Good evening. This is Gomi, Head of Investor Relations at Coca-Cola Bottlers Japan Holdings. Thank you for joining our Third Quarter 2026 Earnings Presentation for analysts and investors. Today, we are joined by President Calin Dragan and Vice President and CFO Bjorn Ulgenes. Also with us are Vice President of the Food Service Company, and Chief Business Strategy Officer, Maki Kado; Executive Officer and the President of the Retail Company, Alex Gonzalez; and Executive Officer, Chief Supply Chain Officer, and Chief Sustainability Officer, Andrew Ferrett. Following the prepared remarks, we will be happy to take your questions. Simultaneous interpretation in Japanese and English is available for both today's presentation and the Q&A. Before we begin, please note that today's presentation contains forward-looking statements and should be considered together with cautionary statements in our presentation materials. With that, I'd like to turn the call over to Calin Dragan. Calin-san, please.
Good evening, everyone. This is Calin Dragan. Thank you for joining us today for our earnings call. Let me begin by sharing the highlights of today's presentation. Please turn to slide three. For the third quarter year-to-date, business income achieved an increase of JPY 7.9 billion year-over-year. This summer, during the peak demand season, the entire beverage industry was hit by record-breaking adverse weather. The situation in the Middle East increased cost pressures across the industry. Together, these factors created an extremely challenging business environment for our company. Even under these conditions, we maintain an upward trend in business income through our relentless focus on profitability. We are very pleased with our results. Sales volume continued to outperform the market, and our value share grew. This showed that our competitiveness is steadily improving. Key initiatives to strengthen our future earnings base are also on track.
We implemented our September price revision ahead of the industry as planned with strong will, despite the challenging conditions. Our transformation efforts to build the growth foundations are also progressing smoothly. We are also making solid progress on shareholders' returns. In addition to the previously announced enhancement to the shareholder returns measures, we have decided to cancel seven million shares of treasury stocks, equivalent to 4.1% of total shares issued. In the fourth quarter, we intend to build on this momentum and aim to increase business income. While we continue to forecast cost increases due to the situation in the Middle East, we expect those to remain within the projected range. We are working together company-wide to achieve our full-year business income target of JPY 35 billion.
Furthermore, we will focus on strengthening our profit foundation and investing in growth, both of which are critical to achieve our goals of our Vision 2030. Now, our CFO, Bjorn Ulgenes, will provide a detailed explanation of our financial results.
Thank you, Calin. Good evening, everyone. This is Bjorn. Slide five shows the year-to-date third quarter profit and loss. By rigorously focusing our business activities on profitability, we were able to achieve an increase in business income. Revenue declined by 1.4% year-over-year. Record-breaking adverse weather during the summer led to lower sales volumes and an unfavorable channel mix. Positive impact of price revisions continued to improve wholesale revenue per case. Although sales volume declined year-over-year, we outperformed the market by leveraging the solid growth foundation we have built to date and implemented effective marketing activities. Gross profits was impacted by rising costs due to commodities, including the situation in the Middle East. However, improvements in wholesale revenue per case resulting from price revisions helped support gross profits, limiting the year-over-year decline to 0.8%. Business income increased by JPY 7.9 billion year-over-year.
This was driven by a series of price revisions, transformation benefits, and agile company-wide cost savings. These gains more than offset the impact of lower sales volumes and higher costs related to the situation in the Middle East. We are on track to meet our full-year business income targets. I will explain the factors behind the change in business income later. Operating income improved significantly, rising by JPY 103.8 billion year-over-year, driven by an increase in business income and the absence of JPY 88.4 billion impairment loss recorded in the vending business in the second quarter of the previous year. In addition, net income rose by JPY 68.4 billion year-over-year to JPY 19.6 billion, driven by the increase in operating income. Slide six shows our financial results by segment. First, the vending business. Sales volume declined due to factors including price revisions and adverse weather.
Wholesale revenue per case continued to improve, but revenue decreased. On the other hand, segment profit increased by JPY 6.5 billion year-over-year to JPY 14.8 billion. This includes the positive impact of reduced depreciation expenses following the impairment loss in the vending business in the previous year. Transformation initiatives also played a significant role by improving profitability and route productivity, enabling us to achieve organic profit growth. In the OTC business, volume declined, but revenue remained flat year-over-year, supported by the price revision. Segment profit increased by 9.4% year-over-year, primarily due to the flexible reduction of marketing expenses in response to adverse weather conditions. In food service, both volume and revenue grew year-over-year, driven by the expansion of our product lineup to meet customer needs and the success of our efforts to secure new business.
Revenue grew by a robust 9.3% year-over-year. We are also steadily implementing investments aimed at growth over the medium to long term and are achieving business growth in line with our plans. Please turn to slide seven for the factors behind the change in business income. In addition to price revisions and transformation benefits, agile cost savings efforts across the entire company contributed to a year-over-year increase in business income of JPY 7.9 billion. Starting from the left, we can see the impact of volume, price, and mix. Together, these factors reflect changes in marginal profits from our commercial activities and resulted in a negative JPY 0.5 billion impact. Major contributing factors include the unit price impact, which posted a positive JPY 12.1 billion, largely due to improvements in wholesale revenue per case resulting from the series of price revisions.
