Coca-Cola Europacific Companions PLC (NASDAQ:CCEP) Q1 2024 Earnings Convention Name April 25, 2024 7:00 AM ET
Company Individuals
Sarah Willett – Vice President of Investor Relations & Company Technique
Damian Gammell – Chief Govt Officer
Nik Jhangiani – Chief Monetary Officer
Convention Name Individuals
Matthew Ford – BNP Paribas Exane
Simon Hales – Citi
Lauren Lieberman – Barclays
Edward Mundy – Jefferies
Bonnie Herzog – Goldman Sachs
Mitch Collett – Deutsche Financial institution
Eric Serotta – Morgan Stanley
Sanjeet Aujla – UBS
Bryan Spillane – Financial institution of America
Robert Ottenstein – Evercore
Richard Withagen – Kepler Cheuvreux
Philip Spain – JPMorgan
Charlie Higgs – Redburn Atlantic
Operator
Whats up, and thanks for standing by, and welcome to immediately’s Coca-Cola Europacific Companions Q1 Buying and selling Replace Convention Name. [Operator Instructions] I have to recommendation you this convention name is being recorded immediately.
I would now like handy the convention over to Vice President of Investor Relations and Company Technique, Sarah Willett. Please go forward, Sarah.
Sarah Willett
Whats up. Thanks all for becoming a member of us immediately. I am right here with Damian Gammell, our CEO, and Nik Jhangiani, our CFO.
Earlier than we start with our opening remarks and our first quarter buying and selling replace, a reminder of our cautionary statements. This name will include forward-looking administration feedback and different statements reflecting our outlook. These feedback must be thought of along side the cautionary language contained in immediately’s launch, in addition to the detailed cautionary statements present in studies filed with the U.Ok., U.S., Dutch, and Spanish authorities. A replica of this info is obtainable on our web site at www.cocacolaep.com.
Ready remarks might be made by Damian. We’ll then flip the decision over to your questions. Until in any other case said, metrics offered immediately might be on a comparable and FX impartial foundation all through. They will even be offered on an adjusted comparable foundation reflecting the outcomes of CCEP and our Australia, Pacific and Southeast Asia enterprise unit, APS, as if the Coca-Cola Philippines transaction had occurred firstly of this yr fairly than in February when the acquisition accomplished. Following the decision, a full transcript might be made out there as quickly as attainable on our web site.
I’ll now flip the decision over to our CEO, Damian.
Damian Gammell
Thanks, Sarah. An enormous thanks to all people for becoming a member of us immediately.
So to our first quarter. I am happy with how the yr began, reflecting our nice manufacturers and nice in-market execution, all supported by our nice individuals at CCEP. I would prefer to, due to this fact, begin by thanking everybody at CCEP for his or her continued arduous work and dedication to our enterprise, additionally our prospects and our model companions who help CCEP.
So now to take a fast take a look at Q1. We achieved stable top-line development of 5.3%, with quantity development of two% and income per case of three.4%. This displays a extra balanced income development in comparison with final yr to the quantity and naturally value combine. Our volumes replicate strategic selections we made in our portfolio, the biking of robust quantity development in Europe, and an amazing begin to the yr in APS, particularly within the Philippines and U.S. market.
Our variety immediately really makes us a stronger and extra sturdy enterprise, with round 30% delivered by our APS working unit. So given a great begin to the yr and our confidence within the steadiness of the yr, we’re additionally immediately reaffirming our steerage for full yr 2024, which I’ll contact on a bit extra later.
So first on volumes, up versus final yr and versus 2022. Quantity development versus final yr was pushed by APS, up 8.1%. Given the dimensions and the context of CCEP, we are actually offering a bit extra disclosure of Australia and Pacific versus Southeast Asia, as you should have seen in immediately’s launch. The robust momentum in Australia and New Zealand continued over the summer time interval regardless of powerful comparables, biking a robust Q1 final yr, benefiting from industry-wide provide constraints in addition to the final quarter of our strategic bulk water exit in Australia, efficient from Q2 final yr.
Excluding the affect of this strategic exit, underlying quantity for Australia, Pacific would have been broadly flat. And from a model perspective, we noticed good quantity development within the Coca-Cola trademark, Fanta and Monster.
Now I will flip to Southeast Asia. The Philippines had a robust begin to the yr, delivering double-digit quantity development with stable share positive aspects. Though we had been biking our softest quarter of final yr, underlying market demand remained robust. And given our confirmed monitor document of integrating new markets, you’ll not be stunned that the Philippines has transitioned seamlessly into the CCEP household because the deal closed in late February. From a model perspective, we noticed double-digit quantity development in our Coke trademark and stable development in Fanta and Sprite and we additionally launched Monster and Predator within the power class.
Indonesia additionally delivered good quantity development, with the SKU rationalization now full, delivering encouraging Glowing quantity development of over 10% alongside transaction development, albeit supported by an earlier Ramadan festive interval. The current launch of Coca-Cola Zero Sugar and Sprite Zero additionally stays encouraging. And alongside Glowing, we proceed to take a look at the ready-to-drink tea alternative as a part of our long-term transformation journey with the Coca-Cola Firm.
While Europe volumes had been down 1.4%, we had been biking our hardest comparable of final yr. Should you recall, we delivered 5% quantity benefiting from the tail finish of COVID restoration in Northern Europe, Germany and Iberia. We did see a slower begin in what is usually the smallest quarter for away-from-home channel, however we had been biking quantity development of 8.5%, and naturally, the climate additionally performed an element. In distinction, our residence channel volumes grew versus final yr. On a 2-year view, complete volumes for Europe had been 3.4%, and from a model perspective, we noticed quantity development in Coca-Cola Zero Sugar, Sprite, Powerade and Fuze Tea.
