Good evening. This is Gomi, Head of Investor Relations for Coca-Cola Bottlers Japan Holdings. Thank you for joining us today for our first quarter 2025 earnings presentation for analysts and investors. Today, we have President Calin Dragan and CFO Bjorn Ulgenes. We are also joined by Executive Officer and President of the Retail Company, Alex Gonzalez, Executive Officer, President of the Food Service Company, and Chief Strategy Officer, Maki Kado, and Executive Officer, Chief Human Resources Officer, Yuki Higashi. Following prepared remarks, we will be happy to take questions. Simultaneous interpretation in both Japanese and English is being provided for both today's call and the Q&A. Before we begin, let me remind you that today's presentation contains forward-looking statements and should be considered together with cautionary statements contained in our presentation. With that, I'd like to turn the call over to Calin Dragan. Calin-san, please.
[Foreign language]
Good evening, everyone. This is Calin Dragan. Thank you for joining today's earnings presentation. Let's begin with today's highlights. Please turn to slide 4. We have made a good start to 2025. First quarter business income increased by JPY 1.3 billion year-on-year, keeping us on track to meet our full-year business income target of JPY 20 billion. Continuing from last year, top-line growth and transformation benefits are driving profit growth and maintaining a good trend towards improved profitability. Sales volume remained flat year-on-year, outperforming the market despite the impact of volume declines due to price revisions. At the same time, price revision benefits improved wholesale revenue per case, lifting revenue by 1.7% year-on-year. The first quarter also saw significant progress on price revisions, a key measure for improving profitability.
Since implementing revisions in October last year, we have worked to maintain and improve shipping prices while we also prepare for the price revisions for juice products scheduled for this May. In addition, we recently announced price revisions for all product categories, including coffee, starting in October. Details will be provided later, but these initiatives will help accelerate our profitability improvement this year and beyond. In transformation, initiatives to strengthen our foundation and reduce costs are progressing well in each area. In the second quarter, we will accelerate the positive momentum we have generated to date and be ready to maximize profits during the peak demand period. In addition to thoroughly implementing profitability-focused initiatives, including price revisions, we will also focus on strengthening our foundation with a view for a mid to long-term profit growth.
Now, I would like to turn to the first quarter results, which will be explained by CFO Bjorn Ulgenes.
Thank you, Calin. Good evening, everyone. This is Bjorn. Slide 5 is our first quarter P&L. Following on from last year, we continue to maintain an upward trend in our earnings improvements, with both revenue and business income increasing. As Calin mentioned earlier, sales volume was flat year-on-year, while wholesale revenue per case improved, resulting in a 1.7% increase in revenues compared to the previous year. Gross profits increased by 2%, outpacing revenue growth. Despite cost pressures from external factors, we captured the benefits of price revisions and improved manufacturing efficiency, resulting in a higher gross profit margin. Business income improved by JPY 1.3 billion year-on-year, reflecting contributions from top-line growth and cost savings achieved through transformation. Factors contributing to the change in business income are explained on the next slide. While business income increased, operating income declined by JPY 7 billion year-on-year due to temporary factors.
These include the cycling effect of a one-time gain of JPY 5.4 billion from the sale of property, plants, and equipment recorded in Q1 last year, and a JPY 2.8 billion expense this year for a voluntary retirement program tied to our transformation efforts. These temporary factors are included in the full-year forecast announced in February, and we remain on track. Net income also decreased by JPY 3.6 billion year-on-year for the same reason as operating income. Again, this result is in line with our plan. EBITDA grew 28.8% year-on-year to JPY 4.8 billion on the back of business income growth. Please turn to slide 6 for a breakdown of our primary business income drivers. On the left-hand side, we can see volume, price, and mix. These represent a year-on-year increase of JPY 1.9 billion in marginal profits from commercial activity.
The main factors were a negative impact of JPY 0.9 billion from volume, including channel mix, JPY 4.3 billion improvement from unit price, and other factors of negative JPY 1.5 billion. The improvement in wholesale revenue per case due to price revisions contributed significantly. Rebates and other items included in the other category also increased year-on-year due to the increase in revenue against the backdrop of price revisions, but this level is appropriate given the increase in revenues. Transformation benefits were JPY 1.2 billion. In the first quarter, commercial transformation had a significant benefit derived mainly from vending transformation. Initiatives in each area are progressing as planned. Marketing expenses increased by JPY 0.8 billion from the previous year, primarily due to investments made in preparation for the peak demand period and appropriate marketing investments with a mid to long-term ROI focus. Manufacturing costs decreased by JPY 0.4 billion year-on-year.
