Good afternoon. I am Masaomi Komi, Investor Relations Department Manager for Coca-Cola Bottlers Japan Holdings. Thank you for joining us today for our first quarter 2023 earnings call for analysts and investors. Today, we have President Calin Dragan, CFO Bjorn Ulgen, and Sue Choi from the Coca-Cola Japan Company. Also joining us today are Executive Officer and Chief Commercial Officer, Costin Andrei, Executive Officer and Executive Business Manager, Maki Kado, and Executive Officer and Chief Supply Chain Officer, Bruce Herbert. Following prepared remarks, we will be happy to take your questions. Simultaneous translation in both Japanese and English is being provided for both today's call and during the Q&A. Before we begin, let me remind you that today's presentation contains forward-looking statements, including statements concerning annual and long-term earnings objectives, and should be considered together with cautionary statements contained in our presentation.
With that, I'd like to turn the call over to Calin Dragan. Calin San.
Good afternoon, everyone. Calin Dragan here. Thank you for joining us for our earnings call today. I would like to begin by summarizing our first quarter 2023 earnings. Please turn to slide 4 of the presentation. Sales revenue for the first quarter grew strongly by 8% over the previous year. This was a result of last year's price revisions, improving wholesale revenue per case. We also saw a positive effect from commercial activities to capture opportunities from traffic recovery, minimizing the impact of volume decline from price revisions and achieving a 4% volume growth over the previous year. The intended effects of last year's price revisions implemented with strong determination are materializing as planned. Across all channels, wholesale revenue per case improved by more than double digit in JPY.
Business income improved by approximately JPY 3 billion versus the previous year, in line with our full year plan. This was achieved by significant profit improvement in the areas under our control, such as the top line growth that improved profitability despite the external cost pressures of higher commodity and energy prices, yen depreciation, and the cycling of temporary cost reductions of same period of last year. In the first quarter, we negotiated with customers to prepare for 1 of our key initiatives for this year, the price revisions of CAN and large PET. These revisions were implemented on schedule, starting with May first shipments. Moving forward, we will continue to implement them in the market with agility. The driver of profit improvement in the first quarter was top line growth. Please look at slide 5.
Of particular value was the improvement in both wholesale revenue per case and sales volume as contributing factors to the strong 8% revenue growth. I'm sure you are aware that these two factors are very difficult to balance. Let me provide additional detail. First is growth in wholesale revenue per case. Agile and speedy implementation of price revisions led to the early benefit realization. We made every effort to negotiate carefully with customers to gain their understanding of our situation and approach. Achieving successful price revisions would be impossible without their understanding and support. Additionally, we have closely monitored market conditions, including the impact of revisions on retail prices and volumes. Despite the competitive environment, we have maintained shipment prices by focusing on disciplined commercial activities. Second, it's sales volume growth.
The growth foundation built to date has positioned us to capture increased demand from traffic recovery and minimize the negative impact on volume from price revisions, especially in the second half of last year to the present, while looking ahead to increase traffic trends. We have launched new products and renewed existing ones, expanded our sales space with a focus on key customers and executed effective marketing campaigns. These initiatives have resulted in a strong top line growth and driven profitability improvement in the first quarter. These outcomes have provided us with valuable learnings and a sense of confidence as we move forward. Slide six shows the quarterly growth rate of sales revenues versus the previous year from 2020. In 2020, the severe impact from the spread of COVID led to a difficult period for revenue with decreased volume from reduced traffic.
Since 2021, revenue has been on a gradual upwards trend. We believe this is the result of our efforts to build foundation for growth as well as pushing forward with key transformation initiatives, even in the difficult business environment of COVID. Furthermore, we have accelerated the upward trend as a result of our strong commitment to price revisions, a profit improvement initiative that was previously difficult to achieve. These outcomes are the result of the hard work of our employees. Regular employees, employee engagement surveys have shown improvement in scores since 2021, which we believe is supporting this top line growth. Our employees are an asset to the company, and improved employee engagement creates a positive cycle. I believe that these results are an indication that our employees, working hard in the marketplace every day, are experiencing an improvement in the company's situation.
I would like to share that the strong top line growth in the first quarter is not only the results of the price revisions, but is also backed up by historical uptrend. We believe that our strategy is the right one, and we'll continue to maintain this good momentum as we prepare for the upcoming peak season. Now, let me ask our CFO, Bjorn Urgeness, to take you through the details of the first quarter results.