On the other hand, the volume impact was negative JPY 6.6 billion, reflecting a decline in volume due to the inclement weather and worsening channel mix, while the others category, including alcohol, had a negative impact of JPY 6 billion. Transformation benefits totaled JPY 4.1 billion, in line with our plan. Especially in commercial area in particular, we are seeing improved profitability from the transformation of our vending business. We are also achieving cost savings in the supply chain and back office areas. Marketing expenses decreased by JPY 1.7 billion compared to the previous year. This reflected our agile decision to scale back marketing investments when their expected return on investment declined because of the adverse weather in the third quarter. We continue to make investments that will lead to profit growth from a medium to long-term perspective. Manufacturing costs decreased by JPY 0.1 billion from the previous year.
Although equipment utilization rates declined due to lower production volumes, cost-saving initiatives on the production floor continued to contribute positively. Other costs decreased by JPY 4.4 billion. This was driven by company-wide cost-saving measures implemented in response to the business environment, including adverse weather conditions and cost increases resulting from the conflict started in the Middle East. Note that these figures include the positive impact of this year's depreciation expense from the previous year impairment loss of the vending business. This effect has already run its course in the first half of this year. For commodity and utility costs, including the impact from the conflict started in the Middle East, became apparent in the third quarter resulting in a total cost increase of JPY 1.9 billion.
Although our hedging strategy kept the impact from the Middle East within the anticipated range, market conditions and foreign exchange rate fluctuations contributed to a cost increase of JPY 2.4 billion, while energy costs decreased by JPY 0.5 billion. In the third quarter, we adjusted our capital allocation in response to market conditions, and as a result, CapEx decreased compared to the previous year. Next year, we plan to appropriately strengthen our capital allocation while carefully assessing market conditions and growth opportunities. Starting with the next slide, Alex will give an overview of our commercial activities. Alex?
Good evening, everyone. This is Alex. Slide eight shows sales volume by channel and category. Although year-to-date sales volume through the third quarter fell by 1% due to record-breaking adverse weather, we continue to outperform the market, supported by the solid growth foundation we have built. Also, revenue per case increased year-over-year in nearly all channels, driven by a series of price revisions. Vending volume fell 4% year-over-year. Campaigns marking the 10th anniversary of the Coke ON app and other initiatives supported sales, but the results were affected by the poor weather during the peak season. Supermarket volume declined due to adverse weather conditions and price revisions, leading to lower sales of water and sports. At drugstores and discounters, marketing activities tailored to consumer needs helped drive growth in sparkling, resulting in volume flat from the previous year.
At convenience stores, in addition to implementing price revisions, we appropriately controlled rebates and promotional activities, particularly for coffee. While sales volume declined, wholesale revenue per case improved significantly, and profitability is steadily improving. In the online channel, wholesale revenue per case was affected by increasing large PET water. However, strong subscription sales and other factors drove a 5% increase in volume, maintaining robust growth. In Food Service, efforts to secure new accounts and increase sales with existing customers contributed to a 7% increase in volume. By category, sparkling saw a 3% increase in volume, driven by campaigns and in-store promotions that emphasize drinking occasions, particularly for Coca-Cola. In the tea category, strong growth in Yakan no Mugicha and Kochakaden offset the decline in green tea volume following price revisions, resulting in a 2% increase for the category as a whole.
For sports, water, and coffee, volume declined due to adverse weather and price revisions. Slide nine shows the status of market share and OTC retail pricing. The total channel value share increased by 0.7 percentage points from the previous year. While record-breaking adverse weather affected the beverage industry as a whole, we steadily increased our market share. In particular, our decision to implement price revisions in September ahead of the industry had a temporary impact in our market share. Nevertheless, our sales volume continued to outperform the market throughout the year, driving growth in our value share. In vending, growth in volume share drove an increase in value share. In addition to having built a strong consumer base, we have successfully optimized our product assortment to focus on profitability using an AI-powered assortment system and implemented promotions through Coke ON.
As a result, we have achieved sustained growth in value share even as an overall volume in the vending channel has stagnated. In the OTC channel, although the price revisions in March and September had an impact in market share, we were able to maintain both volume and value share at levels roughly equal to the previous year, while improving profitability by thoroughly implementing commercial activities designed to strengthen our competitiveness in each channel. OTC retail prices of our products continue to command the premium over the industry average. As a result of a series of price revisions, OTC retail prices for both small and large PET exceeded the previous year's level, despite being affected by channel and category mix. In September, when the price revisions were implemented, they were steadily reflected in OTC retail prices.
Prices for both small and large PET rose by approximately JPY 4-JP Y 5 across all categories, excluding water and sports, which were not included in the revisions. Slide 10 covers quarter three topics. Our ability to achieve profit growth even amid adverse weather conditions was due to the contribution of our profit-focused commercial activities. Supported by the solid growth foundation we have built to date, our sales volume continued to outperform the market. Our core products, led by Coca-Cola, are one of the foundations of our growth. Marketing activities focused on drinking occasions have strengthened our competitiveness. In Food Service, in addition to our focused efforts on acquiring new customers, our strong presence in indoor facilities such as shopping malls and movie theaters contributed to our ability to achieve volume growth even during periods of inclement weather.
