitious midterm guidance we outlined this morning.
On the back of that, obviously our customers, they like to make money on our brands, but they also want to make sure that they get the service that they deserve. We've got good customer service levels, over 90%. We've been recognized by The Coca-Cola Company with New Zealand winning the Candler Cup, which is a great award for any bottler to be recognized by the Coca-Cola Company and voted on by the system as being the best bottler. New Zealand took that award in 2021. '
The Netherlands this year were runners-up, so we came close, but not close enough. We'll win it next year, hopefully. That's the aim. We've got the biggest sales force, over 10,000 frontline. I hope a lot of you had a chance to meet some of them today. Passionate, engaged.
I think the big difference from today to probably 4 or 5 years ago, hopefully you felt it. One, there's a lot more information. Two, there's a lot more technology. Three, there's a lot more diversity. We're clearly trying to leverage that across those 10,000 frontline sales force. 85% of our volume is now captured digitally, so that's a big step change, so you can imagine the wealth of data and analytics that we can build off that.
Clearly, we've always looked at this business in the long term and consistently invested for growth, and we've always had the support of our board. To do that, even in the difficult years of COVID, we continued to invest, for what we know is going to be a brighter future. A lot happening on the service side.
Clearly as I look at this business, it's built on two pillars, great brands and great people. You'll hear from Véronique ] in a moment around our people strategy. We start every meeting at CCEP talking about people, whether it's a board meeting, whether it's our management meeting. First item on the agenda is health and safety, more recently, wellbeing, physical and mental. 'Cause fundamentally we believe that if we continue to look after our people, they will look after our business. and we're providing them with a more digital workplace.
We've got a lot of first aiders around wellbeing that we created over the pandemic, now over 600, fully trained and equipped to help their colleagues. We've just completed our first global engagement score. Really happy with the results. Top quartile.
Clearly lots of strengths and most importantly, still lots of areas that we want to work harder on. We are getting more diverse. We're not where we want to be, but clearly we want to continue to make CCEP reflect more of the markets that we operate within, and that's our goal, going forward. Finally, on sustainability, I would say CCEP has been leading this journey, particularly across the bottlers.
Obviously being based in Europe originally, we were probably at the forefront of some of the challenges that went global, whether that was sugar, whether it's plastic. We've refreshed our ambition on the acquisition of API.
We've taken our This is Forward platform, which I think is best in class in terms of laying out in a very simple way, but in a very ambitious way, what we really want to do to make CCP, certainly in the Coke system, the most sustainable bottler, but also across our peer group to continue to have sustainability as a benefit that our customers can link into and our employees feel proud about.
A number of different areas across renewable energy, rPET, more RGB, and clearly, as you'll see later, we were the first bottler to put our greenhouse emissions goals into our long-term incentive plan. Lots happening on sustainability. Before I hand over to Véronique, I just wanted to close on a slide that I think underpins the way we look at our business.
Clearly, we're passionate about shareholder value creation, but in order to drive that, we're really passionate about customer value creation. If you go back to Europe pre-merger, we were not seen as a leading category for value creation for our customers.
The category was declining. Margins were under pressure. We turned that around and clearly while we're growing, we're very happy that our customers are growing slightly faster, enhancing their margins and making our categories even more important to their journey. I think that's a nice combination because clearly the more relevant we are, the more time we get with them, the more space we get in store, the more open they are to our ideas. I won't say the more open they are to our pricing, but clearly it's a better platform to lead that conversation.
That's on the back of us being the number one FMCG value creator in Europe, and also in Australia and New Zealand. We go into those conversations from a position of joint value creation, not arrogance, but a recognition that we have been consistently delivering more value for our customers over a longer period of time.
That sets us up, we believe, for more growth in the near and midterm.
With that, I'd like to hand over to Véronique, who's going to touch on that second pillar before Manolo talks about the brands, which is our great people strategy.
Thank you. Véronique?
Thank you very much, Damian, and good afternoon, everyone.
I'm Véronique Vuillod, leading the people and culture function globally for CCEP, and I am more than 20 years in the company. I've been really lucky living fantastic career experience in many different HR roles, locally, globally, as business partner, generalist, and supporting all functions of our business.
Today I'm delighted to present you the people strategy and the key strategic initiative we believe would make a difference for CCEP in the future. I'd like to come back to the early years of CCEP. It's been an amazing journey, like Damian just explained, and we truly believe what makes CCEP so special, it's the culture of the company and its people.
As many people say internally, "We join for the brand, but we stay for the people." The culture of the company is really, really strong. We also believe that the leaders of the organization are the one shaping the culture, are the one role-modeling the ways of working, and are the one to be best in employee engagement. That's how we supported them with what we call the Accelerate Performance program.
All of our leaders went through this leadership program at the beginning of the merger in 2016 and 2017. The good news is we refreshed that program and cascaded down in API to all management positions. We are now with a company culture, the ways of working, the values of the company that are truly embedded globally. Second, we define our people experience.
It is how it is to work at CCEP. That's what we call Me at CCEP, so it's really communicated to the entire workforce. Third, of course, we supported our people on COVID. It's been two years of quite a challenge for our people, especially frontline people. 80% of our workforce is frontline, so we put in place a very strong support to them. We also clearly set an objective for being an inclusive, diverse, and equitable organization. We believe that it's really making a difference, and we want to reflect the communities in which we operate.
We set a strategy for I&D, we set some targets, some action plans, and we receive recognition and awards for our diversity initiatives.
To attract people, to attract talent, we believe being a recognized employer among the best companies is absolutely critical, and we are very proud because we got a lot of certification and recognition in all our markets, including in some markets where we could see potentially it's a little bit more challenging. Indonesia, as an example, got a certification as Best Employer, so we are very pleased with that.
Now we are investing in what we call the way we lead. It's really how we invest in our capabilities, in leadership capabilities, commercial capabilities, customer services capabilities, and as well as in digitization, including in the area of people, where we provide up-to-date and very innovative tools for our people to access the people function, any HR-related topics.
The way we set and shape the people strategy is through the lens of a strategic workforce planning. Basically, it's really for us to ask the right question for the future and to really prepare the workforce of the future, the capabilities of the future, making sure we have the right people and right talent in the most critical roles, and making sure the culture of the company is really embedded and lived in by all of our workforce.
It's a global workforce, Damian mentioned that, operating globally, 33 countries, so it's a key responsibility to ensure the workforce stays relevant for the future and to ensure we skill, upskill, and reskill the workforce to really stay and perform for the future. I'd like to call out three strategic priorities for us. I mentioned it and Damian mentioned it.
It's all about being even more inclusive. We have a very high ambition on being an inclusive and diverse and equitable organization and workplace, so we set up for ourselves some targets, challenging targets, where we really want to accelerate. Gender is a critical target. We are targeting 45% of female in management position by 2030. We also believe that we can continue to give an opportunity for our people to feel safe, to really live with some form of disability at work. We decided to set a target for disability representation of 10% of people by 2030.
We are very conscious about our footprint and the impact we can make on communities, so we set an ambitious program on social mobility and we support internally and externally programs helping people to get back to employment situation. Second is building a culture of sustainability. It's really at the heart of everything we do, so we embedded sustainability in all of our capabilities programs and in all of our training curricula.
Second priorities, we mentioned about that it's all about culture, it's all about leadership, it's all about having the right leaders, the right people in the right roles. So we decided to design a new competency framework, a leadership competency framework, to really give our expectation for a leader to be successful at CCEP. So we are building all leadership program on the basis of that framework.
We are also investing in the entire workforce, first at entry level. We have a significant program for internship, for apprenticeship, for graduate program. We also develop people at the middle management level, what we call the Emerging Leaders Program, to really prepare the future leader of the organization and for some of them to fast-track their career path. We are investing in senior leaders of the organization.
I'd like to call out what we call Career Hub. It's a total innovative tool. It's what we call an internal talent marketplace based on skills and not only on traditional jobs, an d based on AI, where people get offered some vacancies, some training, some connection with the leaders, with their experience that the individual is trying to get or has an aspiration to grow within CCEP.
Last, we developed our own internal explorer for any people-related request. That's what we call Genie. Every employees, including frontline or in factories, blue collars, can access Genie and ask any question and can get support directly, digitally first, and then from center of expertise or specialists in HR when necessary. Last is, for us, we live in a constant volatile world, so it's very important to really embed change management in everything we do and to equip our leaders leading change, leading transformation, leading upskilling of their team, and leading with care.
We embedded in our leadership program and management program change management approach so that we ensure we have the entire workforce engaged, understanding on the change initiatives of CCEP.
We have a track record of driving efficiencies, and we have clear communication with our union partners on how we see the future of CCEP. Last, we have an ambition to be a high-performing organization, so our rewards philosophy align to the business objective. We pay for performance, and we align all the incentives of our leaders globally, short-term incentives, including the critical financial metrics, of course, as well as some individual objective for the executive team on diversity, so everyone understand the role they have to play to build that more inclusive organization.
On the long term, Damian spoke about that, we also included sustainability objective, making 15% of the potential outcome of long-term incentive. In summary, we want to be an even more inclusive organization.
We continue to invest massively in capabilities, in the differentiating capabilities, in commercial capabilities, and Stephen will speak about that a bit later. Then how we manage change and making sure we sustain and maintain engagement of the workforce in a change environment. We can be very pleased as the workforce demonstrated to be extremely resilient.
We maintained the engagement score in the hardest moment of the pandemic. We also surveyed our people on well-being and stress at work, and we were pleased to see that we've been able to maintain that level of resilience from our workforce. We are very confident we have the right people, we have the right investment plan for them to fit the company objective for the future.
Thank you.
Now I hand over back to you, Damian.
You can clap. It's allowed. It's no prohibition.
Just to come back to something Véronique touched on. For those of you who were with us in 2019, we laid out a number of frontline digital capabilities, really focused around revenue. We quickly learned that if we didn't digitize inside the organization quicker, our ability to digitize the revenue was just going to be slower. What we recognized as we were having conversation with our customers about a more digital relationship, more online, if the people working in our organization were 10 years behind, you could never meet that commitment. We have invested with Peter and the team in a lot of digital tools, and hopefully some of you saw that today with the sales force.
It really goes across supply chain, our back office, our wonderful facility in Bulgaria, because we recognize if you want to be a digital bottler on the outside, you've got to be very digital on the inside. That journey continues. That's why I thought it was important this afternoon we share a little bit of that, if you work at CCEP, how digital is enabling you to be more engaged and more productive. Before I hand over to Manolo, I just wanted to touch on one slide because I know some of you are really familiar with the Coca-Cola system and our quirks, let's call it, our unique structure. For some of you may be quite new, and I think quite often myself and Nik and Sol, one of the questions we get is like, "So how does it work?
how does it work? How does it really work?" As the day goes on, "How does it really, really work?" Clearly, we've got some great foundational platforms like our incidence model, which really drives the economic sharing principle, very different to where we were on volume a number of years ago. Clearly, as we both engage on a bigger footprint, being really aligned with the Coca-Cola Company is a fundamental belief that the system has and that we in CCEP have. That allows us also to challenge, disagree on areas that we're both passionate about and collectively raise the bar.
for us, obviously, as the bottler, our primary goal is bottling the great brands of the Coca-Cola Company, getting them to market, sales and distribution, managing those customers, big, small, online, offline, and being passionate about the consumer's interaction with our products. Whether that's in the cooler, on the shelf, or on a webpage. From the Coke Company, clearly, they're the custodians of the world's best brands. You'll see a lot of them later. They supply us with the concentrate at a very reasonable price, Manolo, I have to say.
They work with us on brand and portfolio development. Clearly, what you're going to hear from Manolo is they really drive that consumer brand love through great consumer marketing that is the engine of our customer relationship and of our revenue growth.
It's built on some good processes, a lot of transparency, a lot of good decision-making platforms, a lot of dialogue. That dialogue can be very consensual or it can be quite disagreeing on certain topics. I think that's really one of the beauties of the Coke system is that you can challenge and collectively end up with a better solution. I'd now like to hand over to Manolo, who's going to share a little bit more, particularly around that consumer marketing platform.
Thanks, Manolo.
Hello. Good afternoon, everyone.
Pleasure to be here. For those of you that haven't had the opportunity to meet before, I've been in the system for 27 years. I joined very early at the age of three. Spain first, US, back to Iberia for eight years, another eight years in Asia-Pacific, leading a lot of the bottling re-franchising. Left the company, went to two other industries, back to Coke, Mexico a couple of years, Asia-Pacific again.
I'm based in Singapore, managing Asia-Pacific and Bottling Investments Group, and since 2020, I'm the CMO of the company. A pleasure to be here. Thank you. The category vision. Category vision for us is a story of transformation, and it's a story of growth.
That transformation was required after the realization that a lot of our investments were not really as effective and as efficient as we would want it to be. The digital disruption had changed dramatically and moved and shifted power from the brand owners to the consumer, to each and every one of you that decided one day, thanks to the smartphones, that you can watch and see, or not, any consumption of media. We were just not ready for that.
After decades of moving from a soft drink company into total beverage company, we end up also in a place where we had a lot of components in our portfolio that were very fragmented. As an example of that, we were managing 6,000-7,000 agencies around the world, and we were managing more than 3,000-4,000 innovations per year.
While the performance was okay, it was not that good. The good news is that we are in a really exciting industry, arguably, if not the most, one of the top two today in terms of growth. There is a lot of growth at very interesting margins in beverages. It's a vibrant and competitive industry, as Damian mentioned.
As you can see on the top left chart, the growth is projected to be, in the next three years, between 4% to 5%. Different by the different beverage types, soft drinks, so that's colas and sparkling flavors, around that 4%-5%. Same thing for hydration, coffee, and tea. Nutrition is a little bit lower than that, 3% to 4%. Energy, 6% to 7%.
Emerging that for us is, at this point of time, alcohol ready to drink, so below 10% alcohol content, is somewhere between 9%-10% projected over the next three years. We are guided by our purpose and we have a very clear strategy that, as you probably have seen last week in our Q3 results, it's working and is delivering results for us. We feel very, very confident where we are at this point, as a company.
We understand the environment is uncertain, but we are probably entering a challenging and complex time at our best time from a capability building standpoint in our whole history, and that expands across the whole business. The transformation that we embark a bit more than two years in marketing starts really on the consumer.
It starts really understanding what they want really, truly, and deeply, and delivering to them superior tasting products. Taste superiority is core. It's the first pillar in our marketing. What we do then is to meet the consumer where they are in the specific consumption occasions that happen in certain channels, and that's where we collaborate and create or co-create those plans with our partnering partners like CCEP. Then we add a little bit of magic, and the magic is trying to engage with the consumer with what they love the most, which typically are passion points, whether it's sports, music, gaming, ESG for many.
That's how we bridge the importance of driving conversion of non-consumers into consumption in a specific occasion, but bringing the magic, the value perception through engaging, leveraging multiple passion points.
All of that happens through marketing platforms, brand platforms, innovation platforms, and importantly, execution at the point of sale. Half of our marketing, I always say to my own team, half of our marketing, it doesn't happen in Atlanta. It happens in the stores. It happens in every one of the 26 million outlets where we serve our products every day. The transformation really went about tackling three areas that we needed to address. Portfolio, innovation, and effectiveness and efficiency of every single dollar that we invest in marketing.
Starting on portfolio, as many of you may have seen, we went through a very significant exercise of what we call internally pruning. We started off from more than 400 brands around the world that span across all the different categories, beverage categories.
Those 400 brands were brought down to around, today, around 200. That is an absolutely formidable portfolio of brands today that you have. There's no doubt that you name it, anything that you want in beverages, we have it available for any kind of age, any kind of category, in any part of the world. There's far more than what we could execute in any given country to choose from. The way we went about it is a combination of organically created brands. Sixteen of them. Seventeen of them actually now are billion-dollar brands.
Not only in sparkling, not only in soft drinks. We have a lot of billion-dollar brands in stills today. 60% of them actually. We also expanded the portfolio through bolt-on acquisitions.
You probably have seen recently BODYARMOR, which is a phenomenal brand with a very impressive track record in the U.S., which is redefining how consumers in that market are enjoying hydration in the sports occasion. fairlife, where we are seeing exactly the same phenomenal success of the U.S. being replicated in Canada as we speak. We also expanded our way of thinking.
We were very conservative in the past. We wouldn't really dare to mix the Coca-Cola in something that is mixing and blending with alcohol, experimenting, but being much more bolder around how we tackle and how we enter surgically those segments. That portfolio specifically for CCEP looks like this.
On the left, you have the brands that are on the top left that are globally present, part of our core portfolio. On the bottom, it's complemented with very significant and sizable, with a lot of scale, local brands that are present in the different territories of CCEP. Ultimately, we got to a point where you're really balancing the power of global brands and their scale with the local touch and intimacy that you need to address very sizable, profitable opportunities through a local brand in different segments.
Moving into innovation, as I mentioned, we started off from 3,000-4,000 innovations per year. The success ratio was excellent. It was 3 times the rest of the industry. The problem is that the success rate of the industry was 1%. It really called for action to really reassess upside down our innovation process.
It would take us 18, minimum 18 to 24 months. Some of those not so easy conversations with people like Damian would be around that because we were very, very slow. It was just not acceptable. We were way behind the speed of the market. After reviewing all of that process, we end up in a place where we clearly assess any new idea against three criteria, consumer desirability, financial attractiveness, and supply chain manufacturing feasibility.
In the past, any senior leader of the system would have an idea, we would brief R&D, and by the time we realize the idea is not good, a year later, we would have spent around $300,000 in every idea, times 1,000 ideas.
Today, we have an app with a history of the last 20 years of the whole food and beverage industry for $70. $70, 7, 0. In minutes, you understand where it falls into the consumer desirability level. Today, all our innovation pipeline for next year is in the top quartile of that database. We're raising the bar in 2023 to the top 10%. Our pipeline for next year is 60% stronger and more robust than what it was a year ago. In the Q3 results, those of you that saw it last week, 1/3 of our revenue comes from innovation. One quarter, 25% of our gross profit came from innovation.
We're seeing innovation become two times more effective than the rest of the beverage industry, more than 40% effectiveness than our main competitor today.
Still a lot of work to do, but the 18 to 24 months is now gravitating between 3 to 9 months, depending on the nature of the project. This is a critical capability, particularly as we face challenging times over the next months and years. Moving into marketing effectiveness and efficiency. I'm not going to bore you with a chart on the left. Just believe that there's a good degree of process there. In essence, where we are right now in Coca-Cola, it's in a migration from a traditional TV model. What that means is in 2019, 71% of our media investment globally was on TV, 29% in digital. This year, we're getting very, very close to the 50-50.