Thank you, Calin. Hello, everyone. This is Bjorn Ulgenes. Please turn to slide 7. As Kaleen explained earlier, in the 1st quarter, sales volume grew by 4% and revenue growth was 7.8%. Gross profit grew 9.3%, exceeding revenue growth. Although impacted by higher costs related to external factors such as higher commodity, energy prices, and the weakening of the yen, the effect of improved profitability through price divisions and other measures led to an improvement in the gross profit margin. Business income was a loss of JPY 9.4 billion, this is an improvement of JPY 3.3 billion on the previous year. Factors behind this change will be explained on the next slide. Operating income improved by JPY 0.5 billion on the previous year.
This was mainly due to a year-on-year increase in business income, but a decrease in other income due to the cycling of gains on sales of property, plant, and equipment recorded in the first quarter of the previous year. We maintain efforts this year to improve our balance sheet. As a result, net income improved by 0.1 billion JPY from the previous year. On slide 8, you will see our primary business income drivers. From the left are volume, price, and mix. This shows the year-on-year change in marginal profit from commercial activities, an improvement of 7.2 billion JPY on the previous year. As we explained earlier, it includes the contribution of a 4% volume growth, maximizing opportunities to capture traffic recovery, and the effect of the improvement in wholesale revenue per case through price revisions. Next is transformation.
Transformation has generated recurring cost savings of JPY 1.2 billion. This effect was mainly from operational efficiency improvements in supply chain. We are on track to achieve our full year cost savings targets of JPY 3.3 billion. Marketing expenses decreased by JPY 0.3 billion from the previous year. This is the result of strategically invested marketing activities that account for cost effectiveness to fully capture the demand from traffic recovery. Next is manufacturing costs. Although we benefited from improved manufacturing efficiency from increased production volume, costs increased by JPY 0.8 billion from the previous year, from the shift in consumption trends from small packages to large packages following the price revisions. Other costs increased by approximately JPY 2.6 billion from the previous year.
This includes the cycling impact of a one-time cost saving of approximately JPY 3 billion in the first quarter last year, with approximately JPY 2 billion from the temporary leave. Cost-saving efforts also progressing, including a decrease in logistics costs through an efficient supply network operation, leveraging S&OP and the mega distribution centers. As shown here, elements under our control from volume, price, and mix to others, excluding the external factors including commodity and Forex impact, have increased profitability by JPY 5 billion compared to the previous year. Our commodity and utility costs. These were significantly impacted by external factors. Cost increased by JPY 2 billion from the previous year. The impact of commodity prices, including Forex, was JPY 1 billion, impacted by the yen's depreciation and higher raw material prices such as PET resin.
In addition, utility costs increased by JPY 1 billion, with higher electricity costs resulting from higher crude oil and natural gas prices. Although we continue to be impacted by cost increases from external factors, we view it positively with profit contribution from top-line growth making a significant contribution to the overall improvements in business profits. These were the main drivers of business income. Please turn to slide 9 for volume performance by major channels and categories. Channel total sales volume increased by 4%. We believe we were able to minimize the impact of the volume declines from the price revisions implemented in the previous year by thoroughly implementing commercial activities to capture increased demand with the traffic recovery. In addition, the wholesale revenue per case improved by more than double digits over the previous year in all channels from the price revision benefits.
In vending, despite the volume impact from price revisions, market share foundation built to date and the campaigns through the Coca-Cola Smartphone app contributed to a 1% increase. For the price revisions in vending, wholesale revenue per case improved significantly by JPY 167 through speedy price reflections in vending machines. In retail food, volume grew significantly by 23%, benefiting from a recovery in traffic at restaurants and the cycling of COVID-related restrictions that were still in place in the previous year. Supermarkets, drugstores, discounters, and CVS volumes were impacted by the price revisions and severe competition. However, drugstores and discounters achieved 3% growth with a recovery in large PET volume, which was weak after the price revisions. Most categories achieved growth except tea and sports that was significantly impacted by the price revisions.
Sparkling grew 6% with growth centered around traffic recovery and Coca-Cola in vending and restaurants. Water grew strongly, supported by the bottle design renewal effect. Coffee was positive with the renewal of the Georgia brand and the expansion of the Costa Coffee lineup. Slide 10 highlights market share trends. Total channel value share for the full year grew by 0.3% from the last year. This is led by a 0.7 points growth in vending value share. Vending value share has grown for the 10th consecutive months. For OTC retail prices, the benefit of the price revisions are materializing with both large PET and small PET exceeding the previous year's levels. The smaller increase in the retail price of large PET compared to the growth in small PET is mainly due to a change in the package mix with the increased composition of water.