In the online channel, we continue to expand our product lineup, including label-less products. We also work to acquire more subscription users. These initiatives helped us capture at-home demand and maintain steady volume growth. In the vending channel, proactive measures to boost traffic led to strong market share growth. This included campaigns marking the 10-year anniversary of Coke ON and our collaboration with the popular Pokémon GO smartphone game. We are achieving business growth supported by our customers and our partners. In customer satisfaction survey conducted by Advantage, we have been recognized as the highest-rated partner for three consecutive years among local and global companies in the consumer goods and domestic beverage industries. We are confident that this solid growth foundation and these strong partnerships are the source of our competitive advantage. We have also steadily and flexibly implemented initiatives to improve profitability.
Key measures, including price revision, are progressing as planned. In September, we implemented price revision for products in major categories ahead of the industry. In addition to maintaining and improving shipment prices following the price revisions, we are also working to optimize rebates and other measures, thereby steadily improving profitability. Another factor contributing to our continued profit growth was our strategic execution of marketing investments tailored to the business environment. This year, we managed our marketing investments in line with market conditions. Slide 11. In addition, our efforts to strengthen our business foundation to achieve Vision 2030 have been progressing smoothly. First, in our vending business, we are working to optimize our product assortment based on profitability using AI and data-driven assortment system, and we have already seen improvements in profitability, such as increased route productivity.
We have implemented this AI assortment system in more than 300,000 of our vending machines, approximately half of our total. We will continue to expand the system to more machines to further improve profitability. It has been about a year since we launched this initiative, and we have accumulated a variety of data and gained many insights. We are leveraging this to upgrade the system and further improve the accuracy of our efforts. For Monster Energy, a product with high unit price, we began rolling it out early to ensure it was available during the peak demand period, and it has already contributed to an improvement in the product mix and an increase in gross profit.
In addition, to ensure the placement of new vending machines that will drive profit growth, we are working to efficiently and effectively secure high-potential prime locations using our proprietary targeting tool, which combines big data and technology. Through these data-driven initiatives, we continue to optimize the profitability of our entire vending machine portfolio. Next, let us turn to how we are strengthening our manufacturing and logistics system to support profit growth. Two Integrated Distribution Centers scheduled to open this year have begun operating in phases. We are also reorganizing our logistics network, gradually consolidating product inventory and logistics facilities. We are also working to optimize cost to serve by leveraging our direct-to-consumer model in collaboration with our customers. Alongside promoting a local production for local consumption model, we are reducing transportation distances and the number of touches, which helps achieve logistics cost savings.
In the manufacturing area, we are also preparing to launch a new aseptic production line at our Saitama Plant. By strengthening our manufacturing capacity for aseptic products in the Kanto region, our largest market, we will further promote a local production for local consumption model and maximize use of the adjacent Saitama mega IDC. Starting with the next slide, Maki will explain our marketing activities. Maki, please go ahead.
Good evening. This is Kado. Slide 13 provides a review of our marketing activities for the third quarter. To further strengthen our core category, we worked to boost sales of Coca-Cola by launching the Coca-Cola Summer Campaign and running promotions where consumers could win limited edition Coca-Cola summer goods. Additionally, starting in September, we launched a new Coca-Cola Zero campaign featuring BTS's V, focusing on driving trial of the Coca-Cola Zero series. As part of our new product lineup, we launched Georgia Café Water in September, a coffee-flavored beverage that does not contain coffee beans as a new value proposition. Additionally, with the aim of attracting new consumers and creating new drinking occasions that cater to diverse lifestyles, we are offering a 400 milliliter PET bottle of I LOHAS Tennensui with a labelless design exclusively through online channels.
As part of our experiential marketing efforts, we launched a new Coca-Cola Foodmarks initiative in Shibuya in August to deliver experiential value to the Food Service market. By evolving and strengthening this initiative, we aim to provide greater experiential value to the Food Service market. Next, slide 14. In the fourth quarter, we will carry out marketing activities with an even greater focus on our core categories. In October, Coca-Cola launched a winter campaign aimed at boosting brand engagement, including promotion offering a chance to win Christmas gifts and the release of winter-themed bottles featuring iconic designs such as Santa Claus. In addition, starting in November, we will launch a Premier League campaign for Coca-Cola. We have entered into a global partnership with the Premier League, England's top professional soccer league, and will run a promotion offering the chance to win limited edition cans and merchandise to boost sales.
In the coffee category, Georgia is running a cross-channel promotion campaign in collaboration with the popular anime series "JoJo's Bizarre Adventure." We are conducting several large-scale promotions with the goal of maximizing Georgia sales during the fall and winter seasons. In addition, within the tea category, we will launch a large-scale Shokutaku Jumbo promotion spanning our five tea brands. This initiative will drive consumer purchases and accelerate sales growth across the entire category. Slide 16 outlines our outlook. By continuing to rigorously focus on profit-driven activities, we aim to achieve an increase in business income in the fourth quarter as well, with a goal of reaching our full-year business income target of JPY 35 billion.
