CCH Italy Field Trip 3 June 2014 -...
Transcript of CCH Italy Field Trip 3 June 2014 -...
CCH – Italy Field Trip
3 June 2014
Page 1 of 18
Q U E S T I O N S A N D A N S W E R S
Edward Mundy - Nomura
Morning. Couple of questions. First of all on 2013 your volumes in Italy were down 6%
and your revenues were down 9%. I think your stills underperformed your sparkling so I
was wondering whether you could provide some commentary on what was causing that
negative revenue per case because it clearly wasn’t category mix.
Secondly on the business services organisation you have in Sofia, could you just go into
a bit more detail as to what’s included within that, you know finance, HR, and what else
could be included if you widen the scope of that?
And then thirdly, you mention some further opportunity in warehousing logistics and
route to market, could you perhaps go into that a bit more detail?
Dimitris Lois - Coca-Cola HBC AG – CEO
Okay, I’ll take the first one and then Michalis will take the second one, and Sotiris will
give a bit more granularity.
Okay, 2013 you described accurately the volume and the revenue. Well, looking at the
market and having discussed about how important affordability is, we have been
focusing a lot to address this affordability, so an element that reflects the revenue and
the volume has to do with the promo intensity. And the promo intensity reflecting also
the trade dynamics behind organised trade, and within organised trade the bigger
formats and that’s hypers. So this is, if there is a head message, this is the head
message that we have seen in 2013.
Michalis Imellos - Coca-Cola HBC AG – CFO
So in terms of business service organisation that you asked. So far, as we have said, we
have been deploying the first two out of three phases of the project. When it comes to
finance this includes everything around accounts payable, general ledger and financial
reporting, master data, accounts receivable and credit management, travel and
expense. So these are really the back office processes which do not yet touch the
customer directly.
And what we want to do in the last phase, which is not yet fully scoped out but we are in
the process of doing that now, is to move towards the transactional processes that do
touch the customer. And by that I mean billing, pricing and rebate administration, route
CCH – Italy Field Trip
3 June 2014
Page 2 of 18
settlement, in other words the cash application of our collections and complete all the
master data maintenance. That’s just the finance part. There is also a similar approach
for human resources transactional processes, everything to do with recruitment,
personnel administration and so on.
Sotiris Yannopoulos - Coca-Cola HBC Italy – General Manager
Now about the route to market, well route to market, I think already Enrico shared, is a
way to deliver better service in a segmented approach. Now what we have been seeing
in Italy is that in order to win we need an approach that it also cost efficient for us, and
for that we have to work with wholesalers. So actually what we have been doing is we
went out, we mapped out the environment, we understood in which areas we want to
maintain and reinforce our DSD which is our direct organisation, and in which areas we
need to enable even more wholesalers to drive availability of our products. So we have
been creating an organisation that has the capability to work with wholesalers. It’s a
wholesaler account management organisation in process of being created and piloted
to be fully deployed in the years to come in Italy.
Now we believe that in this way we are not only going to be able to drive the right level of
execution to different points of sales, we are going to be able to do that to enable
growth and we’re going to do that in an even more cost effective way.
Edward Mundy - Nomura
So that 18% of direct store distribution that you showed, is that going to continue to
come down you think?
Sotiris Yannopoulos - Coca-Cola HBC Italy – General Manager
Well the percent of sales is a factor of the volumes that they are going to. Right now we
have been looking in each of the cities that we are having DSD. We are piloting our new
route to market, and based on that we will take further decisions.
Andrea Pistacchi - Citigroup
Two questions please. First could you talk a bit about the discount channel in Italy, the
relative size of it and your strategy in the discount channel?
Then if you could talk a bit about your ambition in water. You've got 4% market share
now, I think you said, what’s the ambition? And if you can get there with just one brand
CCH – Italy Field Trip
3 June 2014
Page 3 of 18
and where the water is profitable at this point, your water business, or when will it
become so? Thank you.
