Coca-Cola Hellenic Field trip presentations - Dimitris Lois, CEO
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Coca-Cola Hellenic
Field trip presentations
Dimitris Lois, CEO
Forward-looking statements Unless otherwise indicated, the condensed consolidated financial statements and the financial and operating data or other information included herein relate to Coca-Cola HBC AG and its subsidiaries (‚Coca-Cola HBC‛ or the ‚Company‛ or ‚we‛ or the ‚Group‛). This document contains forward-looking statements that involve risks and uncertainties. These statements may generally, but not always, be identified by the use of words such as ‚believe‛, ‚outlook‛, ‚guidance‛, ‚intend‛, ‚expect‛, ‚anticipate‛, ‚plan‛, ‚target‛ and similar expressions to identify forward-looking statements. All statements other than statements of historical facts, including, among others, statements regarding our future financial position and results, our outlook for 2014 and future years, business strategy and the effects of the global economic slowdown, the impact of the sovereign debt crisis, currency volatility, our recent acquisitions, and restructuring initiatives on our business and financial condition, our future dealings with The Coca-Cola Company, budgets, projected levels of consumption and production, projected raw material and other costs, estimates of capital expenditure, free cash flow, effective tax rates and plans and objectives of management for future operations, are forward-looking statements. You should not place undue reliance on such forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they reflect our current expectations and assumptions as to future events and circumstances that may not prove accurate. Our actual results and events could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in the UK Annual Financial Report and the annual report on Form 20-F filed with the U.S. Securities and Exchange Commission (File No 1-35891) for Coca-Cola HBC AG and its subsidiaries for the year ended 31 December 2013. Although we believe that, as of the date of this document, the expectations reflected in the forward-looking statements are reasonable, we cannot assure you that our future results, level of activity, performance or achievements will meet these expectations. Moreover, neither we, nor our directors, employees, advisors nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. After the date of the condensed consolidated financial statements included in this document, unless we are required by law or the rules of the UK Financial Conduct Authority to update these forward-looking statements, we will not necessarily update any of these forward-looking statements to conform them either to actual results or to changes in our expectations.
Italy is important to the Group
Significant part of the Group
Group Italy
GDP per capita GDP per capita
12,800 US$ 31,100 US$
Population Population1
Share in
585m revenue 56m
Plants Plants2
68 5
NARTD volume3
2,354m u.c.
1 Excludes Sicily
2 Three sparkling beverages plants and two water plants
3 Source: Canadean
4
Growing the top line
660
584
• Increasing sparkling 2013 Total sparkling category servings
per capita
beverages consumption
within NARTD 321
353
280 288 298
• Growing value share in 166
204 209 219
water, tea and juice 93
134 142
47
• Working with customers to
increase availability and
United States
Italy
Mexico
Romania
Bulgaria
Switzerland
Nigeria
Russia
France
Spain
Europe average
Great Britain
Coca-Cola HBC
Poland
Ukraine
value creation
Per capita consumption: Average number of 237ml or 8oz servings consumed per person per year in a specific market.
Coca-Cola Hellenic’s per capita consumption is calculated by multiplying our unit case volume by 24 and dividing by the population.