Cost reduction measures at manufacturing sites have led to improved productivity, including reduced energy and water consumption, as well as lower overall manufacturing-related expenses. Other costs increased by JPY 0.2 billion from the previous year due to higher logistics expenses. Commodities and utility costs increased by JPY 1.1 billion amid a continued severe cost environment. Higher raw material prices had a significant impact, with commodity and forest-related costs increasing by JPY 0.9 billion and utilities costs rising by JPY 0.2 billion. Please turn to slide 7 for the sales volume performance by channel and category. First quarter sales volume remained flat year-on-year with effective commercial initiatives, despite the cycling of the leap year effect last year and the price revisions impact. The successful renewal of Ayataka last year continued to support volume. Wholesale revenue per case improved year-on-year at all channels due to price revisions.
Sales volume at supermarkets declined by 1% due to decrease in large PET volumes following last year's price revisions. Drugstores and discounters saw volume rise by 4%, with contributions from growth in Ayataka and medium PET bottled coffee products. Convenience store volumes decreased by 4%, impacted by price revisions and the cycling impact of new product launches last year. In vending, the overall market was challenging and volume decreased by 4%. However, digital marketing via Coke On app helped increase value share. Price revisions also had a clear effect, rising wholesale revenue per case more than JPY 100. In retail and food service, sales volume increased by 3%, supported by stronger demand at restaurants and tourist spots, as well as growth in commercial used juice products. Online sales volume increased by 11%, driven by exclusive offerings such as Label ST and targeted digital marketing initiatives in collaboration with customers.
By category, sparkling volume increased by 1%, driven by the limited edition Fanta flavors and Sprite in cans, which were strategically introduced. Tea volume grew 6%, driven by Ayataka, which was renewed last year and saw a 14% increase in volume, driving overall category growth. Sports, water, and coffee declined due to the impact of price revisions. Juice growth was led by Minute Maid, primarily through restaurants. Slide 8 covers market share and retail price trends. Our profitability-focused commercial activities, including price revisions, have driven value share growth and helped maintain price premiums. First quarter total channel value share increased by 0.2 percentage points year-on-year. Vending led the way, with strong value share gains continuing by 1.4 percentage points.
Although the OTC channel saw a slight decline in value share due to the impact of channel and package mix, volume share continued to improve, supported by increased competitiveness driven by the success of Ayataka. Despite industry-wide price revisions, our products have maintained price premiums over the market average. In the first quarter, OTC channel retail prices for both small and large PET bottles increased year-on-year, primarily due to the price revisions implemented last October. Especially large PET bottles have faced profitability challenges. We proactively implemented price revisions in 2023, and OTC retail prices rose by an additional JPY 5.5 from such risen levels, representing a cumulative improvement over two years of approximately JPY 25. Next, on slide 9 is the highlights of activities in the first quarter. This year, we're steadily implementing commercial strategies aimed at maximizing profits, guided by a profitability-focused approach.
Starting with price revisions, wholesale revenue per case improved significantly following last year's October price revisions for PET bottles and can products. Maintaining and improving shipping prices after the price revisions and efforts to minimize the impact of lower volumes are producing solid results. We also made preparation as planned for the price revision for juice products, including negotiation with customers, which will take effect from the shipment starting today. Furthermore, we recently announced our plan to revise prices across all categories, including coffee, in October. Price revisions are an important initiative for achieving sustainable profit growth, and we believe that this represents a significant step forward. To optimize growth and investments and costs, we focused on ROI-driven investments from a mid to long-term perspective, carefully managing profits by account, and reviewed and refined our activities, invested capital, and cost leveraging strategies. Initiatives in each channel are also progressing well.
We have implemented channel-specific growth strategies while also focusing on strengthening our foundation in preparation for peak demand periods. In the OTC channel, we worked to expand sales space by tailored activities to each store's needs. This includes leveraging retail media and using eye-catching display racks. In vending, we aim to attract new users and deepen engagement with existing ones by enhancing Coca-Cola experience. In online and food service, we were able to strengthen the growth foundation by implementing activities with a mid to long-term perspective rather than simply focusing on short-term volume gains. Next, I will discuss the transformation initiatives to strengthen our foundation. Please turn to slide 10. Key measures in each area are off to a good start. Let's start with vending transformation. This year's key initiative is optimizing product assortment based on profitability, and we are making solid progress as planned.
We revamped our vending assortment system, enhancing simulation accuracy to build a system for enabling profitability-focused assortment optimization. We are rolling out the new system in stages, starting with locations expected to benefit from this. This assortment optimization will help increase sales and improve route efficiency by improving the frequency of visits and product filling rates. In addition, based on profitability analysis of each vending machine, we are implementing new placement activities with precision and reviewing terms and conditions with a greater focus on profitability and capital return. In the supply chain field, on top of improvement activities at manufacturing sites, efforts to reduce transportation distance and the number of touches per case are producing positive results. A new initiative this year has started towards the preparation for an integrated distribution center, IDC, which will enable advanced product inventory consolidation and optimize product allocation.