Dimitris Lois - Coca-Cola HBC AG – CEO
I’ll take the second question and I'm sure that Sotiris will build further on the second
question, and then Sotiris will give you a bit more colour on the discount.
So first of all yes, we do have an ambition to take a bigger part of this market. And the
first initiative is behind Lilia. In Lilia there are, as we have been sharing with you, there
are a couple of key pillars. The first one, especially for water, is taking cost out. And we
have been working a lot behind that. As you heard from the teams we have done a
benchmark study to see where we are good and what is the opportunity. And we have
taken a lot of initiatives behind that pillar. We’re not there yet.
We have taken initiatives to lightweight and we have great plans ahead for benchmark
SKUs in terms of weight. We have been working a lot in minimising the number of
touches of pallet and you've heard that, still we have quite some work there. Eventually
you heard from Jenny we are building a lot on brand equity, and this is something that
we have not been very consistent in the years, having a very specific space for Lilia in
the consumers’ minds. And with all that we believe that there is a great opportunity for
Lilia to expand.
On your second question with regards to ‚so can you achieve your aspirations with Lilia
only?‛ Well I’ll make that a bit bigger which is what we have been sharing with you on
having an eye behind stills overall, and that’s acquisitions. And obviously the water and
the juice play an important role. Italy is a very big market so I believe that we are very
consistent in our thinking behind the overall M&A and an eye for acquisitions. And being
a very big market we cannot exclude Italy for being a part of this strategy.
And with that, Sotiris …
Sotiris Yannopoulos - Coca-Cola HBC Italy – General Manager
About discounters. Well discounters, as Jenny mentioned in the beginning, is a growing
channel in Italy. We’re also growing in discounters. We have been focusing a lot of our
OBPPC approach into discounters, and we have actually a specific OBPPC for this
channel which differentiates also the typology of the shopper that goes over there.
We’re also doing a lot of tailor made activities. For instance now with FIFA we have been
activating what we call the flag bearers, which is a programme to drive the Italian people
who will touch the flag in Brazil from Italy. And we have been doing that in a profitable
way. So all our pack price choices, as well as our expansion to this channel, has been
positive so far. We have been able to win together with them. And it’s a channel that
CCH – Italy Field Trip
3 June 2014
Page 4 of 18
we’ve placed specific focus going forward, as we would believe it will continue to pose a
growing opportunity for us.
Dimitris Lois - Coca-Cola HBC AG – CEO
If I can build a bit on the discounters question. Italy is one of the markets, and that’s an
additional beauty, that we don’t have 100% penetration in discounters. And there are
other markets north of Italy that we have 100%. So there's a considerable discounter
that we have don’t have business with. Obviously this is a great opportunity and
believing that the win/win collaboration is there, this is another thing that the local
leadership has also as part of their targets for the years ahead of us. So that is an
additional opportunity in the discounter channel.
Tristan van Strien - Deutsche Bank
Just expand on the RTM in a bit more detail if you don’t mind, the swing from DSD to
more wholesalers, what kind of numbers are we talking about versus three years ago?
And what’s the minimum drop size that you’re really looking at? And for that matter
what’s the maximum range actually that you'll be looking at for that?
And then on that as well, just where are you on your cooler penetration per cap? And
how are you managing that with the wholesalers as well, what kind of recourse do you
have on that?
And I guess just, you answered most of the stuff on Lilia, maybe this is more a demand
creation question, but how is it differentiated, I guess both functionally and emotionally,
from the other 96%? Why would people shift?
Dimitris Lois - Coca-Cola HBC AG – CEO
Okay. Let me - definitely Sotiris is in a far better position to take your questions, very
detailed questions. I just want to start with the route to market. Just a definition with
regards to DSD. The way we define DSD is focusing on the outlets. And I'm saying that
because in other companies and in other segments DSD also has to do with the physical
movement of the product. Our interest in Hellenic is the outlet level, so the absolute I
would say ownership and development of the outlet. And this is what counts for us.
And eventually this is what Sotiris has been sharing with regards to segmenting.
