Coca-Cola Europacific Partners Plc (NASDAQ:CCEP) Second Quarter 2022 Earnings Conference Call August 4, 2022 7:00 a. m. m. , Eastern Time
Participating companies
Sarah Willett – Vice President, IR, CS
Damián Gammell – Executive Director
Nik Jhangiani – Chief Financial Officer
Conference Call Participants
Edward Mundy – Jefferies
Simon Hales – Citi
Brian Williams – Bank of America
Charlie Higgs – Redburn
Sanjeet Aujla – Credit Suisse
Bonnie Herzog-Goldman Sachs
Fintan Ryan – JPMorgan
Lauren Lieberman-Barclays
Robert Ottenstein – Evercore ISI
Eric Wilmer – ABN AMRO ODDO
Sarah Willette
Hello. Thank you all for joining us today. I’m with Damian Gammell, our CEO and Nik Jhangiani, our CFO.
Before we begin with our opening remarks on our effects for the current quarter and part of 2022, a reminder of our warnings. This call will include forward-looking comments on control and other statements that reflect our perspective. with the warnings involved in today’s press release, as well as the detailed warnings discovered in the reports submitted to the British, American, Dutch and Spanish authorities. A copy of this data can be obtained on our online page at www. cocacolaep. com. Prepared feedback will be made through Damian and Nik and accompanied through a set of slides. Then we will move on to your questions.
Please note that, unless otherwise stated, the measures presented today will be on a comparable and impartial exchange rate basis. Any expansion rate will also be presented on a pro forma basis. After the call, a full transcript will be sent. be had as soon as you can imagine on our website.
Now I will give the floor to our CEO, Damian.
Damian Gamall
Thank you Sarah. Et smart tomorrow, smart afternoon and thank you very much to everyone who joined us today. In May we celebrated our first year as Coca-Cola Europacific Partners, and I am incredibly proud to have the team and pleased with the progress we have made today. We have built a platform forged for successful long-term growth, focused on creating prices for our shareholders and, of course, for our customers. an impressive point of loss of moneyArrayIn reality, it gives us confidence for the rest of the year. Therefore, I am very pleased to increase our profits, gains and loss of money direction for 2022 today. We are very proud of our strong dating and alignment with Coca-Cola. Company and our other partner brands, such as Monster, are confident in the future.
We’ve focused on managing earnings expansion and gaining better power across the enterprise, while investing for long-term expansion. Especially in our portfolio, our virtual platforms, sustainability and, of course, in our employees to whom I would like to say thank you very much for everything you do for CCEP and our customers. Therefore, while we are aware of the unprecedented macroeconomic and inflationary environment, we are well placed for the time being, part of 2022 and beyond. Now I would like to communicate a little about the categories in which we compete. The market has remained physically powerful and I am very pleased that we have continued to take action, increasing family penetration and, most importantly, generating more price for our customers. We have great projects that our consumers love. and through continuous investment and innovation in brands, products and packaging, our brands continue to help a very strong RGM expansion platform for our customers.
This means that we can continue to get smart costs in the market, even in the most difficult times, because the love, taste and quality of the logo are of utmost importance to our consumers. We continue to innovate by driving enthusiasm and expansion in the NARTD category, which grew by 5% in the first part of the year across our market. This expansion was even higher in the API at around 15%. It’s also wonderful for our clients and I’m immensely proud of the relationships we have with them. Especially in recent years with all the demanding situations that COVID has brought to our company and its businesses. It’s wonderful to see that, once we get back to the first part of the year, we’re the biggest pricing author in retail. channel within FMCG in Europe and via NARTD in API.
In fact, in Europe, we have delivered more than twice as much costs to our consumers as our closest counterpart. We have made structural adjustments to our business over the years, which positions us more favorably in the event of a possible recession environment. As you know, around 40% of our volumes come from the most inelastic outer channel, which is naturally more resilient in difficult times. And in the national channel, we have made ambitious strategic decisions in recent years, obviously targeting cost rather than volume and improving the underlying profitability of the channel. We have gradually replaced our recommended value package architecture to continue catering to other consumers and now, with a bit of luck, we play with a diversity of recommended values and elasticities.
