Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Coca-Cola Europacific Partners PLC (CCEP, Financial) achieved solid top and bottom-line growth and strong free cash flow in the first half of the year.
- The APS business unit performed exceptionally well, offsetting softer volumes in Europe.
- The company reaffirmed its full-year guidance, aligning with midterm objectives.
- CCEP continues to invest in growth, with strong commercial plans in place for the rest of the year and beyond.
- The integration of the Philippines business was completed seamlessly, contributing to double-digit volume growth.
Negative Points
- European volumes were softer due to strategic delistings and adverse weather conditions.
- The company faced a higher interest charge and a higher effective tax rate, impacting earnings per share.
- Adverse weather in Europe, particularly in June, negatively impacted both home and away-from-home channels.
- The geopolitical situation in Indonesia led to mixed demand, affecting overall performance in the region.
- The company had to make strategic exits from certain product lines, such as Capri Sun in Europe and bulk water across multiple markets, impacting volumes.
Q & A Highlights
Q: Hi, everyone. Hope you're well. I guess I had a question on your volumes in the quarter, hoping to get a little more color and really trying to get a sense of how they trended relative to your internal expectations? I know, Damian, you mentioned weather was one of the main impacts on volume pressures, especially in Europe, but any other factors that maybe surprised you? Also, if you could provide us with how volumes trended month-to-month in the quarter? And any color on July and August so far? Finally, curious to hear if transactions outpaced volume in the quarter and if those transactions sort of accelerated sequentially?
A: Hi, Bonnie. Thank you. Yes. So maybe I'll just start with the second part of that. We are pleased that transactions performed better than volume. We saw that in Europe and across all of our markets. So we are seeing transactions continue to hold up stronger than volume did. Yes, clearly, it was a weaker volume quarter than we would have liked in Europe. I haven't seen anything in it other than we're gaining share. I think all of our activations landed really well. I was lucky enough to be at the Euros and the great activation across Germany across all of our markets have been recently in France. So it's certainly not an executional issue. It's just an offtake issue. When we look at offtake, I would say June and July were slower than we would like. We have seen it improve and certainly, we've got a lot of plans in place for the remainder of the year in Europe, but across all of our markets to drive volume and revenue. As you've seen, we've got great revenue per case realization. So the one delta in the quarter obviously was volume. And as I said, I don't see anything beyond some adverse weather, which really dampened our away-from-home business. Retail performed better. So we did see our retail business continue to hold up. So when you look through it, there's nothing on a specific brand or pack to call out. It's really kind of across the category and not just for us. So we gained share in the software category, which I think is a good outcome. And as I mentioned, our retail business held up well. Yes, and you just saw less people out and about and away from home. So footfall was down particularly in June. We saw that continue a little bit into July and then it started to improve and we see August looking a bit better as well. So I think that gives us confidence for the rest of the year. On top of that, I think our diversification strategy has played a big part. So while we did have a slightly weaker European volume outlook, our businesses in APS continue to perform really well. And I think that will continue to the end of the year.
Q: Thank you and hi, Damian, I wonder if you could just talk a little bit more about the health of the consumer more broadly across your developed markets, in particular? You mentioned in your prepared remarks perhaps the need to sort of continue to balance affordability and premiumization. How are you thinking about the promotional environment generally heading into the second half of the year? Your peer CCH was calling out this morning, perhaps some signs of a more price-sensitive consumer in some European markets. I just sort of wonder what you're seeing are you seeing that in some areas, if so, where, etc.?
A: Hi, thanks, Simon. And I would say we haven't seen a dramatic change in that space. I think last year, we talked about it. And I think we adjusted our real pricing and our promotional strategy to reflect that some of our consumers were needing more affordability. That's kind of been in place for us now, at least for the last 18, maybe even 24 months. It hasn't deteriorated and we don't see that in the second half. So I think we're well-funded from a promo strategy. I called out some of the examples like in Spain. But if you go across all of our markets from the UK right across New Zealand, I think we've done a good job offering value for consumers who are looking for it, but we haven't lost that ability to drive premium NSR per case on profit for us and our customers through those small PET packs, multipack cans and glass. So yes, it's still an element of our strategy. But to answer your question, Simon, I don't see it getting worse. I think as we look at Europe, potentially with lower interest rates, Ed talked to some of the commodity pressures easing, that's not only going to benefit us, but it will probably benefit the more macro consumer spend environment. So I'd say we don't see any more promotional intensity required. I think it's really about executing what we already have in place. And we see that working from a share perspective. We added over 1 million households in Europe. So we're definitely getting more people to participate in our brands. And I think that will continue probably into '25. So as we look at '25, I see a similar environment, maybe some more potential for a mix benefit as potentially consumers go out a bit more and eat out a bit more. So I'd expect in the medium term, the away-from-home channel to do slightly better than it's done. And I think that's going to be a big benefit as well.
Q: Hi, both from a couple from me, please. Firstly, just coming back to the Europe market share trends. I think Ed talked about growing share in the away-from-home channel. Can you just talk a little bit about what share trends you're seeing in the home channel? I think that Nielsen data, things have softened there of late. So just look to get you taking that. And my follow-up question is just really on how you're seeing the COGS outlook shape up for 2025 with the level of hedges you have in place to date?
A: Thanks, Sanjeet. I see the direction for one question per caller has gone down really well today. No surprise there. So I'll touch on share and then I'll let Ed talk a little bit to the hedging. So we have gained a lot of share in away-from-home, particularly in Europe. We're pleased with that. And we're also gaining volume share in retail and value. Our volume share is slightly ahead of value and I think that reflects what I talked to Simon about in terms of for a while now we have been supporting some of those more affordability strategies and that's driven volume share ahead of value, which for us is unusual. Typically, if you go back over the years, it was value ahead of volume. But in this environment, we're pleased that we're recruiting consumers and households. So that will remain a focus. So on a consolidated level, good share gains, strong in away-from-home and share gains in retail mainly driven on the volume side in sparkling. So pretty pleased with that and I'll hand over to Ed to talk a little bit to the commodities and hedging.
Ed Walker: Yes. Thank you. So I mean, for this year on cost of goods to start with, we're pleased with the fact we're now guiding
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