Regarding key initiatives such as price revisions and transformation, we will continue to capture their benefits in the fourth quarter while further strengthening our efforts to lay a solid foundation for profit growth starting in 2027 and beyond. In terms of the top line, we will continue the positive momentum we have seen so far. Our sales volume continues to outperform the market, and we will leverage this solid growth foundation starting in the fourth quarter and beyond. Although October was impacted by a decline in volume due to price revisions, sales volume is expected to decline by only a low single-digit percentage compared to the previous year. Meanwhile, wholesale revenue per case continues to improve as a result of these price revisions. Regarding the impact of the conflict started in the Middle East, there have been no change to what we have previously communicated.
The impact on our full-year earnings forecasted is expected to be limited to an increase in cost of approximately JPY 2 billion-JPY 4 billion, thanks in part to our hedging strategy. We expect to absorb this additional cost impact through our key initiatives, as well as company-wide cost reductions. We are steadily fulfilling our commitments regarding shareholder returns. The JPY 30 billion share buyback program we have been implementing since last November was completed as planned. Furthermore, we have decided to cancel seven million shares, equivalent to 4.1% of total shares issued. This year, we have already announced a 20% year-over-year increase in our annual dividend and a JPY 40 billion share buyback program, and we will continue to move forward toward furthering enhancing shareholder value. Finally, let me summarize today's presentation. Please turn to slide 17.
Against the headwinds facing the entire beverage industry, including record-breaking adverse weather and the impact of the conflict started in the Middle East, our company achieved an increase in business income in the third quarter as well, resulting in year-to-date business income growth of JPY 7.9 billion. We believe this significant achievement was driven by our thorough focus on profitability across all departments, including the profit contributions from this year's key initiatives and agile cost savings. In addition, we see positive signs on the top line that supports future profit growth. Although we were impacted by a short-term market contraction, our targeted growth strategies in each channel strengthen our competitiveness, particularly for our core brands. Our sales volume also continued to outperform the market throughout the year. Our value share also increased. Price revisions and transformation initiatives are proceeding as planned, enabling us to further strengthen our earnings base.
We are confident that the foundation we have built to date will serve as a driver of our mid-to-long-term profitability improvement. In the fourth quarter, we anticipate higher costs due to the conflict started in the Middle East, but the impact is expected to remain within the projected range. We will continue to build on the upward trend in business income with the goal of achieving our full-year business income target of JPY 35 billion. This year marks the crucial first year of our Vision 2030. In this pivotal year, based on our strong commitment to achieving Vision 2030, we aim to achieve both improved business performance and enhanced shareholder returns, building good momentum toward further increasing shareholder value. That concludes today's presentation. Thank you for your attention. Now, we will move on to the Q&A session. Gomi-san, please take it from here.
Thank you, Kado-san. This Q&A session is intended for analysts and investors. Members of the media are kindly asked to refrain from asking questions at this time, as a separate session will be held later today. Due to interpretation lag, we request that you ask only one question at a time. We will now begin the Q&A session. Operator, please proceed.
If you would like to raise a question, please press hash seven. If you press again hash seven, you are going to cancel your question from the queue, so please be careful. Also, during the Q&A session, you can press hash seven anytime to raise your question. If you would like to raise a question, please press hash seven and wait for a second. We already have someone in the queue, so let us begin the Q&A. I am going to call the name of the person with the question. When you ask a question, please tell your company name and your name before asking a question. Now, I would like to unmute the first person with a question. UBS Securities, Ihara-san. Ihara-san, please go ahead.
UBS Securities, Ihara speaking. Thank you very much. Thank you for joining. I have two questions. The first question is about cost reduction. This time, you had a high-level profit commitment, so you significantly reduced cost. What kind of cost reduction have you done? Also, with this cost reduction for 2027 and onward, will your cost reduction lead to the benefit for 2027? I would like to know the details about your cost reduction.
Ihara-san, thank you very much. Regarding the first question, it is about the cost reduction and the contents and whether it will lead to the future status. Bjorn will answer. Thank you.
Thank you, Ihara-san. Bjorn. Yes, absolutely correct. We took significant cost measures in Q3, and you can see from the financial statements overall, the SG&A were down close to JPY 10 billion. There is basically two or three elements to that. First, we optimized marketing investments. You heard Alex talk about that later, how we adapted a lot of the market-facing investments given the situation we were faced because of the weather in Q3. Secondly, our transformation efforts continued full force across the business, as you have gotten used to seeing from us in the past. Thirdly, we took also more tactical cost interventions in the third quarter, again, with the purpose of delivering our full-year financial commitment. When it comes to next year, we prefer to talk about the details and the drivers of that when we get there.
But again, from a marketing standpoint and a capital standpoint, we will be investing where the opportunities and the growth is for next year, as we have in the past also. Hope that answers your question. Thank you.