Both large PET and small PET have maintained their price premiums to the industry average. The detailed status of the price revisions will be explained in the next slide. Please look at slide 11. These are the trends of the price revisions in the OTC channel. In the OTC channel, we implemented two rounds of price revisions for large PET in May 2022 and for small packages in October. Retail prices have steadily increased after the shipment price increase and have remained at a higher level since. Graphs shown on the slide represent the change in retail prices in the OTC for large PET on the left side and small PET on the right side. You can see that both are rising steadily.
As shown in the graph on the left, in large PET, we implement the price revisions in May last year ahead of the industry, and since the second quarter, we increased the price premium against the industry average. Until the third quarter, the situation remained severe in terms of volume, with a large price difference against the industry average. Efforts to maintain shipping prices through sales activities that emphasize discipline resulted in retail prices remaining at an elevated level. The graph on the right illustrates the price revisions from the small PET that were made at the same time as other companies. There is almost no difference in the timing of the retail price increasing, but price premiums have expanded significantly. We believe this is the result of speedy and strong determination in price negotiations, product deployment, and creating sales space.
For the second quarter onwards, we will continue to strengthen our sales foundation by building sales space for the peak season. At the same time, we will continue to strive to maximize the effects of the price revision through commercial activities with discipline. Slide 12 shows the recovery in vending with higher prices. The graph on the left shows the level of price reflections in vending machines and our wholesale revenue per case trends. In the vending channel, we were among the first in the industry to complete the price reflections in vending machines, leveraging our strong and agile operations. Within one month of the price revisions, we completed price re-reflections for over one-third of our overall vending machines. Within three months, by the end of December last year, we had completed re-reflections of almost all vending machines in our operating area.
By comparing the two line charts, you can see that we have been able to reflect our prices ahead of the industry. We believe that this rapid response has led to the early realization of the improvement in wholesale revenue per case. Vending achieved volume growth in the first quarter despite the impact of price revisions. This has also led to the materialization of the effects of price revisions. The market share base that we have built to date and the user base on the Coke ON app has supported volume growth following the price revisions. While leveraging these solid foundations, we continued to provide a unique user experience by strengthening our product lineup to suit each location, including the introduction of new products and introduced vending machines exclusive campaigns using Coke ON. We believe this has helped minimize the volume impact from the price revisions.
In vending, we're encouraged by the fact that we were able to improve wholesale revenue per case and achieve volume growth together in the first quarter. We will apply this experience and learnings towards market execution to the price revisions implemented starting this May. Please look at slide 13 for updates on our ESG initiatives. We are accelerating various initiatives towards sustainability management. We're focused on collaboration with our customers. As an example of our efforts, we have started the collaboration with FamilyMart for the promotion of sustainable development goals. With Seven & i, we have introduced our 4 fully recyclable PET bottle product. By working together on sustainability initiatives, we not only aim to work together with customers on social issues, but also to expand business opportunities through strengthened collaboration.
For collaboration with local governments, we are making steady progress in our efforts to achieve a zero-waste society, and are steadily increasing the number of local governments with which we collaborate through Bottle-to-Bottle initiatives. We will continue to accelerate our efforts to create a circular economy. Other initiatives include participation in LGBTQ events, water source conservation through forest preservation activities, and donation of beverages to food banks. In recognition of these ESG initiatives, we have received high recognition from external organizations. We will further accelerate our efforts with a wide range of stakeholders to enhance the value we provide to society. Now, I would like to ask Ms. Sue Choi from Coca-Cola Japan to take you through our marketing initiatives updates. Satoshi Simon, please.
Thank you, Bjorn. Hello, I'm Sue Choi from the Coca-Cola Japan Company. I'm on slide 15. I would like to take you through a review of 2023 1st quarter and highlights of our marketing initiatives in 2nd quarter of this year. Let's start with the review of 2023 1st quarter. As the market recovered from the COVID-19 pandemic, we were able to grow more than the market. Our value share in the soft drink market successfully grew by +0.3 points, driven by strong renewals and activations in the core, and new innovations to recruit new drinkers, enabled by digital-centric experience way of marketing. Our 1st strategic pillar is to strengthen the core, and we're continuing to focus on revitalizing the core brands. Starting with the Coke With Me campaign launched in March.