Source: The Coca-Cola Company, 2013 data
5
Growing the bottom line
• Business impacted by the Eurozone
crisis
– c.40% EBIT decline in the last four
years
• Significant restructuring of the
manufacturing base
– Consolidation of plants
• Reduction in operating expenses
– Taking out fixed operating expenses
• Further opportunities in warehousing,
logistics and route-to-market
6
Executing strategy in Italy
Winning in the market
• Combine demand creation and
demand delivery
– Brand investment
– Joint initiatives with customers
– Execution in the market
• Strong leadership position in
sparkling beverages
– Room for further growth,
particularly in flavours
• Low share in still drinks
– Grow value profitably and
sustainably
8
Growing revenue ahead of volume
• Occasion-based brand, price,
package, channel (OBPPC)
strategy
– Growing single-serve multi-packs
in the modern trade
– Increasing presence in the
immediate consumption channel
– Making products relevant to the
consumer
– Addressing affordability
9
Taking cost out
• Optimising infrastructure
– Reducing the number of plants
from five to three
• Centralising IT and procurement
• SAP Wave
• Shared Services Centre
• More to come
– Outsourcing of warehousing
– Phase 2 of deployment to Shared
Services Centre
10Generating cash
• Sharp focus on working capital
management
• 40% of cash-flow from operations
channeled into revenue-generating
investment
• Cold drink equipment
• Modernising production
11Five elements of strategy in Italy
Sparkling is our top priority Driving profitable
volume in still drinks
OBPPC, Customers’ profitability, Execution
Tight control Optimising Working capital
of expenses infrastructure management
12Agenda
Dimitris Lois Italy in the context of the Group
Jenny Stoichkova, Coca-Cola Italy Italy: Opportunity to grow
Sotiris Yannopoulos
and Enrico Galasso Capturing the opportunity in Italy
Dimitris Lois Closing remarks
Q&A
13Italy: Opportunity to grow
Evguenia Stoichkova
Operations Director TCCCRecovering confidence: Priority for Italy
Germany UK France Spain Italy
92 99
88 90 95
87 87 88 87 87 87
86 92 84
90 90
79 79
77 77
75 75
72 73
71
67 69
61 61 61 61 61
60 58 59
56 55 56
54 53
57 50 52 52 51
55 48 48
52 53 46 47
47 44 45
49
44 41
45 46
41 39
Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014
Source: Nielsen Consumer Confidence Research 15Job security is the biggest concern
Job security 30 11
The economy 13 12
Italy - Unemployment Rate (%)
12.4
12.1 Debt 9 7
Increasing utility bills
5 11
(electricity, gas, heating, etc)
10.7
Health 5 10
Biggest concern
Childrens' education and/or welfare 6 8
8.4 8.5
Second biggest
7.8 Political stability 5 9
concern
7.7 Work/life balance 5 7
6.8 Increasing food prices 4 6
6.7
6.1 Crime 3 5
No concerns 2
Source: Nielsen Business Indicators; Nielsen Global Consumer Confidence 16Consumption behaviour is
deeply impacted by the crisis
There are signs of recovery in 2013 – more
savings & holidays – even though spending
is still decreasing for many categories. In
Italy crisis has changed purchase behaviours
more than in other EU countries
Compared to this time last year, have you changed your
spending to save on household expenses?
Nielsen Consumer Confidence 17As well as shopping behaviour
63% (+4 pp vs ‘12) have a strict
budget and buy only what they need
86% (=) prepare a
shopping list before the trip
45% (+2 pp vs ‘12) usually
purchase only what they planned
Source: Nielsen shopper trends 18Key Italy insights
1. In the last four years Italy has had the lowest consumer confidence index among
the big western European countries
Country
2. Job security is the biggest concern for Italians, as unemployment doubled since
2007
3. As a reaction to uncertainty, Italians modified consumption behavior more than
other Europeans , down-trading (more discounters) and down-grading (more
private label)
4. There are however signs of recovery: in 2013, a growing number of Italians are
able to save money. These trends are expected to continue in the coming years.
TCCC
1. Italy has the highest Coke Brand Love (5.6) in Europe
2. Number 2 in Europe in % of households buying Coke classic on an annual basis
3. Italy shows low % of people that reject / never tried the Sparkling category
4. Coke Regular is the most preferred NARTD brand for 50% of Italians
NARTD: Non Alcoholic Ready To Drink Beverages 19The Italian NARTD market landscape
NARTD Volume (2,354m u.c.) Retail Value (14,891m €)
6
258 168
129 13
85 SSD Colas
164 SSD Colas
225
SSD Flavours 960 1753 2924 SSD Flavours
Water Water
RTD Teas 2022 RTD Teas
Juices Juices
1732 Energy 6806 Energy
Sport Sport
Source: 2013 Internal estimates based on Canadean and Red Book – CCH territory only 20We have a strong position
in a small portion of the market
Source: Internal estimates based on Canadean and Red Book ” CCH territory only 21Capturing more value Source: Internal estimates based on Canadean and Red Book ” CCH territory only 22
New trends - Mindset
HEALTH & BEAUTY INNOVATION & GREEN INTERNET
“ 57% of Italians feel QUALITY “ 42% consider buying “ 38.9m had access to the
green/low impact Internet in 2012 (+7.8%)
overweight “ 56% do not withdraw products
from quality and are
“ +40% penetration of
“ 46% are trying to lose willing to pay more for it
“ 24% bought more green smartphones
weight (fitness & diet) products than in the
“ 39% love trying new past “ 26M consider
brands and new products Internet as the main source of
“ 26% are keen to pay a information
premium for organic,
23% low-impact and “ 21M read opinions of other
fair-trade products consumers about products
and services
Source: Nielsen shopper trends 23Expected development of the Italian
beverage landscape
• Italy is the 2nd country worldwide in terms of ageing population; this will drive
still beverages volume growth
• In the short term, decreasing Disposable Income (index 88 in 2014 vs. 2008 )
will further impact high value NARTD categories
• Growing health and wellness concerns will favour still beverages and especially
infused RTD Tea which in Italy is perceived as one of the healthier drinks
SSD ’14-’20 +8 servings per
+20m u.c. capita vs today
NARTD ’14-’20
+80m u.c.