Next year, we will surpass the 55% on a global scale, with places like China, 80% digital, the US, 65%, Europe and LATAM, close to 60% as well. As you can imagine, the marketing factory that you need for that transition is radically different. In the past, we would do three or four big TV ads per quarter, and we would put bells and whistles around. We give it to a media agency, and in one week, you reach 80% to 90% of the population. Today, particularly for those of you that have teens at home, they're not watching a single TV ad. No one is watching any more TV, really. That's a fact. You need to move the marketing factory to a factory that creates content on a real-time basis.
You actually need to allow consumers that engage with you to co-create some of that content and put some of the voice, their own voice, in an authentic and real base to brands like Coca-Cola. It's a very, very different way of doing marketing. It's starting to yield results. On the right side of the chart, you see some of the numbers specifically for CCEP. I think it's fantastic to see the progress of our partner in Europe. It's really leading the way in many and very important marketing programs, not only for Europe, but from Europe for the rest of the world, thanks to the talent in this part of the world, and clearly driving much more gross profit for every dollar that we invest in marketing.
The early signs that marketing is also working start on the mothership, on the big brand of Coca-Cola. We have seen in the last quarter, for example, 37 of the 40 top markets of the company growing in double-digit Coca-Cola Zero. It's a clear winner. There's a very specific IP going on around taste superiority that explains why we're getting closer and closer and closer in every iteration to Coca-Cola Original Taste.
For the first time ever, we launched, for example, the new campaign, the new platform for the brand Real Magic in the U.S., not in TV. We didn't use TV at all. We put all the investment in just one single digital platform, TikTok, which happens to be Chinese, by the way, interestingly. The results are there.
12 billion views in just two months. That was 4 times the best-in-class example in the history of TikTok in the US, which was 3 billion views. It seems that digital is the place to be and to work. We're seeing improvement of almost 50% in brand perception as a result of that campaign. A lot of work in digitizing our marketing programs, including food delivery, particularly during the pandemic.
The work on Coca-Cola Creations, while I can confess now internally was a bit controversial initially, is really driving more than 50% of all the search that is going on on the trademark across the world. A lot of stuff is coming for next year also in that direction.
The reality is that when you see that this is happening, it is happening not only in Coca-Cola, it's also happening in the rest of portfolio. For example, in Sparkling Flavors, Fanta and Sprite are almost doubling the growth versus the prior year in some of the key markets, thanks to the new platforms. I'm not going to elaborate through all the different platforms in the portfolio and rather I'll share with you just a quick video, which you will be able to see some of those platforms that have already been rolled out in some of the markets. In some others will be completely new for you, but I hope you enjoy it.
Thank you. Video in, please.
There's a new way of marketing that is brave and boundless, where experiences meet scale. A new way of marketing that is powerful, immersive, and iconic.
Out on the verge of a restaurant.
It's the Real Magic of a single global platform. United, connected, a place where experiences win over content.
Out on the verge of a restaurant.
That's where you'll find Coca-Cola Creations merging Gen Z and unique collaborations, interactions with the brightest stars. Bold ways to surprise and delight.
These are our times. These are our times.
It's consistent and global. A reason to celebrate Sprite beyond the summer.
These are our times. Our times.
It's a new way that changes definitions.
These are our.
age demographics, showering consumers with news and games.
Out on the verge of a restaurant.
It lets food power wellness, reinvigorates and unlocks growth, and inspires us all to live fully and richly.
Trust you tonight. Edge of the earth and we're touching the sky tonight. Out on the verge.
Here, what's unique is leveraged for new moments and markets are captured.
Of a restaurant.
Opening the way for those seeking to discover new ideas, fresh markets, unleashing new passions. Where amazing things are created and cultural lifestyle icons reinvented.
There's no looking back. Full steam ahead on this one-way track. From this day forward.
It lets you establish a self-care ally for all. Innovations that are brave and fast and new experiences scaling at the speed of fandom.
I will do what's right.
It's also a breathtaking fusion of tea, fruits, and herbs.
Out on the verge.
Fueled by different points of view.
Top of the world and we trust you tonight.
This new way of marketing isn't afraid to make waves or turn the category on its head with a better way to enjoy what's truly worthwhile.
These are our times.
Being brave and boundless knows that to pause is power. Challenging sports category conventions, capitalizing the sign of the times, and inviting our tribe to always come back stronger. When experiences meet scale, amazing happens. Our work becomes brave and boundless, breathtaking, immersive, driving weekly plus to new heights, fueling consumer engagement, capturing first-party data, and building sustainable, long-lasting relationships.
Of a restaurant.
It's why we believe that together anything is possible.
Thank you. Dr. Stephen. Good afternoon, everybody.
My name is Stephen Lusk. For those of you that we met at the last Capital Markets Day, it's good to see you again. I joined CCEP in 2017. I've been with the system nearly over 30 years, so as young as Manolo. In different roles, general management, supply chain, and commercial through my career, both in Asia, Southeast and Western and Eastern Europe, so it's great to be here. I want to talk to you about an even brighter future and how we see the next number of years as we've been building the strategy and as we see the momentum that we have in the system.
Starting as ever it's important that we look outside in and make sure that we're taking into consideration what's happening in the world around us. Post-COVID, that's even more critical as we look to our strategy and make sure that we look at it through the lens of the macro and what's happening around us through the trends that we see, and the winning formulas that others are making in CPGs and how we can adapt to that. Then obviously the channel trends and what that means for us in and around where we should play and how we should win.
Then obviously lastly with our brand partners, with the company, and Monster, what the consumer trends are going to be and how we need to access those. As damian said earlier, we're in a great category.
It's big, it's EUR 130 billion. That's what it'll be around about this year across our markets. It's growing.
3%. We see it for the next number of years continue to grow. It's sizable in that in API we'll continue to see faster growth, driven of course by Indonesia, but there's also the point that in Europe it will continue to see growth. We expect as we shared in our midterm earnings, that we will be wanting to grow ahead of that and take share. Around that, we see in the midterm then the capability to build our coffee innovation to go into alcohol ready-to-drink as we'll be entering, and we'll talk about that a little bit later. Then obviously through package lists and the sustainability aspects, working with our customers to look in the longer term.
I want to talk about the category, and this is something we reviewed back in 2019 at our previous capital markets, and again, giving an update. The next number of years we're going to see growth driven by carbonates, a great category where we have great opportunity and leadership and challenging under our coolers and flavors. Secondly, obviously through energy, which we believe we're well positioned to continue to grow.
Then obviously, tea and ready to drink coffee, another area. A continued growth of an additional EUR 30 billion over the next number of years, which continues to give us great enthusiasm for taking the share that we expect with our customers.
As Manolo talked about, we have continued through the occasions work that we've done with the company and Monster to look at the best brands with the different categories around our vision. That category enables us to have diversification of our portfolio with all of our customers. We're really well set up, and there'll be few brands, as you see like Coke, that play in so many different occasions.
Ultimately taking that, and you would have seen today in the market visit, whether that's in home, with food or out of home, that we're well set with our portfolio to win in the future.
As we talk about the categories and we talk about those that are going to win, and starting with our cola category and cola lights, a big opportunity for us, and that's going to continue to be led by the acceleration on zero sugar, where we're going to continue with the company to look at recruiting consumers into the no sugar continuation. Then obviously secondly, you'll see just now as we see Zero going into a new occasion, the late evening, when zero caffeine with zero sugar, a phenomenal success from Spain that we're exporting across all of our markets.
Big opportunity in cola lights and in cola still to drive continued margin and growth. Then in energy, you'll see, as we've just announced in our Q3, continued growth up 60% versus 2019.
The energy category really is on fire and through innovation and what you would have seen today in the market through great execution, through our retail and on the go, and the ability to provide also no sugar, we continue to have a great opportunity to grow and win in energy. As we look at the other parts of our business, and Manolo talked about flavors we have continued to work with the company on having a great sugar and a great zero calorie pro-portfolio.
T hat's really how we're going to see continued reformulation and ways in which we can win, as we go forward and being even more relevant to things. You'll see from Peter a little bit later some of the innovation that's coming through in Australia, and we'll continue next year to look at that innovation.
In the ready to drink tea and coffee area, Fuze Tea in Europe is looked upon by the company as one of the best relaunches from Nestea into Fuze Tea. We continue to go from strength to strength.
Obviously our decisions to refine our innovation and choose where we go with Costa. For those of you that will be around later tonight with Nik and Sol at the late night bar, we'll be also wanting to show you how we take Costa Coffee into a different way in which we can believe it can stretch the credentials of the brand at a late night offering. Back to what Manolo said we're in a category that continues to have great opportunities with our consumers.
The priorities we set with the company and working with the company to prioritize in those areas continues to bring focus, the continued investment of the company and then the choices that we're making. As you see, we'll be looking and we're very excited to look at sports being another category, learning from Australia, but also with BODYARMOR, POWERADE, and Aquarius, we'll continue to look at that functional and that consumer trend to health as a big opportunity.
Then lastly, of course, we can't not talk about alcohol and the impending launch that we will have, and you'll hear more from that later tonight. You'll be able to try that when we go into Jack Daniel's and Coke early part of next year in Q1 and Q2 when we move with Brown-Forman.
We're excited about those innovations and about the choices and priorities that we're going to take. What's great about the resilience of the category is also the diversity, and Damian talked about it. We want to grow, and we're in a growing and diverse and resilient category, both in-store and online.
One of the things we've seen on the diversity of our channels is that many of the at-home post-COVID trends have stuck. You will have seen today when you're out in the market, many of the at-home occasions that we are tapping into that's enabling us to drive growth, whether that's with food or eating in or socializing with friends. What clearly we see in the next number of years, away from home, that many of our away-from-home socializing will be driven by HoReCa.
Food will be trading in the QSR where people are looking for value. Then obviously we'll see continued growth in Asia through mom and pop stores, and you'll hear Peter talk about general trade and that opportunity. This continues for us to see the ability to grow and win with our customers. That means in reality, in home, as we've said that we're not agnostic to growth.
We want to grow wherever we can. Through our home market, as Damian said, when we created CCEP, we had two objectives. One, get Sparkling back in growth, and two, create and bring margin growth to our customers in retail. That's something that we've done successfully and continue to invest upon. That's something that you'll hear Peter talk about how we want to bring that to API.
Obviously we've invested in digital, and that's enabled us with data and analytics to be able to create ways in which we see growth coming. As Damian said, we continue to be the biggest value creator for our customers across those markets in FMCG as well as NARTD, driving growth and margin that makes it also a great story for our customers. That doesn't mean that we're happy with where we are, and as we look forward to the next five years, we see significant opportunities for us to grow. Some opportunities that we talk about is we're reviewing again, as we look to the challenging times ahead in our market, what we call segmented affordability.
You'll hear Jantine talk later about our RGM capability and how we're looking at how we segment our different types of shoppers to enable them to drive affordability. Then doubling down, as we say in home, on our revenue and growth management. Peter will again talk about a little bit of that in what we're doing in API, but we believe that is another capability that will enable us to win in the future. Then obviously in Away From Home, we continue to see accelerated growth, as Damian said, coming out of COVID. We know that we can improve with our execution, our capability, and all of that enabled digitally.
You'll actually hear a little bit later from one of the team, David, talking about how we're doing that with our customers. Sorry.
Finally, talking about online and winning both, as Damian said, in store and online. We continue to have higher share with our customers online than offline. If you take an Australia or a Spain, our NARTD share is 10-15 points higher at nearly 40 online than it is offline. At the same time, we continue to work very closely with those online food services to drive incidence, which is critical for that ticket with our delivery partners or our fast food and international QSR customers.
The reality is we continue to invest as a business, and much of that or a significant amount of our future-looking investment, again from our capital, goes against digitizing and enabling our revenue growth. Finally, we're in a great category. It's big, it's growing, it's dynamic, and supported by great people and great partners.
We're going to continue to have a brighter future. With that, I'll hand back to Damian. Damian, back to you.
Just noting that Manolo got the loudest applause. I think that's a function of so many bottlers being in the room and trying to keep the Coke Company happy. Yeah, no, no. I'm expecting a lot more from you, Nik. A lot more, as usual. We're just close to a break here. I think we're good on time. I just wanted to just close off with a map, and it kind of goes back to something we talked about at our board, and we're going to hear from Peter next around the API acquisition, was that we set an objective. One, obviously, was to make the acquisition accretive and great for our shareholders. You'll hear we're doing that.
Secondly was to make Europe even stronger. Particularly when I talk to a lot of our large shareholders, I felt that was really undervalued in terms of the potential that we could take from particularly the Australian, New Zealand businesses back into Europe. I think when you hear Peter, you'll get a flavor for what we've been doing. You heard from Stephen and Manolo quite a global and kind of pan-country perspective. I just don't want to lose what's great about our business as well, which is the bottling business is still quite a local business.
If you take our markets from Iceland, where we're the second biggest player in beer, go to Norway, where we have a fantastic coffee business over many, many years.
Go to Sweden, where we probably have one of the most diverse and sustainable workforces in Europe. Here in GB, hopefully you got a flavor today, wonderful key account management skills, big ambition, great supply chain management. Go to France, where we've just relaunched our whole RGB portfolio in Away From Home. We've got the Olympics coming. Germany, you'll hear a little bit later from José Antonio and Nik, great capabilities around discounters, who are the winners in retail, we know that, but also significant restructuring and reorganization over a number of years to unlock value. You gotta go to Belgium, probably one of the best away from home markets globally for the system.
The Netherlands just won the Candler Cup, built on numerous years of success. You gotta go to Spain, traditionally one of the best Coke markets in the world.
Again, a great HoReCa business, great brand love, and a great supply chain. Portugal, with Rui and the team, turning around a business that has struggled for a number of years. Then finally, I want to talk about Bulgaria. Thankfully, as Hellenic know, we don't sell there. We'd like to, but we don't sell there. We've got a fantastic, shared services capability in Bulgaria that really is helping us transform CCEP, not just in the areas of process efficiency.
Cost, but in the areas of data, analytics, robotics. Fantastic group of people led by Tamsin, highly energetic, young, talented, and that's also allowing us to unlock a lot of value beyond the top line right down through the P&L. After the break, you'll hear a lot more on the other side of the map from Peter around where we're seeing API. I think we're good for a 20-minute break, Sarah. Stay in the room. Well, you can go to the bathroom, obviously, but stay in the room. We'll be back in 20 minutes. Thank you.
Good morning. I say good morning 'cause it's 1:15 A.M. for me. I'm Peter West.
I'm the General Manager for API, and just as a brief introduction on my background, I started my career at Mars on the pet care business, then moved to confectionery. I had 11.5 years. I had 6 years at a biscuit company called Arnott's, which is quite an iconic business in Australia. I then returned to Mars for another 8.5 years, and the last job I had was running the chocolate business in continental Europe based out of Brussels. I then went back to Australia, ran a dairy business for 4 years, and then I joined Amatil in 2018. It was a very different experience from three years of being at Amatil to then go through the acquisition.
I'd been involved in acquisitions before, but not to be on the receiving end. It's a very different experience as you wave goodbye to your peers and boss and everything else as you go into a new world. We're 18 months from the completion, and I suppose my message to you is just how brilliantly the integration's gone. My sort of reflection, having worked for large multinationals, is I think there's a continuum that exists between local market accountability and then how do you leverage scale and capability. I think all large companies struggle with that to get the balance right. I believe that CCEP, and I say this very sincerely, threads the needle of getting that combination between local market accountability and scale perfectly right.
He's trying to position himself well.
Just don't forget me then at that time. I think that's actually made the integration extremely successful. But it has meant, certainly from an Amatil perspective, a difference to the way we operated. I would say we had a very strong local accountability, but we weren't working in an interdependent way, and we weren't leveraging scale and capability in the same way. That really does, in my mind, step change, as I was sort of reflecting in coming here, is that I can say if you fast-forward from 18 months, I say sincerely, we are a much better business than what we were before. We do get to leverage expertise and the expertise because of the breadth of the markets that are involved in CCEP.
When we're putting a new can line into Moorabbin, and we're going through the specification, and we're dealing with the experts that sit within engineering and capital, we make a whole series of modifications to that planned investment that ultimately saves millions of dollars and generates the efficiency. That type of expertise function by function is something that we really tap into to take us to the next level. Under the new ownership, there is an opportunity to become more focused than where we were.
You start to address, is there a size of prize for things that we've been in the past, and you address some of those issues. One of my themes for today is that we operate in a super impulse category. It's incredibly responsive to display and activation.
Portfolio and portfolio prioritization is actually the key to drive the sort of off-take of the category. The two things that were different to what I expected, I think the first was it's a learning organization. When you're a part of large multinationals, often there's a way it's done, and they're not that receptive to learning something different. I was sort of surprised by a very successful organization that's done incredibly well over a period of time to being so open to new ideas.
If we presented stuff that was good, they'd say, "Oh, that's better than we do it." We'd be like, "Oh, wow, that was great feedback, wasn't it?" To get that reinforcement and then to see our ideas being shipped into Europe has given the team then a lot of satisfaction about the openness of the culture. There comes an ambition to take our performance to a higher level. If you set an ambition to be the number one value creator for your customer, it starts to put what is possible, and then you start to take those learnings. It has made a difference to the acquisition, and I do think you see that in our performance year to date.
In doing the integration, you can imagine doing it mainly via video conference. What we did is we're very clear on the cultural elements that we thought would make a difference. We aligned our reward system, we aligned our rating system, we embraced the artifacts of the organization that I feel is incredibly important. We tried to drive the functional alignment that would really make a difference.
What we had was a value realization committee, and this was really the business case of making the acquisition work. There was a frequency that existed in the value realization on these themes, which is, how do we leverage the expertise that sits in Europe to make Australia and New Zealand a better business now, especially when you look at the similar opportunities and issues?
What would really make a difference to the long term is a real reset of Indonesia. Having Indonesia that is therefore a bigger business, and will be therefore accretive to the performance of our organization for the long term. That's been the theme of the value realization co-committee over video conference for a long period of time. What I'm going to do today is try and bring to life the Australian turnaround story and where we're at on that. I'll share really about our Indonesian plans and our expansion. If you go to talk about Australia and New Zealand, you always got to start at New Zealand.
When I had the pleasure of hosting Sol and Damian there, Damian sent me an email afterwards to say it was perhaps his best market visit in 25 years because of how great the market looks, is a great role model for our organization. Where we were at, I'd say in the past when I joined in 2018, is that we weren't taking the learnings from New Zealand and transferring that out.
If you go to the magic of New Zealand, it actually starts with the growth mindset of the organization. People have an expectation that they will beat the market, and that the way they design it, I'd say is elegant because they're very clear on the role between large stores and big stores.
They understand their costs unbelievably, therefore, of how they design their pack and price. They understand their profit to serve, not their cost to serve in how they operate. They are the best in the standards of driving the picture of success and the right execution daily of what you see in store. What they present to you on a PowerPoint is what you see in the store. I have a view in packaged goods that you should be able to stand in a store and look at a fridge, look at a fixture, look at a display, and you can actually tell the strategy of the company being executed. That's what you see beautifully in New Zealand.