Alongside Australia, as I discussed simply now, volumes in Europe additionally replicate our strategic portfolio selections, together with our transition out of the Capri-Solar model, which began in March this yr. These are the appropriate selections, as we proceed to be extra choiceful on the place we need to play for the long-term to make sure we proceed to develop our enterprise each profitably and sustainably. Excluding the affect of those exits, underlying quantity for Europe was up on a 2-year foundation of round 4.1% versus 2022.
Shopper spending has held up moderately nicely. We absolutely perceive that a few of our customers are persevering with to really feel the squeeze. We proceed to concentrate on the wants of our customers, driving nice execution each within the residence and away-from-home channels, and dealing intently with our prospects to stay reasonably priced and related for all of our customers.
We have nice manufacturers throughout a broad value pack structure, which permits customers to entry our merchandise throughout a large spectrum of value factors. It’s important now greater than ever that we proceed to steadiness premiumization for those who search it, with a extra reasonably priced providing for those who want it.
One instance is in Spain, the place we activated a preferred and reasonably priced value level on our iconic 2-liter pack within the residence channel to proceed to drive frequency and family penetration and deal with a few of these price of residing pressures. And in GB, we labored in partnership with Domino’s to activate, with a Pizza promotion, driving constructive outcomes, thereby supporting worth share positive aspects throughout the away-from-home channel.
So our top-line efficiency actually demonstrates the energy of our manufacturers and the resilience of our class. In truth, the NARTD class continues to be among the best performing classes throughout FMCG, rising in worth phrases over 6% in Europe and 18.5% in APS.
I did point out earlier that I am assured about the remainder of the yr and past. We’re constructing on our momentum as we head into Europe’s key summer time promoting season, together with many nice alternatives, as you recognize, to have interaction and excite our customers. Our plans are absolutely in place to leverage the Euros in Germany, the Paris Olympic and Paralympic Video games, and the thirty seventh America’s Cup in Barcelona. So numerous pleasure forward for our customers in Europe.
Transferring now to income per unit case, which was up 3.4%. This displays our continued concentrate on income development administration, constructive headline value and ongoing promotional spend optimization by means of knowledge and analytics. The favorable pack combine additionally contributed to development, led by the outperformance of Monster.
In Europe, our income per unit case was up 5.6%. We proceed to learn from the pricing we took within the second half of final yr in GB and Germany and have already efficiently executed pricing throughout most of our different markets.
In APS, income per unit case was up 0.2%, reflecting headline value will increase, however offset by the geographic combine. This was pushed by a robust quantity development within the Philippines, which is at a decrease income per unit case. For Australia and Pacific, income per unit case grew extra consistent with Europe. We proceed to imagine that with our nice manufacturers, our best-in-class capabilities, we’ll proceed to not less than preserve our broader share of the class.
General, we gained worth share each in-store and on-line in NARTD, and we proceed to create worth for our retail channel prospects inside FMCG and NARTD. For instance, we have delivered over €2.6 billion of worth development over the past 3 years in Europe.
On our portfolio, we proceed to spend money on our core manufacturers and launched centered innovation, all consistent with increasing our portfolio by specializing in the place we need to play for the long-term. Our Coca-Cola trademark carried out nicely, up 2.4%. In Europe, we launched our lemon taste extension out there in each common and Zero variants. Monster outperformed, driving total power quantity up 7.5% on prime of the spectacular 15% development it delivered final yr.
Unbelievable innovation continues to drive recruitment and distribution, constructing on the launch of Monster Inexperienced Zero and the launch of Monster Dangerous Apple and Reign Storm. Our sports activities volumes grew 4.3% regardless of the robust development final yr led by Powerade throughout all European markets. This was supported by nice activation and continued favorable shopper tendencies into the sports activities class. We’ll proceed to construct on this momentum and have an thrilling pipeline of sporting occasions within the coming months to leverage for the model.
And eventually, in ARTD, as we diversify our enterprise to handle totally different want states, we’re constructing on the joy and inspiring outcomes of Jack Daniel’s and Coca-Cola, having now launched Absolut and Sprite in GB, with additional markets deliberate over the approaching quarters.
So now again briefly to our full-year outlook. Given our good begin to the yr, delivering quantity and income per unit case development and our confidence within the steadiness of the yr, we’re immediately reaffirming our steerage for the total yr 2024. We proceed to anticipate full-year income development of round 4%, once more extra steadiness between quantity and value combine in comparison with final yr, our working revenue development of round 7%, supported by our ongoing effectivity applications and our robust free money circulate technology of round €1.7 billion.
Our steerage mixed with immediately’s interim dividend declaration of €0.74 per share clearly demonstrates the energy and resilience of our enterprise, in addition to of our confidence in delivering shareholder worth. We’re nicely positioned for the total yr 2024 and past, persevering with to speculate for the long-term. Our disciplined investments in our individuals, our portfolio, our digital capabilities and naturally our sustainability agenda. You will note a couple of sustainability highlights in immediately’s launch.
To shut, I might once more prefer to thank our prospects, our model companions, and our nice individuals at CCEP, whose arduous work and dedication imply we’re in a position to go additional collectively to ship for all of our stakeholders.