The unique and refreshing taste of Coca-Cola goes well with me is a key occasion platform to build habit of drinking Coca-Cola for consumers. Through leveraging a strong partnership with influencers, digital, TV, and consumer promotions, we're able to bring rituals into these key occasions with our consumers. Next is Georgia relaunch in March. Georgia has been our core coffee brand since its launch in 1975, and we decided to relaunch the Georgia brand under our new strategy in 2023. The full relaunch, including a new brand logo, product, and positioning, was implemented for consumers and new consumers through relevant and exciting communication and activities. With this relaunch, we're off to a good start, showing strong distribution and turns in stores, revitalizing the Georgia brand through system effort. Moving on to the innovation. Let's begin with Ayataka Koi Green Tea, which was launched in February.
This is an upgraded to food with functional claims product with effective of reducing both visceral fat and subcutaneous fat. Through this product launch, we successfully addressed a wide range needs of health-conscious consumers, in particular, seniors. Moving on to the marketing transformation. We're working on transforming the way of marketing to stay relevant and connected with the consumers and to become more effective and efficient. Let me quickly walk you through the My Drawbot as the first user participation experience content for the Georgia brand, which is one of the core programs of the Georgia new campaign. This program is an AI illustration maker function that converts your regular normal photo into an illustrator version that makes you feel like you're the main character of your own story, making your everyday moments into an extraordinary drama.
This became one of the most engaging consumer promotions we've done in Georgia, generating significant buzz, especially among Gen Z. Next, Coca-Cola brand has launched a Coca-Cola Original and Coca-Cola Zero campaign called Which Great Taste You Like. This campaign includes the first time under the cap promotion with a unique code printed in each cap of the bottle. By registering this code using the Coke ON app, users earn a taste judge vote and can participate in a voting promotion to win a 1,000 year supply of Coca-Cola. In addition, through the Coca-Cola Taste Test Tour in six cities across Japan, we're conducting experiential marketing. The initiative is to continue recruiting new users into Coke TM, growing both Coca-Cola Original and Coca-Cola Zero. Now on to slide 16. Next, I'd like to share with you the key initiative highlights in the second quarter of this year.
On the core, Kōcha Kaden is evolving further as high-quality black tea brand, aiming for even better taste. In April, the entire package design would have been refreshed to intuitively convey the even more quality taste. Renew the formula Royal Milk Tea and Peach Tea to enhance the richness of the original black tea flavor and to achieve a refreshing finish. New TVC Kōcha Kaden, featuring actress Fuka Koshiba, conveys the deliciousness of Kōcha Kaden, which makes people smile and feel positive when they drink it. I LOHAS brand launched a new bottle nationwide last December. A new brand campaign was just launched today on May 15th, under the key message of a gulp of water that changes tomorrow. The new campaign aims to convey the message that choosing I LOHAS will lead to a better tomorrow and future.
Along with the new brand campaign, we've also launched a consumer participation sustainability promotion that consumers can easily participate in through a QR code on the package. We pursue to strengthen the brand edge while attracting new drinkers. Moving on to innovation. In April, we launched Aquarius NEWATER, a completely new hydration drink with superior hydration functions, as well as zero sugar and zero calories. Our proprietary technology, which uses amino acids instead of sugar, provides superior hydration than water, absorbing water faster and longer than water with zero sugar and zero calories. We offer a new hydration drink option to support your daily life. Next, Jack Daniel's & Coca-Cola was launched in April. This is the Coca-Cola's first RTD alcoholic beverage that mixes Coca-Cola and Jack Daniel's, one of America's leading Tennessee whiskey brands.
The refreshing taste of Coca-Cola and the rich Tennessee whiskey flavor of Jack Daniel's are in perfect balance, providing a one of a kind, perfect taste that can be enjoyed easily. We're expanding our RTD alcoholic beverages option for those who regularly drink whiskey, highballs, and other alcoholic beverages. Moving on to marketing transformation. When Jack and Coke was launched, Jack and Coke Bar was opened for a limited time in Shibuya as an experiential marketing activity to provide the new experience of Jack and Coke directly and indirectly. In the Jack and Coke Bar, great taste experience of Jack and Coke, along with DJ performances, relay games, and photo spot to experience the world of Jack and Coke, was offered to create social buzz and to continue increasing the trial of Jack and Coke. To slide 17. This is a summary of my presentation.