The good thing is that we've taken a lot of those learnings from New Zealand in recent times to Australia. The great thing now is the teams countries that were in lockdown for so long like we were, but as the team from New Zealand now come to Australia, they see a very different business pre-lockdown and the learnings that are taken there. That's what we also see is the opportunity for New Zealand of tapping into the broader learnings in Europe. The performance and the track record of success over many years has been significant, and the value shares that we hold within the market is incredibly high.
The New Zealand business does sit as a very good proof point for what's possible and the learnings that we also apply from New Zealand to the rest of the world. Moving from New Zealand to talking about Australia. We are very optimistic on the fundamentals of Australia. We do have good population growth. I'm personally a big believer in the big Australia.
It's too big a landmass with such few people. Immigration is fantastic. Historically, before lockdowns, we were growing at a net level of about 200,000 from immigration, and it really powers the economy and the strength of our country. Then we have a buoyant NARTD category. I think the behavior of the category is operating differently post-COVID.
I think that there are more occasions that do exist in this sort of balance between home and flexibility of work. I think it's an incredibly buoyant category as a result. We're incredibly well-positioned against that with our market share, and we're even stronger in the away-from-home sector. When you add that from an NARTD, we'd be over 40% of the market. We've got a very nice spirits and RTD business, which I'll talk to.
The market share on coffee is specifically to do with beans in grocery. I'm not preaching with an 18% share of the market. It's beans within grocery. What we do is we then leverage the cost structure of our supply chain through the efficiency of that to our away-from-home business as a really effective bean production.
Our competitive advantage is we have a direct store delivery business. We deliver to 94% of postcodes fortnightly or less. We're second to Australia Post and therefore that reach that we provide by postcode. We have a strong equipment business in the market that is a real competitive advantage. Therefore, it's about how do we leverage this capability to take us to a higher order.
The challenge for us was that from 2012 to 2018, we declined as a business. If you go to the background and the history to that, the number one issue that we had is that we put an overemphasis on emerging categories and innovation, and the math doesn't work for you because of the dynamics and importance of just core sparkling.
We just had to get back into growth, especially on brand Coke. The second area is we'd underinvested in small stores, and the flip of that was that we were overly reliant on price promotions in grocery. Then because we'd had a decline, we just lacked a bit of a growth mindset, and we didn't have benchmarking. I sort of have when you have good benchmarking, it gives you belief as to what's possible and actually sets an agenda to take you to a higher order.
We have been improving, but on each of these areas through the acquisition, we really take capability and performance to the next level. Becoming even clearer on our portfolio prioritization that powers us, that provides simplification for our supply chain.
The knowledge in revenue management and sometimes the courage in revenue management when you're taking the move and you're two-thirds the profitability of a company, it's just much harder as a risk profile versus when you're a smaller part. I think the real thing that we would bring, as a present to the CCEP ownership is precision execution.
We get to really leverage being part of a global system for best in class when it comes to supply chain sustainability and talent. I'll try and bring to life the first three. The most important part of our business is brand Coke. At a NARTD business, it's over half our sales. Getting it back into strong growth is the most important and growing share. The explosive part of the market has been Coca-Cola No Sugar.
We're seeing low single-digit growth on classic, but we're seeing explosive growth when it comes to No Sugar. The formulation change that Manolo spoke to has been critical because the taste is so exceptional. The packaging changes really worked, and I think the most important thing in the packaging change is they actually popped classic first and really made classic look good, and the logo size and the shopability, and then the colors that have played out in No Sugar.
The marketing that supported No Sugar, and then I would say precision execution, which I'll talk to. We've consistently won market share over the last two years off the back of this, and it is the most important battle for us moving forward.
What you see on this page is when you look at the market growth, the market growth is really being driven by the categories that are core to us, where we have a good share position, and we also have good capability. We took a view on water that over time, that still water will be a smaller part of the market. We really had to reorient Mount Franklin to sparkling water, and we've done a really good job of driving range into sparkling water and driving our share of sparkling water, which we see as the sort of driver of that water category into the future. From an NARTD, we think we're well-positioned.
The area of weakness for us had been flavors, and we'd lost share over a number of years, and we'd had too much packs in the market with duplication, and we'd had a lot of deletions. That was a key area for us to address in acquisition, and I'll talk to that. We also have a very successful alcohol ready-to-drink business, and I thought I'd just bring that to life. RTDs represent 18% of the alcohol category.
Now, if you look at a lot of markets across Europe, you're probably talking 1%. When you then look at the growth profile of the market, what we're seeing is a decline in beer, a decline in cider, wine, relatively flat, single-digit growth on spirits, double-digit growth on ready-to-drink.
If you're a retailer and you want to be growing and you want to be part of the future, RTD is what you have to back because it transforms the age profile of your shoppers. Beer shoppers probably look a bit like me.
People under a certain age are not buying it, and they're moving to this category as a replacement. For our rugby league final in Sydney, where we had Parramatta versus Penrith, the number one selling alcohol product through the bar was RTD. It just goes to show how mainstream it's become. Now, we really love it because we get to make it on our can lines. We've got investment in alcohol tank farms. We buy it off the same suppliers in terms of the packaging.
We utilize it in the same warehouse, albeit that they're bonded, and we get to leverage all the efficiency of our supply chain. Lots of the knowledge that we have in execution play out to this category, especially at a segmentation and a precision.
We've had a really good track record of landing innovation in the market. It's a really nice piece of business that we've been selling it for a long time, and therefore, the knowledge that we've built. As you enter alcohol, you learn about the legal obligations that are required. You learn about excise tax. We pay over $700 million a year in excise tax. It's bound to a CPI increase. You learn lots of things as a capability that are built over time.
In the integration, what we did in the first 6 weeks is that we did a program, a sprint program of how do we turn around our flavors portfolio. We aligned with the Coca-Cola Company on this program. We tried to incorporate a lot of the learnings out of Europe, and we've had a really explosive performance off the back of that this year. It's really pleasing to see the share turnaround that we've had. If you look at it's driven by small packs, and it's driven by No Sugar in particular. We're starting to see as bars reopen, some of the post-mix business also rebound from a channel perspective. It's been incredibly strong.
The most important thing for us to deliver our our sort of medium-term plan is the performance of flavors. Just getting traction there is very important and we were weak on lemon, and we've launched a Sprite Lemon+ into the marketplace. Early days, I wouldn't declare victory, but we're certainly pleased with the progress we've experienced here. Product prioritization, it's also been clear on what not to do. The starting point for us that I'm really pleased with was that we had brands that we owned, and that brought us into conflict with the Coca-Cola Company from a roles. We've done that transaction of selling those brands to the Coca-Cola Company. What I like is there's a perfect roles sort of how we move forward.
What it means for our customers is that we actually go forward in a coherent way of presenting the category and presenting our innovation. 'Cause strangely enough, when you're competitors, you can't share your plans between each other in a coordinated fashion. This has been great to make the role sort. We also took the opportunity to look at the categories and to say, "Do we actually have a right to win from our share?" The example in beer, we had a 1.5% share. If we did really well, we might get to a 3% share. It's not going to move the needle in terms of the economics, and it's a distraction. You can't leverage it through your supply chain. It requires its own brewery.
we can turn around our core business within a few weeks to pay for what we'd be making in this area. We took the opportunity to sort of simplify our portfolio. When we looked at Europe, we would say, "Gee, we do have a lot more SKUs." We took about 25% of our portfolio when I joined between sort of 2019-2020, and we thought we'd move the needle. When we recognized what was going to happen in our supply chain, we felt COVID was going to be nothing more than a dress rehearsal for the turbulence of the supply chain. If you look at if you're going to be having issues in your supply chain, what decisions do you want to make that frees up capacity?
We looked at what played out with Europe. This year, we've reduced from this time last year. We've got 37% less SKUs in our NARTD portfolio. When you look at the loss of sales that we've had, it's pretty much gone to our other parts of our portfolio, and then it's freed up an enormous amount of capacity for us that we can then sell at a higher margin. For us now, we've done. That was Simplification 2.0. The team have presented to me last week 3.0 and 4.0. We know that we've got a lot to drive here, and therefore, we're seeing some record performances in our supply chain off the back of it.
When you sort of go back in the history of the business and you're declining, it does mean that there were a few of me turned up. There was a few different MDs in that time that sort of front the organization. The leadership of the business actually becomes like they're really under pressure. We had some good people, but it was incredibly tough time. As you sort of bounce out of that, the confidence that comes in what's possible. It feels more like when I'm in a meeting now, it feels more like I'm in the New Zealand mentality than what it was when I joined.
Especially on brand Coke and getting that back to really strong growth because that's what gives us the credibility with our customers, it's what generates the growth, and it allows us to bring our total portfolio along on the journey. The share improvements that we've seen across the year this year have been very positive. But I just wanted to call out the Advantage Survey. We were in the top quartile of our peer set. We were sort of sitting at number five. In the latest survey, which was just out in October, we finished at number one. We finished in number one also on supply chain. When you look at each of the measures, we were number one on ESG of the moves that we've had.
Of the twenty-odd, I think it was 28 different measures, we were number one on about 15. That was a particularly pleasing and reinforcement. Again, if we benchmarked ourselves to GB, we would be saying there's a raft of things within GB that are much better than what we're doing. We think we can continue to really step that up. It is an important one to get to number one when you get to the discussion on pricing because one of the areas that we really tried to focus this year on was the price realization, which was within our customers' financial calendar last year, we took 2 price hikes. We took one in July, we took one in February.
We also made changes to the promotional depth, and it was a category where it was incredibly responsive on large cans. That 40% has actually become the maximum of large cans. If you're in Australia, the last week of September to October, the maximum you would have seen is 20%. Now, you're trying to manage your market share at the same time within that mix because of the discounting of our competitor.
We've really made significant inroads. I think the key benefit that we've learnt has been how it's unlocked our smaller pack sizes by providing the oxygen. It's exactly what happened in Europe by doing it, provided the oxygen. Our fastest-growing is the 10-pack, 6-pack mini cans, and the 12-pack by 300 PET.
We launched the PET because of the price of cans, and we wanted to put another offering into the market, and that's had an explosive growth for us. I know there's often sort of questions about the Australian retail scene.
I would say it's from a collaboration. Having had 20 years of managing businesses in Australia, it's the highest level of collaboration that I've experienced in that time. I do think the establishment of the Grocery Code of Conduct and the requirements that sit within that has been an enormous enabler to how we operate. What we also would put forward on our journey on revenue and margin growth management is there's more to be done.
The tools that exist within in Europe are certainly better than what we would have. Our trade promotional optimization is a program that we're rolling out that leads to much better optimization of our promotions and our future pack price architecture. It's been the area that we've probably put the most change in resource, and we've redeployed significant resourcing of the organization to beef up our journey here.
The area that I'm really excited by is when it comes to data and analytics. I've worked in confectionery, salty snacks, biscuits, gum. Never seen a category that's as responsive as beverages, you know. Like, you talk about impulse categories, this is the super impulse category.
It's because household penetration is so high, the appeal of the brands are so high, the ability therefore to get the display standards and the activation right magnifies an impact like no other category, I've experienced. When we look at our business, we get store level data to about 85% of our volume. Either that's customer data, it's transaction data that certain customers provide for us, it's part of a joint business plan that we have for things like QSR restaurants, and it's our own direct store delivery data.
When we look at it, you take the same customer and we look at their store profile, the variation from the average is significant. You have certain stores that are selling certain mix and certain stores.
As soon as you can get those insights, you start to form clusters of behavior. What I would put to you that people that can use clusters will beat the people who use the average every time. Because of our size and our market share and our field size, we actually have the ability to activate clusters that nobody else in the industry has because of our market share. The way we bring that to life is we use it in joint business planning. We'll have a QSR customer, we'll use their transaction data, and we'll show them what meal bundling looks like by type. If you're selling chicken versus we'll say it and why.
We've got pizza chains where we'll say to them, "You've got 10 restaurants that you're closing too early on a Friday and Saturday night 'cause 75% of your sales are Thursday to Sunday. And when you look at how many pizzas are coming out of the oven at closing time, you're closing too early." The data and analytics of the organization are incredibly strong. Coca-Cola No Sugar is another great example because if you walk in with one of our reps into a store, they'll say to you, "This store is 55% No Sugar. The display standards are 55% No Sugar." What that means is if it's visible and available, especially during peak trading, it makes a step change to performance. We see key selling weeks and the variation.
No surprise in Australia, those that are closer to the beach do better in key selling weeks. We're incredibly responsive to weather, but the pack type by area changes. We can walk into a store and present to a store manager what key selling week and which packs need to be on display. We also use it in our away from home, and this is if it's a single door fridge, what do we want in it?
You can imagine when you've got something as precious as one door, you don't want to load it up with low performers, therefore ranging of the blockbusters. In 2018, we had more distribution of Mount Franklin water than Coke 600 ml. Once you're clear of what velocity looks like and success, then you can drive it.
The field tools that support that are incredibly strong. We also have large retailers that we learn from. I would have said in my journey, I used to walk into a customer and just based upon leadership, I could sort of say who I thought would win, and you take into account their supply chain and their store footprint. You've said based on leaders. Now to me, it's who uses their data the best.
The leading retailers, the way they're using data and the way we respond. We do have an Accelerate Performance plan for Australia. We're strengthening that plan through the acquisition and the integration focus that we've had.
Therefore, we do have a lot of confidence in our ability to continue to drive the business performance and the sort of financial objectives of CCEP. Moving from being a better business, I now want to talk more about being a bigger business and the opportunity that exists for us in Indonesia. Today, it represents 29% of our volume in API. It represents about half of that of our net sales or our revenue and it represents less than that of our operating profit.
Gearing up growth and scale here will be something that's therefore accretive to the performance of API, and then we'll keep Nik happy that API is accretive to the performance of CCEP. When you see the opportunity in Indonesia, it's significant. More than 270 million people based in Indonesia.
When you look at the economy, it's the largest economy in ASEAN. If you fast-forward based upon the sort of fundamentals, the sort of prediction, it'll be one of the big markets or big economies around the world. It has very low per capita consumption of NARTD, and the job to be done, it has very low per capita consumption of sparkling. If you look at some of the fundamentals, the fundamentals are strong, because with that, you've got a growing middle class, you've got a young population, and you've got increased urbanization.
All of those things will be a positive tailwind for the category. In developing the forward strategy on Indonesia, you have to start on shopper behavior.
If you go to the sort of households with low per capita consumption, small kitchens, a lack of refrigeration, a lack of motor cars, people shop frequently. They shop somewhere between 5-6 days a week. For most people, the notion of a daily shop would be something that they do. The winner at a local shop, therefore, is the general trade rather than the large supermarket. It's those that are in proximity to the home. If you picture a small general trade store, we're talking about something of about 10 square meters, and you can imagine the range that they can have.
The shopkeeper wants high velocity items, and the shopkeeper is focused on cash because if they sell something today, they want to replenish it tomorrow at a wholesale level on that supply chain. It's a SKU driven business. The route to market that goes with it is incredibly complex between distributors and wholesalers to be able to get that reach. Now, as we've been sort of formulating our go-forward strategy on Indonesia, we've certainly reached out to other emerging markets within the Coke system to sort of get an understanding of the success stories.
We've done a whole raft of deep dives in markets. Perhaps the most valuable for us has been to study what the winners have been doing in Indonesia. The starting point with the winners is that they've been incredibly consistent over time.
If you look at our history, I'd say we haven't been consistent. We have some success, we then add complexity. We go back to being more focused, we add complexity. We've not been consistent. But if you go to the winners, they tend to focus on a few categories. They tend to be very focused on the general trade because of its proximity to home. They're also very clear of the prioritization that it's an SKU game. If I said, I believe the world of beverages as an impulse category is an SKU game, it gets magnified by 10 or by 100 because of how small the stores are.
Therefore, you've got to be able to put forward a very clear picture of success. Here we've been obviously going through a journey which is greater prioritization across the board.
In portfolio, in geography, in how we improve our route to market effectiveness, and then how do we bring people especially to the sparkling category. We also recognize, being Indonesia, that we have to demonstrate leadership in sustainability with a priority on packaging and with a priority on plastic as the callout. Obviously that's the journey that we've been on.
If you then go to portfolio prioritization, if you go to what the winners do, and this being a super impulse category, it's the cornerstone for us starting. Within the general trade network, for us, this is a prioritization of 6-10 items that make a difference to distribution. In the modern trade, we're talking about 35 items.
In the modern trade, there would be no modern trade store with 35 because you can imagine a QSR outlet that we might be selling post mix to, versus a bar that might be having some mixers versus a grocery store. It's got some different nuances to that range. Now, we had a portfolio of over 100 items, and I always have a view, are we setting up a good person to do a good job, or is it that complex that not even a good person could do a good job? If you arm people with more than 100 choices to be made, don't be disappointed when you see a lack of consistency in execution. For here, the prioritization is driven at a SKU level, which then drives a category focus.
Now, if you then looked at the stores that we were covering directly, we had more than 20% of the stores that we covered that were only buying cup water and cup tea that had no margin structure. They weren't buying sparkling or our blockbusters at all. Because if I'm selling, I've actually got range of some volume as opposed to is the important things being ranged within the store.
The job to be done here is in reality, priority 1, 2, and 3 is sparkling because we've got three brands, Sprite being our largest, Fanta, and then really unlocking brand Coca-Cola. It's a strong tea market and therefore seeding that for relevance to the future. Then when you look at selectively in dairy and juice, think of 2 SKUs only that we have invested in those in the past.
We've got some velocity, but we're very narrow in our participation there. We're seeing some early success in this momentum, but it's a journey that we're on. To see sparkling growing at the volume levels that we had is pleasing and a reinforcement.
We realize that there's a lot to be done here. Over the last few years, we've also had in the shadow of a future plastic tax or a shadow of a sugar tax, and those things are not clear. There's an election in 2024, so we'll have to wait and see how some of these things play out.
When you actually have a narrow range of 6-10 in general trade, then you can do reformulation, you can manage pack size changes because you actually have a size of portfolio to manage, and then you can start to drive no sugar as a part of that. So we feel having the portfolio that we've got allows us to be able to modify those options into the future.
At a geography level, I mean, everything about Indonesia is massive, right? 270 million people, 17,000 islands. The one side of the other is, like, 5,000 kilometers. There's three time zones within it. And it can look incredibly overwhelming. Really, it's about Sumatra and Java as where the economy is at.
When you look at where the GDP is, we under trade in those areas. We have good national coverage, but we're not really maximizing where the heart of it is and the prioritization at a geography level. Now, at a modern trade, I think we've done a respectable job. There's certainly lots of tools that we can have. There's a lot from activation at the modern trade.
The big job to be done for us is within the general trade. Job number one to be done is actually what we'd be saying is high velocity customers within the general trade. We have approximately 150,000 high velocity customers. There'd be more than 400,000 within the market. These customers actually give you the sort of drop efficiency, supply efficiency that underpins your business.