Okay. I understand. Thank you. Basically, the cost reductions through transformation will be continued. However, regarding the optimization of market investment and in consideration about whether you control the cost, for 2027, in order to grow the volume, your cost saving will be invested in the future in 2027 and onward. Is it correct?
To summarize, Ihara-san, yes, we will continue to invest where the commercial opportunities are, both from a marketing standpoint and also from a capital standpoint. Yes, agreed.
Thank you. Thank you very much. Let me go to the second question. Connecting to the previous question, your perspective of the profit growth in 2027. In the guideline, JPY 45 billion- JPY 50 billion BI is the target of 2027. So at least nearly JPY 10 billion profit should be grown. Of course, you cannot discuss the details, but in what way you are going to significantly increase the BI? If possible, I'd like to know the outlook for the profitability increase in 2027, including the profit increase and decrease.
Ihara-san, thank you very much for the question. The view regarding the 2027 profit, Bjorn-san will answer the question.
Let me first state very clearly, Ihara-san, that we, as management of the company, we remain very committed to delivering our Vision 2030 financial targets and performance targets. When it comes to 2027 specifically, as I said to your prior question, we prefer to discuss the details, as you also mentioned, and all the drivers when we get to the February announcement for the target. I think it is fair to say, given the external circumstances we are facing, it is fair to believe we will probably target towards the lower end of the range we gave for this year. Seems like we are in sync with what you are stating, if I got the translation.
Range means JPY 45 billion- JPY 50 billion. Are you going to target JPY 45 billion?
Yes, that is correct, Ihara-san.
Okay, thank you. Also, regarding the factors behind the up and down of the profit, based on the Vision 2030, the year 2027, what characterizes the 2027 for you? Is it a phase to harvesting a profit, or in order to jump up toward the 2030, is it a period of investment? I would like to know your view. That is all from my question.
Thank you for the additional question. In line with the Vision 2030, what characterizes the year 2027? Bjorn-san will answer the question.
Good morning again, Ihara-san. When it comes to 2027, the backbone of the plan, which is very consistent again with the Vision 2030 activities and the drivers, is strong commercial growth. That is the key for everything we are doing. Supported that, as you have seen multiple times earlier, we have been discussing the key drivers of the commercial growth. It is driving pricing where required. It is executing in the market, in the key channels, and therefore the three business units we have, and it is continuing definitely to invest in the future opportunities we see in the Japanese market. The second part, as we alluded to in the prior question, we are continuing the transformation full force. We are transforming our commercial operations, as you heard Alex talk about earlier.
Deep into the vending, transformation is going very well, taking out cost and optimizing capital while using technology again to enhance sales. In supply chain, great technology going into production now, again, helping us to optimize logistics cost and drive that. For the back office, we are planting the seeds now for, again, optimizing all our back office processes going into next year. We will invest in capital, commercial capital again, to drive that growth inevitably, as we have been holding back capital now during the Q3 and probably also into Q4. We will be investing again in the markets going into 2027. Exciting times ahead. Thank you.
Thank you very much. It is clear. Thank you.
Ihara-san, thank you for your question. Operator, could you go to the next question?
Okay. I will unmute the next person. Furuta-san from SMBC Securities, please go ahead.
Hello. Furuta speaking from SMBC. I have two questions. First question is about the cost reduction initiatives. For that, there is a market investment optimization and also cost reduction. I would like to further ask question, what kind of specific measures are you doing, and why are you able to do this, and where are the rooms to do further cost reduction? Could you please elaborate on this?
Furuta-san, thank you very much for your question. For the cost reduction, and also the optimization of the market investments, Bjorn will take this question.
Thank you, Furuta-san. I will probably have to repeat a little bit what I said to Ihara-san's questions, but again, try to think about the cost measures we have done for this year in two to three buckets, as I said. One is the marketing investments, as Alex described in the prepared remarks. We have optimized, again, with a purpose of return on investments adjusted to the external market conditions, basically bad weather, as we also said in the prepared remarks. Secondly, as I also said, our transformations are continuing full force in all parts of our business, yielding significant benefits for us, which will translate into savings and better investment abilities in the future.
And three, we have the, what I call the more tactical Q3 cost reduction measures, where we optimize, again, across the board in the company with the purpose of delivering what we have promised on the profitability. On top of that, as I also alluded to earlier, we have held back some on the capital part, again, with the purpose of delivering on the cash and the profit targets we have set. Hopefully, that answers your question.
Thank you very much. The last one that you mentioned, the company-wide cost reduction initiative, and also capital, sustainable capital allocation, and what kind of specific items are you doing? Could you please elaborate more details? Thank you very much for additional questions. For the company side cost reductions or the capital allocation, what exactly do those entail?
Bjorn will answer this question.