Still ’14-’20 Water ’14-’20
+60m u.c. +55m u.c.
24How we plan to capture
these opportunities
Grow Sparkling per capita Gain share in Still Beverages
(Italy per cap is 91 vs EU average of 141)1 (currently 4%)
1. Consumption with food @ home is
#1 occasion (39% of total beverage
consumption) and TCCC share is 7% 1. Become a significant player in water
2. Socialising out of home is #3 and improve the profitability
occasion (13% of total beverage 2. Re-launch RTD Tea business to
consumption) and TCCC share is 9% become a strong #3 player in
3. Category permissibility with volume and #2 in value
shoppers is the entry point to 3. Create a dedicated business model
improve incidence and frequency to drive volume and value in small
4. Leverage portfolio of brands to profitable categories and innovation
maximise user base (adults aged 30-
49 are 31% of Italian population)
1 Consumption per capita per annum of TCCC sparkling soft drinks 25Our success comes when we have
LOVED FROM A TRUSTED IN A RELEVANT
BRANDS COMPANY CATEGORY
26Entrenched in Italian society
Reasons to Believe Sharing the passion for football Own the summer:
Crazy for Good Say it with Coke and a song
Leverage our Flavours sparkling portfolio to gain new consumers Restart advertising behind Lilia
27And the ‘At Home with Food’ occasion
Family Couple Friends
Point of Sale Activations Extrinsic POS Visuals Intrinsic POS Visuals
POS: Point of sale 28With dedicated programmes
for Coke Zero & Light…
Double-digit growth Targeting women
through recruitment with fashion
Coke Regular, Coke Zero & Coke Light Execution
Coke TM Asset in-store activation
29Ensuring Category Acceptance
4 Commitments of Coca-Cola with Italians
SMALLER PACKS MORE CHOICE FOR EVERY WE ENCOURAGE THE PASSION IN
FOR EVERYONE LIFESTYLE SPORT. SINCE ALWAYS.