The job to be done is ranging our blockbusters within those outlets. Whether we look at Nielsen data or our own data, there's a job to be done to make sure that the blockbusters are ranged. Once you get velocity coming through an outlet and velocity in the blockbusters, then you can continue to redesign your route to market because you actually have efficiency to be able to manage that. The journey that we're on a route to market efficiency is again to learn from the winners. It is the combination of having your own direct approach with wholesale.
Before you get there, you got to make sure that the combination is the winners in the market would be using distributors, exclusive distributors to get to the larger stores and then wholesalers that provide the breadth of distribution. If you can imagine also the country, the number of islands that you get to with wholesale. It's also for us about sales force effectiveness because we've had industry lower volume outlets.
A lot of our time is spent on customers that you won't get a return that need to be covered by wholesalers, and therefore it's an optimization of resource. To do that, you've got to have a digitization, so you can keep control of your business and your activation. The job to be done in partnership with the Coke Company is about driving the relevance of sparkling.
If you arrive there in Ramadan, you would get a different picture as to how you think the market looks, a different perspective. It's incredible, its level of relevance compared to the other months. We've just got to be able to drive this harder. It's a great area for recruitment. The opportunity is to make it more relevant all year round. We do that through the combination of breaks, meals, but also the passion points of music, sports, and gaming. That's therefore very important for us to recruit. We do want to take a leadership position on sustainability.
We have managed reduction quite well in history, but establishing recycling within the country becomes the key. As you can imagine, the infrastructure's not great. The consumer behavior around waste and rubbish is not developed like you would know it.
What we have to do is set a journey of our aspirations. What we've done here is we've invested in a joint venture with a local company on an rPET plant. It's a world-class facility. It's up and running. Next year, that facility will produce 25,000 tons, and about half of our total plastic needs will be through rPET through this facility.
To provide the feedstock for that, we then had to provide the collection system, and we've really tried to learn from places like Mexico on how to do this. In the collection systems, it starts with the pickers, and there's about 5 million waste pickers in the country who will take material if they can get value. By putting a value on the plastic, the picker makes money. We then have collection centers who sort the material.
It gets bundled. We have a not-for-profit who oversees the whole area from a sustainability and human rights. It's been a massive investment. This is an area that we're really trying to take leadership on plastic. We're then trying to throw the challenge to our large competitors to do likewise. If you can imagine in a country where there's lots of small packs across the board, there's a job to be done of creating this industry.
From an Indonesia perspective, we understand it's about setting the foundations right. We're very clear about its long-term opportunity. I think the thing that I've really found different in presenting this to Damian and Nik, it's actually having patience as we've been working through it.
Having come out of Amatil, where there's a lot of frustration about Indonesia, as we presented it, let's get it right, let's take our time, let's make sure we make the right decisions, and I think that's set us up really well. It is one that we'll learn by doing.
To give you a sort of a sense from the acquisition, and I hope that what the presentation has brought to life today, is that we are very excited, to now be a part of CCEP. The integration has gone brilliantly. You can say that if you don't have momentum, then it probably doesn't have credibility. We have good momentum. We recognize that in the results within the market share, within Advantage.
We do believe we're a better business now in the key markets that generate the profit today. We think we're setting the foundations to be a much bigger business in Indonesia to the future. Thank you, and I'll now pass to Stephen Lusk.
Thanks, Peter. Back in 2019 when we were doing the due diligence, we were looking at what the plans would be and the opportunities. It's fantastic to see the progress and the headroom for growth that we see.
A lot of that we base around our capabilities and the capabilities for the future in making sure that we grasp the opportunities in a brighter future, as I shared earlier. We'd like to share with you some of those capabilities that we believe are going to make CCEP what it is to be a fantastic business, to grow and invest, and to create shareholder value for ourselves as well as our customers. Myself and a number of the team are going to share some capabilities on what we think is going to make a difference for the future.
Really it's all about what we call joint value creation with our customers. We're going to take you through the story of how we do that around the wheel. From our signature program, which is around about how we deal with customers and work, to our ability to drive revenue and margin and growth for ourselves with our customers in the category, enabling our future digital capability, as we learn and we progress and we invest some of that capital from Nik into our future capability, and then being able to use that with smart execution, some of which Peter has just shared and other examples.
Then lastly, to be able to show you what that means when we bring the future forward and the future back as the higher supply chain is going to enable great success with our customers. Really starting about world-class customer management, and this is all about why someone or a customer would do business with CCEP. We call it our CVP, our customer value proposition.
That is what they get when they do business with CCEP and how we serve them across the different elements of our portfolio, our vision, our ability to grow margin, all the way through the wheel to what we then deliver. hearing about the numbers like Peter on the number one advantage and the ability for us to pivot quick with those capabilities is critical for us.
This is something that we're very focused on as a large part of our business in many of our markets as both retail and out-of-home customer. That's critical for us as we continue to build that for the future in the next coming years.
We understand what our customers need, and we have spent a lot of time since we last met many of you in 2019 all the way through the pandemic, as we come out now on being able to upskill our capability. Understanding the profit pool, where to chase the money and where the value is for ourselves and our customers, and how we create that value.
What we are able to do then through data analytics and our capability to drive revenue and margin. Obviously ensuring that, as Peter talked about joint business plan, that we're able then through our functional ways of working to deliver value.
Our customers are quite simple in what they ask us for if it's in retail. It's to get into more households. It's to make sure through more households, we get more baskets, and through more baskets, we enable more stores, and through more doors, we drive more margin. If you're in away from home, it's driving more people through the door, driving greater incidence of our beverage with a transaction per incidence and an amount. That way, how we create value with both retail and out of home. To do that, we obviously need to understand better our customers.
That's where I would say we've made a lot of progress, and we continue to challenge ourselves that we need to make more on the capability of how we bring insight into the capability to drive growth and that mindset. You're going to hear a number of areas of how we've created where to play, how to action, and how to win with a number of initiatives and investments that we've made as we go forward. We're not there, but we know we've got a lot of progress to make. You're going to hear from the team either that through customer and how we drive margin through promo optimization along with price realization.
Whether it be understanding where you go to find the money with profit pools with our customers to obviously when you're in indirect or direct markets, how you use data to try and find headroom for growth, and then how we activate our front line, which many of you would have met this morning, with tools to be able to make that happen. With that, I'm going to pass over to Jantine, who's going to talk about revenue and growth margin. Jantine.
Thank you. Thank you, Stephen. Yes, I do think R&MGM is one of our essential capabilities going forward. My name is Jantine Grijzen. I joined CCEP eight years ago to build the RGM capability in the Dutch business in the Netherlands, and then I progressed to become the retail director in the Netherlands, working, negotiating, and growing with the retail customers. Then I moved on to a group role for international customers, and now I'm solely focused on revenue and margin growth management. We want to continue to invest in that as a capability for three reasons. First, to expand our strong foundations in growing RGM to also maximize margin growth from the traditional RGM levers such as price, promo, and mix.
We want to have the capability and strengthen capability to do both, grow the revenue and maximize margin, and that's also why from now on we will add the M to R&MGM. Second, because we still believe and know there's a lot of headroom for growth to smart R&MGM, both in away from home as in home channels.
Third, because we want to proactively grow the customer profit pool with our customers and also capture our fair share of it. There's a strong link between the world-class key account management program Stephen talked about and R&MGM, and we really truly want to be that MCG that is able to create win-win with our customers also in the area of profit growth and margin. The headroom. We not only identified the headroom but also identified the levers and the programs to capture the headroom.
That's also why I'm personally very passionate about RGM, is because you always start with the headroom. We identified the programs and the levers that will support our mid-term growth vision of approximately 4% revenue growth. Volume, price, and mix will all be important contributors to that. Let me give you a few examples. On volume, you already heard Manolo and Stephen talk about the category growth potential. Let me take the example of increasing incidence in away from home. With incidence here, we mean how often you buy a drink with your meal. We can learn a lot still across our countries and by simply bringing our efforts to the best-in-class countries like Spain.
Also here, we can learn a lot from Australia, where they sat together with one of their quick service restaurant customers, and they set the ambition to bring the incidence from 1/3 to 50%. As you heard Peter talk, through using the customer data, not weekly, but really daily and hourly, they learned about the outlet executions and benchmarked the outlets to really drive that incidence with our customer through meal deals, through having the right on the go propositions, through activations together.
After a year, they hit roughly the 40% mark, and after two years, they are really close to 50%. Half the times a meal is bought, also a drink is bought. That's where that QSR customer, the delta of that equals the top-selling food item. There's a lot of value there for customers and for us.
On price and mix, you already heard about the strength of our pack architecture. That strength of the pack architecture is also helping us to offset the COGS inflation because we are present in all price tiers.
From below €1.50 to €3 to €6, et cetera, and that allows us to segment headline pricing. The vast majority of our SKUs in soft sparkling still have low to moderate price elasticity. This also helps to cater consumers that are maybe, through their cost of living increase, looking for more affordable options. Be it a lower out-of-pocket spend, or more better value for their money in promotions or multipacks. You already saw that today in the market in GB, but let me also give an example from Germany.
In Germany, we sell roughly 40% of our value in colas below EUR 1.50. Below EUR 1.50 is an out-of-pocket spend. People pay for the product. Roughly 30% is sold in the whole range from EUR 1.50 to EUR 6.50. Another 30% is sold above EUR 6.50 as an out-of-pocket spend. That's a huge spread, and it is allowing us to play with the pack price and promo combinations in all those tiers, but even within the same pack. We sell a 4 by 1.5-liter small pack as a multipack in the German business. We sell it for approximately EUR 4, so that's in that mid tier, and we sell it then for EUR 2 per liter average.
The same half a liter pack, we're also selling as a loose item in coolers, like you see here in the back. There in the front of store, in the retail store, it's really an impulse item, and we sell it for close to EUR 1.20. If you calculate fast, you see that's EUR 2.40 per liter, so that's EUR 0.40 more than a multipack. Both are selling great, and that's one of the mechanisms we can really use to segment our pricing and our headroom thereby also staying close to the consumers and give them offerings in all the price points they like. Let me also talk about the small pack growth opportunity.
You already heard many examples earlier today, and we still believe there is a lot of headroom to grow the small packs in the business, especially when we look to the shopper needs and the consumers, and we segment our shoppers. In Europe alone, 45 million shoppers already buy exclusively small packs or really across all our pack size and types.
That's roughly 50% of our shopper base in Europe. Those shoppers are still willing to pay a higher price per liter, and we can trade them up, as we call it, in making them buy more and more often. Within that group, the group that really buys across all our pack types, is the fastest-growing group, and they spend share of wallet three times more than the other groups. We can drive a lot of execution in that.
For example, in the Netherlands, we built a boulevard of small packs on the shelf. Really the shopper, when they go into a retail store, they are confronted with a whole kind of boulevard of small packs, not only for us, but for the whole category. In Belgium, we simply added a shelf of small packs on top of our large pack pallets in a discounter, because also in discount, small packs sell. Then last example I will give is also in wholesale, maybe a channel you might not think about very easily thinking about pack mix.
This is a case study from GB, where together with a wholesaler, when they were starting to sell more and more of their sales online, so more than 60% of their sales are coming from online, we were helping them with joint customer planning to really drive the sales across the full range of our packages. What you see on the screen is where through search and optimizing search items on their websites, their customers are not only drawn to one pack, but across the whole range to really also serve their customers with the full range. The results were great, right?
We drove +90% revenue growth just by working together with the customer on this. We did the search items. We also did other things, training their salespeople, for example, working on activation. We continue to build the capabilities.
We will work with our already strong local in-market teams we already have in place in RGM, and we will continue to support them also with tools. Just highlight shortly three of them we already have in place.
One is trade promo optimization or TPO. We use to drive the promo ROI. We have a price and profit tool that helps the teams on that profit pool ambition with the customers and ourselves. We have what we call POGO, and POGO is a tool that actually uses all the data we have to make a picture of the future potential of an outlet, and that's then feeding in our frontline sales tools, for example, like Red One. Rather than telling, let me show how these tools work already day to day in the markets.
The Trade Promotion Optimization tool is our essential platform to optimize the return of investment on promotions. Analytics guided promotion recommendations delivered immediately a quarter of a million of revenue in the Netherlands, all by switching promotion mechanics. John, as VP key account manager, has refreshed data and improved recommendations to choose the promotion mechanic for each product and customer that will give the highest returns.
A massive game changer for our commercial teams is the price and profit tool. A deep dive analysis of customer margins is done within minutes instead of weeks. Hannah, a CCEP revenue growth manager, can now focus on a fact-based, informed, and valuable conversation. The tool automatically identifies opportunities to increase our profit through optimized mix and volume strategies. Powered by those insights, we win the customers and stay their most valued supplier.
The capability of consumer behavior data guides our CCEP's field sales teams in a fast-paced environment to the best performance. Our platform for outlet growth gives an insight-driven approach and has identified 4,000 HoReCa leads. It helps identify prospective customers.
It also informs field sales territory planning by showing the outlet headroom for growth, how much we should be able to sell in these outlets, whether they are customers or not. That's not all. Analytics drives marketing activation plans effectiveness in Spain to generate a return of EUR 5.5 million, improved our focus accuracy in Germany by 7%, and is driving savings in CCEP's overall procurement spend. CCEP is delivering value from analytics. Next, we'll manage data assets better and scale further smart actions to drive superior performance for our customers, powered by insights.
Yeah. That provides really a snapshot, and let me hand over to David Martin, who will tell you more about our digital capabilities.
Good afternoon, everybody. My name's David Martin. I'm part of the group commercial function, and my role really is to look at how we use data, technology, new sales channels, and new business models to drive incremental and profitable revenue growth. I've been with CCEP for around nine years, always working in this particular area. Pre-CCEP, my background is customer side, building and running online grocery and general merchandise businesses for the likes of Asda, Morrisons, Ocado, and FreshDirect in the U.S. We really have, I suppose, two key use cases against which we build our digital agenda in CCEP. The first one is how do we make it easier for customers and shoppers to buy from us? The second is really around, how we make it easier for our frontline colleagues to sell.
The role that I have with my team is to, as I said, enable that commercial strategy and build the solutions and tools that allow our frontline teams to go and drive execution and revenue growth in the markets. If we talk about how do we view the opportunity around digital revenue growth, it's really based on three pillars. The first one is around our customer portals, and this is how we make it easier for our customers to order from us. Probably more importantly, both for our direct and indirect customers, how do we be the best CCEP that we can be for them, helping them to grow their businesses with and through our portfolio? The second pillar is around winning with the winners.
Whether this be the online grocers or wholesalers who are increasingly moving online, the food delivery platforms or the quick commerce platforms, how do we ensure they're always putting our best foot forward? How do we make sure that we're delivering the perfect digital shelf? Obsessing around execution online as we do in store.
How do we develop the activation plans along with The Coca-Cola Company that actually really allow us to drive additional basket adds, additional drinks incidence through the platforms that we're working with. The third area is around owning the future. This is about understanding how we can develop new routes to market that service both customers and consumers, that open up new revenue streams for us, but also give us new ways to engage with that broader church.
In terms of E-B2B platforms, we have a number of initiatives that are running across our markets today. Some of those are through partnering, some of those are through equity investments that we've made for our ventures team, where we're really starting to understand the opportunities in this new space. We have the likes of Kollex in Germany, which is a partnership with two brewers.
We've got an equity investment in a business in the UK called StarStock, and then we have a pilot in Portugal using the company-owned platform, Wabi. Lots of really interesting learnings for us here and really starting to form our understanding of what we need to do more proactively in this space.
From a consumer perspective, we continue to learn and build capabilities in this space through the ongoing development of our Your Coca-Cola store in GB. As Damian has alluded to already, actually, a significant proportion of our volume is already captured through sort of digital channels or through digital touch points. Whether that be the way in which we work with some of our bigger customers through EDI and VMI solutions, whether this be the revenue that we process through our customer portals or the revenue that we're generating through our frontline colleagues who are using digital tools to take orders in outlets. It fits 85% of our volume today, and obviously a big drive for us is to really understand how we can move that number up and close the gap.
What I'm going to do now is focus on a couple of key initiatives I think that really bring to life what it is that we're doing. The first one is very much about the first use case of how do we make it easy for customers to do business with us. This is our customer portal. Here we're talking about MyCCEP in Europe and MyCCA in Australia and New Zealand. This year we'll process around EUR 2 billion worth of revenue through these portals, which is up around 50% year-over-year. Our focus really is threefold. The first one is, of course, to continue to understand how through the use of data we can grow our incremental sales and the lifetime value of the customers who are currently ordering through these portals.
The second opportunity is how do we increase the ordering footprint? Looking both within our existing markets, but I'm particularly excited about the fact that before the end of this year, we will launch the MyCCEP platform into Indonesia to start to service some of our QSR and modern trade customers. The third area is really how we actually start to use the portal as the omnipresent element of our omnichannel strategy to be always on for all our customers. 24/7, we are there to help them grow their business with and through our portfolio.
I've got a couple of videos. The first one really is just, I think, to look at MyCCEP and some of the key functionality that exists today and is supporting our customers as they work with our business. Play the first video, please.
Welcome to MyCCEP.com, your Coca-Cola customer portal offering all your benefits in one place. Easy product ordering and convenient self-service everywhere, anytime, no matter how you choose to engage with us. At MyCCEP.com, ordering online is simple, fast, and secure. Create favorite lists, order and reorder with just one click. Thanks to our tracking system, you can follow the status of your orders, invoices, or other requests 24/7 and wherever it's convenient for you. Your personalized dashboard offers you a clear overview of all your activities at a glance.
Find your orders, invoices, and favorites, but also the latest news and trends, valuable tips and insights precisely tailored to your needs. It's your single point of access to an ever-expanding range of tools and services, helping you to grow your business. It's not just our great products and services that are available on MyCCEP.com.
Account depending, you'll be able to order and manage your Coca-Cola coolers, access point of sale material, and much more. We have an exciting pipeline of innovations planned with your business in mind, helping you to optimize your revenue. Stay one step ahead with my.ccep.com for your everyday success. Sign up today at my.ccep.com.
I think it's always good in these sort of events also to have the voice of the customer in the room. As I said one of the big opportunities for us here is how do we open up the portal for our indirect customers where we may not be selling them products, but there's a huge amount of advice and help and support that we can give them. We've got a short video with some of our Dutch customers talking about how MyCCEP is supporting their business.
Hi, I'm Diego, owner of Diego's Burgers, the hamburger restaurant at the Kop van Zuid here in Rotterdam.
Hi, I'm Sue. I am the Board Chairman for the catering at Hockey Club Pijnacker, HCP.
Hi, I'm Benjamin, and together with my wife we have our Peruvian restaurant Inca Mania, here in Delft.
The MyCCEP platform is very easy for us to use. We use the platform to download our promotional materials and use them in our canteen.
Oh yeah. They for sure like the vests, but they love to drink the Aquarius after our trainings.