We are moving towards a full-scale operation. We are applying learnings from our Mega DC projects to ensure a smooth transition to the new structure. Furthermore, to improve the accuracy of the sales and operations planning process through digital transformation, we have started working with external partners to automate supply planning. This will further enhance our flexibility and agility in responding to fluctuations in demand. Next is the update of our marketing activities, Alex please.
Good evening. This is Alex. I will walk you through our marketing activities in the first quarter and plans for the second quarter. Please look at slide 12. In the first quarter, we delivered growth in both revenue and value share, driven by strong campaigns and activations. Let's begin with strengthening of our core brands.
The Coke with Meat campaign evolved into Cochilou with Coke and Chicken, offering more specific suggestions to consumers while taking a comprehensive approach to help shape drinking habits. In the first quarter, we boosted Coca-Cola's visibility in stores through engaging and attractive displays, leveraging this campaign. In the coffee category, we strengthened Georgia by renewing our core PET bottle lineup and launched a new campaign featuring AutoSan as the new brand ambassador. Lemon Dough underwent its first full renewal since its launch, including the introduction of a new taste in March. Although the market environment remains challenging following the initial surge in home drinking demand and we have been impacted by price revision, this renewal is helping to revitalize the brand and reinforce its role as part of our portfolio. Next is new products.
In March, we launched Cocha Caden on sweetened Earl Grey Iced Tea, supported by a high-impact campaign featuring Tiny Tan characters from the globally popular BTS. We also released a limited edition Fanta Retro Muscat, featuring a nostalgic design in March. As experience-based marketing through implementation of Glass Bottle Coke Yakocha Event in Shibuya and the Onigiri Shokudo Ayatakaya, we collaborated with Coca-Cola Japan seamlessly to integrate campaigns, experience-based marketing, and in-store activities to enhance the appeal of our products and expand sales of our core products. Next, let's look at the highlights of our marketing activities in the second quarter. Please turn to slide 13. In the second quarter, we're implementing the second phase of Cochilou campaign. We have selected two new brand ambassadors, Anochan and Entim, both highly popular with Gen Z, to foster new consumption habits among younger audiences.
For Jacan Barley Tea, we released the brand's first live-action short film in collaboration with the popular anime Karayeon Shinchan as part of its April renewal. We will reinforce in-store displays that will promote purchase together with the emotional story. Aquarius Taste has been completely redesigned for the first time in 20 years and now features a refreshing aftertaste ideal for hydration. It will continue to support sports activities. As demand increases towards summer, we will highlight Aquarius' strengths. For new products, we introduced Minute Maid Zero Sugar Lemonade, which offers a refreshing taste made from grated whole lemons, including the peel. In April, we renewed I LOHAS Peach and I LOHAS Shine Muscat to strengthen sales. As part of our experience-based marketing, we expanded the popular Glass Bottle Coke Yakocha succeeded in Shibuya to Osaka in April.
Also, with the Osaka Kansai Expo, we're running promotional campaigns offering prizes such as coupon tickets and expo admission tickets. We hope you will take part of this promotion. This wraps up the marketing update. I'll now hand to Calin for the outlook.
Slide 15 is the outlook. From the second quarter onwards, we will accelerate efforts to strengthen our foundation for sustainable profit growth while preparing to maximize the effect of our activities during the peak demand period. In commercial activities, we will continue to prioritize profitability and strengthen our competitiveness by channel. Sales have been solid so far. Although April sales volume declined year-on-year due to price revisions' impact, we see our volume trends continue to outperform the overall market.
Ayataka continues to perform well despite the impact of the cycling impact from last year's full renewal and intensified competition, including the renewal of green tea products by other companies this year. Furthermore, we will accelerate profitability improvement through further price revisions. The price revisions from October will be the largest in terms of volume in our company's history, covering products of approximately 80% of our annual sales volume. Combined with the juice price revision starting today, we made these decisions with strong determination ahead of the industry. Details are provided on the right side of the slide. The price revision will apply to 217 products across all channels, including premium items such as Foshou products. Manufacturers' suggested retail prices will be revised by JPY 20-30 per bottle.