Thanks on your time immediately. Nik and I’ll now be glad to take your questions. Over to you, operator.
Query-and-Reply Session
Operator
Thanks. We’ll now being the question-and-answer session. [Operator Instructions] The primary query immediately is from the road of Matthew Ford from BNP Paribas Exane. Please go forward.
Matthew Ford
My query was on Southeast Asia and the efficiency you have seen there. So clearly, very robust development within the quarter. And that is, I suppose, the primary actual quarter of Philippines and Indonesia, each making a constructive contribution. There was quite a bit occurring there, whether or not it was the early timing of Ramadan, the comps within the Philippines. However I used to be simply questioning for those who might form of choose it aside and say what are you most happy with in these markets? How a lot of the expansion that we have seen in Q1 ought to we be enthusiastic about form of extrapolating ahead into Q2 and past? And the way a lot of that development was form of benefiting just a little bit from form of low-hanging fruit, for instance, within the Philippines? Any ideas you could have there can be nice.
Damian Gammell
Hello, Matt. Thanks. Properly, really, Nik and I are simply again from Indonesia. We had been there final week to spend time within the enterprise. So it was nice to be there after a great first quarter. So clearly, the steerage displays how we see these markets for the remainder of the yr. I do assume it is nice that we might get pleasure from such a robust quarter.
There are a few, I suppose, components to name out. One, Ramadan was earlier. So we did profit in Indonesia from having an earlier Ramadan. And secondly, as I referred to as out in my feedback, we had a weaker Q1 final yr within the Philippines, so the comps had been useful. Having stated that, the underlying momentum in each of these companies is powerful. What I am significantly pleased with is the Philippine integration has gone very well, and the enterprise has carried out strongly, and the workforce feels very a lot a part of CCEP now, clearly our largest market, so a variety of pleasure there. And clearly, we have made a variety of modifications in Indonesia, and we’ll proceed to take action. So we’re nonetheless on a change path in Indonesia.
Our subsequent huge focus is on the tea class. I really feel fairly good that we have centered extra on Glowing over the past 18 months. We have seen that in our outcomes, each by way of quantity and transactions. We’ll now, with the Coca-Cola Firm, take a look at our tea platform. So extra work to do in Indonesia, however clearly glad for the workforce, and significantly, regionally, to see the outcomes that we might ship in Q1. So sure, a robust quarter helped by comps, early Ramadan. However that underlying momentum we have mirrored in our full yr steerage. I hope that helps, Matt.
Nik Jhangiani
So Matt, simply on some numbers to present you a way there. Clearly, you are seeing a lot, a lot larger development in Philippines for the comps, however I believe that normalizes. So while you assume again across the class development being in that circa 7% to 9%, I might say from a income perspective, we might clearly be taking a look at getting again to that at a full-year foundation. And that is very a lot then quantity pushed largely.
After which Indonesia, as Damian stated, an amazing begin with Glowing. We’ll proceed to trace nicely by means of the yr. And you will most likely see comparable ranges going ahead as nicely. However as Damian stated, constructed into the steerage that we have supplied.
Damian Gammell
Which we have held.
Operator
Thanks. We’ll now take our subsequent query. And that is from the road of Simon Hales from Citi. Please go forward.
Simon Hales
So a clear and inspiring begin in Europe for the yr regardless of some powerful quantity comps. I do not know for those who can simply speak just a little bit maybe about how Q2 has began and the way shopper confidence is evolving, as you famous and maybe there may be indicators of an enchancment across the edges there.
And perhaps extra particularly, as we head by means of Q2 and Q3, Damian, you talked about clearly the activation that is coming across the Olympics and the Euros, et cetera. How ought to we take into consideration the affect that may have on your small business? Is it extra of a brand-building train, or is it actually a possibility to drive larger quantity and crucially larger worth development by means of the interval?
Damian Gammell
Hello, Simon. Sure. I believe after we take a look at Europe particularly, a few issues that I would name out. We talked in regards to the comps in our feedback, and I believe we had an amazing Q1 final yr. So I believe that is a actuality. I am actually happy with our unit value per case evolution in Europe. I believe for those who take a look at the expansion that we have delivered on our value combine, I believe that is nice, and it units us up for a stable remainder of the yr from the worth combine, which actually leads again to your form of query round volumes.
So once I take a look at quantity in Europe, it is actually, I believe, two components that I would name out. One, our retail quantity has held up nicely and we proceed to create a variety of worth in retail on-line and in-store. I believe the realm that we have seen been slower has actually been within the out-of-home channel. Clearly, we would anticipate that to select up as we undergo Q2 and into the summer time. A part of that, for these of us residing in Northern Europe, is clearly we’ve not actually loved the spring but. So I believe all people is wanting ahead to brighter days forward and a extra normalized summer time. We’re nicely settled for that. So I believe we’re gaining share in away-from-home. We have some good buyer wins. In order that market opens up, I believe we’ll actually profit.
On the again of that, to your remark, we have got quite a few belongings which can be giving us an opportunity to have interaction with our customers and our prospects by means of the summer time, the Euros, the Olympics. Usually, your first remark is de facto extra legitimate. They’re actually brand-building alternatives. And so they do assist us to usher in new customers, join with our loyal customers, and to form of construct the picture of our Coca-Cola model, each in Zero and common. And that is what we’ll concentrate on.