We also use MyCCEP for inspiration. Our barmen were looking for new cocktails, ended up on the platform to get inspiration, and also saw an offer for Royal Bliss, two plus one free, and with that we developed a cocktail. It's very easy when I go home by metro in the evening to open the platform and say, "Oh yeah, my Coca-Cola machine is acting up," so click, click, and it's registered. I'm not the only one who can do that, all my employees can do that.
We always want a delicious meal, and that is always served with a fresh Coca-Cola. With the loyalty program, we earn nice materials for the club.
MyCCEP makes it very easy for us to use promotional material for our combo deals.
Well, actually, we are always looking for cooperation with our suppliers, so also with Coca-Cola. How can we, in addition to serving Coca-Cola in the restaurant, involve our guests even more with the brand? What we actually do is we made a barbecue sauce based on Coca-Cola, and that's actually what we cook our chicken wings with.
The second initiative we're going to quickly touch on is I suppose is really working against the second use case, which is how do we make it easy for our frontline colleagues to sell. As David mentioned earlier, we have 10,000 colleagues every day, every week, every month, going into our customers' outlets and having conversations with them around how we can drive better execution and how we can drive growth through their outlets by better utilizing our portfolio. At the heart of this, of course, is how we use data analytics to drive that smart execution agenda.
The reality, obviously, is in the hands of the frontline colleagues. They have the RED one tool. Now, many of you would have seen the tool in action in the field visit this morning. What we thought we'd actually do is share a video of
From the New Zealand team actually, about how their adoption of RED more generally has driven their business. Sort of Peter has touched on this already. How they're using data and technology to really improve the efficiency of their frontline colleagues and really drive more valuable growth conversations with customers. Alex, you want to play the video, please?
In Aotearoa, New Zealand, we're riding a red wave of success that continued in 2021 with growth across all our key metrics despite significant market headwinds. How did we do it? Right Execution Daily is at the heart of our sales business and is a key driver of our sustained growth for CCEP, our brand partners, and just as importantly, for our customers.
We live and breathe red in every part of our business. We've doubled down on driving efficiency by investing in technology, tools, and capability so our teams can spend more time selling. Our world-class in-house developed SAM platform tracks performance against range, share, and activation, ensuring we consistently achieve executional excellence in every outlet. We leverage the power of photo recognition technology to measure the share of visible inventory and 3D picture of success to deliver faster conversion of opportunities.
The RED platform, partnered with our SAM technology, allows us to manage a broad portfolio as well as a diverse customer base. We have access to real-time data, which helps drive profitable transaction growth, not only for CCEP but also for our customers.
We're serious about supporting our customers, and for us, that means face-to-face relationships. Our investment in a high-touch model means 80% of our customers have access to a two-weekly rep call and delivery, and our call coverage is 74% of all available outlets in New Zealand. This provides the platform to deliver our world-class execution metrics and to build strong, lasting partnerships with our customers.
Through our CCEP sales team using the SAM platform, the information it provides helps us monitor our sales and grow our business. Super satisfied with the same technology. It brings so much value to our business.
The RED mantra drives every part of our business, maximizing value from our diverse portfolio, driving excellence in execution, and delivering great results for our customers, our business, brand partners, and our people.
A fantastic story from the New Zealand team. What super excites me about all of this, I think, is our ability to share our successes and our failures across the market, which is ultimately allowing us to go further and faster together. That's just touching on some of the work that we're doing in this space. A lot of progress has been made. We see a lot of further opportunities in terms of how we can use data and technology. I'm now going to hand over to José Antonio, who's going to talk about customer service and supply chain.
Hello. Good afternoon. My name is José Antonio Echeverría.
I have 25 years' experience in consumer goods industry, and I joined CCEP 18 years ago at Cobega, the Spanish leading bottler at that time.
Now I'm lucky enough to lead the customer service and supply chain organization across CCEP. At CCEP, we have very clear what is the strategic role of customer service and supply chain. I will summarize as supporting sustainable growth and profitable growth through a strong focus on our customers. Doing that through our people and innovation mentality, and especially about technology that really support business growth. Well, it's difficult today to
In these times to talk about supply chain without recognizing the headwinds that we are facing in terms of commodities or the difficulties coming from the geopolitical situation and the volatility on the global supply chain. In this environment, I can say that in CCEP, we are improving our performance. We are improving our performance through tools like optimizing our portfolio.
As you have heard previously from Peter, we have been able to reduce the total number of SKU by 30%. Just a fact, in the case of Australia, that means that with the timing that we are saving in changeovers, we are able to produce 6 million unit cases additionally with the same equipment.
Clearly, we continue with our improvements in productivity, and that has allowed us to really consolidate some of our manufacturing plants in Germany, also in Iberia during the last years, and also some of our distribution centers. We keep on working on building an innovation mentality, an innovation culture in CCEP. We are doing that with our partners of CCEP Ventures. We are working with them in different topics like sustainable packaging, different route to markets or logistics, or even sustainability with a project that I'm really excited about that is Direct Air Capture, trying to get and remove the CO2 from the air directly in order to reduce our carbon footprint. One of the innovations that we are now having is our innovation labs. I'm very excited about that.
We have just opened two innovation labs for customer service and supply chain, one in our plant in Barcelona, another one in our plant in Berlin. Let me share more with that through a video. Play the video, please.
NXT LABS will unravel existing and future innovations, positioning CCEP as a beacon in sustainability and innovation. Designed to be a physical and virtual space that adapts to each visitor, showcasing the latest products and services, unifying the digital and physical experiences while offering an ideal space for open innovation, bringing together our employees, customers, suppliers, and startups to give life to our core values in every touchpoint. It's a journey that we have already started and that will continue evolving and expanding across CCEP territories to enhance our innovation capabilities, develop new ways to support our customers, and become a more agile and resilient operation.
As I have mentioned, we're continuing investing in technology, in technology that supports growth and productivity in our customer service and supply chain organization. We are investing in almost all the areas of the end-to-end supply chain. We're investing in our area of planning with new tools that allow us to use artificial intelligence or machine learning in order to synchronize our forecast and our supply, or managing our fleet, our logistics, through the advanced transport management system that allow us to really not only optimize, but have an online tracking of what our fleet is doing and being able to connect with our customers in order to deliver the proper information about that.
Getting all the information with our coolers in the market, information from a technical point of view, but also from a commercial point of view.
Probably one of the areas that I would like to share with you today is about the factory of the future, Industry 4.0. That is starting to be a reality in many of the CCEP factories. For that, let me guide you through that through a video. Please. We have multiple initiative like this HV project that allow us to have 24/7 operation without labor interventions in order to support our operations in preforms, for instance, in one of our German factories. Or the use of 5G technology in order to ensure the safety of our operations from a truck point of view, from our people point of view, and also with our forklifts. Using 5G with Internet of Things in order to detect collisions before it happens. Or the use of digital twins in order to optimize our warehouses.
An example, in this case, in this factory in Germany, we were able to get 1,000 additional pallet positions just optimizing in a dynamic way our warehouses. Using augmented reality to support the line operators connected directly with the suppliers that allow us to get technical advice on how to fix a breakdown. Using technology for our operational excellence routines, having directly online all the information, and allowing also to connect with teams, for instance, in the night shift with all the people. The use of 3D printing in order to print spare parts when we are in a situation that we need it.
That's all linked directly with the suppliers that allow us to really save a lot of time and reaction time in spare parts. This project, which is a really exciting one, which is a self-driving electric truck that we are really testing in Mannheim, in one of our German factories to move product across the factory without human intervention, 24 hours a day, and on top of that, with an electric driver. Our quality control automatically done online for robots, and they are able to really to check the quality of the can without human intervention. I think that we are well equipped in order to face the future and all the productivity challenge that we have ahead of us. That's all from my side. Looking forward to receiving you tomorrow at CCEP, and let me hand over to Ana.
Good afternoon. My name is Ana Callol. I am in charge of public affairs, communications, and sustainability in CCEP. I joined the Coca-Cola system also a long time ago, 22 years ago. As you see, we all entered very, very young in this company. I want to go through the roadmap in sustainability. I was in the company with Manolo a long time in marketing, after in consumer positions, in customer positions, and afterwards in sustainability 7 years ago, joined the bottler, and currently with this role since January. As you have seen today, although sustainability is a key piece in all of the parts of our business, and you have seen consistently that everyone has been speaking about that.
We have a story behind in doing this way. We were one of the first companies in setting science-based emissions reduction targets in 2015. Two years after in November 2017, we launched the first for the former Coca-Cola European Partners bold our sustainability action plan called This Is Forward. It relies on all of what we are doing to add value to our shareholders, also to add value to the communities in which we operate and to the environment, of course. We have done so far a lot of progress in shifting to 100% renewable electricity, investing also in collection systems, in new ones for recyclability, also in recycled materials and in finding solutions for more sustainable packaging.
We just don't attach to the environmental piece, but we of course also touch the social part, and try to have more diverse workforces, as Véronique mentioned previously. We also work on developing the communities in which we operate and help them for their employability. I will go a bit more farther there. We are getting external recognition for this. As you can see here, in 2016, we entered in the Dow Jones Sustainability Index, and also in the CDP A-List, both for climate and water, in the same year, and we have maintained ever since. We also very recently got the recognition from the Coca-Cola System for our ESG performance, the Paul Austin Award.
Paul Austin and also EcoVadis, which is the tracker that measures the sustainability in performance in our supply chains, recently also awarded us with the platinum medal, meaning being among the 1%. Where are we going now? Since the Amatil acquisition last year, we have been working in extending our commitments to include the Asian, Pacific, and Indonesia territories there, and this is what we have updated now, and I will give you a bit of update on that. Also, we are updating our inclusion and diversity targets and social targets beyond gender, updating also our water targets and introducing a new society target.
This of course is very aligned with the Coca-Cola Company in order to be a World Without Waste system, also to achieve the social impact goals and the water security goals. What we have done is setting more measurable targets, more bold targets, time-bound and committing to 20 targets that we have, we are going to externally assure their performance. This is the structure that we for consistency maintain because we believe these are the pillars that are the key ones and are the material ones for our business, but also what's more important, the key ones for our stakeholders.
They have 20 commitments, as I showed, bolder bold commitments in it, some of which you are seeing here now. I'm especially proud to highlight the society one, which as you saw previously, contains the internal dimension, one with which means 45% of management positions are female, as Véronique highlighted, and also meaning for all the workforce being one-third of it female, but also adding the disability targets there, and as an external commitment supporting the skills development of 500,000 people by 2030.
Going to environmental commitments on climate, we are especially reliant on, and we work very heavily with our suppliers in order to achieve our commitments and in order to get them to have science-based targets, also and, to have 100% renewable electricity. On packaging, we are of course working very hard here, and we are working towards achieving the targets that we wanted to meet the challenges that we face with the packaging. We are there investing in recycling facilities as we recently did with a joint venture in a recycling facility in Jakarta, Indonesia, in order to upscale the collection and the recycling bottle to bottle.
Also we are investing into rolling out our tethered cap closure in all our plastic bottles in all of Europe among this year and next year. Of course, we are continuing investing in our recycled materials and PET that we include in our bottles. We are investing also in ventures in order to find solutions to get more sustainable packaging. Going to water, we are adding to the commitments that we already had, and in order to align also with the Coca-Cola Company, 100% regenerative water commitment in our leadership locations, which are those ones that are under water stress or that are more water risk-related.
Also our drinks, you saw already that we are making a lot of efforts in promoting our low and no-calorie sweeteners drinks and also in reducing our sugar of our products. For everything we have been done so far, there's still much more to come. In the immediate future, what we are doing currently is updating our 2030 reduction emissions targets, including the Australia, Pacific and Indonesia territories to align them with science-based targets too, and we will update you soon, next year. We are working in including a new target on reusable to respond also to the commitment that recently The Coca-Cola Company has done on including reusable targets within our strategy. We will update you also soon on this.
Also being very aware of how biodiversity is really important and is being impacted by value chains. We are also introducing new commitments on biodiversity and nature, and the first steps that we are taking is taking part of the science-based target network engagement program for corporations so that we can validate and study what the impact is of our value chain within the nature and within biodiversity in order to set a target there.
I would like to finish by explaining how our sustainability agenda is really linked with our value creation in our business with some examples. For example, we are offering more sustainable packaging solutions like we recently did in France in order to help also customers with their margin growth.
We recently launched in all of our products the returnable glass bottle in the HoReCa business, in hotels, cafeterias and restaurants, being the first non-alcoholic ready-to-drink supplier in offering a deposit system in this channel. Also, by offering electric vehicles, for example, to our employees, we decrease our CO2 emissions and as well as we achieve also employee engagements.
We also by delivering solutions such as offering bottles with more recycled PET inside, we build brand love. We deliver to consumers what they are waiting for. Also to customers, by delivering also package-free solutions, we eliminate materials and we drive innovation for consumers, build consumer loyalty and also offer lower costs served.
By enhancing also digital workplace, for example, we avoid travels, we reduce OpEx, and at the same time, we get also higher employee engagement. That's our approach. This is Forward in action in our plans and in the heart of everything we do. We are very aware that that there's a lot to do still. We have a long way before us, in front of us, but we have the experience, we have the commitment, we have the ambition, the conviction, and the right partners in order to achieve them. Thanks a lot.
I think we're ahead of time, so that's great news. That means we've got more time for Q&A later. We look forward to that. Before the break, I just wanted to kind of wrap up with the reasons to believe slide. I won't go through it, but I've hopefully from what you've heard this afternoon from the size of the opportunity, a clear strategy to extract value from that opportunity for our shareholders and our customers, and most importantly, the people and capabilities to execute. Because clearly having the opportunity and the strategy, a lot of businesses can be good at that, but it's bringing that to life and executing it consistently across all of our markets.
I hope that what we shared with you gave you a feel that we've got the people, the capabilities, and in a lot of cases now, the technology in place. We've got a 30-minute break. I'm sure everybody could do with a drink. Yeah, and the highlight after the drinks is you gotta listen to Nik. Yes. Don't be late. 30 minutes only. Waiting for it. Yeah. Thank you.
All right. Welcome back, and welcome to the main event that everybody's been waiting for. I stand between you and the pub or the 6 P.M. announcement from the Fed. I don't know which one's more exciting.
What I want to really do today is take you all through, kind of bringing everything that we've seen, for the last couple of hours together in terms of what does that really mean for us as a business. Starting obviously with closing out 2022, hopefully on a successful note. Then talking a little bit more around 2023, then really focusing around what does that mean if we look at 2024 and beyond. I say 2024 and beyond because we believe and hope that the markets will stabilize. I think we'll hopefully return to some form of normality.
We really based our mid-term algorithm on the basis that we will get back to a more sane world in terms of inflation. A world in which everything that we've been doing to lay the right foundations since the formation of CCEP back in 2016 should continue to help us and enable us to deliver on those ambitions. That's what I'm going to try and do over the next 25 minutes. I've been told that's all I have. If I run over, then I'm going to be in trouble 'cause I tend to talk too much. Let's start with a really important chart, I think, just to kind of ground everybody in terms of where we started out.
I remember 2015 meeting Sol and actually being on the other side of the table negotiating on the formation of CCEP. Little did I know that the deal was going to happen at that point because it was still a year and a half away before we closed it, and that she was going to be my ultimate boss. I should have been nicer, but you know. It worked out okay. We did close and form what was Coca-Cola European Partners back in 2016. It's been quite a journey, right, if you think about where we've come from.
I think Damian talked about the fact that the biggest thing that we had to achieve was really be able to convince the markets around the fact that Western Europe could grow, and Western Europe could grow and grow sustainably and grow profitably, right? I think a lot of people doubted that, right? I think a lot of people were excited about more the synergy number that we talked about in terms of the EUR 300 million that we were going to deliver or the EUR 25-340 million. I got lots of questions around, "Is that gross? Is that net? What's going to be reinvested?"
All that kind of stuff. I swore after that I'll never give a target and commit to actually telling you how I'm delivering against those.
There will be a target today that you've seen, but it's going to be in our numbers. Don't ask me, "Is it gross? Is it net?" Don't ask me what's being reinvested. It's in our numbers. We did deliver against those, and we delivered bang on. I think not just about delivering bang on, we were able to invest in the business alongside The Coca-Cola Company to be able to drive that sustainable top-line growth, right?
I think that was critically important because, it wasn't just about delivering all that to the bottom line. We delivered what we committed, but we also invested to set the right base for the future. Really solid free cash flow, and you'll see a chart coming up on that a big focus was working capital.
I'll talk a little bit about the number that we've achieved to date, but more importantly I think there's still some room in the bank to get some more on that as well. We started our inaugural share buyback program, which unfortunately or fortunately had to be paused. I say fortunately had to be paused because COVID hit.
In covid yes, I think we all sat back and said, "Oh, this is going to be over in a few weeks." I remember Damian and I being in Florida with one of our shareholders. This was the end of February 2020, and we said, "Oh, this is never going to come to Europe." little did we know, three weeks later, we were going to be in a lockdown, and a lockdown that lasted or impacted our business for several years, right? We're still kind of recovering from that. In some ways, it really forced us and emboldened us to make some really smart and big choices, right? A big thing around preserving and maintaining our balance sheet, which was critically important.
It was much stronger focus on cash, which was very much the right thing to do. Looking at our OpEx and really saying, "How do we look at our cost base, and how do we start stripping out those costs and move more aggressively?" That's something I'll talk about a little bit more as well. What it also did was allow us to kind of step back and say, "There's an option here to make a really bold decision and a bold choice, and make an acquisition," right? People thought we were crazy, right? The Amatil board thought we were crazy when we called them up and said May of 2020, "Hey, you remember we talked to you last year? But we want to talk about this acquisition again," right?
I think the fact that Sol and our board supported us in saying, "Yes, let's go do it," right, was a great choice. You heard Peter talk about how well that integration's gone. A lot more to do, so I'm not going to say it's done. If you talk about 18 months on and how we're operating as one company and what we're realizing as the benefit of having a more diverse geographic footprint, it's incredible. Manolo, keep in mind, you've got the best integrator here in terms of CCEP. Any territories, Robert was asking me what might come up next. He said, "You've crushed Europe. You've crushed this integration. What's next?" I said, "Okay, don't ask me tough questions. Ask Manolo that over dinner." He's going to be asking you.
Let me know what he says to you, by the way. We went out and at that time did a big transaction, EUR 6 billion of debt. I know several in this room challenged me on going out and raising that level of debt. At the same time, several of you didn't want us to go out and raise equity, right, and dilute. It was a bold choice. Fortunately, timing was everything. We were able to do that debt at 40 basis points. If we went out to the market today, we're probably looking at additional 250 basis points at a minimum to go out and do that transaction. Timing was everything.