Segmenting the outlets with obviously cases delivered, and also potentiality. So with
this I’ll give the floor to Sotiris to give us a bit more on the DSD question. And maybe
Jenny can say one word about demand creation, with regards to Lilia and the
differentiation.
CCH – Italy Field Trip
3 June 2014
Page 5 of 18
Sotiris Yannopoulos - Coca-Cola HBC Italy – General Manager
Well the objective here is to be able to work with wholesalers to get DSD quality type of
execution. At the end of the day what we want is to have our people going into the
stores, activating those stores the same way that they would activate any direct store,
whereas this store is going to actually be taking the order and the logistics is going to be
covered by the wholesaler.
Practically it means that DSD or wholesaler is just a choice of how we go to market.
Building on what Dimitris says, what is absolutely more important for us is when you
enter into a store to find the cooler in the right place with the right assortment in the
right prices at the right point of the store. What we have seen is that in this trading
environment, expanding further our DSD, it doesn’t make any economic sense. So we
are building the capability to do that through our third party wholesaler collaborators.
We have put a specific commercial policy in place, something that we believe it’s
engaging and relevant to them, and right now as we speak we are piloting it in three
areas, in Parma, in Bahrain, in Genoa. And based on that we will have the actual details
to understand the drop sizes, the movements and the execution metrics based on
which we will be taking further decisions.
Now Jenny, about Lilia.
Evguenia Stoichkova – The Coca-Cola Company - Operations Director, Italy
I will start with the phrase that we believe in the Coca-Cola Company, and that is that
facts creates conclusions but emotion creates behaviour. And as you saw, a lot of
things that we are doing in communication are based on emotions. This is always a
stronger bond with our consumers. So coming to Lilia, what we will try to do is make our
differentiated point more on emotional side than rational side which for water has an
additional complication always, because it’s very hard to differentiate waters rationally
in any way. So emotions are a much stronger ground to be.
In Italy there are 300 different waters, most of them sourced waters. So that’s another
element of why we want to go more here on this side. At the moment we are going to
explore a theory of simplicity, as you saw, and honesty with the insight that today lots of
things are so complicated that we want to bring simplicity in people’s life. We are only at
the very early start at the beginning. This is our campaign on air since two weeks, so we
are going to move on and improve it in the future I am sure.
And another element I want to say is that right now the position of Lilia is such that we
need to start with building awareness. So although we talk about differentiation, right
now the key factor is this year start bringing the brand on top of mind, the brand per se.
The other element of differentiation is going to be this green area with the plant bottle.
We are not the first one on the market; I need to be honest, which is coming with a
CCH – Italy Field Trip
3 June 2014
Page 6 of 18
packaging that has this element. However, we are committed to making it very big.
Nobody so far explored it in a very big way. There are other water competitors that
have elements of a light weighted bottle or a plant in there, but we are going to make it
very big.
Sotiris Yannopoulos - Coca-Cola HBC Italy – General Manager
Just want to follow up a little bit on the cold drink equipment part that you also asked
before. In Italy we have 240,000 different cold drink equipments in the marketplace.
Something that we have been increasing every year on an average by around 5,000 net
placements every year. By 5,000 that doesn’t mean that we are only actually placing
5,000, this is the net placement. Because as you can understand there is a significant
amount of movements. In only the last three years I can tell you that we had 70,000 of
coolers been placed into the market.
That is continuing investment ensuring not so much the cooler penetration per se, but
ensuring that we put the right coolers into the right type of stores. The metric that we
are following is as we said segmentation. So what we have done is we have segmented
all the marketplace in three types of stores, gold, silver and bronze. With some specific
metrics in terms of the location of the store, the capacity and the size of the store, the
throughput of the store. We have a model that is actually followed also behind what was
presented, the right execution daily, that classifies it as gold, silver and bronze. What we
want to reach and where we are today is 100% of all gold stores to have a cooler. We are
about 90% of all the silver stores, and in the next years we will drive that to 100%. This
way it is not just a matter of having the numbers, but also having the right quality and
profitability of the coolers which we have doubled in the last three years, ensuring the
right merchandising standards and quality of execution there.