We do clearly leverage it to get extra space, significantly by means of shows, drive extra activation, extra promo area. And that does profit. However I believe the long-term profit is de facto that connection by means of the model constructing. However we’re clearly centered on leveraging it for quantity and for income as a lot as we are able to. And once more, we issue that in as we glance by means of our steerage for the remainder of the yr.
Operator
We’ll now take our subsequent query. And that is from the road of Lauren Lieberman from Barclays.
Lauren Lieberman
Two separate questions. First, which is just a little bit, I believe, of a follow-on from what Simon was getting after. However I famous the language within the launch assertion. You stated you are sustaining steerage regardless of a dynamic outlook. And so I simply needed to get perhaps an replace on stated dynamic outlook, what you are form of learn is on the patron.
After which while you discuss affordability and managing the portfolio and premiumization versus affordability, I assume, your KPIs, like your measure for tips on how to gauge the place you stand on affordability? Is it transaction development? Is it frequency? Sort of what’s your finest measure for understanding how you might be doing on that metric and shopper engagement with the model. Thanks.
Damian Gammell
Hello, Lauren. You all the time managed to get 2 questions in.
Lauren Lieberman
I’ve like 7. You understand that really.
Damian Gammell
Sure, I do know. So perhaps on the second first. Clearly, we have checked out affordability throughout all of our portfolio. And there is a few metrics that we monitor very, very intently. And I believe you have referred to as them out. Most likely the one which we’re centered on is family penetration. So simply to be sure that we proceed to keep up and develop our family penetration. And I believe that factors to the energy of our model.
As we take into consideration that, clearly, the appropriate pack on the proper value. And I referred to as out within the launch what we have performed in Spain. I believe that was a acutely aware choice and with the Coke firm to regulate our pricing on a 2-liter pack.
And once more, that is all primarily based off a variety of work that we have been doing on knowledge and analytics to grasp extra across the value elasticity of our manufacturers at sure value and pack factors. So we’re additionally very centered on transactions, significantly as we transfer into the summer time in Europe. I believe that provides us a wholesome metric that we’re persevering with to supply extra drinks to extra individuals. And clearly, we’re additionally monitoring quantity. So each of these dynamics result in a wholesome quantity development as we search for the remainder of the yr.
Sure. So just about family penetration, transaction development, after which that finally ends up, clearly, by way of quantity. By way of the macro atmosphere, I imply, there’s a few issues that I would name out. One, the class is extraordinarily sturdy. So after we take a look at NARTD, throughout all of the classes, and I will simply speak to Europe, it stays one of the vital resilient and one of many highest rising classes.
So whereas there’s a dynamic atmosphere, we really feel that the class is holding up very well and it is resilient. We’re gaining share. So I believe that is a metric that we’re all the time acutely aware about. And as we glance by means of that, I suppose what we’re taking a look at is, how does that cost-of-living stress, significantly in Northern Europe, unwind as we undergo the remainder of the yr. And clearly, there’s some macro political challenges that we’re all coping with. So I suppose that is what’s form of driving that dynamic atmosphere. However once more, I believe on the again of a variety of work that we have performed over quite a few years, we’re providing extra packs at extra value factors for our customers than ever in Europe. And I believe on the again of the nice work, significantly in digital advertising that the Coke firm are doing, we see that reference to our manufacturers getting stronger. So that provides us confidence as we glance by means of 2024 and certainly into 2025. In order that’s how we’re seeing it for the time being.
Operator
We’ll now transfer on to the subsequent query. And that is from the road of Edward Mundy from Jefferies. Please go forward.
Edward Mundy
Simply to construct on that query from Lauren. I imply, your volumes are holding up extremely nicely inside Europe and you’ve got nonetheless managed to get extremely robust income per case by means of not simply this quarter, however over the past couple of years. I believe you have traditionally stated that value is just a proportion of that, perhaps 2/3rds of it. How far more is there nonetheless to do on the pack and the class aspect of issues as you take a look at, take into consideration Europe over the subsequent 3 to five years?
Damian Gammell
Hello, Ed. Sure, I believe we have been very choiceful significantly on headline value. In order we take into consideration our form of midterm, we prefer to get to that 1/3, value, quantity and blend. I believe that is all the time a wholesome form of break up to goal for. And clearly, we have seen a bit extra on value and quantity has come again. So we’re pleased with that. I believe as we glance into the midterm and also you take a look at how we’re positioned in Europe, I nonetheless assume there’s alternative on combine throughout our markets for positive.
I believe there’s some actually good class alternatives coming by means of. I believe I referred to as out Powerade immediately. I believe the sports activities class, for those who take a look at how huge and worthwhile that’s for us in Australia, is a chance. Vitality continues to outperform. And clearly, that is a single-serve class. In order that’s a wholesome dynamic into the long run as nicely. ARTD, it is a small a part of our enterprise now in Europe. It is a huge a part of our enterprise in Australia. So we have got actually good insights on how that may contribute to that midterm development algorithm. And clearly, there’s a variety of innovation coming from the partnerships with the Coca-Cola Firm and quite a few different corporations. In order that’s a play.
Additionally, if we take a look at our taste portfolio, it is beneath by way of relative share to our cola. In order that’s a possibility going ahead. So actually throughout all of our markets in Europe, Ed, I really feel excited in regards to the development alternatives. I believe it is going to be extra balanced. I believe we have performed actually good on value/combine. We need to see quantity proceed to be a much bigger a part of that income story in Europe.
And clearly, we nonetheless have inflation, proper? So I believe whereas inflation has slowed down, we nonetheless see the necessity to take headline value. And clearly, we’re choiceful about the place we do this and the way we do it. And I believe the truth that we have made good selections primarily based on actually good insights have supported that quantity in Q1.