We announced, obviously, a really great transformation program at the time of the closing of the deal. The good news is we'll have delivered about 90% of that by the end of this year. A little more to come in 2023, which is really going to help us. That's when I think it's critically important. As an organization, we've never stepped back and said, "Okay, we're done with that." It's always about thinking about what's next, right? I know I've had several conversations over the years with you guys around there is more opportunity, and I'm going to talk a little bit about that. Hopefully you've seen some of that in terms of some of the opportunities we've talked about, be it on digitization, be it on the customer service supply chain piece.
We really have an opportunity to continue to look at productivity and efficiencies in our business. Then obviously, 2022 has been kind of a record year. The fact that we're 13% ahead of 2019 revenues says a lot in terms of the recovery of the away-from-home business. Also very much around again the belief that we have in this business and the growth opportunity for this business for the midterm.
More to come on that. Then one of the things I will talk about is back to our balance sheet and the fact that we don't have a need for refinancing, at least for the next 2-3 years. I think that's a critically important point given the volatility and the uncertainty in the markets.
Not having the need to go out and access the debt markets at a point like this and be able to utilize our free cash flow to be able to deleverage and pay down our debt is critically important. I think that's really a solid place for us to be as well. Full year guidance that we've raised. This is our third raise this year. I know it's a little crazy when you think about the fact that in a volatile year like this, we've been able to raise top line three times, and free cash flow and operating profit twice. We're looking at 15%-16% growth on the top line. It was 11%-13%. COGS continues to be the most elusive number that I've ever seen in my career, right?
If you recall, we talked about it being about 7.5% on a COGS per unit case in August. The challenge has been in Europe. You're dealing with a very uncertain environment from a gas and power perspective because we're pretty much well hedged on the other elements, right? It's just the volatility that you see on gas and power, unhedgeable at this point, really. One that we're just living with that through our P&L. The big piece obviously that we'll be tracking is what happens from an energy caps perspective that comes through, hopefully, across all our markets in Europe that can give us some certainty as we look at 2023 or at least parts of 2023.
Even with that, we're still delivering and upgrading our operating profit growth to 11%-12%, and both those being currency neutral, so about 150 basis points add from a currency tailwind. The effective tax rate at 22%, so at the lower end of the range that we guided you towards. We'll talk a little bit about tax rates going forward because again, that's probably an area of a fair amount of volatility or uncertainty given what governments might do. We're sitting in one of the markets right now where that rate move has yo-yoed just in the last six months in terms of it's going down to 9%, it's going up to 25%, it's going down to 19%, it's going back up to 25% and maybe more, right?
We'll wait to see. Diluted earnings per share of 14%-15%, which obviously is on an FX actuals basis. That obviously allowed us to declare a very strong record dividend of EUR 1.68. then free cash flow, EUR 1.8 billion, a EUR 200 million raise from where we were sitting here in August, and I'll talk about that in a moment as well. Probably 2023, which is the big question for a lot of people in the room, right? From an angle of great, 2022 delivered. Great, you're talking about your midterm objectives probably starting up in 2024. What does 2023 look like, right? Now it is too early to give you precise guidance, right?
I think any company that can go out and give you that guidance, I'd love to be able to meet their CEO and CFO and say, "What the hell are they smoking?" Right? Because I want some of that. But quite honestly, the market is remaining resilient right now in terms of what we've seen, and that's obviously evident in terms of the upgrade that we've provided. But we are mindful of an uncertain future. listen I know it sounds so cliché-ish, but we honestly don't know what's coming around the corner, right? 2023 can be incredibly challenging or it might be a huge opportunity for us again. It comes back to some of the points that we've talked about. We're in a great category where we're seeing very strong and robust growth.
We're not seeing any signs of down trading to date. We have a much more resilient business to private label than we ever had before. We have a much more diversified business from a pack and channel and geographic footprint perspective than we've ever had before. Those are all things that we are very positive about as we go into 2023 in terms of our ability to weather the storm, right?
Now the category, as you'll have seen, is going to grow 3%-4%. That's 2023 to 2027, right? 2023 is going to grow in the high single digits, right? We want to maintain share, right? That's a critically important piece. You are going to expect in an inflationary environment that we're in, that a large part of 2023 top line growth is going to be price driven as opposed to volume, all right?
That's what we're factoring in right now. That's also important if you think about the fact that we are looking at cycling a very, very strong 2022 from a volume perspective, right? We had a phenomenal summer. We've had the benefit of the COVID recovery, but we've also had the benefit of unusually warm weather until probably even a day or two ago, right?
It is definitely going to be much more price driven as we think about that inflationary pressure. The good news is, we did take a second price increase in July through kind of September, October. Those have, for the most part, successfully been landed across our markets.
That will give us the benefit as we go into 2023 'cause you'll get that annualization impact of that coming through in 2023, in addition to what we will be doing as additional pricing. All right. Now, I think it's critically important that we realize that this is not an easy environment to get that pricing, right? But we've done it well, right? And it goes back to, hopefully, a lot of the examples around revenue and margin growth management, how we're effectively looking at surgically executing our pricing across channels, across packs.
How we're focused around promo optimization, and that's always a tool we've talked about, and you've seen how we've been able to effectively use it in markets like Australia, where everybody said, "God, I remember when we did this transaction. Retail consolidation.
You're never going to be able to break that promo cycle." Right? Well, we were able to, right? Now, I think the environment also helped us. I think Peter and the team have done an amazing job being able to pass that through.
That's more in terms of also the tools, the capabilities, the brand depth, that we have that allows us to be able to do that. The experience in terms of the customer value creation is huge, right? Top line focus as we look at next year. On the cost side clearly a challenging environment when you look at the commodities. Today, we're probably looking at that being up mid-teens, largely energy led, okay? It's not so much about the actual underlying commodities piece that have actually moved favorably.
I would just say favorably from an angle that don't get caught up in spot prices 'cause spot prices don't necessarily reflect both our hedging positions year-over-year, but also don't necessarily reflect the forward curves, right? Clearly, from an underlying commodity perspective, that is a positive. The challenge is really the conversion cost piece that you're dealing with, right?
That is purely linked to the energy and gas and power piece, right? Converting those aluminum sheets into can bodies, converting those plastic, the PET that we buy into preforms and into bottles, that clearly has an impact. Transportation has a huge impact, right, in terms of what's coming for haulage into just bringing those raw materials into our factories, right? Those are things that I think every company is going to be dealing with.
The good news is, again, from an underlying commodity perspective, we're about 60% hedged for 2023, and we're about 35% hedged for 2024. I'll call out two commodities in particular just to give you some comfort. Both on alu and sugar, we're about 75% hedged on alu for 2023 and about 55% hedged for 2024. This is again on the underlying commodity.
Then on sugar, we're about 85% hedged for 2023 and again, about 55% hedged for 2024. We're taking advantage of where we see opportunities to go in and lock in some savings against what we've seen in 2022 and 2021. Concentrate is clearly something that is linked to our incidence model. It works extremely well. I don't know what Damian was smoking when he said we pay a very cheap price for concentrate.
Manolo, I want you to know we pay a fair price for concentrate. I would love it to be lower, but jokes aside, I think that model is extremely important because it does link us to what we can realize in the marketplace in terms of revenue growth, right? That's very different from what most companies would be dealing with, where they'd have a lot more exposure to the commodities piece, versus us, where that's a much lower number relative to that total COGS element, right? It does work well, and the great news is The Coca-Cola Company is just as interested in ensuring brand equity scores, brand health, affordability, marrying those up together to ensure that we can be relevant on shelf for our consumers. All right. That works very well.
We will continue to focus on delivery of efficiencies. Clearly, those are all things that we will work on. Can I give you a number of where we're going to land next year? The shape of the P&L is probably going to look very different from what you have in your models today, right? I'll allow you all to do some crunching on those. We will come back to you in February with some more guidance, right, in terms of some more precision there. For right now, that's what we'd like to be able to share with you on 2023. Damian put up this shot, but I think it is really important as you think about what I just said for 2023, but as you think around 2024 and beyond as well, right?
The diversification of what we offer in terms of our packs through the channels is so different from what we've had if you look back 10 years ago. Lauren, I remember I was at a fireside chat with you, and I was trying to just describe, if you looked at our business 10 years ago or even seven or eight years ago, right, it was effectively a business that was focused around heavy users, so large multi-packs of either cans and PET that we sold through retail, right?
We have a completely different business today, which I think Jantine laid out some really good points in terms of if you look at the spectrum of what we can offer in terms of pricing and the shopper that can go in and be able to choose a more affordable pack versus the premium pack that they want to enjoy at home, socializing with friends, family, if they're replicating that away from home experience at home, is so important because that diversification really helps us back to that point around looking at elasticities in a surgical way and being able to look at the pricing that we pass on in a very different way, right? That's critically important.
acceleration of the top line growth, as you've seen in 2022, but it's one that we feel very good with in terms of what we can do in a profitable way, sustainable way that will give us those bottom line results as well. I talked a lot about what we want to do from having that sustainable license to operate, and that's critically important because that will win at the right time the hearts and minds of consumers who will be willing to pay a premium that will either result in better profitability for us as a system and or market share growth in terms of brand equity scores that are going to naturally lead them towards our brand. Both ways that is going to allow us to win.
I think, as a group, as a company, we're incredibly proud of everything that we're doing in that space. We will then obviously have a greater relevance with The Coca-Cola Company and all our brand partners in terms of the importance of CCEP to them in terms of being able to make the right investments with us to grow in the market. véronique talked about our workforce, our people, which is the 33,000 employees that we have are most important asset, right? That the more we can ensure we've got an engaged, happy workforce, the more we know they're going to be delivering for us as a business. Critically important that we stay focused on that. We have set more ambitious targets. I had an interesting comment.
I won't name a name, but I won't even look at the person. Four and seven, that is pretty ambitious that you've gone out with something like that. At a time like that. I think quite honestly, if you step back and look at what we've been able to deliver over the years, but more importantly, what I think the capabilities that we're delivering to ensure that we can drive that revenue growth sustainably to deliver that 4% growth is what's critically important. Hopefully that should give you all the confidence, not just in terms of what we've done in the past, but what we're building for the future as well to be able to deliver that top line growth sustainably.
That top line growth will translate, and I'll talk about that in a moment, into that comparable operating profit growth of 7%. We're setting a flow of at least EUR 1.7 billion of free cash flow. Some might say, well, EUR 1.8 billion this year, EUR 1.7 billion, what's happening? A couple of things that I'll talk about there as well. Just so you get some confidence in terms of why that makes sense. We've maintained our 2.5-3 times net debt to EBITDA. Again, a question, right? In a time like this, is that the right leverage ratio? Something we review annually, right? To make sure that we understand the market conditions. In a rising rate environment, it could be quite challenging if you think about that, right?
Again, let's hope, given the fact that we don't have to access the markets for now, that rate environment should continue to hopefully come back a little bit, maybe not to the levels that we enjoyed when we did the Amatil acquisition, but definitely not at the elevated levels that they might be driving towards right now. Strong focus on return on invested capital. We're looking to deliver at least 50 basis points. I would say to we feel very confident about being able to deliver that. CapEx, four to 5% of NSR. If you step back and look at CCEP, as in Coca-Cola European Partners, 2016 through 2019, we spent about that 5% of revenue on CapEx.
It was critically important that we spent that to be able to lay the foundations of what we needed from an angle of infrastructure, capacity, coolers, et cetera. We definitely did pull back and scale back during COVID.
That's probably been what we've been doing over the last couple of years to preserve cash. So if you look at our ratios from 2020 to about this year, we'll probably be at that circa 3.5% of NSR. We will, we want to step that back up, right? With all the capabilities that we want to continue developing from a digitization perspective, an investment in systems architecture, supply chain to support that growth, coolers, et cetera, you will be seeing that move and step back up, and that's probably a great link back to that free cash flow number, right?
Now having said that, if you look at the way our revenue will continue to grow, you would expect that that would taper off. That's why I've given you that range of the 4%-5%, because on an absolute basis, if you look at that revenue growth, that 5% is a huge amount, and I can definitely see that starting to taper back down towards the latter part of this century. Dividend payout ratio, we will maintain at the 50%. We believe it's a very competitive dividend payout ratio. We believe with the earnings growth that we have, that's an increase in step up in dividend per share each year.
We do believe that the flexibility that that offers us in terms of use of cash in a way to continue supporting returns to shareholders or looking at value accretive M&A is probably the best way to go.
Again, as a board, that is always reviewed each year to ensure it's still fit for purpose. Everything that we do is really laid out in what we call a very consistent and disciplined capital allocation framework. It starts with our quality profit growth. It's then about the free cash flow generation that comes through that. Maintaining that solid balance sheet, that's critically important. Being very, very disciplined in terms of how we look at our investments, and then always maintaining that optimal capital structure that we review, each year, as I said. Our top-line algorithm, 4%.
I want to spend a moment on this because Damian, myself, the team, we spent a lot of time looking at this to get confident and comfortable with this. If you remember, we were at a low single-digit revenue growth, so call it 2%-3%, and we always said about a third each from volume, price, and mix. If you look at our business excluding Indonesia, that allocation probably still holds pretty well, right?
About a third each coming from each of those elements. When you bring Indonesia in, there are two elements that change as a result of, right? Clearly much stronger volume growth, right? If you think about just that element, well then that upweighting of that third probably goes to a little bit towards 40% or maybe even slightly north of 40% from a volume perspective.
The impact that it has on our mix, which would have been 1/3, is because of the fact that we're getting all that volume at a much lower NSR, that clearly has an impact on our mix, right? If you're looking at it going forward, that 1/3, 1/3, 1/3 might be more like 40%, 40%, 20%. Rough numbers, right? And that'll vary each year depending on that level of growth that's coming through.
That is still a very solid level of growth that will support our P&L in terms of that profit delivery. Like I said, we're towards the tail of delivery of the EUR 350 million-EUR 395 million that we laid out, right? Recall again, that was about EUR 225 million that we were pulling out of our European business in terms of cost base.
About EUR 90 million coming out of the API cost base from a perspective of their Fighting Fit program. Then we laid out about EUR 60-80 million of synergies that we were going to deliver. Really pleased to say 90% of that will be delivered in our P&L, really supported that profit growth, really supported us, particularly in 2022 when you think about those challenges from a COGS perspective.
Because there's no way we would've been able to upgrade our guidance in terms of that bottom line delivery had we not had the support of our combination and efficiency program. We're setting a bold new ambition today as well, you know. I mean, I think if we're looking at the next kind of 5-year period, we're saying we want to deliver another EUR 350-400 million, right?
Now, if you look at that from 2016 to 2023, by the time we close out this program, 6-7 years, we delivered double that, right? So one might say, "Well, is that bold enough?" Quite honestly, if you think about everything that we've delivered so far there are opportunities that are that much more challenging to be able to get. But that digitization journey, the things that we're going to do in terms of some of the examples that José Antonio called out, CDSP, critically important in terms of not just ensuring that we can actually extract value from a bottom-line perspective, but hugely important in terms of ensuring that we've got on-shelf availability, right? Because that's marrying that up.
We want to move from four legacy systems that we're still operating with today to one system, right? S/4HANA. That's going to enable a huge amount of us being able to standardize processes and ways of working going forward, right? Damian called out what we've set up in Bulgaria. We started out with that in 2013, literally with 200 people, really as a transaction processing center. Today, we've got over 1,000 people in Bulgaria that do everything from elements of transaction processing, but we've actually outsourced some of that to markets like India with a third-party provider. We've upskilled and upscaled what we do out of Bulgaria, which is a lot more focused around reporting, around analytics, around data, around robotics, et cetera. We can leverage that a lot more, right?
Because today we're focused purely, I would say, 80%+ around the finance piece. We're building in elements of what we're doing on the people and culture side. We're building in elements of what we're doing with supply chain and commercial reporting, but there's a lot more we can do there, right? There's a lot of focus on that, and that systems architecture moving to one system will really enable that as well. We feel very confident about delivering that number. I would say probably a small part of that will come through in 2023, but then 2024 and beyond, you're really going to see that starting to kick in. Very strong focus around continued productivity benefits. What does that all look like when you pull that together in terms of the P&L?
We talked about where we'll exit this year, so let's call it roughly EUR 2.1 billion. I'm rounding. Should be a little higher than that, right? 12.3% operating margin. Some questions always on margin percentage. Listen, at the end of the day, I'd love to be able to get back as quickly as possible to our 2019 pro forma margin, right? Which was about 13.4%, right? Clearly strong focus on doing that, but we've got to do that in the right way, right? Critically important is always what can we do in terms of absolute margin growth. That's what I take to the bank, right? We have a focus on that, but that's probably going to take some doing things in the right way to get back to that.
Because we don't believe anything's really changed structurally in terms of the markets that we operate in. That revenue growth will give us that leverage to the P&L. I talked about the price and volume equation there. I think that's critically important when you think about those two elements and how that plays out. Clearly, the more price we can get in the right way, clear benefit and drop to the bottom line.
The volume clearly has a cost associated with it, whether it's about manufacturing, logistics, et cetera, but that balance is what's critically important. Talked about the ongoing focus around cost and productivity, and that gives us the comfort in being able to deliver that 7% OI growth with both of those coming through in the right way.
You're looking at least 30 basis points of an improvement year-on-year when you look at that operating margin percentage perspective. I think we'll get some very balanced growth across our developed markets, and then obviously you've got the kicker in terms of that volume growth coming through from Indonesia as well. Really solid free cash flow generation. I mean, a chart I think all of us at the company are extremely proud of, and I think Véronique made the point in her presentation. What gets measured and what gets incentivized clearly has a huge impact for the business, right?
I think it was very much the right thing that the board supported in terms of Damian and my recommendation to put free cash flow into our numbers for incentive plans because it's really paid off tremendously, right? The business thinks about free cash in a very different way as opposed to just thinking about an operating profit target. It's critically important, and that's what's allowed us to deliver what we have. We will deliver or will have delivered through 2021 about EUR 1.1 billion in terms of release of what was inefficient use of our cash and working capital tied up on our balance sheet. The great news is that when we talked to API about this, they embraced it. Peter used the terminology with his suppliers, saying, "New sheriff in town.
I don't have a choice. This is what it is. This is what we got to do," right? I think we will deliver probably. Am I allowed to give out a number for this, Sue?
Yes.
It's in our free cash flow guidance, so it's okay. It's about another EUR 400 million that will come through in terms of that working capital benefit, very strongly supported by what API's been doing. That's been a huge part of the success of our ability to drive that kind of free cash flow. Then you can see on a macro level that free cash flow yield, which I think is truly underappreciated for us as CCEP as a company in terms of that number. now yes, that share price moves and yes, clearly that's going to have an impact, so call it depending on if it's a good day somewhere around 8%, and if it's a bad day, somewhere around 11%.
it just talks about the power of that free cash flow generation, the yield that I think when you compare it to the other Coca-Cola bottlers, we're almost double that. I mean, you look at a lot of our peers, right? And across a lot of those indices, we're still doing really best in class. I think a really underappreciated piece of our story, and that's why I think the free cash flow generation of the EUR 1.7 billion per annum going forward as a flow is a critically important number. Now again, just to remind everybody, low single-digit revenue growth to 4%, mid single-digit operating profit growth to 7%, and we had talked about a flow of EUR 1.25 billion. That's about EUR 1.7 billion now going forward.