Furuta-san, I hope you appreciate that I prefer not to give too many details of where we're taking out the costs for competitive reasons, but think of it as all conditional spending we do as a company. Start with the DME, as Alex said earlier, promotion spend, activity spends is very much up to us to gear up and down in the market, again, depending on the market conditions. When it comes to the tactical cost savings, holding back on spending where we can, again, where we control, is really important. When it comes to transformations and the marketing spend, it's also important to understand that holding back now enables us to keep the powder dry, as they say in English, to again celebrate for next year, where we have the 70-year anniversary for the Coca-Cola System in Japan. That's a big celebration for us.
On top of that, we also have the 10-year anniversary for our company, CCBJH, next year. All of that, again, will be appropriately funded through savings, through pricing, all the other commercial activities we are doing in the plans for next year. Hopefully that gave you a little bit of detail into what we're working on. Thank you.
Thank you very much. The second question. In the September price revision, there's as the price hike range is that expected as you, and what is the view on your market situation for price revision? Thank you.
Thank you for your question. For the September price revision, Alex will answer this question.
Furuta-san, Alex here. As we have, time and time again, he said, one of the key initiatives to leverage up this pricing to drive our profitability growth. In September, we executed now a wave 10 price increase ahead of and leading the industry, and we executed as planned with the regard this as before. It is progressing as planned. What we are seeing is the wholesale revenue per case is starting to materialize, and we will obviously observe and monitor the situation from a competitive standpoint, and we will continue to monitor. In the end, pricing is one of the factors, as well as our whole pack price architecture, which we will be leveraging on going forward to ensure that we are capturing the demand in the market.
Thank you very much. Thank you. Thank you for your question. Operator, please move on to the next question.
We will unmute the next person. This is Igarashi-san from Daiwa Securities.
Yes, thank you very much. I am Igarashi from Daiwa Securities. I have two questions as well. My first question, slide 11, actually, and looking at the right-hand side. This is the manufacturing, the logistics structure that is supporting profitability, like IDC, the Saitama Plant, the aseptic line. These are the new things that you are mentioning here. For the next term, the transformation impact is, where is it going to come from mainly, is my question, out of those pillars? Here, I know that you are doing various measures, but what is going to be the largest measure for the next fiscal year? Other than this, what are some other new initiatives that you are going to do in addition to these initiatives that you have mentioned here?
Well, thank you, Igarashi-san, for the question. You are talking about the supply chain information on page 11. This is about the IDC, the impact from the new plans, and other transformation in this area. I would like Andrew-san to answer this question, and if there is any additional points, Bjorn-san will follow up.
Good evening. This is Andrew. Igarashi-san, thanks for asking the question regarding the supply chain productivity opportunities. As you correctly say, we continue to optimize our network, which is to drive productivity and cost savings. We have accelerated our cross-enterprise efforts to improve and take cost out of our cost to serve, which will come into full effect in 2027. Furthermore, we are investing in a variety of technologies or digital technologies to enhance our planning and operations capability, which started to take effect in 2026, but will continue to roll out in 2027. We believe those initiatives will help us significantly to continue to extract productivity across the supply chain.
Maybe to build a little bit, Igarashi-san, on this. Part of your question was, when will the benefits of this materialize? As Andrew also alluded to, a lot of it is already happening, and we're building the foundations now for even further transformation savings inside supply chain going forward. Because remember back to what we have communicated many times, and also in our Vision 2030, we are investing in the IDCs, which are the physical locations where we will hold inventory for sales activities. On top of that, we are also investing in digital tools to, again, optimize the whole network for our business.
All of these things will be happening over the five-year plan period, as we had said earlier, but many of them are already happening today. For instance, the touches are significantly going down, again, giving immediate cost savings for us as a business. Hope that gave you a little more flavor. Thank you.
Thank you very much. On the right-hand side, the second bullet point here, collaboration with the customer, and you're going to reduce the cost to serve. I'm just wondering what this means, because I don't have a good understanding about what you mean here. Can you kind of explain this point?
Well, thank you very much for your question. Andrew-san will answer this question.
It's Andrew again. We work closely in collaboration with the commercial teams at a customer level to look at how do we, as we say, optimize the cost to serve through increasing drop size, reducing the frequency of delivery as appropriate, but at the same time, looking to how do we continue to add value for the customer and make doing business with us more convenient and easier.
Igarashi-san, Alex here, if I may add. I alluded in the prepared remarks about Advantage Survey, which is a syndicated survey to assess our level of preference of doing business with the customers. We rated, third year in a row, number one across beverage manufacturers. This is a result of our collaboration with customers is going beyond the typical product negotiation and the space to sell into broader holistic enterprise. That's the way we're working in synchrony with Andrew's team to bring whole enterprise solutions of how we actually help customers address pain points, such as inventories.
Lowering inventory with customers is one of the examples of how we're collaborating with them to reduce carrying costs for them, improving forecast accuracy, reducing time, travel, touches. Those are the initiatives that we're working very actively and taking control and extending that work with customers. I hope that gives you some color on what's happening.
Thank you very much for the thorough explanation. My second question is about the Middle East cost. This term, you mentioned that it's going to be within your forecast, but what's going to happen the next term? Due to the September price revision, were you able to offset the Middle East impact or not this year? Those are my questions.
Thank you very much. The Middle East impact to our cost. This will be answered by Bjorn-san.