So sure, so much to play for within the midterm. After which, clearly, after we think about Philippines, Indonesia and Australia and New Zealand, the place the class is much more sturdy, I believe it helps that midterm outlook that we have guided to. Thanks, Ed.
Operator
We’ll now take our subsequent query. That is from the road of Bonnie Herzog from Goldman Sachs. Please go forward.
Bonnie Herzog
I had a query in your acquisition of the Philippines. Simply curious for those who might speak just a little extra about the place issues are surpassing your preliminary expectations, I assume, for the deal up to now? After which perhaps the place issues have been just a little bit more difficult than what you guys anticipated? After which, lastly, might you speak just a little bit extra about how accretive this could possibly be to each the highest and the underside strains? Thanks.
Damian Gammell
Hello, Bonnie. I will take the primary couple, after which I will ask Nik to only touch upon how accretive we see it. So clearly, we’re actually happy. So I believe on a really form of strategic degree, I believe it is bringing a unique dynamic to CCEP. Clearly, it helps a much bigger footprint in Asia Pacific and also will help our Indonesian enterprise as a result of we see a variety of learnings that we’re taking from Philippines again into Indo, and, clearly, from Indo again into the Philippines.
I believe what’s continued to excite us is the model energy within the Philippines and the model love of the customers. We now have an amazing group there, which they name themselves the Tigers. So extraordinarily passionate in regards to the enterprise. And that is been one thing we noticed pre-acquisition, however has continued to impress us and a ardour for execution. An incredible refillable enterprise. So an enormous a part of our quantity there may be refillable. And I believe that is one thing that we’re embracing and persevering with to be taught from.
From a difficult perspective, we’ve not actually seen something totally different to what we anticipated entering into. I believe we are able to add some extra worth round a few of the key account work that we have been doing each in Europe and in Asia Pacific as key accounts. And the trendy commerce continues to outpace development in Philippines consistent with most markets on the market. We proceed to spend money on that enterprise on provide chain, the place we see we are able to add worth by way of not simply capability, but additionally our customer support ranges.
And clearly, it is a market that we really feel over time we are able to additionally take a look at totally different classes as nicely. And that is some work we’re doing each on power, we have simply launched with Monster and Predator. So we’re enthusiastic about that. And clearly, ARTD is a play there as nicely. So so much taking place. However I’ve to say actually happy with the way it’s gone. Nice management with Garreth, our CEO there and the workforce. And clearly accretive. And on that be aware, I will go it to Nik to only share a little bit of colour on that.
Nik Jhangiani
Sure. So I believe, Bonnie, Damian has touched on a variety of the weather that give us a variety of confidence in that market. So clearly, for those who go to my earlier remark, we see that market from an NARTD perspective proceed to develop in that 7% to 9% vary. So clearly, that’s enticing.
Now inside that, we’re very nicely positioned, as Damian stated inside Glowing, which occurs to be over 50% of the class, which is sort of totally different from Indonesia, as you recall. And our per caps proceed to develop. So I believe we have got nice alternatives to proceed driving per caps in glowing, and the workforce is doing a improbable job with that. A part of it comes again to what Damian simply stated, packaging variety. We have a refillable enterprise, however we have additionally gone into PET. However then additionally going much more into the Zero class, which is de facto seeing a lot stronger development.
So in a variety of methods, it is a developed market that continues to have very enticing development alternatives in different classes as nicely. Damian touched upon power, he talked about ARTD. We already selectively play with premium water. We now have a juice enterprise that we’ll proceed to take a look at. We now have a dairy enterprise. And people serve us very nicely while you return to the purpose Damian made across the components of how trendy commerce and retail is rising so much sooner in that market.
So clearly, a top-line accretion, as you’ll think about. And I believe we’ll proceed to watch that as we proceed to take a look at the subsequent few years. However you will notice that coming by means of each healthily from a quantity angle, and over time as we take a look at these new classes a few of these are larger income per case classes. After which some that clearly has an affect on leverage on the P&L.
After which for those who add to that the weather round price base and particularly a few of the commodity challenges that exist in that market, which is sort of a closed market. Clearly, that may give a double profit from the broader leverage from prime line. And hopefully over time decreasing price base on the commodity aspect and what we are able to proceed to do to leverage from the size, which can get us to a lot a better margin.
So we see it on all components being extraordinarily accretive. And I believe the opposite piece you bought to bear in mind is, I see an accretion component by way of nice learnings going into Indonesia as nicely, and issues that we are able to construct as widespread platforms with 2 giant markets of scale — two of the most important populations in Southeast Asia that we now have entry to. So numerous positives on that acquisition from a broader accretion perspective.
Operator
We’ll now take our subsequent query. And that is from the road of Mitch Collett from Deutsche Financial institution. Please go forward.
Mitch Collett
You had very robust development for Sprite this quarter, and I believe you say within the launch that is pushed by nice execution throughout all of your key markets. Are you able to present a little bit of colour on what that nice execution is? And is it one thing you possibly can placed on different SKUs, maybe inside flavors and even translate throughout to Coca-Cola? Thanks.