Damian McNeela - Panmure Gordon
Just on the water market with Lilia, just to try and understand a bit more of the market
dynamics. Obviously 300 competitors in that segment and you've got the ambition to
be a national sort of brand, how many other brands in that segment are national brands
and what market share do they have? And is Lilia sort of predisposed to having strong
market share in any particular part of the country?
And secondly, asset or capacity utilisation is up 10%, can you tell us what you’re
operating at at the minute please in your three core plans?
Sotiris Yannopoulos - Coca-Cola HBC Italy – General Manager
Let me start a little bit from the last one, and then I’ll also join with Jenny on the first
one. Our asset utilisation is around 65% in the plans that we operate right now in Italy,
CCH – Italy Field Trip
3 June 2014
Page 7 of 18
from a capacity utilisation standpoint. So there is ability for us to fulfil more demand.
When it comes to other national brands - Lilia first of all is a national brand. There is
emotional stronghold of Lilia into the south of the country where we actually have our
operating plants, and there are a couple of other brands which of course are national.
Jenny, would you like to share a bit more on that?
Evguenia Stoichkova – The Coca-Cola Company - Operations Director, Italy
Yeah. So the market, indeed there are five or six big players, but when we say big we
need to understand that even the biggest have 15%. I think it is the biggest market
share on that market. So I would quote Nestlé, San Pellegrino and San Benedetto, those
are the biggest companies, we have two or three more with a smaller size.
Now Lilia has been acquired as a regional brand and we moved it to national and this is
our ambition, but with the current capacity and source that we have, as also Dimitris
said, Lilia can grow and expand up to a point. Although being national, we still can build
the distribution and so on, and then if we want to move to a larger scale, much larger
scale, then we need to think of another brand.
Don’t know if this has answered the question.
Andrew Holland – Societe Generale
Yeah, can I just ask, you've talked a lot about increasing or where you’re going to put
your spend for brand support, can you actually say whether that represents an increase
in brand spending as a percentage of sales overall? You’re nodding so I guess it does.
Dimitris Lois - Coca-Cola HBC AG – CEO
Yes.
Sotiris Yannopoulos - Coca-Cola HBC Italy – General Manager
It does.
Andrew Holland – Societe Generale
Can you give us an idea how big an increase that is as a percentage of sales?
CCH – Italy Field Trip
3 June 2014
Page 8 of 18
Sotiris Yannopoulos - Coca-Cola HBC Italy – General Manager
What I can mention is that we will be actually matching in the next three years our
highest ever investment per case that we have done in Italy. So that’s the vision, that in
the next couple of years, the percent, the Euros that we will put for every case we sell is
the same as the highest ever in Italy.
Dimitris Lois - Coca-Cola HBC AG – CEO
So add your gradual investment year on year reaching to the highest ever in Italy. Does
that answer your question?
Andrew Holland – Societe Generale
Well obviously not, no.
Dimitris Lois - Coca-Cola HBC AG – CEO
Can we help you more with that?
Andrew Holland – Societe Generale
Could you tell me what the highest level was that you’re going to get it up to?
Dimitris Lois - Coca-Cola HBC AG – CEO
At this stage, since we are talking about a multiyear initiative working with our partners
in growth, I would prefer not to give you the maximum. But as far as the increase is
concerned it’s a considerable increase, considerable increase. Sorry for not giving you
more.
Andrew Holland – Societe Generale
So 1% a year or 2% a year?
CCH – Italy Field Trip
3 June 2014
Page 9 of 18
Dimitris Lois - Coca-Cola HBC AG – CEO
Well in our world considerable increase is not 1% per year, so it’s more than that.
Andrew Holland – Societe Generale
Okay, we’re getting there.