We feel really good about that. I want to spend a few minutes on the balance sheet because I think this is really important. I say my treasury team has just done a phenomenal job here. We do remain committed to our investment grade rating. That is important because it allows us the times of need to be able to access into the markets much easier.
We have a very strong commercial paper program that's supported by that as well that gives us flexibility to manage our working capital needs through the year. We have a really good balance of maturities. One of the things I've always talked about is in any given year, we don't have a maturity that's greater than our free cash flow generation.
In the event that there is a challenge and we don't want to draw down on our RCF, which is EUR 1.95 billion, the free cash flow allows us to be able to service our debt very effectively. That is precisely where we are and why we don't have to access the markets for the next 2-3 years because that free cash flow generation will clearly support what we might need to do over the next 3 years to pay down that debt, right? An enviable low cost of debt, which I'd love to be able to get back to. Clearly going out at this point wouldn't be great for our cost of debt either.
Great flexible balance sheet that gives us a lot of horsepower to think about what we can continue to do going forward. We've talked about our leverage, maintaining that currently at the levels of the 2.5-3 times.
The deleveraging has been a great story for us, right? Again, supported by that free cash flow generation. I remember when we did the acquisition we were close to 5 times at peak, right? There was a lot of challenge and a lot of pushback saying, "Jesus, at a time like this, you're going out to do an acquisition like this, raising debt." we also didn't want the equity dilution. A lot of you didn't want the equity dilution.
We were very clear and committed that we were going to delever, and we said we're going to delever and get to the top end of our range by 2024. I'm really pleased that with the strong free cash flow generation, we can get to that almost a year earlier, right? We expect to end 2023 now at about 3x. The top end of our target, right? Not like don't suddenly expect I'm going to be announcing a big buyback program, if some of you are thinking about that. Clearly, we're getting to the top end of our target almost a year earlier, right? That's critically important because, again, like I said, that gives us a lot more flexibility as we look forward. CapEx, I talked about this, in terms of that 4% to 5%.
Probably about two-thirds of that will go into supply chain from an angle of capacity expansions, new lines, replacement of old lines. If you look at that two-thirds, typically I would say at least 70% of that is on growth CapEx and about 30% of that is on obsolescence replacement, et cetera. You're looking at about 20% going into IT. Our capabilities that we need to do from an angle of digitizing our business around what we want to do moving from the four legacy systems, but that will be spread over a number of years, right?
Again, very much within our range of 4%-5%, but making the right investments. Coolers continues to be a very important part of what we can do to drive availability of our products across the market.
That's a strong commitment, that's the other 15%. Clearly, we throw off a lot of cash. Manolo, Kunal, take this message back that we're looking to expand if we can find the right value creative opportunities in terms of, M&A. Clearly, we've always said that if we look at best use of cash, it is about looking at a geographic expansion. That is the best way for us to invest it.
Yes, we want to spend money in terms of looking at opportunities from a CCEP Ventures perspective. Sustainability is probably our biggest focus that we want to be investing in. I think you've seen some examples of that. But those are not necessarily going to be of the size and scale with the type of cash that we generate, right? Clearly, that's what we're focused in on.
Now, absent that, we're also very clear we want to continue maintaining an efficient balance sheet. If that means looking at cash returns to shareholders, we're completely open to that. We've had a history of doing that in the past. You saw that when we delevered, and we announced the first EUR 500 million at the end of 2018, and then we did another EUR 1 billion in 2019. We have a history of doing that. The board is very committed to doing that, and that goes back to that dividend payout at the 50% because that flexibility is critically important. What does that all pull off together?
Of course, about driving that P&L and getting that cash flow, that balance sheet maintenance, that investment in the business, like I talked about, and then that excess cash in terms of either being deployed into or both, right? It's not one or the other, it's about we can do both as well. That's our focus. Strong returns to date. EUR 5 billion returned to shareholders since 2016, since we formed Coca-Cola European Partners. Really strong dividend CAGR as well, when you look back to the formation of CCEP, including the dividend of EUR 0.68 that we declared today. In summary, I think we've got hopefully a very clear and a consistent and a very disciplined capital allocation framework.
I think everybody understands that, from the board all the way down to our teams within the organization, and within our BUs, that that's what it's about. That's what's helped us deliver our story to where we are today. That was my last slide. Did I keep on time or am I over?
You're not.
Okay. I never do. Why, why make today different? Well, with that, I'm going to invite Damian and Peter to come up, and obviously we'll open up the floor to questions. We will also invite people from our leadership team as appropriate to help us.
Do you want to wrap up?
Okay. Basically you raise your hands and then I'll sort of cover this side, and Claire will cover that side of the room. When I give you this handheld mic, you have to do what I'm doing, otherwise no one's going to be able to hear you. Just to let. I'm not doing this by choice. Okay.
By the way, he was 15 minutes over.
He was. He has used the 15 minutes.
I gave you all 10 minutes back because I made sure everybody rushed along.
I'm sorry. Can you say who you are and where you're from as well?
Sanjeet Aujla from Credit Suisse. Three questions, please. Firstly-
Three? I like one.
On the input cost guidance for 2023, Nik, can you just help me run through the moving parts? Because you came out in August with high single-digit outlook when gas prices were particularly high. They've come down a little bit since then. So kind of what have you locked in terms of conversion costs? And are you factoring in any energy subsidies that might come through within that guidance for next year? Second question. Didn't really hear much about hot coffee today. Is that still an exciting opportunity for you guys? How is the cost of rollout evolving? And thirdly, just on Indonesia, one for Peter.
Just understand all the SKU and portfolio resets done this year, and is that business ready to really start to deliver strong growth from next year onwards? Is that how we should think about it? Thanks.
Start with the easy one. 2023.
Nik, we haven't talked in a while, so you must.
I know. Great question, Sanjeet. I think when we looked at this in August and where we were in terms of the high single digits, the area that's continued to move is gas and power. Now, you're right, it's come off. Again, that's the danger of looking at a spot price versus a spot price in two months. Because if you had looked at just that, I mean, even in the last four weeks or six weeks, you've seen a huge improvement, right? Challenge is you can't go out and hedge and cover for that, right? The only market today where we have protection for the longest period of time is Iberia, because that price cap stays until the middle of next year.
The UK obviously pulled back and already moved that only up to April, so we need to see what's happening. Within the rest of the EU, we're still waiting to see that, right? Yes, there potentially can be some upside, and that's why I mentioned if there is those price caps that come in, that gives us a lot more certainty. It gives our supplier base a lot more certainty in terms of what they can commit to us in terms of conversion costs as well, because that's the moving part right now, right? I'm hoping, clearly, once that comes through, we can get some upside there, but early days to call that.
The other piece we've got to keep in mind is that has a knock-on impact on what inflationary pressures are in terms of just our cost base from so many different angles, right? Whether it's logistics, whether it's within manufacturing, whether it is what our employees expect in terms of salary increases given cost of living crises, right, and the challenges they're going to face. Clearly, that also will have a positive impact if that comes down in a way that gives more certainty on those elements as well.
Those are some of the moving parts that hopefully by February, when we come out with our full year results, we should have a little more clarity on to be able to give you firmer guidance.
On Costa, I mean, I think Manolo mentioned it, Stephen mentioned it was in my slides as well. Obviously, we lost a bit of time with COVID because mainly it's an away from home play. The last 18-24 months were more challenging. Certainly, on ready to drink we've made good progress. We've got a good coffee business in Australia with Grinders, so we're learning from that.
I think what we're doing is prioritizing some markets, so predominantly Germany, Norway, obviously the UK on ready to drink where the brand is really well known. But we are trialing, particularly the express machines, which hopefully some of you got a chance to try today across all of our markets, but particularly in Spain, at the moment.
If I kind of step back, there are two categories we talked about today, alcohol ready to drink and coffee, that support that 4% or certainly could help accelerate it. Both of them are at an early stage of development for us. We've got some great learnings on alcohol ready to drink from Australia. We're starting that with the UK.
Then obviously, coffee is a huge category. It's like a EUR 40 billion category in terms of revenue. That's beyond what Stephen talked about in that 130. We want to make sure we can make money and make a good return. I suppose that's why we're still trialing a lot of solutions and looking to make sure we can get a good payback.
It's in there, and there's a lot happening, and we can probably give more color on that in February.
Just on that EUR 40 billion, again, keep in mind, as Damian said, it's about where can we make money, right? If you really look at the addressable market, you're looking at maybe a quarter of that, where we feel we can play and make money, right? Which is still very attractive, but we've got to do it in the right way and build a sustainable business, for the long term.
With Indonesia, we exited the cup water and cup tea before Ramadan. The rest of the portfolio was done after Ramadan because we want to focus on execution. We'll have some of those in our numbers in the first half at a volume level. For me, I zero in on sparkling as the performance, and that's why we shared the number today, because as we're freeing it up, are we seeing the performance on sparkling? That comes through at a better rate overall.
Just to build on that, I think to the team's credit, Jorge and the team in Indonesia, we certainly had the best Ramadan in terms of customer service levels and supply continuity. That really comes out of the SKU reduction we talked about earlier, being able to run our lines a lot more efficiently and provide better customer service. You get a double benefit.
You get more profitable volume going through your lines by simplifying your portfolio, and that certainly delays some CapEx as well. As we look at continuing to manage that CapEx number, a lot of the initiatives you heard from José Antonio in terms of line efficiency and productivity is a key driver of that.
It helps the top line, and that's really what we saw in Ramadan in Indonesia this year.
Robert Ottenstein, Evercore ISI. First, just a quick clarification. You had mentioned that you hadn't seen any slowing in the business or down trading in Europe. Is that inclusive of September and October?
Yeah. I think year to date we've seen the category remain resilient. We've seen away from home remain resilient. We've had the benefit of great weather reopening. September, October, the trends have continued. We're seeing certainly private label getting more emphasis in store. I think that really goes back to the beginning of the summer. We haven't started to see that really come through yet in terms of share. We're also seeing a lot of the private label having to reflect the higher commodity prices, maybe a bit later than we did. Clearly, their cost base is off a much lower revenue base, so the percentage increase that they need to deliver because the price of plastic or the closure or the label is pretty much the same or, maybe we're even more advantaged.
We're starting to see some pricing creeping in on private label as well, which is understandable. So far, we haven't seen a big difference year to date.
Great. Then sort of more structurally, you under-index, right, in the hard discounters. That's the fastest growing channel. How should we think about that dynamic, and how do you think about that as you model your business, and how are you looking to address that?
I think that supports that growth number, Robert. I mean, we'v really took a stronger position in that channel in Germany, probably before the rest of Western Europe. I give credit to the German team. If you recall, when we created CCEP, we identified that discounter capability out of Germany has been a big driver of value across our other markets.
We haven't got to our average share yet, but we've consistently gained share in that channel. We're winning share in a winning channel. In some ways, you kind of look at it and say, "Well, it's a disappointment we're not at our average share level in discounters," but in some ways that's the opportunity for growth. That also comes back to some of the categories.
I mean, it still surprises me, and I look at these charts a lot when I see our share in sparkling flavors. If I see our share in energy at 25%, and that's on the back of multiple years of double-digit growth in the 20s. Some of that indexation really supports that 4% mid-term target. I suppose if we weren't gaining share or we were going backwards, obviously then it doesn't work. If you look at our share, particularly in discounters, it's been the biggest driver of growth. That gives us the confidence.
Profitability.
Yeah.
I think what's critically important is a lot of people continue to think as we made our foray into discounters, that was going to be unprofitable, right? Or dis-accretive. Actually, the profitability that we have in the discount channel is actually very strong, right? Because ultimately we have a much lower cost to serve. Central warehouse delivery, no merchandising. We're not typically allowed to even enter the store, right? So it's actually a very profitable business and actually continues to be accretive.
Actually, it's a good point just to build on something Damian had said earlier. Our home business that we've built and the resilience of that business with the diversification, but also the profitability of that business has really continued to evolve, right?
If you recall, I know with several of you, we've had this discussion around what is the home and away-from-home, and away-from-home is such a simplistic way of really looking at eight or nine different sub-channels and how very how HoReCa can be in one market versus QSR versus food-to-go, et cetera, right? We typically always saw that you had a revenue accretion piece that came as you grew your away-from-home, a mixed benefit, right? Because the revenue per case is higher.
If you then think about down to the operating profit level, and this is some great stuff that we learned actually with the API acquisition, as we did a lot more modeling of our channel profitability based on the work that they've done, that our cost to serve is that much higher, right? You've got your coolers, you've got your sales force that's calling in to those outlets.
We used to talk about the fact that away from home was typically around that 1.1 times higher from a profitability level. COVID really allowed us to reset that home business, right? With that diversification of pack, the pricing, the smart RGM that we've done in the store.
Today, I would say to you, yes, that revenue accretion stays, but the profitability of our home channel is just as strong as our away from home channel, right? Depending on the sub-channel within home and away from home that you're looking at, actually some of the home channel can be even stronger, right?
Yeah.
The beauty is today we can benefit from the growth that's coming across all channels, as opposed to worrying about how do I push this one more because that's where the profitability is better, right? That's a great thing for our business as well going forward, 'cause we want to be where the consumers are, where they shop, where they buy, where they consume, and our profitability then is strong from both.
I think it's important to reiterate a point I made earlier today, that profit growth hasn't come at the expense of the retailer's profit, right? If you look at what we've achieved, we've grown our home market profit and they've actually grown theirs faster. I think that's what makes it sustainable. If we'd just taken profit from them, obviously one time you get away with it, but it's not a sustainable business.
We've allowed them to expand margins as we've corrected what were some real inefficiencies, really in our own supply chain.
Yeah
Our pack mix and inefficiencies around promotions.
We were happy, Ed Mundy, that you stole that chart from us and put it into your research notes, so.
Hi, it's Mitch Collett from Deutsche Bank. I'll try two given three as too many. You had significantly fewer pack sizes if you went back to the creation of CCEP, and that's one of the areas you've been very successful in creating higher price per unit.
How much further can you continue to push that? And how does that sit with your sustainability objectives? And then my second question is on the COGS breakdown, which I think was slightly different this time, Nik, to what you presented in 1H 2021. I appreciate a lot of that is because of price, but the two bits that seem to have moved are concentrate is a higher percentage of COGS, and I think it's taxes and other that have gone down to offset.
Could you just give a bit of color about how those moving pieces have changed? Thank you.
Yeah. On the first piece, I think if you look at brands like Coke or Coke Zero, we've done a lot, but we still have a way to go, particularly by channel. I think if you look at our other categories where we've got more share upside, particularly in flavors we're still nowhere near where we've got with the Coke brand. I think if you look at Fanta, Sprite, our tea franchise, Energy, particularly in multi-packs, we've started a journey. If you're in the market today in GB, that would've been a commentary you would have heard. We've still got a long way to go in terms of pack differentiation.
A lot of it's glass, a lot of it's RGB. You saw a lot of cardboard today, hopefully in GB. That is supporting our sustainability goals.
A lot of the plastic you'll see on the outer wrap will go over time. We're committed to that. Within the bottle, it'll be all rPET and it'll all be collected. We're very conscious that as we drive pack proliferation, and we're incentivized on it, that it drives down our CO2 footprint, drives revenue and margin, but is also sustainable. I think we still have a way to go, which is, I think, good for us in terms of driving top-line growth. I do think what it can't do is make us inefficient in our supply chain again. Because we need to create the space on our manufacturing and in our warehouses to allow that to happen. That 30%-50% SKU rationalization is a key enabler of allowing that to happen.
I think Peter touched it in Australia, and we saw that from the outside. They had massive proliferation in categories, packaging across numerous segments without culling SKUs, and the business started to decline. Clearly, we want to take out SKUs that will allow us to effectively drive more pack differentiation and also, as Ana mentioned achieve that CO2 target as well. I think OGB in France is a great example. Full range of OGB now in France. Very sustainable, higher margin for the retailer, higher margin for us, and certainly something consumers will buy into as well, particularly with the Olympics coming.
Yeah. The other thing to build on that that's great with the support of The Coca-Cola company typically you had proprietary bottles across each of your different types of packs that you were looking at in terms of the glass float that you would have to go out and invest in, right?
Actually, there's a big move towards what we're calling a universal bottle that really helps in terms of how you can think about your investment in glass float, but also ensures the return of those as opposed to I've got a proprietary pack, and I don't have enough of this particular pack that I need to be able to fill because you've got that universal bottle that we're moving towards. That's going to happen in a number of areas of refillables as well.
To your question on COGS breakdown, part of it is the beauty of rounding. Keeping aside the beauty of rounding, there is a couple of challenges when you look at it, right? Yes, our concentrate pricing has gone up because we've been taking more pricing in the market, right? Clearly that has an impact. Then throughput taxes has come down, both from an angle that we had a benefit in Norway where that was reversed, and so that actually came out, right? Then you've also got the element of some of those are actually fixed on a per liter basis, and depending on what you're selling in terms of literage, depending on the pack, that can actually have, particularly as you move towards more small packs, et cetera, that can have a positive impact as well.
Part of it is in the rounding, but it's a great call-out because I would say to you, if you look now at 2023, you're probably going to see a bit of an upweight on commodities, right? 'Cause if you think about the two years of inflation that we're seeing on commodities, that's going to have a higher weighting as a percentage of our total COGS. That 25% might move up by a couple of points, right? And then you'll see again some elements moving up or down just depending on that rounding element. That's what it is.
Just to come back to a chart on Ana's deck, which Damian knows my favorite slide, which is sustainability driving value into P&L and coming back to that French example of RGB. If we wanted to get into RGB in France two or three years ago, it would have been with eight SKUs with the company. Everything would have to be proprietary, tea, Fanta, Sprite. On the back of our CO2 commitments, we've gone with two bottles. Clearly Coke and Contour, that never changes, but a universal bottle, the mix point for all the other brands. In effect that sustainability mindset is also driving value into P&L. I think that's a great example. If you look through our sustainability goals, a lot of them really drive either great employee and customer engagement, but fundamentally, yeah, drive value into P&L.
Eric Serotta from Morgan Stanley. Could you talk a bit about how you're approaching price discussions for 2023? You did mention both in the press release and today that you'll have the carryover benefit from the second price increase this year, but how are you approaching retailers and sort of where are you in that discussion? Second, for Peter, could you talk a bit about the strategy for extending the business in Indonesia for sparkling beyond the seasons? Talking to Manolo earlier in a totally different context, he was talking about taking 7 or 8 years to change a consumer behavior in beverages. Can you do it sooner than that in Indonesia? What's the strategy for getting there?
It better be sooner than that.