Damian Gammell
Sure. I imply I believe it follows on from quite a few years of robust development and continued development on our Coca-Cola Zero. After which, Fanta has been an enormous contributor to our development for those who look over quite a few years in Europe. After which with Sprite, we have been working with the Coke Firm on form of quite a few initiatives. So clearly, a brand new visible id and labeling, which we expect has refreshed the look of the model. A extremely, actually good tasting Sprite Zero formulation. And I believe each of these have simply given the model just a little bit extra relevance to customers. That is allowed us to get a bit extra space in retailer, area in our coolers. And the manufacturers responded nicely.
So sure, it is just about a playbook that we most likely got here to Sprite after Coke and Fanta. We all the time felt Sprite was a possibility that we might beneath leveraged significantly in Europe and certainly throughout different markets. Fascinating to see Sprite Zero now in Indonesia. And as Nik stated, we’ll most likely take a look at, as we construct out a Zero portfolio in Philippines, what position Sprite can play. So sure, a mixture of improve of visible id and model imagery and what’s all the time critically necessary in our {industry}, a great-tasting product, significantly on Zero. And I believe that is actually been the driving force of that efficiency. Thanks, Mitch.
Operator
We’ll now take our subsequent query. That is from Eric Serotta from Morgan Stanley. Please go forward.
Eric Serotta
Hoping you would give just a little bit extra colour in your considering by way of Europe away-from-home. I do know you referred to as out the climate, the comps. And to be truthful, it is a small seasonal quarter within the first quarter for Europe. Simply questioning how you might be enthusiastic about the remainder of the yr, significantly given the simple comps within the third quarter. After which, particularly, I’ve heard some studies about some QSR visitors weak point in a few of your markets in Europe. Is that something you guys have seen? And the way materials is QSR for you?
Damian Gammell
Hello, Eric. Sure. So simply again to a few of the feedback that I’ve made. So clearly, we had some powerful comps in away-from-home within the quarter. As we glance by means of the remainder of the yr, I believe actually in Northern Europe the climate performed a task. However as we take a look at the full-year outlook, actually a few of the macros are encouraging. So for those who take a look at a few of the tourism knowledge, significantly for Spain, it seems like it will be a document yr by way of guests, resort bookings. Clearly, we have got nice belongings, which can affect away-from-home, the Olympics, the Euros in Germany. So I believe we’re nicely set to carry out nicely in that channel as we get into the summer time.
It’s truthful to say, although, that, sure, you are proper. On QSR, we have additionally seen with a few of our prospects a slowdown in footfall. It is an necessary channel for us, however clearly it is one in every of many in away-from-home. And I do know that actually as we communicate to our prospects, they’re additionally wanting ahead to a extra sturdy Q2 and Q3 as we head into the yr. So a slight slowdown. It differs by market. Clearly, markets the place we have had most likely extra climate finish of winter and into spring, it is had a much bigger affect.
However as you talked about, it is a small quarter for away-from-home. We actually see that market open up as we get by means of April into the summer time season in Europe. And what I suppose what offers us confidence is, we now have obtained these belongings coming in Europe which can actually drive the away-from-home channel. So one thing we’ll proceed to replace on. Clearly, it is an space that we’re very centered on. We have good share, good functionality. However clearly, we want to see the customers getting out — a couple of bit extra. And we anticipate that to occur as we transfer by means of Q2.
Operator
We’ll now take our subsequent query. That is from the road of Sanjeet Aujla from UBS. Please go forward.
Sanjeet Aujla
Simply following up on Indonesia, please. I believe so you have spoken so much about SKU rationalization ending. I believe you had referred to as out a weaker macro atmosphere by means of the course of final yr as nicely. So simply like to get your broad evaluation on the state of the patron there, but additionally how a few of your current value level modifications is impacting, and for those who’re seeing the type of response you’ll have anticipated to that. Thanks.
Damian Gammell
Hello, Sanjeet. Sure, so final yr was a harder yr on the macros in Indo. We have seen that. We have by means of the election. So we have seen that enhance. We see the class in development in ARTD as nicely. In order that’s encouraging. I believe from our personal perspective, we have actually doubled down on our core Glowing proposition. We’re very pleased with that. We’re significantly pleased with the addition of Zeros into the portfolio. It is most likely carried out higher than we might have hoped for, to be trustworthy, significantly within the trendy commerce.
We now have taken some pricing selections actually in opposition to the affordability alternative in Indonesia. And that is landed nicely, and it has supported, as Nik talked about, robust transaction development, good Glowing development. And we plan to keep up these value factors all through the remainder of the yr as a result of we do imagine it is serving to us recruit and develop the class.
Sure, so total, constructive. As I discussed, we have got a bit of labor to do on tea. I suppose that is our subsequent step. We proceed to refine our route-to-market as a result of we do know there is a huge alternative for extra environment friendly and efficient route-to-market in Indonesia. And we’re doing that as we communicate.
After which, clearly, we’re additionally taking a look at, will we need to broaden our package deal portfolio into RGB primarily based on a few of the learnings out of the Philippines. In order that’s one thing we’re taking a look at this yr as nicely, so so much taking place. It’s a multi-year journey. It is price it due to the dimensions of the prize probably. Should you get to even a fraction of the per capitas within the Philippines, you possibly can form of think about how huge a enterprise we might have there.
So that is what we’re centered on. And to ensure after we get there, which we’ll, that it is a sustainable enterprise each by way of profitability and the atmosphere and it is a enterprise that we could be pleased with. And I believe that is the steps we’re making. However sure, total, a great begin, and clearly, Ramadan helped.