For coffee with high interest, PET bottles and bottle cans, which are our main products, will be revised by JPY 30, and SOT cans will be revised by JPY 20. Leveraging accumulated knowledge and experience from price revisions to date, we will make this another success. We recognize the need to monitor volume declines and channel mix impacts carefully, and we are preparing thoroughly to ensure steady results from the price revisions. Together with the price revisions, we will implement stricter rebate controls, especially for coffee before the peak demand period, to promote profitability improvement from many perspectives. For transformation, we will continue to promote initiatives to strengthen our foundation from a mid to long-term perspective while exploring various possibilities accounting for the sustainable future growth. Please turn to slide 16. Over the course of our transformation journey, we have achieved significant results and gained various learnings.
We will continue driving transformation with confidence and explore various possibilities, particularly in vending, leveraging the learnings to strengthen our sustainable future growth. As part of our technology-driven transformation, we are making steady progress in initiatives such as enhancing business process efficiency through digitalization, improving analysis accuracy by visualizing profitability by account, and building a robust technology foundation. Above all, these achievements reinforce the belief that our drive to implement transformation is stronger. These are the achievements and learnings from transformation. Going forward, we will identify potential challenges and growth opportunities for our company by leveraging the data and insights accumulated through transformation from various perspectives and in various timelines. We will develop targeted strategies to address these challenges and opportunities to further reinforce our business foundation. We will explore opportunities to further improve profitability, build a stronger foundation, and allocate capital appropriately considering future growth.
Now, finally, please turn to slide 17 for a summary of today's presentation. In the first quarter, we increased business income and made steady progress in initiatives to strengthen our foundation for future growth. I'm very, very pleased that we have made a strong start to the year that we have designated for achieving both profit growth and strengthening foundation. In particular, price revisions have contributed significantly to profit generation as planned and have become a key driver of profit growth. This success reflects our relentless focus on profitability and our commitment to profit-oriented activities. Based on our track record, I'm confident that we are moving in the right strategic direction. To further accelerate this momentum, we will implement price revisions across all product categories starting in October. We will execute the price revisions with strong determination to make it a success and further improve profitability.
In the second quarter, we will thoroughly prepare for the peak demand period and work to build confidence in achieving our full-year business income target of JPY 20 billion. Also, we will continue to drive fundamental transformation from a mid to long-term perspective, strengthening our business foundation and leading to profit growth for next year and beyond. Now, this concludes our presentation. Thank you very much. I will now hand it back to Gomi-s an for the question-and-answer session.
T hank you, Calin-s an. This Q&A session is for analysts and investors. For members of the media, please refrain from asking questions at this time, as we will have a separate session later today. Due to interpretation, please ask only one question at a time. Now, I would like to start a Q&A session. Operator, please begin.
If you would like to ask a question, please press pound seven on your phone. Please note that pressing pound seven again will cancel your request. You can also press pound seven at any time during the Q&A session to join the queue. If you wish to ask a question, please press pound seven now and wait to be called on. We already have someone in the queue, so let's begin with the Q&A. I will now call on the first person in line. When it's your turn, please state your company name and your name before asking your question. We will now unmute the first participant. From UBS Securities, Ihara, please go ahead with your question.
Thank you very much for your presentation. This is Ihara from UBS. Thank you for having me. I have two questions. Firstly, I'd like to confirm some numbers.
In Q1, price revision impact, what was the amount of price revision impact during Q1? For April, how is the market situation? How is your performance? How much you outperformed versus market? That's the first question. Ihara, thank you very much for your question. Firstly, you would like to know the impacts from the price revisions or beyond? Please go ahead with this question.
Ihara, thank you very much for your question. For Q1, as you saw, we reported a positive price mix for the commercial profits for the market. We believe overall the pricing impact was about JPY 4.5 billion overall, including mix impact. You also saw that we reported a slight decline in the volumes for the period. Net net, we're still up JPY 1.9 billion.
A strong part of this, as I said earlier, comes from the pricing impact, which we are very pleased with, driving that 1.7% increase overall in revenues. I hope that answers your question.
You said that 24 October impact was JPY 7 billion-JPY 10 billion net net. What was the contribution from Q1? That was my question. Can you give me the contribution during Q1? Thank you for your additional questions. You would like to know the net price revision impact during Q1. Bjorn Ulgenes, please go ahead with the answer.
As I said earlier, Ihara, just reiterating my earlier reply, we have a positive commercial impact of about JPY 4 billion for the quarter. Inside there, we have a significant impact positively of the price increase. We are not specifying out in detail the price impact for competitive and natural reasons.
Overall, the positive impact inside the 1.9 billion was 4.3 for the price overall. [Foreign language]
Thank you very much. How about April performance? Monthly performance in the month of April, what were your numbers? What were the numbers of the market? How do you compare with the market? Alex, please take this question.