Jesus. Yeah, I mean, I think pricing today is an ongoing discussion with our retailers. I think jantine grijzen laid out our revenue, and now I think we're quite happy that we brought margin into that discussion because I think, as Nik talked about, we have an aspiration to get back to our margin structure as quickly as possible. It's an ongoing conversation. In some of our retailers, we're now just into November. We probably finished some of our last pricing moves in September. We clearly laid out that we would be back in Q1. Usually our normal cadence is January, February, March, depending on the market. We've been discussing that with our retailers. We've been looking at elasticity modeling. We've been using some of the tools around analytics and promo pricing.
I think what currently is happening due to the kind of unprecedented levels of inflation, those pricing conversations are kind of iterative. They're not that once a year event that they used to be. I think that's going to continue until we get a little bit more clarity, because our retailers are in the same position on their own brands, right? They're having the exact same conversation. We've made it clear that we want to price for the benefit of the category and for our customers. We're very mindful that we've got a great consumer franchise, so we'll maintain a value proposition across our portfolio. We can do that because we've got so many different pack offerings. You will still find value in our category. If you go into any of our retail outlets.
I think that's critically important because some consumers and shoppers quite understandably are under pressure from energy pricing, transportation, and that's going to continue, right? Getting that balance right for us and our retailers is critical. We'll be back in the market in Q1, again with pricing on shelf. then we'll see what happens. We could be back again in the middle of next year. I mean, I think that's the reality of the world we're operating within. So far, the elasticities look really good. I think that pack differentiation allows us to play with that a little bit more than we could've. Certainly four or five years ago, it would've been a very different story. Indu?
Development in Indonesia will be the combination of mental and physical availability. I think in Manolo's overview, my interpretation is the network model that's been developed and the evolution is there's a real mojo back in the marketing of the Coke company. I say that as a relatively new starter to the system, where the magic sort of come back to the marketing of it through the storytelling, but also then recognizing digital and passion points. There's no shortage of awareness of the brands. The brands have been in the market, people know them, but it's through the marketing to make sure that it's front of mind, and therefore tapping into the passion points and areas like gaming and digital and sports are at the center of that.
Our job is to demonstrate the physical availability and the pragmatism is people are loyal to the brands they can find. If you're not in the right outlets and you don't have the right visibility. In my background of chocolate, the facings were important 'cause if you went from one facing to two, sales went up by a percentage to three facings.
If you were a blockbuster brand, you had to be multi-faced because it's a three-second purchase decision. The distribution on our blockbusters remains too low. When we took the board there, the feedback would have been our relative was the lack of visibility. We had the extreme with Sol, which New Zealand, which was the opposite of it's everywhere. It's just not visible.
The team are incredibly excited by what's possible on the blockbusters, and I think the combination of mental and physical availability accelerates performance. It's a building block to take it because of the number of stores and the complexity of doing. It takes time to do.
Just to maybe build on Manolo's point, I mean, typically in NARTD, sparkling would be 20% plus of the category. We're certainly nowhere near that in Indonesia. That probably is a seven-year journey. If you take that CAGR on annual growth levels, that'd be quite healthy, actually. I think to get there, it's going to take time, but we're coming off such a low base.
I think our priority is to make it sustainable and profitable. I think we've got that opportunity now in Indonesia. What also surprised me from being there a couple of times, and those of you who've been Indonesia, they'll celebrate everything. There is a lot more happening in that country than Ramadan. In some ways, it was a far too binary month of the year.
There's National Day, there's events happening every month in Indonesia that we never connected to.
Yeah.
We've just started to realize that consumers in Indonesia are passionate about. Obviously, Ramadan is a really special time of the year, but beyond that, there's something happening every month. In some ways, Ramadan maybe was too simplistic for us. It was one month, let's go for it. We've challenged ourselves to look at why the per capita drop off. How can we connect outside of Ramadan? We've just discovered there's a lot of either regional events or national events that we can be a bigger part of. I think that.
Actually festives.
Yeah.
When you think about 270 million people, everybody is not Muslim in that country as well, right?
Yeah.
There's Christmas celebrated, there's Diwali celebrated, I mean, you name it, right?
Yeah.
There's a lot more festives that we can. Peter, do you want to talk a little bit about just Australia pricing as well as you're thinking about that?
We have a price rise hitting the market in February. We've communicated that to customers. We've also put forward our promo program, which reflects continued fine-tuning from what we've done this year. Our alcohol side, the excise tax for that is actually tied to CPI, so we'll have two price rises on alcohol next year. The first one hits in February and the second in August.
Is this on? Okay. Hi. John Keeble from Bank of America. Just around the M&A outlook and considerations. I was just wondering, are you guys focused or prioritizing in any way other Coca-Cola franchises? As a follow-on, would you consider buying out the rest of Indonesia from Coke? Would that fall under the consideration as a strategic M&A, or does that have some other kind of designation?
The second one first.
Should we ask Manolo to answer the first one? The second one's easier. Well, listen, at the time of the transaction, if you go back to 2019 when we were first looking at this transaction, we had a very convoluted structure that we were trying to get through, where we were actually selling back Indonesia to The Coca-Cola Company, and we're looking just to buy Australia and New Zealand simplistically.
Clearly, that had its issues, and anyway, we walked away from that for a variety of different reasons, including Coca-Cola Amatil's board that just wasn't comfortable with that. When we closed this deal, we did agree with the company that listen, either you're going to buy back that 70% from us or we're going to buy that 30% from you, right?
It's a question of which one is going to happen. I would say to you, we clearly have an interest in being able to buy that out, just to keep it simple. I would say the Coca-Cola Company would clearly have a preference for that as well because it clearly is a tie-up of capital for them in a sub-entity that they can't monetize unless we actually buy it, right? It's the right thing for both parties. At the right time, we'll tell you what's happening there.
I think on broader M&A, I mean, I think with the board, we did quite a good detailed exercise of where it makes sense. Clearly, we believe that more Coke franchises is the best use of our capital for our shareholders.
That was a disciplined approach we've taken. I mean, we looked at vertical integration, we looked at adjacent categories, but clearly, we don't see them generating the returns that more Coke businesses can, providing they're the right Coke business, right? I think we've been quite disciplined as well. Clearly, with the Amatil transaction, we brought in very high-value-creating businesses like Australia, New Zealand, and we brought in a very large, bigger business in Indonesia that we believe over time we can create sustainable value. We'll apply the same lens to other M&A.
Is there a lot out there? Speak to most Coke bottlers, there isn't a lot of for sale signs around. It's a great business. Most bottlers want to get bigger. We'll keep working with the Coke company. We'll keep building our credibility, which is really demonstrating that we can support faster growth in Australia, New Zealand, and turnaround Indonesia. If that unlocks some markets over time, we'll wait and see. I think with Indonesia, 270 million consumers, it's, that's a lot of small countries wrapped up in one big one. We're kinda happy with that one at the moment.
Simon Hales from Citi. Couple of questions. I know we don't want to get too bogged down in 2023 guidance at this point, Nik. Obviously, we've talked a lot about COGS. I wonder if you could talk a little bit about OpEx and maybe some of the moving parts we should be thinking about there. Maybe not scale them at this point, but clearly, there's wage inflation, and they're sort of going on around the world, just maybe some of the moving parts we should be aware of. And then secondly, Damian, you mentioned again sort of alcohol earlier. Clearly, there's a bigger ambition in alcohol than RTD there. How do we think about the scale of that ambition? Is it.
Do you think it'll be easier to perhaps for you to scale in alcohol than perhaps it has been to date in coffee, for instance? I'm just trying to get a flavor of strategically how you think about that.
Go for the easy one first.
Interesting. I think not by design, but when we're looking at the Amatil business, clearly, and Peter laid out Australia's probably one of the best alcohol ready-to-drink markets globally. It's per capita growth. I've been down there a few times. I've been amazed, even though I lived there previously, how relevant that category is for the customers and consumers. I was at the grand final with Peter. Exact same thing we saw at the rugby. Everybody was drinking alcoholic ready-to-drink. Clearly, that's at a share of 17 or 18%. I think in Europe, it's about 1%. I think that's you gotta ask the question, when's that trend going to come to Europe, and can we be part of it?
I think prior to the Brown-Forman relationship with Coke was probably an interesting idea, but you need brand power to get after it. We didn't have it. Now we have it. But that's quite a recent development.
We'll go live in Q1. I think the company are going live this quarter, Manolo in Mexico. So I think we can say we've got the brands. We certainly have the learning, and we see the size of the opportunity. Maybe it's never going to get to that Australian, but if it's half that size, it's a big opportunity. I suppose it's something we'd like to come back to after we kinda get into it in Europe. I mean, Topo Chico was interesting. It was a stop-start with COVID, it's a category that's not as developed in Europe as it is in the US.
We've seen markets like the Netherlands and GB showing enough opportunity that we want to stay in it. I personally feel that flavored alcoholic ready-to-drink and Jack Daniel's and Coke has a much bigger relevance for a European consumer than hard seltzers, outside of maybe GB. So that excites us. And a bit like coffee, it's look at it supporting that 4%, or it could accelerate that 4%. I suppose that's color we'd provide as we go through 2023, get feedback from consumers.
You'll get to taste it soon. I know everybody wants to get to the bar. You'll get there soon. Certainly, I think as a marketer at heart, having Jack Daniel's and Coke, Coca-Cola on the same can is just a phenomenal proposition in a very underdeveloped category in Europe.
We're excited about it. Again, it's early days. I suppose we've all been with the board on a market visit in Australia, and you can see what the team have done with the Beam Suntory franchise over a number of years and a category that's very profitable, very dynamic, and is playing against some headwinds that, frankly, beer and wine and spirits are suffering.
To Peter's point what's probably different, we did try, some of you recall spirits distribution in Belgium. We have a beer business in Iceland. We had a beer business in Australia. We kinda exited that because it's not a near to us capability. It was like a step too far, a lot of complexity. The good thing about alcohol ready-to-drink, it's very near to us. Same manufacturing same customers.
It's mainly sold in key accounts and on the go. It's not an on-premise drink, so it's not Hurricane. You're not really trying to break into that very competitive, very complex and fragmented market. You'll find it where you'll find a Coke, generally. I think that's also something that leads us to think it's probably more sustainable.
Back to 2023. If you look at the P&L, I mean, if you look at the inflationary pressures, it's within COGS, you're going to see that coming into our manufacturing piece, right? Given the workforce base that we have in there. That's one element, and then you've obviously got it in your the rest of your workforce, either sitting through commercial or in G&A, right?
Now, that inflation level is going to vary across markets, right? Depending on the levels of what is being seen locally, and that's some of the stuff that we're working through. Damian, Véronique and I are having some very good discussions around how do we think about that to make sure that we do the right thing for our employees, right?
Ultimately, we're doing the right thing for our customers, we're doing the right thing for our suppliers, for our shareholders. The employees are a critically important part of our success, and we need to do the right thing. In some markets, what we've done this year is actually go ahead, and that's obviously built into our guidance, before you ask, is around doing some one-off support payments to actually support with the cost of living crisis that they're dealing with this year. That obviously should help us as we think about next year.
The other element is what do we look at, which is a kind of increase in terms of base and what is a one-off benefit that doesn't necessarily stay in the base going forward if the inflation is going to be at that level as well, right?
I can't give you a clear answer because a lot of that's going to depend on how we actually see those numbers shake out. How do we want to go through those discussions and negotiations? Again, we'll give you some more color on that, but that's what you're going to see. The other element is really what's linked to volume related elements of manufacturing and distribution.
Now, as I said earlier, 2023 is not a volume linked plan, right? You're still going to see inflation even on that same volume that still needs to get to that outlet, right? That's going to play out, right? From that whole energy cost perspective. Lots of moving parts. Then again, what I would say to you is a lot of focus around what can we do on the efficiency and productivity piece.
We've got the tail of what we have from the announced program when we did the transaction, so that's to come. Clearly, we will try and accelerate elements of what we've just announced today in terms of what can come through in 2023 to offset some of those pressures as well.
We'll be sharing that challenge with our suppliers next week.
Absolutely. Monday.
Monday.
Tune in if you want.
Hi. Richard Brewis at Trinity Street. When you raised your long-term revenue growth forecast, did you incorporate a higher level of assumed inflation? In other words, did you take up a real level of revenue, or was it just a nominal level of revenue growth that you increased?
What's that?
Listen, I mean, it goes back to what I said in terms of when you look at that split out of how we think about that 4%, right? And what we've been able to do, if you go back to the history, is even in years where we weren't seeing the same type of inflationary pressures, we were focused on getting shelf pricing and then optimizing promo spend as well, right? You're looking at both of those elements that we can continue to play with, right? It's about 40% of that that we're looking at, and we're looking at it based on what we see as the category growth, wanting to maintain, if not grow our share, year-on-year.
What we see as general inflation levels in most markets, given that we're sitting in a developed world, you're looking at real kind of inflation in terms of that circa let's call it 1.5%-2% type of range that hopefully we'll get back to in a more normalized world. That's what we've built in, right? Now, Indonesia is obviously very different, right? That's a different equation because it's not just about then is it real or nominal? It also comes back to the elements of affordability, the pack architecture, what we want to do to drive volume and availability and distribution. It's a bit of different equation over there.
I think that's why we talk about it from 2024 because as Nik laid out already, 2023 will be very different just on the basis of the inflation, the pricing we've taken this year. clearly as we get to a more normalized world, hopefully, it's back to a reasonable level of inflation to drive that 4%.
There's no change in our plans.
Absolutely.
That is perfect.
Was it just working? There we go.
It works.
Ed Mundy from Jefferies. Just two questions, please. The first is on this greater profit sharing with the retailers. You put that slide up, where you've grown your revenues 4.5%, the retailers have grown 5%. It's clearly worked given how much sort of value you're creating for them and your market share improvements, and we've seen it in the numbers.
Are we at a sort of plateau of that relationship, or are there opportunities to sort of share further as you collaborate with your retailers? I guess is the first point. The question.
Second one, Peter, on Australia, I think you talked to moving down your promo intensity, or depth of promos from 50 to 40 without a huge amount of impact on the elasticities or the the business. Are there further opportunities to bring that down further, as you look out the next few years?
He's done 30 and 20 as well, not just 40.
That was one more though, so in case, Do you want to answer that and then I'll come back on the first?
The way we think of the Australian business is instead of trying to think of the P&L in totality, we break it down by channel. Each of our channel has a point of departure to point of arrival economic shape. It has different price assumptions, volume assumptions, and then we also take profit to serve. In the profit to serve, we look at fridges, we look at coverage, and we also then look at the mix of what we sell. That channel by channel provides absolute clarity. When you start thinking of fridges, even with large retailers, you can then say, well, of your 1,000 stores, the following 250 don't need the number of fridges, and that actually improves the profitability.
For our customers, their mix on front of store, they make a lot more out of the front of store, so that's a really important one. If you come and do store visits, we're 75%-80% share at the front of store in grocery. In promo mix, as we're freeing up 6 packs, 10 packs, 12 packs, our intensity on that also now comes up because of the success we're seeing on those packs.
We're seeing more price realization in small packs. For the retailers, they make a higher margin on those small packs. I would have confidence by channel of our plans and landing those promo improvements.
Just your first question, Ed, I mean, we'd see that continuing. I mean, when we look at the margin opportunities we see by pack or by category, we see that for the retailers too. I mean, will there be always that 0.5% delta where they take a bit more? Maybe. Will it grow much more? I don't think so. Could it come back to where we're both growing at the same level? Probably.
Will we eat into their margin to support their value creation? I don't see that happening. That's not a sustainable model. I think as we look and I think the tools that Jantine showed today, when we model that, we model the margin for us and the retailer.
I mean, ultimately, they set the shelf price, but we look at the elasticity assuming that they would effectively pass on. I think that's worked really well for us. I think in some countries particularly like France, margins had eroded for retailers over many years, and we've been rebuilding it. Some countries we've given a bit more back because we're off a lower base.
Other markets have been very equal like gb great growth. I think we'll continue with that joint value creation model. The gap may widen or close a little bit, but I don't see us growing at the expense of our retailers profitability. That's not something that works long term at all. Sarah's waving at me.
I am, yes.
Sarah.
Just finished. I know there are more questions. There's plenty of time this evening to ask more questions for those of you who are joining us. That's the close of the Q&A. You've just got a couple more slides, Damian, to close.
Yeah. I
I'll cover some logistics.
Okay. I'm standing between everybody and a good night out, hopefully. Before I close, I just wanted to a big thank you to everybody from the team who presented. Thank you. To a great IR team for pulling it all together.
Thank you, Sarah. It's been really easy. I hope you got a flavor today of not just where we are, obviously in 2022, a flavor of how we see 2023, but more importantly, how we see our midterm and taking those numbers to a more ambitious level.
We tried to give you an overview in a relatively short period of time of our growth story. Again, a big thank you to Manolo for sharing the Coca-Cola Company's perspective and for Sol for her opening remarks on where we see our business. It's a great business.
Lots of reasons to believe that we can discuss over dinner. When we deliver on this strategy we truly believe that that sustainable shareholder value creation is at the heart of what we do. That also creates value for our customers. It'll lead to a more diverse business, not just in terms of geography, but category and also talent. We're very happy that we can accelerate our ambition on the top line and the bottom line. Obviously, free cash flow, which myself and Nik are always very passionate about. We see sustainability as a core value driver as well as being the right thing to do.
Ana shared with you a few very simple but very powerful examples that by doing the right thing for the environment and for the future, we can also support value creation in our business, and also, most importantly, connect with our customers' objectives and make our employees a lot happier. Simple example, rolling out electric vehicles has had a massive impact on our employee engagement.
Because at the end of the day, most people, particularly in Europe, feel better about driving an electric car. It's the right thing for CO2. It reduces our cost to operate, and it builds a more sustainable business. You can really work hard. The OGB example in France is another great example of the right thing for the environment being a good thing for our customers and a good thing for our business.
You heard from Manolo, you saw the numbers in terms of our relevance for the Coca-Cola Company. That's also a big number for Monster. You will have seen today in terms of our growth numbers, the energy category has been and will be a big driver of our growth on that 4%. Obviously, Nik laid out a plan around our capital allocation framework and we are very committed to returning cash to shareholders.
I want to come back to that point that Nik mentioned. It's in our DNA. It was something we were doing pre-COVID. Clearly, we made the decision to allocate our capital to the acquisition of API. I trust you'll share with us, as Peter laid out today, that was a great transaction at the right time. As we look forward, we will delever.
We'll get back to the number we've committed to. Absent other uses of cash in M&A, clearly, we're very much committed to returning that cash to our shareholders. To Nik's point, and I think it's very important, we can do both. That's something that we'll continue to focus on with our board.
Hopefully tonight, you will get to meet a happy and engaged workforce. If they're not happy and engaged, give me their names and I'll have a conversation with them. On that point, we look forward to having a drink with everybody who's joining us tonight. Again, thank you for taking your time, and it's great that we could get back together after such a long period.