Dimitris Lois - Coca-Cola HBC AG – CEO
We’re giving you a little bit more colour. As you heard there were brands that we
haven’t been supporting at all, and starting with the reference that was made on water,
then also Sprite, that has been you know very - responding to initiatives. I think it was
obvious that Kinley is playing and will continue to play. Also we are far more aggressive
with Fanta and I haven’t even touched the oxygen yet.
Evguenia Stoichkova – The Coca-Cola Company - Operations Director, Italy
Maybe I can provide them a little bit of granularity on the plans. Even within the crisis
time we made sure that we have the right level of investment behind Coke always. So if
you look at the marketing investment behind Coke it has been consistent in Italy,
relative or absolute.
What we need to do is to leverage our portfolio. So what we are trying to do is to add on
top of that, more investment on Fanta, investment on Sprite. Now if we are to really
transform tea for example next year, it’s a separate project altogether which is going to
come with a bulk of investment for the tea incrementally on top of the other. So there
are different building blocks, and I was sharing with some of you outside as well our long
range exercises have been to try and phase that properly in the next three to five years,
because as you understand we can’t do all of this in one year at once. So we need to
phase it properly.
Dimitris Lois - Coca-Cola HBC AG – CEO
If there are any other questions outside of Italy, definitely we will be happy to answer.
Andrew Holland – Societe Generale
Sticking with Italy, so I'm just obviously trying to think through what the implication of
this is for your country margin and the regional margin. Can you start by telling us
CCH – Italy Field Trip
3 June 2014
Page 10 of 18
whether your country margin is above or below the regional margin, and whether the
implication of what you’re saying is that we should be modelling a reduction in that
margin?
Dimitris Lois - Coca-Cola HBC AG – CEO
No, you should not be modelling a reduction. We invest to have return and we believe
that that’s the right thing to do and the right investment. The second is that we
strongly believe that the plans we have are excellent plans across the board. And it’s
not only oxygen, it’s also Nestea and water. So with this investment, if you see that
over a two, three year period, definitely this is not going to affect negatively the margin.
The second is Italy has contributed to the margins.
Andrew Holland – Societe Generale
Is contributing to the margin?
Dimitris Lois - Coca-Cola HBC AG – CEO
Correct. To the group margin, yeah. That’s your first question, isn’t it?
Andrew Holland – Societe Generale
Yes. So it’s above the average for the …
Dimitris Lois - Coca-Cola HBC AG – CEO
Yes.
Andrew Holland – Societe Generale
And it’s going to stay there despite these increased plans.
Dimitris Lois - Coca-Cola HBC AG – CEO
Yes.
CCH – Italy Field Trip
3 June 2014
Page 11 of 18
Andrew Holland – Societe Generale
Okay, let’s widen it a bit further.
Dimitris Lois - Coca-Cola HBC AG – CEO
I like this modular approach.
Andrew Holland – Societe Generale
Across the rest of the region, so looking elsewhere in your developed region, do you
have similar plans to the ones you’re describing for Italy?
Dimitris Lois - Coca-Cola HBC AG – CEO
Similar plans in terms of?
Andrew Holland – Societe Generale
Of marketing and increasing marketing spend?
Dimitris Lois - Coca-Cola HBC AG – CEO
Yes we do.
Andrew Holland – Societe Generale
Everywhere?
Dimitris Lois - Coca-Cola HBC AG – CEO
Well Italy being I believe, in the established markets, one of the biggest opportunities for
the reasons that we have been discussing, starting with per capita. And then obviously
what the team has been showing is consistently growing share. So two pillars, and I'm
CCH – Italy Field Trip
3 June 2014
Page 12 of 18
referring to sparkling, it’s not only the size of Italy but the opportunity of Italy. So Italy is
definitely the number one priority. And the answer is yes, we do have plans with varying
degrees of aggressiveness in terms of investments behind the rest of Hellenic, yes.
Andrew Holland – Societe Generale
Thank you.