The flash that we're seeing, obviously, as of April, of yesterday, our sales volume are slightly lower year- on- year, driven by a couple of factors, obviously the impact of price revisions and slightly cooler weather in the month. The preliminary figures, again, showing a relatively -2% decline on volume cases. However, we believe the volume trend is ahead of the market.
Thank you very much. Your volume also slightly declined, but it was better than market decline. Yes, you are correct. Thank you.
My last question is, what I'm concerned is that unit price impact seems to be shrinking. For example, in the month of December, volume 3% up, but volume flat and sales 1.7% up, meaning that unit price impact is about 2%. I am a bit concerned that your unit price impact is getting weaker. Even if you are shipping, prices are up, but the impact seems to be weaker now. What do you think about this? This is my last question. [Foreign language] Thank you for your question. It seems that compared to the past, unit price impact seems to be weaker now. What do you think about that? Bjorn Ulgenes, please take this question.
Thank you, Ihara. Let me try to interpret your question.
Let me first reiterate that this is the sixth time we're taking price effectively, the seventh as of today, when the juice price goes into effect in the market. We always have to remember, when we take price in the market, there's always a price elasticity that comes with it. As you continue to take price, which is the right thing for the industry, it's the right thing for our business, you will have an impact of the price elasticity. They will not be linear forever. That is something we observe in Japan and something we observed also globally with a similar effect. We continue to be determined to take price. You saw our announcement for October because, again, we think it's the right thing to do for the industry and our business.
Price elasticity will be impacted over time as consumers and customers get impacted by the price increases. All of this is according to our plan. Thank you.
[Foreign language] Thank you very much for your question. That is all. Ihara, thank you. [Foreign language] We will move to the next question. I will unmute the next question. JP Morgan, Fujiwara-san. This is Fujiwara speaking. Good afternoon. I have two questions. First of all, this is similar to Ihara-san's question. Slide 8, please. On the right-hand side, you talk about the retail price, the store price. For the large size, for the small size, the retail price year- on- year, it is plus JPY 4 or JPY 5 only. Compared to the past, the shelf price increase is minimum. Therefore, is this due to competition? Is this your strategy, focusing on volume for the time being? I'm just wondering because the price raise is really small. The reason for that, I would like to know. Thank you.
Thank you, Fujiwara-san. Your question is about comparing to the past, the change or the increase on shelf price seems to be very minimum. You want to know about the background. This will be answered by Alex-san, please.
Thank you, Alex. Here, first of all, we're pleased to see the progress of price increases. We have implemented as per plan. We're seeing wholesale revenue per case increasing across channel in the double-digit yen. Evidently, the retail price is a prerogative of the customers. From the outset, we are seeing the prices expected to rise, obviously at a slower pace than the past, given the higher absolute price points that we're seeing in the market.
Particularly in large BT, the bottle, large BT has been revised several times, resulting in a year-on-year increase of JPY 5.5 per bottle. However, let's not lose sight of the accumulative increase of approximately JPY 25 over the last two years.
[Foreign language] Could you move to your next question?
Okay. We have done price revisions for a couple of times. You mentioned that this pace is becoming slower. Why is that? What is the background for the price being slowly implemented than before? Thank you very much for the additional question. It seems that the reflection of the price increase is slower. What is the reason? Alex-s an, please.
Again, I think we have continued the discipline of increasing our wholesale prices. In the end, the customers have a prerogative of what is a suggested retail price.
We're seeing, obviously, evolving consumer dynamics in the market. Having said that, we will keep on our discipline, a strong stance of leveraging on pricing to improve profitability for CCBJI into the long term.
[Foreign language] Okay. Thank you. My next question is page 15 about Q2, the initiatives you're planning for Q2. You talk about the rebates and that you're going to take strict control of the rebates, et cetera. It's what you have here. Compared to the first quarter and the second quarter on, I know that the price revision will be reflected in the price. Probably the margin of profit will be increased. Can we expect that? It's my question. Thank you for the question, Ihara-san. Q2 on, including rebates, are we going to control it more? Due to that, are we going to see more impact from the price revision?
Alex-s an, please.
Going into Q2, obviously, our strategy is to normalize rebates at an appropriate level. To give you more color onto what we're saying is we're implementing stricter controls on rebates, particularly with coffee, ahead of peak demand season. Evidently, we will continue to make appropriate market investments that lead into mid to long-term growth, taking into account the return of investment. This is just to say that we're taking multiple angles to improve profitability. Thank you.
[Foreign language] Thank you very much. Thank you, Ihara-san. Operator, please put through the next person. I will unmute the next person. Morita-san from Nomura Securities, please go ahead.
Hi, this is Morita speaking. I would like to ask about page 8 as well. On page 8, the small PT average price is positive, is like plus JPY 7.9 . In the past, I think it was somewhere around 10-ish.