Our marketing strategy for the year continues with three main pillars: strengthen the core, fewer bigger innovation, and marketing transformation. To deliver the marketing strategy and plan, the Coca-Cola system will continue to strengthen the partnership to work as one Coca-Cola system in order to win together in the market. With our mission to refresh the world, make a difference, we will continue to strive to deliver refreshing moments and make positive difference through our brands. Thank you. Now over to you, Kostin.
Thank you, Sue, for your presentation. Calin here again. From slide 19, I will talk about the outlook. From the second quarter onwards, we need to monitor the impact of the previous year's early end of the rainy season and the record-breaking heat wave. The effects of commodities and exchange rates continue to put pressure on earnings, as does the impact of domestic inflation on consumer sentiment. In such a business environment, we will continue our efforts in four main areas. First is that the price revisions for can and large PET bottles for shipments from May first for all channels have been implemented. We will take a disciplined approach to price revisions and work to maintain these revised shipping prices. We continue to seriously consider further price revisions while monitoring the market conditions. Second is commercial activities focus on profitability.
Key commercial initiatives implemented to date are steadily delivering positive results. We will continue to enhance efforts to launch new products and expand sales space to minimize the impact of volume decline following price revisions. In the first quarter, the number of sales points per store increased from the previous year, and we will continue to strengthen such efforts. Sales volume in April maintained a flat level from the previous year. This was achieved despite the previous year's rebound from COVID restrictions and while price revisions continued to impact volume. For supply foundation supporting growth, we will further strengthen our S&OP process. This process was vital to ensuring a stable supply of products during last year's heatwave. By improving the accuracy of demand forecasting and leveraging our Mega DCs, we will strengthen our ability to respond to the demand fluctuations and ensure stable product supply for this year as well.
In addition, the operations of a stable supply network will help capture sales during the peak demand season while achieving low cost operations. In April, the Ebina plant started a new production line on schedule. We will continue our efforts to provide further value through beverages by strengthening our manufacturing capacity for strategically important high value-added products. This year we are engaged in transformation efforts centered on operations in the areas of manufacturing and logistics, with the target of generating JPY 3.3 billion in annual cost savings. For today's summary, please see slide 20. In the first quarter, we improved profitability by about JPY 5 billion in the areas under our control, excluding the impact of external factors such as commodity and foreign exchange effects.
We are pleased that the price revisions implemented last year with strong determination contributed significantly to revenue growth, and that we were able to improve profitability using that top line growth as a driver. We have been clear that this year will be a year to improve profitability, and we are pleased with the progress up until now. From the second quarter onwards, we will keep this momentum and concentrate on commercial activities that maximize profit. We aim to achieve top line growth by maximizing market recovery opportunities and meeting our profitability improvement targets for the full year. That concludes our presentation. Thank you very much for your time. Now I'd like to ask Gomi-san to open the question and answers.
Thank you, Carlin-san. As the following Q&A session is for analysts and investors only, members of the media are asked to refrain from asking questions at this time. We will hold a separate media Q&A session later today. Simultaneous interpretation is provided, so please ask your question in the corresponding language of the participating phone line. Please speak Japanese on the Japanese line and likewise English on the English line. Due to the constraints of simultaneous interpretation, please limit your question to one at a time. I'd like to start the Q&A session. Operator, please begin. If you would like to ask a question, please press sharp seven. Please note that if you enter sharp seven twice, your question request will be canceled. You can also request a question by pressing sharp seven any time during the Q&A session. We will now start to take your question requests.
Please press sharp 7. We have received requests for questions. I would like to begin the Q&A session. We will now call the names of those who wish to ask a question. When speaking, please state your company name and your name before your question. We will now welcome the first person with a question and we will be unmuting you. This is Fujiwara-san from Nomura Securities. Please go ahead.
Thank you very much. This is Fujiwara from Nomura Securities. Thank you for the presentation. I would like to ask about the possibility of doing another price revision. Last year you did the price revision and the volume went up and it has contributed to the growth of sales. At this point, why haven't you announced that you will be doing another price revision in the future? Let me continue. My next question is kind of related to my first question. If we just continue as is, the price revision in the future, probably it will be like around the fall season, I'm guessing. In the past, there was lots of price revision for the food industry and the inflation has continued. The later, you are on the price revision-
This momentum we have for the food price revision, the momentum is going to be gone, and it might be not be successful for the beverage industry. My question is around your future possibilities on price revision.