INFORMATION FRONT OF PACK and responsible communication policy
30From a trusted company
Participation in EXPO to support the Coca-Cola Cup promotes active healthy
Refresh 2020 commitments lifestyle in Italian schools
2,806 schools
330,000 students
Supporting local communities and the
Commitment to the environment
economy
Package
innovation Coca-Cola
has an
Decreasing our
Italian Heart
footprint yoy
31Our enablers
• Joint scorecard
•Aligned System • Monthly review between country teams
vision
• Quarterly review with Regional Teams / BU
• Increased marketing
investment
•Up to date and
relevant marketing • TCCC: Demand Creation
approach
• CCH: Demand Delivery
32Capturing the opportunity
Sotiris Yannopoulos
General Manager, ItalyOur reference point
is our Strategic Framework
34Based on that we
have a clear Job Ticket for Italy
Grow Per Capita & Share
while defending profit
1 2 3
GET BACK TO GROWTH TAKE CHARGE WIN TOGETHER
Create Demand with: Deliver Demand with: Increase Productivity with:
• Permissibility • Best-In-Class Execution • Governance & Control
• Relevance • Customer Service • Engaged Talent
35Get back to growth
Get Back to Growth elements
Drive per capita consumption and share of MyCoke
Sparkling
Beverages
Grow market share in SSD premium flavours
Revamp Water business profitably
Still
Beverages
Claim our fair share position in RTD Tea
37We have a strong
market share position in SSDs
+5.3pts
CAGR ‘08-’13 CAGR ‘08-’13
38
Source: Internal estimates based on CANADEAN & Market SizesGrowth drivers for SSDs
•70% of beverages consumption is water (2nd highest in Europe)
• Low SSDs per capita despite highest brand love
• SSDs are more profitable than Water for retailers
• 39% of beverages consumption is with meals
- MyCoke share with meals is only 7%
• Socialising Out of Home is the #3 occasion with 13% of consumption
” My Coke share in socialising is only 9%
• Italian population is ageing
• Adult Flavours (tonic, lemonades, bitter) are the only growing segments
Source: TCCC syndicated researches
39Creating Demand
with focused initiatives
REFRESH 2020 MEALS ASSET EXPLOITATION
COCA-COLA CUP SOCIALISING
Enabled with a focused and segmented OBPPC strategy
OBPPC: Occasion-Brand-Pack-Price-Channel
40Our OBPPC supports our
strategy to increase consumption
Meets all shopper needs Implementation
and creates value The right pack, in the right zone
Modern Trade: the right sizes & recommended
INCIDENCE ZONE
prices to meet all shopper needs and basket types 1. Dairy NEW
+1
All prices are RECOMMENDED.Pricing decision are at sole discretion of the retailer
zone
Vs py
2. Water Section
RSP €/lt 3. Check-out&cooler
1L 0.50L
4. Bakery
Entry Pet 1L 1.25 € 1.25/lt
FREQUENCY ZONE
Pet 1.75L 1.89 € 1.08/lt 1. Cheese&Cold Cuts (Counter)
2. Ready Meals
Frequency
3. Fruit & Vegetables
Can 0.33x6 3.49 € 1.76/lt 4. Pasta 1.75L 6x0.33L
UPSIZE ZONE
Pet 1.5L x 2 3.19 € 1.06/lt
1. Promotional Main Hall
Upsize 2. Promotional Area
Pet 1.5L x 4 5.99 € 0.99/lt 2x1.5L 4x1.5L
UPSCALE ZONE +1
Pet 0.5L x 4 3.65 € 1.82/lt 1. Cookies&Snacks
zone
Vs py
2. Juices for Minican
Upscale 3. Check-out
Can 0.15x12 4.99 € 2.77/lt 4. Spirits NEW 12x0.15L 4x0.5L
41Delivering demand
in Modern Trade flawlessly
• Extra Displays: right packs in • Permanent COMBO deals • Coke Regular, Zero & Light in-
the right zones store activation
Modern Trade key pillars
• Co-marketing with food
•Claims & POS materials • Big & impactful Extra Displays
• Quarterly Household Penetration, focus Female 30+
KBIs
• Basket Incidence, focus Small Baskets
• Total Volume on Extra-Display
42As well as in Fragmented Trade
• 3-pack strategy activation • Permanent ‚meal‛ solutions • Dedicated Artwork
(quick stop, meals, on the go)
Fragmented Trade key pillars
• Coolers Visibility & Quality
• Glass bottle conversion &
distribution •Dedicated
point of sale materials
(Menu boards, etc)
• Coke incidence with meals
KBIs
• 3-packs & Glass distribution
• Coke incidence in Socializing occasion
43Leveraging our portfolio
to excite teens
New Teens advertising Back to advertising
campaign support
NBA asset exploitation
Local asset exploitation
44Leveraging our portfolio
to win with adults
Brand relevance with Kinley Capitalise Fanta Lemon success