From JPY 10 to this JPY 7.9 change suggests that your premium has somehow shrunk or something. If there is any background to this shrinkage, would you like to explain about it? Thank you.
Thank you, Morita-san, for your question. Your question is about the premium price of our products against the market average. It seems like it is getting smaller than before. Alex, would you like to take this question?
Thank you. Just to probably repeat myself, the price increases that we have been implementing are reflecting in, again, the wholesale price increase. It is rising as per plan, and we are happy with the progress. Just to, again, repeat myself, the prices are expected to rise probably at a slower pace. That does not mean that we are losing premium in the market. We are maintaining premium in the market as reflected also in the slide.
We will continue to do so into the future.
[Foreign language] Thank you. I have another question, the second question. I think this marks the seventh time that you are taking on the price, and you are going to take on the price once again in October. Probably in the soft drink market, we will see a change in channel mix and the products mix in the market. Through this price practice, what is your expectation on the shift in the channel and the market mix, the product mix? I believe that you have to also shift, look at those fixed costs. With this change in channel mix and the product mix, is there any strategy that you have behind to overcome this changing environment? Thank you, Morita-san.
I believe your question was, we would like to understand what is our strategy to overcome the change in the channel mix and the product mix in the market as we are taking on the price for so many times in the market? Alex, would you like to take this question, please?
First of all, just probably going back, we have said and we have been consistently driving price increase and leading the industry over the last three plus years. We have an unwavering focus that this is the right thing to shape healthier industry dynamics. Having said that, again, from a consumer behavior and consumer sentiment, we do not see at this point in time changes that materially will change our assumptions.
We see, and we have been flagging some defensive consumption behavior, particularly in some of the more specific categories where you have private brands such as water and the likes. We will evidently continue to monitor this very closely. I think it is all to say that, and if you look at the trends, we are seeing channels such as online and drug discounters growing faster than the vending channel. At the same time, we are driving wholesale revenue per case growth in high double-digit yen across channels. We will flex all the levers of our flexible revenue growth and margin expansion algorithm to manage proactively changes in mix and addressing and capturing growth of consumption and recruiting more consumers where they buy. This is just a summary of how we will be addressing and proactively helping shape as well consumer behavior. Thank you.
[Foreign language] Thank you very much. Thank you very much, Morita-san. Operator, please put through the next person. I'll unmute the next speaker. Next, we have Miyake-san from Morgan Stanley. Please go ahead with your question. Thank you. This is Miyake from Morgan Stanley. I have two questions. Firstly, the price revision of this time, I mean, October 25, unlike the past revisions, now the yen is slightly stronger. Compared to the over the past few years, from retailers, they may not be so willing to accept price revision or price increase considering the external factors. Retail costs are rising, and you are also facing a lot of cost hikes as well. When you have a price increase negotiation with retailers, compared with the past few years, their posture might have changed versus price revision.
Considering the current external or macroeconomic changes, I thought that retailers may be more resistant to the price revisions from the makers compared to the macroeconomics over the past few years. Kalin-san, could you please take this question?
Thank you so much, Miyake-san. Calin Dragan speaking here. I'm sorry to jump in quite in the middle of the discussion with my colleagues here regarding the pricing. I'm surprised, to be honest with you, to see that all the questions that came since the beginning of our discussion tonight, it were pricing-related. Although we were the company which we were very, very clear throughout the years that we are fully committed to price increases and to do that for the health of the industry.
It is the seventh time we are going to do it, the eighth time, whenever we consider it as necessary for the industry to happen to move on the right path. Meaning, I personally evaluate the status and the profitability of the industry overall. We discussed just a couple of meetings before the fact that for the first time after three decades, we are able to leverage all the three pistons of the engine which drives revenue, which is volume, mix, and pricing. Historically, for three decades, we relied purely on volume and mix to drive the revenue. We were able to break that equation and really leverage all the elements of it. I think this is, from my perspective, a very healthy environment.
In my opinion, everybody in the industry, other players, and as well the analysts in the industry, I would say, should probably direct the questions in a sense to drive value out of this initiative. Regarding the pricing, we are trying to lead the industry where we think that it should be, that it's still room, in my opinion, to put the prices up for various reasons. Consumers look like they are still willing to pay the current prices, which were increased seven times, because they see value in these products that we are offering. We were losing some volume, but we were able to increase significantly the revenue. We were seeing over time that after these price increases, even the volumes are recovering. That tells me that industry can still drive that. The second thing, everybody around us in the industry takes price increases.