Igarashi-san. As we said at the beginning of the turmoil in the Middle East, we estimate the impact for this year to be in the range of JPY 2 billion-JPY 4 billion, and we are very much still inside that range, probably towards the higher end of it. But as you see in our year-to-date and also in our full-year commitment for this year, we are managing that through, again, pricing, you heard Alex talk about earlier, and also all the different cost initiatives we are doing inside the SG&A area. With all of that, we are able to offset that increase for this year.
A lot of that, of course, comes through, again, good hedging programs that allows us to mitigate the impact of it as much as possible. For next year, as I said earlier to Ihara-san and Furuta-san, I would prefer to discuss all of these details and drivers when we get to February and we will announce the full year. Hopefully, bear with us for that.
Thank you very much. Operator, let us move on to the next question, please.
I am going to unmute the next person. Next person is Taji-san from Mizuho Securities.
I have one question. With regard to the CapEx, at the beginning of the term, it's on page seven, you said JPY 12.6 billion, all right? It's kind of suppressed, because at the beginning of the term, it's like JPY 34.8. My question is, which kind of the investment has been suppressed here? Also, in midterm view, can you actually shelve this investment to the later stage? Do you think it's okay? I would like to understand how you revise and how you change in your plan for the CapEx planning.
This is a CapEx planning question, so Bjorn, I would like you to answer.
Thank you, Taji-san. When it comes to CapEx, many programs will be commissioned and therefore finally capitalized towards the end of the year. That's the normal planning and deployment schedule. Nothing undue on that part. When it comes to holding back again, we have looked closely into all opportunities, again, as part of the suppressed external environment in Q3. We have actually tried to hold back on most of the discretionary CapEx, if we can call it that, from the commercial area into the back office, IT, et cetera. For the future, as I said earlier, I think it was to Furuta-san's question, we will be investing in commercial opportunities going forward. Again, by keeping the powder dry now, we will be able to step that up again as the commercial opportunities materialize in the next.
We strongly believe that celebrating, again, what I said, the 70 years anniversary of the Coca-Cola System in Japan is a big thing, and secondly, also celebrating that we then have a decade of operations for the CCBJH company. All of them, again, will be appropriately funded for future periods. Hope that gave you a little detail. Thank you.
By the way, I think you need to invest into this kind of celebration, but is this going to be adding to you or kind of like you are going into the negative range for that investment?
Thank you for your question. Which kind of costs are going to spend for the celebration? Bjorn, would you like to answer this question, please?
When it comes to commercial opportunities, which, of course, is the reality when we execute against these two major milestones for us as a company, the investments will come in marketing activities. As you know, we spend the customer-facing part of the marketing, and The Coca-Cola Company does the consumer part of it, what we call the ATL. When it comes to the CapEx, again, we have plenty of opportunities in investing, again, for front-facing. We have investments in the Food Service Company coming through. We have investments in profitable locations, as you heard Alex mention in the prepared remarks for vending.
Overall, rest assured that when we put capital into the market, it is with the mindset through our capital allocation policy to have a positive return on. We are not deviating at all from these type of policies and rules as a company. Hope that gave a little detail. Thank you.
Okay, understood. Thank you very much.
Since we are up on the time, I would like to go for two more questions. Operator, please put through to the next question.
I am going to unmute the next person with a question. Morgan Stanley MUFG, Miyake-san. Miyake-san, please go ahead. Miyake-san? Please go ahead.
Can you hear me? Sorry, I was on mute. Morgan Stanley, Miyake speaking. Thank you. Thank you for joining. First of all, regarding the cost, actual cost, I would like to ask about the cost. Because the commodity situation, the third quarter, I think, JPY 2.6 billion is the gap. Out of that, JPY 2 billion- JPY 4 billion Middle East additional adverse impact. How much of that has already materialized? That is what I would like to know. Also, what are the details of that? It is material related. I understand that it is related to materials, raw materials, and also there should be the energy cost and the logistic cost. I would like to know the breakdown of that.
Miyake-san, thank you for the question. Regarding the commodity cost breakdown, Bjorn-san will answer the question.
Thank you for the question, Miyake-san. When it comes to the range that we set for the net impact of commodities and currency and all of that at the beginning of the conflict started in the Middle East, we are very much still managing within it. As I said earlier, to Furuta-san's question, also Ihara-san's question, we are managing probably towards the upper end of that. For competitive reasons, we cannot go out with too many details of how much that has materialized, et cetera. Rest assured, we are managing and again, using hedging, buying, and cost control to make sure that we are within that range for the full year. Hope that gave a little bit of detail. Thank you.
Thank you very much. JPY 2.6 billion, so with number, material-related cost and other cost, could you separate the material cost and other cost out of JPY 2.6 billion?
Gomi will answer. The Q3 standalone, JPY 2.6 billion. Commodity is JPY 2.5 billion, and energy cost is JPY 0.1 billion cost increase. Paraxylene included in the commodity, so it is related to packages, so derived from naphtha, the PET. Also in the commodity, there is a certain impact of the currency, but the majority are the commodity impact. Package materials, that is the cost increase of the package. Thank you.