Population is ageing Doubled volume in 2013
consumer Association s worldwide (35 countries)
‘Product of the year’ is a consumer award issued every year by
• •
• Launch of Kinley in 2013 • +6 share points in Lemonades
• Opportunity to more than triple the • +0.2 share points in SSDs
business in five years • Won ‘Product of the Year’ Award
• Advertising support
45Playing to win market share with Flavours
• Dedicated Assets exploitation • NBA Asset exploitation in store • Glass exploitation
in Extra Displays
Demand Delivery key pillars
• Extra Displays with Fanta • Availability and Visibility
• ‘Rainbow’ ED with MyCoke
• Share on Extra-Display
KBIs
• Users base
• Volume Share
46Working with our retailers
• Lower cost of doing business
• Higher EBITDA for the point of sale
Driven by
Premiumness Higher sales rate Value added services
1400€
Margin/pos
+1000€ +900€ +600€ +500€
vs. leading vs. vs. leading
vs. crisps
candies chocolate crisps
Source: DPP Carrefour, BAIN 2013; Internal estimate based on ad-hoc test 47Moving into Water
CAGR CAGR
‘08-’13 ‘08-’13
Source: Internal estimates based on CANADEAN & Market Sizes 48Addressing brand equity, availability
and sustainability in Water
to build and sustain brand equity
to drive distribution with customers
to drive product sustainability
Source: TCCC syndicated researches 49Building a national brand with Lilia
NEW POSITIONING CONTINUOUS MEDIA SUPPORT PACK INNOVATION
‘Lilia, a simple choice that 3.5m € / year - Highest ever Plant Bottle, up to 30% from
matters’ Share of Voice plants
6th biggest investor in the
Water category
LILIA
A SIMPLE CHOICE
THAT MATTERS
50Recovering profit with value and cost
efficiency, while improving execution
• Increased availability • Command better value: • Light Weighting (Best in Class)
(Distribution in Modern Trade Retail sales price index
from 34% to 65%) from 72 to 90 vs. average - Short neck finish
Demand Delivery key pillars
• Highest ever number of points
of sale activated - New Squared Bottle 1.5l
• Focus on single-serve and
HoReCa (0.5 liter in HoReCa is
the most profitable water SKU)
• Zero touch logistics
• Distribution in Modern Trade
KBIs
• Number of points of sale activated
• Single-serve availability in Fragmented Trade
51Ample room for
market share gains in RTD Tea
Our Vol. Share (RTD Tea)
-6.9pts
12.7%
5.8%
2003 2013
RTD Tea Volume Sales (MUC) CAGR RTD Tea Retail Value Sales (M€) CAGR
‘08-’13 1500 ’08-’13
1228
90 92
85 1067
90 960
1000
60
500
30
- 0
2003 2008 2013 2003 2008 2013
52
Source: Internal estimates based on CANADEAN & Market SizesDriving growth in RTD Tea with relevant
taste, brand equity and availability
to build & sustain Brand equity
Brand Leader = Estathé, 7m€ / year
Infused formulas = 40% of volumes and growing
Lemon & Peach flavours = 90% of market
Full distribution and in-store activation
Source: TCCC syndicated researches 53A new and relevant
proposition for Italians
NEW PREMIUM
PRODUCT FORMULATION
POSITIONING
• A sip of freedom • New infused Tea formula
• 5 m€ investment with lemon and peach
54Delivering results
with the right execution
• Increased distribution (Modern • Step up in-store presence • Relevant line-up to meet
Trade target from 45% to 85%) through in-store promotions, shopper & consumer needs
extra-displays, leaflets, trade
Demand Delivery key pillars
kits, point of sale material
(posters, rotairs, etc)
85 85
45 45
WD WD
• Distribution in Modern Trade & Normal Trade
KBIs
• Number of stores activated
55Take charge
Enrico Galasso
National Sales DirectorCreating value for our customers
We are Italy’s #1 Beverage Supplier
Our route-to-market We understand the
fits the Italian trade customer strategies and
landscape tailor our plans for our
Key Accounts to meet
their needs
Our best-in-class
sales force provides our
customers with services
at the point of sale and We have shopper
unparalleled brand insights that drive our
activation OBPPC and plans
JVC: Joint Value Creation; OBPPC: Occasion-Brand-Pack-Price-Channel; RED: Right Execution Daily;
RTM: Route To Market 57Driving customer satisfaction
through Joint Value Creation (JVC)
‘BeverageWorld’ ‘On Shelf Availability’ Top to Top Routines with all
Category reinvention at customers