Nik Jhangiani
Sure. And one different knowledge level I might simply add from what Damian stated across the shopper is while you really take a look at the market, there may be going to be continued spend being launched given authorities potential modifications with the election. And that is all the time a constructive to proceed to spice up shopper confidence. In order that alongside all of the work that we’re doing by way of constructing model relevance ought to proceed to assist us, supported by the appropriate affordability technique as nicely. So enthusiastic about that market alternative. As Damian stated, it is a multi-year journey.
Operator
We’ll now take our subsequent query. And that is from Bryan Spillane from Financial institution of America. Please go forward.
Bryan Spillane
Simply needed to perhaps touch upon 2 issues. One, there was some concern, I assume, on our aspect of the world about simply the potential for can prices going up, given the sanctions on aluminum. And I believe even we noticed a downgrade by one in every of my rivals on Monster associated to that. So is that one thing we must be involved about, perhaps commodity prices normally?
After which the second, simply as we’re sitting right here and taking a look at how the primary quarter got here in and the phasing for the yr, for those who can simply replace us, Nik, on simply how we must be enthusiastic about the phasing of our fashions first half, second half, please.
Nik Jhangiani
Okay. So we’ll take that one first. Phasing very a lot, bear in mind, goes again to the comps, and it is just about Half 1 weighted comps that we are going to be biking, proper? So clearly, Q1 was that a lot stronger, however smaller quarter however half yr final yr was continued to be robust. After which I believe as you take a look at what Damian stated, take into consideration the occasions. There will be some constructing as much as these occasions, however these are actually July, August, and the America’s Cup even goes into September, October. So you’ll clearly see a profit by way of Q3. And that is a constructive by way of each the comp from Q3, which was weaker, after which, clearly, these occasions which we are able to activate. So clearly, a way more Half 2 weighted from an angle of significantly quantity and top-line.
So to your first query, we aren’t seeing any of these impacts fairly but. And I believe we’re nicely coated clearly for this yr and going into subsequent yr with a few of our contracts. In truth, we proceed to work with our suppliers to drive for far more smooth tolling association, which really permits for extra visibility and monitoring into use of recycled materials, which clearly is a chance since you’re most likely sitting at circa that fifty% mark, and there isn’t any motive why that may’t rise up to 80%. In order that’s a constructive. But it surely’s clearly one we’ll watch, as a result of generally you possibly can see a contango impact coming by means of or a drift into these markets due to the truth that you have obtained some points within the U.S. So one which we’re monitoring, however nothing quick at this level for us.
Operator
We’ll now take our subsequent query. That is from Robert Ottenstein from Evercore. Please go forward.
Robert Ottenstein
Congratulations on a terrific quarter. A few follow-ups. You talked about, I believe, that you just had some share positive aspects in Europe. You talked about that Sprite is getting extra shelf area, I assume, in Europe. I used to be questioning for those who might elaborate on each of these themes. Any extra particulars in any respect by way of quantity or worth share in main markets, any quantification of that? And any extra particulars by way of the place you are getting shelf area. And by way of form of the shelf area units and the modifications in that, is that one thing that is largely performed now or nonetheless coming into the markets? Thanks.
Damian Gammell
Hey, Robert. So we have seen share positive aspects in Europe in ARTD, and I believe that is approaching the again of a few of the development we have seen, clearly, in our power class, the place we proceed to do nicely, on our core Glowing. We now have clearly referred to as out that we need to proceed to develop, as Nik stated, forward of the market or and that is actually what we have been prioritizing.
What’s driving that? There’s quite a few totally different components within the combine. I might say to your level on shelf share and area, that is a unending journey for us. We proceed to work with our retailers to optimize our share of shelf. We have been, as you recognize, since we created CCEP, very centered on the worth creation story for our prospects. We have seen that persevering with to unlock extra space for us, each on shelf and in cooler.
We’re very centered throughout Europe as we come into the summer time on increasing our share of chilly area. That is actually pushed by two initiatives. One is our personal cooler placements, which is mirrored in our capital. After which, secondly, we have been working very arduous additionally to develop our area in our prospects’ coolers. In order you recognize, in Europe, a variety of our retailers have their very own chilled area entrance of retailer. We take part in that, however we additionally see a possibility to take just a little bit extra space primarily based on our fee of sale and on our profitability.
After which as we increase into classes and take a look at a bolder ambition round manufacturers like Powerade, clearly, power, we need to proceed to over index within the area that we are able to get for these manufacturers as they’re actually rising forward of the class. So so much taking place in that space round area and it helps development on manufacturers like Sprite, as you referred to as out, however actually throughout all of our manufacturers.
Operator
We’ll now go forward with our subsequent query. That is from Richard Withagen from Kepler Cheuvreux. Please go forward.
Richard Withagen
I simply need to return to the Philippines. You talked about a great efficiency on the Coke trademark, additionally the entry within the power class. So a few months into the acquisition, what would be the largest guess for you within the subsequent 1 to 2 years and why?
Damian Gammell
So clearly, to maintain up the momentum is certainly one in every of our huge bets. As we have referred to as out, we had an amazing quarter. However clearly, it has been a robust Coca-Cola enterprise for a few years. So beneath that, we obtained to stay reasonably priced. So I believe supporting our RGB enterprise is an enormous guess. And we’ll proceed to work with our groups by way of effectivity round our provide chain, ensuring we have got the appropriate glass float in place. And I believe we referred to as that out after we acquired the enterprise that we did see a step-up in our capital on the again of supporting our RGB. So positively affordability.