Thank you, Fujiwara-san, for your question on the price revision. I would like, Costin-san to take this question, please.
Good afternoon, Fujiwara-san. This is Costin. Thank you for your question. First of all, I will say that the previous two price revisions in May and October 2022 were disciplined and executed, and they made a significant contribution to the revenue growth. We see this in the results of first quarter, and we see it in the wholesale price across all channels. As you saw also in the presentation, we are seriously considering additional price increases, and we are right now monitoring all the market conditions. Our focus right now is to implement with discipline the third price increase, the one in May for can, bottle can, and large PET. Also, we are working with our customers to understand what is the impact on the total market.
As you said, there were significant price increases in the market, and we are evaluating the effect of this for every single channel and for overall consumer behavior. We'll keep you updated with the further decisions. Thank you very much.
Maybe it's Bjorn, Fujiwara-san, just a quick build. The two price increases Costin Mandrea talked about are included in our full year forecast that we announced back in February for this year. It's included in the JPY 30 billion marginal profit uplift we're planning to execute for this year. Thank you.
Fujiwara-san, would that be okay? At the risk of having another price revision, do you see there's any risk the later you are to announce the price revision? I think you're going to miss the best, you know, timing to do the price revision. Do you see if there's any risk if you are late in announcing the price revision?
Costin again. Like I said, our entire focus is right now on implementing the third price increase. Let me remind you that we executed already with discipline and across the market two price increases. Our sales force, it is ready to execute in the market whatever decision we are making at a later stage. We'll keep you updated with all the scenarios and with further decisions. Thank you very much.
Fujiwara-san, thank you very much for your question. Thank you for the answer.
Operator, can we move to the next question, please? I will unmute next person for the question.
Next question is from Saji-san from Mizuho Securities.
Thank you. This is Saji. I would like to ask about the price hike in the past. I would like to understand the background to your success of all those past price hikes in comparison to those in previous months. You mentioned about the vendings benefits is becoming very large. What is the success factor behind the vending success? Will you expect the May price hike to have the same kind of benefit in the vending channel?
Thank you, Saji-san, for your question. You would like to understand the background to the success of the price hike.
I would like to ask Costin to pick it up.
Costin. Doesn't matter if it is vending or OTC, what we know is that we executed already with discipline 2 price increases, and 2 weeks ago, we started the third one. I think what is very common for us in the last year plus, it is the way we engaged with our sales force, making sure they know how to discuss, how to negotiate with our customers. The effort we spend with our marketing departments to make sure we have programs to compensate for the price increase. The most important is once we increase the price, we maintain the wholesale price, so we do not discount further.
In the case of vending, as you asked in your request, Saji-san, we being market leader gives us the agility to move faster with the price increases. We see, for example, for the May price increase, already we implemented the price increase. We raised the prices in 70% of the vending, and we expect the rest of the vending machines to be increased in the next weeks before the summer season. I hope this answers your question. Thank you very much.
Thank you. I would like to make clarification on for one thing. In May, I believe that after the May price hike for can, do you see any volume decline after the price hike? Thank you, Saji-san. Your question about the volume, decrease in May price hike.
Only two weeks after we increase the prices, we see some movements of volume in the market, but this is in line with our expectations. We learned from the previous two price increases that in the initial period after the price increase, we see the volumes being affected, but they recover after that, and I expect the same to be this year. What is also very important this year is that we prepared a significant marketing plan. You had some examples in Q1, and you saw what we have in the pipeline for Q2. I expect this price increase in May to be also disciplined and successfully implemented and to help us in benefiting for the overall NSI. Thank you.
Saji-san, I hope that answers your question. Thank you very much. We still have time, I would like to see whether who else has a question. Operator, please.
If you have any question, please press pound sharp seven. Please note that if you press the sharp seven once again, you are going to cancel your question. We will unmute the next question. SMBC Nikko Takagi-san, please.
This is Takagi. Hello. I would like to ask about the possibility of price revision in the future. When you are going to execute another price revision, what are you going to be the factors for you to make the final decision? What is the background when you're going to have another revision? Looking at the beverage market and also, the leadership is at Suntory as well, are you going to make your own decisions to do this another price revision? Are you going to depend on the competitors' movements or not? That's my question.
Thank you, Takagi-san, for the question. You want to ask about our judging criteria for another price revision. Biolo-san, please.