I don't see why our retailers would be reluctant or not accepting price increases from beverage suppliers while they are accepting from everybody else. It should be an opportunity for that. The third element that I would put is, meaning, if we are so cautious about the effect of the prices, I don't understand how can we be so sure that all the rest of the factors are going to improve, like currency strengthening, like commodity price increases decreasing. I would characterize all the reality right now as being very volatile. Meaning, the currency can go up and down, can fluctuate. The commodity market, it is unpredictable. I don't see why this element of pricing can be questioned.
After all this long answer and elements that I tried to provide to you as reasons behind why we believe that pricing is important, of course over time, the elasticity and the effect of all this pricing is going to be stronger and stronger, no question about it. We are not ignoring that. This is why we are looking very carefully when we put the prices up, SKU by SKUs, and we try to extract value from our stronger brands, from our stronger position packages, from the channels where we are driving growth and industry. Of course, eventually, we are trying to leverage all the elements that are in our control. There are elements which are not in our control, and we need to do everything possible to mitigate for it.
I hope this will answer some of the questions raised by you, Miyake-san, but as well some of the answers that were asked, some of the questions that were asked before. If there are any other things that I can clarify, with pleasure. Thank you.
Thank you very much. From retailers, considering the current market and currency situations, I thought that you may face a risk of facing a strong resistance from the retailers when you propose the price revisions. According to Calin-san's comment, many makers are proposing the price increases, and those are accepted. Why not beverage makers? Is that correct?
Thank you so much, Calin. Back again. I said exactly that. Yep.
[Foreign language] Another question. Online channel. On the surface, compared with the rate of price increase, it seems that the online channel price increase seems to be moderate compared to other channels.
Online channel, when we consider the profitability on online channel, what do you think about the profitability of online channel? I know that you always say that BM is the most profitable, and supermarkets, convenience, and so forth. I would like to know how you position online channel when it comes to the channel profitability. Thank you very much, Miyake-san, for your additional question. The rate of increase of wholesale price per case, also revenue per case, seems to be more moderate compared to that of other channels. What do you think about it?
Online has been a growth engine for us over the last plus more than five years. In reality, online channel has, obviously, on the back of COVID, experienced a significant surge. Nevertheless, prior to post-COVID, it has continued to drive it.
In reality, online covers a very specific shopper segment, and it's critical in driving household penetration for our portfolio brand. We are, I think, greatly positioned to continue to capture profitable growth. We are driving a very segmented strategy regarding our labeled packs, for instance, in single serve. We are doing so, collaborating very strongly with key players. We are confident on the potential outlook of driving the expandability of the category in household penetration of the portfolio brands. We will continue to drive growth where we see it's in line with our profitability-focused commercial strategy.
Thank you very much. The online channel, when you look at across channels, then you think that the online channel can generate the profits that are at least in line with your plan or even more than your plan. Miyake-san, could you please repeat your question?
Thinking about, I'm not sure whether BI is the right term to evaluate, but when we think about the characteristics of online channel compared to the company-wide profitability, do you think that the online channel is at least as profitable as a company average or even more? You would like to know the profitability of online channel compared to other channels or at the company level. Bjorn-san, please take this question.
Thank you, Miyake-san. As you can assume, we cannot go, excuse me, extremely specific on channel profitability, but I'll give you some pointers. First and foremost, it's important to focus on what's the growth opportunity by channel. Very rightly, you called out earlier, online is a key growth channel for us, albeit still relatively small in Japan.
The first line of profit that you can compare between the channels is what we call gross margin, so revenue minus the cost of goods. In this case, already at that level, online is accretive to our overall profitability. That is key. You also then have to look at further down in the P&L, you have different cost levels between the channels, vending, of course, being the most cost and capital-heavy, and online all the way to the other end because there is less cost involved in getting the product through the channel. In the end, when we make the channel plans, we look at the revenue potential, we look at the pricing potential, and we look at how to manage the costs. In this case, online is very much on track to deliver for the full year, which, of course, we are very pleased with. Thank you.
Thank you very much. [Foreign language] Thank you. We are approaching our ending time, but we still have requests for questions, and we would like to continue to take questions. Operator, next question, please. It will be great if you can limit yourself to one question, please. We will unmute the next question. Mizuho Securities, Sakai-san. Go ahead. Hello. One question. This is about coffee price increase. You have announced that JPY 30 for PET, PET tea, and bottle can, and also JPY 20 for the SOT can. I want to ask about risk and opportunities. The volume, I think, is going down. In last October, the volume has gone down already. What is going to be the risk related to this price increase that you are going to execute? In reverse, I want to know about the opportunities.