Edward Mundy - Nomura
I think you've got coverage of about 90% of Italy, and Sicily is the part that’s
outstanding. I'd appreciate any commentary on how you look at that opportunity, if
that’s something you’d consider over the next couple of years.
And secondly, just on the per capita consumption, the total sparkling category servings
of 166. I mean what’s the white sky opportunity for that? I mean do you look at France
at 204 which has traditionally been a very wine and food - sorry wine and water, with
food occasion, or do you see something above that?
Dimitris Lois - Coca-Cola HBC AG – CEO
Okay. First of all yes we have 90%. At this point it’s not on top of our agenda to expand
further. Then obviously on the second one, France is one of the countries being close
and we can see the difference in per capita in sparkling. We’re a bit more aggressive in
looking in Spain. We believe that with what the two dream teams have started the last
few years, because there are a lot of things that we do differently, the opportunity is to
beat France. So we are a bit aggressive here and that’s why we have, also working with
our partners in growth, good appetite of investing behind the brands.
Phil Carroll - Shore Capital
Just on per capita consumption, could you tell us how it’s evolved just - on the sparkling
soft drinks just how it’s evolved over the last couple of years, just to give us a sort of bit
of a reference point?
Also, just given economic conditions remain tough, how do you see the balance
between the two opportunities between growing per capita consumption in sparkling
versus water, just going forward, either short term versus medium term? Thanks.
CCH – Italy Field Trip
3 June 2014
Page 13 of 18
Dimitris Lois - Coca-Cola HBC AG – CEO
Let me sort of give the big picture and then - I’ll start with the second one. From the
presentation obviously there is a very clear focus to move consumers from water to
sparkling. Now this is something that the two teams have started relatively - the last, I
would say, year and a half to two years. And in this a very important initiative, we
needed a very strong ally, and we found this ally with the retailers. So there is a cultural
element. This cultural element right now is being viewed by the retailers. I'm saying
that because we have been working together with the retailers increasing their margin
and the return per square metre. What does that mean? As you have seen we have
almost doubled the displays in the floor of retailers. This is how the culture change
starts. So the answer is yes, absolutely, we’re going to be taking sparkling from water,
absolutely. So that’s point number one. Obviously OBPPC is the right tool and the right
strategy towards that direction.
On the per capita, the last couple of years we haven’t seen an increase in the per capita,
but I believe this reflects two things. The first thing is that what you have been hearing
today on changing the approach and focusing a lot more on the habits, is something
that has started a year and a half, two years back. That’s one thing.
Second thing, the outside environment has been extremely challenging. Seven
consecutive years where the disposable income has been deteriorating. So the
combination of the two has not given us per capita in sparkling increasing. So that’s why
we are working a lot to address the things that are in our control, moving consumers
from water while working a lot more to have our allies, the retailers, supporting the
forward stock. That is changing culture. Additionally immediate consumption. And all
of our efforts from what you have seen in an occasion which is a very important
occasion which is the socialising. I don’t know if -
Sotiris Yannopoulos - Coca-Cola HBC Italy – General Manager
There's one thing I want to add. Yes, the category is declining. Important to know is
that in this category we have been growing share. As you saw that we have been
growing share in the last five years, but also recently last year we have been growing
share. So we have been actually able to do much better than what the overall category
is doing, and that is driven by all the reasons that was just aforementioned. So last year
we grew close to one percentage point of market share.
Tristan van Strien - Deutsche Bank
Just to expand on that gap with Spain. I mean what occasions do they have that you’re
not tackling right now, or is it also much more a volume per occasion aspect to it? And
then which occasions is that?
CCH – Italy Field Trip
3 June 2014
Page 14 of 18
And then just to get back on your days receivables. That minus 12 is quite impressive
days, but where has that come from in there?
And so I don’t know if you can answer this, but on the water brand Lilia, did you link test
that and how did it perform?
Evguenia Stoichkova – The Coca-Cola Company - Operations Director, Italy
Maybe I’ll start shortly with the last one. We didn’t link test this current copy that I have
shown you. We are developing a series of copy that we are going to link test. So the
next one we will, this one we didn’t.