Thank you, Takagi-san, good afternoon. Any future price increases, which we have said in the prepared remarks we are seriously considering, will take into account a couple of factors. First is the market reactions to price increases. In other words, how our customers and our consumers absorb any increases in pricing. Secondly, it is about the impact of commodities and currency, as we have highlighted over the last few quarters in our reporting. All of these factors combined will help us determine if and how and how much any price increases might be executed. I'll get Costin Mandrea to add some more flavor to the price increase. Thank you.
Tagaki-san, this is Costin. Thank you. First of all, I will say we want a profitable and healthy beverage market, and we believe price increases are working in this direction. Second, I don't think it's a need for us to prove we increased prices alone in 2019. In 2022, in May, we took the decisions to increase price. We are alone in the market. Yes, we are leading this market from a pricing perspective. Right now, like we said, we are seriously considering additional price increases. Our focus for the next weeks, it is to make sure the May price increase is basically implemented and to monitor the reaction in the market. When we have news, rest assured we'll come back to you.
Thank you very much.
Thank you very much, sir.
Thank you. For the beverage industry, do you think it's healthy now? Just a simple question. Do you think there's still challenges in the beverage industry, or do you think it's already healthy?
The question is about the healthy level of the beverage industry. From Calin-san, please.
Thank you so much for follow-up question. Calin Dragan here. Yes. I can answer very quick to your question and say, yes, I think the industry, through the last year trend, it become healthier because we were able for the first time, probably in three decades, to put the prices up. As you remember, in the past, the entire industry was focusing on leveraging just mix and volumes. That was an unhealthy work until we were able to start tackling pricing in the market. You can see in the whole industry performance for the very first quarter and as well quarter four last year, improvement. Yes, that is a positive trend.
Having said that, as beverage industry in particular and food industry in general, we are still under pressure. Cost pressures out there from commodity prices, variations, utilities, but as well yen depreciation. That puts pressure on the entire industry to create a dynamic environment on where we can leverage all the elements of the revenue growth. Basically, volume, mix, and most importantly now, pricing. We can see that based on the volume trends in the market for the beverage industry, the consumers are prepared to pay premium prices for beverages, packaged beverages. That gives us confidence that the industry is ready to price continuously in the years to come in a healthy way for the health of the industry and of course of each business individually. I hope that answered the question. Thank you.
Thank you. Thank you, Tabaki-san for the question. Operator, next question, please.
I will unmute the next person for the question. We have Ihara-san from Credit Suisse Security. Please go ahead. Ihara-san, please go ahead.
Hi, this is Ihara from Credit Suisse. I have 1 question about OTC share. I believe after the price hike, you are keeping up with the premium price against the competitors, the value share is on declining trend. This premium pricing does really, it looks like it doesn't really work with the consumers. In order for us to keep up with the share in the OTC, what do you see the success factor to achieve that goal?
Also, if you are to, with the price hike, if you can go back to profitability next year or following years, wouldn't this kind of share trend, doesn't your business go back to the declining trend? Including all this share and everything, what will be your positioning of your business in share in the OTC market?
Thank you very much, Ihara-san.
Costin. Profitable share growth, it's our strategy, and I'm very specific about profitable share, not any kind of share. This gives me great pleasure to see in vending the market share increasing consistently. We increase prices and the share is still increasing. In the case of OTC, here in supermarket, in drug and discounters, we see good performance, both in terms of price increase, but also in terms of share. In CVS, the competitive environment, it is very aggressive, and our strategy is focused on profitable growth. You observe that we are getting gradually out of high discount promotions, like buy one, get one free. We are minimizing this. We are staying consistent with our packages. We do not upsize, and we invest a lot in marketing programs.
Just to give you a few examples of marketing programs and how we are planning to grow share profitably in CVS, I want to invite my colleague, Sue, from the marketing department.
Thanks, Costin. In terms of OTC share, specifically in CVS, and as Costin already talked about profitable share, we have new strategy to focus on increasing our share in strategic channels like CVS. A couple of examples that we have done and that I've shared in the presentation part is things, initiatives like Georgia relaunch. We've just relaunched end of March, and the focus has been recruiting new users in CVS with new logo, new product, new lineup with a new brand message. This has been very effective to turn around the share in CVS. Along with Georgia, we also have very strong growth coming from I LOHAS through a new bottle launch as well, too. With efforts such as this from marketing, we're seeing shares turning around in CVS.