The PB impact might be limited for this category. Also, the in-house usage or the corporate usage, like for the Horeca, like restaurants, etc., it seems that they are raising their price as well. Would that be an opportunity overall? Also, globally, I see that the global market for coffee is growing as well. Do you have buying power versus your competitors because you have a global operation? Will that be a benefit for you compared with competitors in the midterm, long term, maybe? I want to ask about the risk and opportunities around the coffee category. Thank you very much for your question. You are asking about the price increase for the coffee and what will be the risk and opportunities related to the coffee category. Alex-san, please.
Thank you, Alex here.
Just probably taking a step back on coffee, particularly since the renewal of the last couple of years, what we have seen, particularly with Georgia, strengthened consumer base and expanded your weekly plus consumer, which is a very positive indicator that we gauge how are we progressing in the market. Now, having said that, relative to the price increase, again, the external factors, particularly pertaining to commodities, is not only an effect on Coca-Cola Bottlers Japan Holdings or the Coca-Cola system, but rather in industry. What we're seeing is other players and manufacturers already reflecting price increases on coffee. This is, again, that from a total category is impacted, and the benefit, evidently, of increasing the prices will be eventually upset. Yes, a near-term impact on volumes, as naturally expected. Nevertheless, over the long run, given the profile of the category, it's a very different dynamic.
Yes, we see opportunities in making sure that we're driving this price increase that, again, is impacting the overall industry overall.
Maybe, Sakai-san, if I, Bjorn, if I can add a little bit to your risk and opportunity question. I just wanted again to remind everybody that we, as Coca-Cola Bottlers Japan, we are part of a global buying consortium. All the commodities that go into our products, be it coffee beans, plastic, aluminum, etc., we buy at the global scale. That gives, naturally, great pricing for it. When it comes to coffee specifically, yes, the coffee bean price has gone up significantly. However, with our pricing arrangements with the Coca-Cola company, this is already included in our base. We will not be directly hit by this. That is important when you evaluate the impacts of the price increases between the different players in the industry.
Overall, we believe pricing is the right thing to do. We took price on coffee and all the other categories, and we believe this will help the industry overall. Hope that answers your question. Thank you.
Thank you very much. In the third quarter, the coffee has dropped a bit. You mentioned that due to the price increase, the volume has dropped a bit already. Would this be a risk in the future? Thank you very much for the additional question. In Q1, Q3, the volume has dropped. Is that risk going to appear again? Alex-san, please.
Essentially, the price increase, always there is a risk of how that impacts the volume.
Yes, while we assume the fact that there is or might be a risk on volumes, we are also at the same time increasing our wholesale revenue because significantly offsetting and improving our margin. Yes, we will manage in a very proactive way to minimize the impact of our price revisions by working with our total portfolio, particularly with coffee, and managing the whole levers of our revenue growth and margin expansion, particularly on the coffee category.
Thank you very much. Thank you very much for your question. The next question will be the last question. Operator, please put through the next question. I will unmute the next person. Furuta-san from SMBC Nikko Securities. Please go ahead. Hi, this is Furuta from SMBC Nikko Securities. Nice meeting you. I would like to ask about the volume. In April, you see the volume going down by 2%.
I believe that the market itself is down and stuff. How about the trend from Q2 onwards? You will have an even more challenging environment. Do you have any plan? If you have any explanation about drops in volume so far and expectation in Q2, I would like you to elaborate. Thank you very much. The volume in April was - 2%. You believe that the market will be even harsher in Q2 onwards. You would like to understand the trend in general in the market for the volume. Alex, would you like to take it?
Volume outlook does not change from what we have flagged at the beginning of the year on the guidance. We are still looking for a flat volume or growth into the full year. We are taking various initiatives to minimize the volume impact.
That essentially is our plan going into the full year.
Thank you very much. How about tea? I believe that you will have a very tough situation in tea segments. What's your thought in the tea segments and tea products? Thank you for a follow-up question. Your question is about our strategy and the plan for the tea category. Alex, would you like to continue answering this question, please?
Thank you, Alex here. Again, with Ayataka and tea, we are very pleased that we have seen, since the renewal, after seven years, sustained volume growth and value share expanded quarter on quarter since the relaunch, again, expanding our consumer base. Up until now, as we begin to cycle, we're still positive on the performance of Ayataka despite the very intense competitive environment.
We're seeing good momentum, and we have various initiatives in the pipeline for tea portfolio, and particularly Ayataka, to continue to build relevance anchored on key occasions and to drive consumer base that is all for it. Thank you.
Thank you very much. Thank you very much for your question. I believe we've run over the designated time, so I would like to close the Q&A session now. All the material for this conference call will be uploaded to our website. If you have any questions or feedback, please get in touch with the IR team. Thank you very much for your participation today.