Inside that, broadening that affordability into new classes like Zero, as we talked about earlier. After which, clearly, we need to proceed to take a look at how we are able to help the bottom-line development and margin. We checked out a stronger enterprise in a few of our extra worthwhile packs like PET, classes like power, which we have gone into. So actually balancing that affordability and prime line development with a backside line focus as nicely. In order Nik stated, it is going to be accretive each prime and backside line to the enterprise. So broadly, the areas is so much behind every of these as you possibly can think about. However that is actually what we’re centered on with the workforce for the time being.
Nik Jhangiani
Sure. And I will simply add yet another to that. I believe we have referred to as out, Damian has picked it up on a few feedback. However I clearly see that there is an accelerating development within the trendy commerce. And that is the place we are able to herald a variety of capabilities. And actually, we have already got a brand new one that’s already joined the workforce for contemporary commerce. World-class key account administration, joint enterprise planning, et cetera, which actually lends nicely to serving to construct that enterprise out at a sooner tempo. So I might name that as one extra huge guess that we might be taking a look at.
Operator
We’ll now take our subsequent query. That is from Philip Spain from JPMorgan. Please go forward.
Philip Spain
I admire the feedback you have made about optimizing your promotional spend, however simply needed to grasp for those who’ve seen any step-up in promotional depth out of your friends or rivals out there? In the event that they’re behaving rationally? After which, if they’ve stepped up their promotional depth, the way you’re planning to reply to that?
Damian Gammell
Hello, Philip. I imply, all the time you see totally different rivals behaving in another way. I believe we’ve not seen any dramatic huge improve. I believe we have seen, on a distinction by market, I might say in GB most likely just a little bit extra, actually on the again of a few of the new branding that we have seen within the market from one in every of our rivals.
General, I might say our promotional frequency and depth has held up. I believe we’re utilizing it a bit smarter on the again of a few of these knowledge and analytics. We most likely have a broader pack promo providing out there, and we see that benefiting us. So sure, I imply rational is all the time an fascinating phrase, so it relies upon the way you outline rational. However I believe total, for those who take a look at the class NARTD and Glowing, broadly you are seeing good income per case development for the {industry} year-on-year. After which beneath that, clearly, that is supported by a promotional technique. Sure. So nothing structurally altering, however it will possibly differ quarter-to-quarter. And that is most likely what we’re seeing extra of to be trustworthy, Philip.
Operator
Now we now have yet another query immediately. Our final query is from the road of Charlie Higgs from Redburn Atlantic. Please go forward.
Charlie Higgs
I’ve obtained one simply on the portfolio, please, and the way you feel about that. We would seen fairly a couple of SKU trims and exiting water in numerous markets. Now you are comparatively pleased with the portfolio because it stands, and is there perhaps scope so as to add extra? I do know that Coca-Cola Firm has been speaking about scaling a few of their bets. They purchased Physique Armor. You’ve got been talking fairly positively about sports activities drinks immediately. Is there perhaps room for Physique Armor in any of your markets? After which, if I might simply squeeze one in. Have there been any new updates on the London itemizing modifications? Thanks.
Damian Gammell
Sure, an amazing query. First, I will speak in regards to the portfolio. So I believe we have made proper selections throughout quite a few classes, I suppose, significantly water, the place we have over a few years exited the majority water and low value-added. We proceed to place stress on our enterprise to simplify our SKUs on our core glowing vary. I believe we did so much within the final variety of years, however I believe it is an space that we are able to proceed to investigate and drive a bit extra effectivity.
I believe that is critically necessary to do the second a part of your query, which is de facto to take a look at different classes or manufacturers that we are able to add into our portfolio. So a few those who we’re pleased with is clearly Powerade. We proceed so as to add so much in power, and we proceed so as to add on our core, significantly flavors on cola. And we have got quite a few out and in activations on Fanta. So creating area for these new manufacturers and variants is vital. So in parallel with including, we have got to proceed to be disciplined round what we’re placing by means of our provide chain.
From a broader class perspective, we’re enthusiastic about sports activities. We’re taking a look at Physique Armor. We constantly have interaction with the Coca-Cola Firm to take a look at international innovation and what might land nicely in Europe or Asia Pacific. In order that’s one thing we’ll proceed to judge. I believe as we go into the remainder of this yr, I believe we’re nicely arrange by way of innovation and types. So I believe Physique Armor could also be one thing we would take a look at as we glance into ’25 and past, however clearly, it is an ongoing dialog with our model companions, each Coke and Monster.
On the itemizing, no information, we’re ready like you might be. So I believe as soon as we get an replace, it is one thing that we’ll all form of replicate on. So no information on that for the time being.
Operator
I would now like handy the convention again over to Damian Gammell for his closing remarks. Damian, please go forward.
Damian Gammell
Thanks, operator. And once more, thanks, all people, for becoming a member of us immediately and the questions. So simply to shut out our name, a great begin to the yr with quantity and income per unit case development versus final yr forward and versus 2022. As you have heard from each myself and Nik immediately, we’re really a extra diversified enterprise now, together with the nice market within the Philippines.
We’re assured within the steadiness of the yr supported by an amazing summer time of occasions. So please go to our markets for those who can. We now have so much occurring as we head into the summer time in Europe. So immediately we’re happy that we’re reaffirming our steerage for the total yr 2024. And clearly, look ahead to seeing you and talking to you once more on the half yr. So thanks, all people, and have an amazing remainder of the day.
Operator
And that concludes our convention for immediately. Thanks for collaborating. You could all disconnect.