Up to 440 POS activated in 2014
Out of Stock reduction
Store based action plan
58Step-changed execution
Number of Extra Displays (,000) FC RED Score
RED: Right Execution Daily is our holistic KBI measuring execution excellence
59Italian trade landscape drives
our Route-to-Market strategy
Less concentrated trade vs. rest of Europe with strong regional focus
Weight of Top 3 retailers
• Multifunctional customer teams
Modern Trade
Source:Nielsen 2012
• Strong national and regional customer
management focus
• Multi-level interface with customers
• Tailored Joint Value Creation programs
RTM reflects opportunities of specific Channel structure
Food & Bev Producers sell-in (20 Bn €)
Fragmented Trade
• Direct Sales and Wholesaler
Direct Sales Intermediaries management capabilities in place
18% 57% 16% 8% • Partnership with wholesalers
WHS C&C GDO
• Segmented approach to outlets
coverage and activation
IC Channels (Day Time Bar, Restaurants, etc)
60Excellent
sales and execution capability
• OBPPC and RED
• Sales and negotiation
• Shopper Insights and Category Management
• Revenue Growth Management
• Financial basics
• Project management
61Win together
We work across all areas
to be #1 in cost leadership
SLE (System Line Efficiency) & productivity 2.5pp
Energy cost reduction*
Production network review
Logistics network review
Plant warehouse outsourcing
Customer collaboration & service level (DIFOTAI)
Total inventory days
Forecast accuracy
* Supply Chain cost reduction as % of net sales revenue over three years (2010-2013) 63We have optimised
our supply chain network
Core Core
production production
network network
2012
2014
5 3
PLANTS PLANTS
Opportunities to address High speed What we have executed
- Network complexity of implementation
- 3 plants near the biggest demand areas
- Leverage the size of our plants - No plant under 40 M UC
- Asset utilisation
14 - +10 % on asset utilisation
- Reduce fixed cost months
- New high speed line in Nogara
- High speed line 64Improving competitiveness
and better service to customers
Supply chain cost 1 % NSR Service Level (DIFOTAI 2)
+620bps
-90 bps
18.3% 96.2%
90.0%
17.4%
2010 2013 2010 2013
1 Supply Chain cost: Production Overheads+Warehousing+Distribution+Haulage
2 DIFOTAI: Delivered in full on time accurately invoiced 65Taking full charge
of our operating expenses
Cost leadership
Accountability efficiency
Lean organisation
2.1pp
Standardisation reduction*
Integration
Business knowledge
Discipline
Efficiency
Partnership
Focus on business
* Reduction in operating expenses as a % of net sales revenue over three years (2013 vs. 2010) 66Contributing to our Zero
Working Capital journey
-Product rationalisation
-Forecast accuracy
22% reduction in
working capital
2013 vs. 2010
67Generating significant Cash Flow
To CCHBC Group
from operations
last 3 years 173m€
290m€
0.19 € (60%)
Investments for growth
0.32 €
per UC sold 117m€
0.13 € (40%)
68Becoming a source of good
for the local communities
69Developing internal talent
Fuel leadership pipeline at all Key Positions covered by Key Make our managers talent
layers People (KPe/KPo) builders
• Fast Forward program
• KBIs in country scorecard
• Management trainee program
• Performance Management
• KPe/KPo and IDP
• Talent acquisition program and Development process
completion as incentivised
objective in MBOs for
• Internal promotions • Individual Development Plans
senior leaders
(IDP)
• Our KPe/KPo grew by 21%
• Successors rate to KPo grew by 10%
70Engaged and
values driven people
+12% +6%
70% 67%
58% 61%
2012 2013 2012 2013
71External endorsement
Award for FINANCIAL STRENGTH
World’s largest employer branding online survey
(7,000 respondents aged 16-65; 150 largest companies assessed)
72We are ready to step up
As the external environment gets better
73Closing remarks
Trading conditions Looking ahead
Underlying trading environment
continues to be challenging
First quarter was weak due to
timing of Easter and liquidity Profitable and sustainable
constraints in the market growth through a
combination of economic
recovery and our efforts
Good trading during Easter and
in May, recouping some of the
volume lost in the first quarter
75Q&A
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