Ihara-san, I hope that answers your question. Thank you very much for your question. Thank you. Operator, please put through the next question.
The next question. I would like to unmute the next question. The next question will be from Daiwa Securities, Morita-san. Go ahead.
This is Morita from Daiwa Securities. I want to ask about the Coca-Cola Group or the Coca-Cola brand power. How has it changed in the past couple of years? Looking at the past like three years or so, is the brand power like stronger, weaker? Can you give us kind of a history on how the brand power has changed?
Thank you, Morita-san. You want to ask about the Coca-Cola brand with a longer perspective and kind of look back at the past. Sue-san, please.
In terms of Coca-Cola, as you know, it's one of the most important categories, not only for the company, but for the consumers in terms of how we look at the growth potential in Japan. If you look at the last three years, we have made quite a lot of effort in growing the Coca-Cola brand. The brand power has been in the past, but is even stronger in terms of brand power. We are growing year-on-year, and this year you will see that we have developed brand marketing campaigns to really not only grow the brand power, but to recruit new users into the key occasions. This will continue to be one of our key focus area to increase new users into the Coca-Cola total portfolio.
The brand equity, what are the ways that you measure? Do you have like important KPIs to measure your brand equity or brand power?
Thank you for the question. We look at things starting from brand awareness to the brand that I love, the first brand that you'd think about that's top of mind. We also look at, on a weekly basis, the brand purchase and consumption as well too, and the intention to drink Coca-Cola, along with the tracking of brand images or edges such as like Coca-Cola is a great tasting drink or Coca-Cola is a happy, makes me happy, which in turn drives the overall brand power of the brand. I hope that answers your question.
Thank you very much. Thank you very much, Morita-san, for the question. We are very sorry, but our scheduled finish time is approaching and the next question will be the last question. Operator, please, the last question.
I will unmute the next person for the question. Amiyake-san from the Morgan Stanley MUFG. Thank you.
This is Miyake speaking here. I also would like to ask about the midterm content, so I have a couple of questions for that. You said the profitable growth will come to the first priority, but having said that, you really have to focus on the growth on the volume too. Back in 2018, you think that you can go back to the volume level back in 2018?
Do you think that you will never be return back to 2018 level because of the pricing? Also for the cost reduction part, I think since the merger, you have been taking up significant amount of transformation, but in a midterm view, do you think that you still can generate the cost reduction effects of JPY 4 billion-5 billion every year? Is there any other scale that you have in mind?
Thank you, Miyake-san. You are talking about the volume perspective in midterm and also for the cost reduction perspective. I would like Calin-san to pick it up.
Thank you so much, Miyake-san, and thank you for the question. From my side, I just need to let you know that first return to profitability and the construction of the mid to long-term plan, it's for every employee in our company the top priority. We are working right now on building up a mid to long-term plan that we are going to communicate at appropriate moment in time based on market conditions and as well, especially market stabilization in term of costs, pressures generated by the Yen devaluation, as well, commodities and utilities pricing. Going more specifically to your question on the volume trends right now.
Well, I am pleased to say that in a number of channels, well, which will be supermarkets, drugstores, discounters, I would say the volumes were coming back to the levels of pre-pandemic already. It's not for the future to reach that level, but rather to build on top of that. In the meantime, there are certain channels, especially the ones heavily affected by the traffic, and here I'm referring to the CVS, to vending and, probably the food service, which are coming back significantly, but still not at the levels of the pre-pandemic that we have experienced at that time. But with the help of now price increases and leveraging the full balance of pricing mix and volume, we are able to display way better performance than during the pandemic time. That would be probably about the revenue construction.
If you ask me about the continuation of our transformation efforts, that have been a relentless process. We haven't stopped during the COVID. We were transforming every year the business because we are coming from a background of 12 local bottlers, which have to be integrated, processes, streamlined and capturing synergies. With the investments we have made over the last years and with our transformation mindset embedded in our mission, vision and values, we are going to deliver every year savings at various levels. For this year, we have a commitment of JPY 3.3 billion in cost reductions, and we promise to come back with targets for the years to come whenever we decide it's appropriate to communicate the long-term plan. Hope this answer your question. Thank you so much.
Miyake-san. Miyake-san, I hope that answers your question. Sorry for running over the designated time, I would like to close the Q&A session now. The contents of today's presentation will be available on our website following this presentation. If you have any questions or feedback, please contact our IR team. Thank you very much for joining the call today.