Tristan van Strien - Deutsche Bank
But you just spent 3.5 million on this advert, the new ones coming up or …?
Evguenia Stoichkova – The Coca-Cola Company - Operations Director, Italy
Altogether.
Dimitris Lois - Coca-Cola HBC AG – CEO
Let me go to your first question on Spain. First of all you heard us talking about culture.
Well there the culture is quite different. For many years they have been promoting, they
have been investing behind Coke and sparkling. And yes, there are a few occasions that
they have been driving. One excellent I think - they are a benchmark and we are learning
from them, one excellent occasion is the Horeca occasion. And it’s excellent because at
the end of the day you recruit consumers through maybe the icon. And I'm referring to
the contour. That is also a big part, the socialising event, and for many years Spaniards
have been working a lot on Horeca. Obviously the benefit is not only recruitment, but
this contributes a lot in the revenue per case. And through that they can also finance
the recruitment in the multi serve. So this is something that I believe and that’s my
personal view here, that the Spaniards have been doing a fantastic job overall in the
Horeca.
So a lot to learn.
CCH – Italy Field Trip
3 June 2014
Page 15 of 18
Sotiris Yannopoulos - Coca-Cola HBC Italy – General Manager
And taking over the question on the reducing of our receivables by 12 days. First of all
we have been able to improve our working capital, focusing both on total inventory and
receivables. So we have reduced three days in total inventory, both in finished goods
and in raw materials. That was SKU, productivity, it was forecast planning and accuracy.
When it comes now to the 12 days of receivables, practically we have reduced across
the board with a lot of focus behind fixing credit issues, ensuring first of all that we
tackle those clients, and some tough choices have been also made there. But we have
mostly improved by working closely with our customers. So the biggest part of those
12 days is coming from big retailers which we have been able through JVC to be improve
through our year on year contracts our receivable days with them. I mean there are
important examples like Carrefour or Conad or Auchan we have been doing extremely
good job in the past couple of years.
Andrea Pistacchi - Citigroup
Can you talk a bit about the mix drivers in Italy? I mean how substantially negative is
channel mix here, given the size of the traditional trade and the structural shift to
modern, sort of compared to other markets? And is your OBPPC strategy enough to
offset this channel mix in Italy?
Dimitris Lois - Coca-Cola HBC AG – CEO
I’ll sort of again start with the overall strategy and Sotiris will build further. The OBPPC
strategy is specific, focusing on organised trade and fragmented trade. And this is a
dual approach. So in principle what we would like through that is to capture the
occasions and the most appropriate price points that will drive and address
affordability, while at the same time increase the margins for our retailers and obviously
for the system. So the answer is you cannot address the channel mix via OBPPC only.
You would like within this channel mix to focus on multiple other initiatives. That’s why
we referred, and I specifically referred, on our action behind single serve multipacks in
organised trade. I think organised trade is about 60% in Italy, is that right? 60/40?
Sotiris Yannopoulos - Coca-Cola HBC Italy – General Manager
Yes.
CCH – Italy Field Trip
3 June 2014
Page 16 of 18
Dimitris Lois - Coca-Cola HBC AG – CEO
So obviously with the organised trade growing a lot faster, there is a negative element
that we mitigate though specific initiatives within the organised trade, and obviously the
OBPPC between fragmented and organised trade.
Sotiris Yannopoulos - Coca-Cola HBC Italy – General Manager
If I want to give a little bit more colour all channels are suffering due to the trading
conditions in Italy. Obviously different channels have a different approach so we see
different trends. Within modern trade we see superette and traditional grocery
suffering a bit more. Why? Because there is a much higher strong price competition
there. Discounters are confirmed, as we said all day, as the biggest opportunity, and as
well is take away. I see national key accounts that we are also focusing a lot. And the
specific choices that we are making in OBPPC is trying to address each channel within a
particular way.