You have made a hedging, but from the third quarter, the package cost increase materialized in the third quarter, although you said the hedging policy. For next year, JPY 2 billion- JPY 4 billion range. This year, in the second half, a part of the second half, impact was felt, but next year, you need to prepare for the cost increase. If the procurement cost could go up, that is a risk in my view. In what way should I understand? When do you think the risk materializes, 2027 and onward?
Thank you for the additional question. For including 2027, impact of the cost. Bjorn-san will answer the question.
Yeah, I think first, Miyake-san, hedging does not mean that you are 100% covered. Of course, that is not how hedging works as a policy. When it comes to the impact for this year, as we had said earlier, when the conflict started in the Middle East, most of this impact will naturally accrue to the second half. So we are very much on track on that estimate. When it comes to next year, as I said both to Ihara-san and Furuta-san, we would prefer to come back with the details and the drivers of all of this when we discuss the 2027 targets for next year. But again, rest assured, we are fully committed to deliver our Vision 2030 targets. Thank you.
Yes. Thank you very much. In the previous question, you mentioned, for one, the range of 2027. So you think that it will be the lower part of the range of JPY 45 billion-JPY 50 billion. Compared with the discussion of several years ago, I think that the cost impact might have been more than you had expected. For the another person's question, the price increase in September could cover all the increase in the cost. So, when do you expect additional cost in the current situation or environment? Do you think that you can make a further price increase next year in the market environment? That is my question.
Thank you for the additional question. From the 2027 perspective, whether we can have the further price increase. Alex-san, could you take that question?
Alex here. As we have repeatedly say, pricing is always in the consideration as we look at cost mitigation and the raw material. So, it will be always in the mix. At the same time, we will also leverage all the different revenue growth management levers to address that. Hope that answered the question.
Thank you very much. Miyake-san, thank you for the question. So, Operator, could you go to the last person with a question?
Yeah, I will unmute the next person. Morita-san from Nomura Securities.
Hello, Morita from Nomura Securities. I have two questions. First is the share buyback way of thinking. You are having ambitious level of share buyback in the future. That is how you already explained, but recently, interest rate is getting higher. Again, with this external factor changes and your plan to do the JPY 150 billion share buyback plan, are there any changes to this plan of the share buyback? Or depending on the external factor changes, you are going to flexibly change your plan? Could you please tell us the concept?
Thank you for your question. For the share buyback, Bjorn will answer this question.
Thank you, Morita-san. Again, stepping back to the announcement of our Vision 2030 plan, we laid out our clear priorities to drive commercial growth, continue the transformation, and three, therefore, spend appropriately on what we call shareholder value activities. One is dividend, and the second one is the share buybacks. We are in no way or form deviating from that plan. As we said in the prepared remarks, as you heard Maki Kado say, we have just finished the JPY 30 billion plan in middle, late of October. We are kicking off the second tranche, the JPY 40 billion, towards the end of next week. So, we are very much staying committed to what we promised plan. Hope that helps.
Thank you very much. The second question, on the page seven for the waterfall chart, I would like to know about the other elements. For the three months, if I look at only the three months, it is a 4.5 increase of the profit. As Bjorn also mentioned the cost reduction earlier, the marketing costs and also transformation initiatives. There are also other transformation on also DME costs that you already explained. So, the other cost in this slide for the three month, it is an increase of significantly for JPY 4.5 billion. What was the reasons for this?
Morita-san, thank you very much for your question. For the waterfall chart, other part, Bjorn will answer this question.
Yeah. Again, the cost measures, as I said earlier, close to JPY 10 billion in total, was coming through DME, as we said also in the prepared remarks and to Ihara-san and Furuta-san's questions. The second part is the transformation. Again, as you heard in the prepared remarks, it is going across the enterprise. The third one are the more tactical measures we are putting in place for the quarter and the full year to, again, make sure that we are delivering on our full year commitment of JPY 35 billion.
These type of spending, the more discretionary one, will come across the board in hirings, in travels, in outsourcing fees, consulting fees, et cetera. So all of that is part of what we are controlling, again, with the purpose of delivering what we promised to the market, JPY 35 billion full year base. Hopefully that added a little. Thank you.
Sorry, I couldn't really understand. So, as you mentioned, the transformation expenses or transformation initiatives, the DME, those are not in the other sector. So, three months, it's JPY 4.5 billion. What is the simple reason for the increase of the JPY 4.5 billion? Are promotional costs included in this?
Promotional costs are increased in this. Again, as I said earlier, we have many discretionary costs that we can flex up and down in our business for competitive reason. We will not get into too much details around that, but as I said, it could be outsourcing fees, consulting fees, and other costs to run our business that we can flex up and down depending on the business climate. Thank you.
Okay, thank you very much.
Thank you, Morita-san, for your question. That concludes the list of those wishing to ask questions. As we are already on end time, we will now conclude the Q&A session. The content of today's briefing will be posted on our company website shortly. If you have any questions or feedback, please contact our IR team. Thank you very much for participating today.