Olivier Nicolai - UBS
Just two quick questions. You bought the Lilia brand in 2006. What was the market
share at the time, and why are you waiting for quite a few years now before relaunching
it more aggressively, as you showed us in the presentation?
And just on the adult flavours, you highlighted that the Italian population is ageing. You
showed us a great advert about the new tonic brand that you launched. Are you
planning to acquire some of these new brands like in the bitter category or lemonades?
Or are you trying to just launch these new products organically?
Dimitris Lois - Coca-Cola HBC AG – CEO
Okay, on the first one to be totally honest I don’t remember what was in 2006; I will
come back to you.
On the second, as we presented, obviously Kinley has been doing fantastically well and
we believe that we’re going to leverage that for the adults. There are other initiatives
behind adults, and one of the initiatives that you have seen potentially is supporting also
mixability. And that’s the premium spirits mixability. We believe that this is another
opportunity, and we have a lot of very, very strong brands. Just a point of reference, in
the States 70% of Jack Daniels is being accompanied with Coke. We believe that a very
good, strong element of addressing the adults, and not only, and accelerating the
growth of our brands, is also capturing and capitalising mixability. So that’s on top of
what we are doing with Kinley.
CCH – Italy Field Trip
3 June 2014
Page 17 of 18
And in other markets you heard me saying that we have an unbelievable jewel and that’s
Schweppes. And in Hellenic region I believe, and Jenny will correct me of that, I think we
have the top two in the top four, either the top two or the top three, countries in terms
of Schweppes for the system. Is that …?
Evguenia Stoichkova – The Coca-Cola Company - Operations Director, Italy
Well let’s take out UK because this is the land of Schweppes, but yes we have the top
two otherwise which are Serbia and Bulgaria.
Sotiris Yannopoulos - Coca-Cola HBC Italy – General Manager
Just a note on water. I also don’t remember the 2006 but between 2008 and 2013 the
market share is pretty much stable in 4%, that I do remember.
Evguenia Stoichkova – The Coca-Cola Company - Operations Director, Italy
Why we waited so long? We didn’t wait so long. Initially, after the acquisition, what I
have seen from the numbers because none of us has been I think around in 2006, but
there has been a push initially, and then a sort of deprioritisation and now we are coming
back. So that’s a bit of a curve for a few years.
Charles Mills – Credit Suisse
You offered the chance maybe of talking through your other markets. We’re nearly
halfway through the year, has anything particularly changed either to the positive or the
negative against your expectations across your other geographies?
Dimitris Lois - Coca-Cola HBC AG – CEO
No, Charlie. What we said in our Q1 results still stands. That’s where we are. We work
to see overall the volume trend having a deceleration versus ‘13, and we stand behind
that, that’s what we are working on.
Other than that what we have been sharing with you in Q1, we don’t have something
that materially is different across the P&L.
CCH – Italy Field Trip
3 June 2014
Page 18 of 18
Michalis Imellos - Coca-Cola HBC AG – CFO
And also just to build out on the forex which was one of the big concerns in quarter one;
we do see some signs of stabilisation. Yes indeed in the high range that we explained on
the €90m to €100m impact for 2014, still things with the ruble primarily seem to be now
on a corridor that points out towards some stabilisation.
Basak Kotler - Coca-Cola HBC AG – Investor Relations Director
We’re going to have plenty of opportunity to talk further anyway today and tomorrow.
Shall we give it a break and have a couple of minutes to refresh ourselves and then go off
to the room for lunch?
Dimitris Lois - Coca-Cola HBC AG – CEO
Sure, that’s a good idea. Thank you very much for your attention and questions.
Sotiris Yannopoulos - Coca-Cola HBC Italy – General Manager
Thank you.
Evguenia Stoichkova – The Coca-Cola Company - Operations Director, Italy
Thank you.
DISCLAIMER
This transcription has been derived from a recording of the event. Every possible effort
has been made to transcribe this event accurately; however, Coca-Cola HBC shall not
be liable for any inaccuracies, errors or omissions.