We also continue to actively manage our overall pricing and optimize our promotions through intelligent digitally driven earnings expansion management. Therefore, we see a smart one in our categories and even if we don’t see replacement symptoms in consumption, we are well placed as we enter more dubious times. So this slide will be familiar to you. We have an undeniable but important purpose to refresh Europe and the API and, above all, to continue to make a difference for all our communities and stakeholders. We just concentrate on wonderful people, wonderful service and wonderful drinks. All done sustainably for a much more wonderful shared future. So now I’d like to briefly touch on each of those spaces as we take a look at the first part of 2022.
First of all, for our wonderful employees, the well-being and protection of our colleagues remains our number one priority at CCEP, and our new “Go Home with What You Love” crusade has indeed made the importance of protection a reality in all of our businesses. We had a very strong turnout in our first global virtual engagement survey with a strong engagement survey overall, a wonderful result in what has been a challenging environment as we identified new tactics for running after COVID. This score continues to position CCEP ahead of our benchmark group. In June, we saw fantastic pride celebrations at several of our sites as we advance our “everyone is welcome” philosophy.
Our D references
We may have celebrated New Zealand’s victory last year. We also have the incredible privilege of manufacturing, moving and selling the world’s most productive beverages. Coca-Cola Zero Sugar continued to outperform in all of our markets, increasing volumes by 24%. compared to 2019. Fanta, the launches of new flavors, such as Fanta Raspberry in Australia, and the most recent What the Fanta crusade have continued to excite our consumers. Celebrating its 20th anniversary in our markets, Monster has continued to gain market share through in-store innovation and execution. In the UK, we are pleased to launch costa Frappe’s new diversity in 3 gourmet flavours, Smooth Coffee, Chocolate Fudge Brownie and Caramel Swirl. , so if you come across one, be sure to check it in GB.
And everything we just shared continues to be increasingly sustainable. This is a key purpose for all of us at CCEP, our consumers, our consumers and our shareholders. We need to remain the leader in packaging-free responses and in some of our markets we are testing a new compact freestyle dispensing technology, designed for small trips and in the workplace. And as we continue our adventure towards net-zero emissions until 2040, we have brought lighter necks to our fizzy drink bottles and will soon have one hundred percent of our beverages packaged in returnable glass bottles distributed to all of our HoReCa consumers in France.
To make it even less difficult for our consumers to recycle, as in Germany, we have added new caps to our plastic bottles in Britain. Our progress continues to be recognised and we are proud to be on the Financial Times’ European Climate Statista list. leaders as one of the 400 corporations with the greatest relief in Scope 1 and 2 greenhouse fuel emissions between 2015 and 2020. Therefore, all of them, in total, continued to take wonderful steps towards a more wonderful shared future.
Now let’s move on to the highlights of our functionality in the first part of the year. We continue to win with our customers, and this momentum is evidenced through our consistent percentage of NARTD value, which is highest through approximately 30 basic in-store issues. and online critic. I am very happy that we have achieved volume and earnings above the grades of 2019. The recovery of HoReCa and tourism, as well as a resilient domestic channel led to a strong volume expansion of 13% in the first part of the year. This has been supported through proper execution and, as I mentioned earlier, strong degrees of service across all of our markets. Our continued earnings expansion in management has resulted in a forged earnings expansion consistent with the case, well above pre-pandemic grades.
In the virtual space, our transformational adventure continues and we are still on track to generate around 30% of our profit outside the European home through our B2B portal, myccep. com. Given the dubious prospects and some of the macro headwinds we face, it’s more vital than ever that we continue to focus on power across the enterprise and, as you see here, and that Nik will cover in more detail shortly. And having recently celebrated our first anniversary as Coca-Cola Europacific Partners, I would now like to share with you some of the highlights.
Last year, we described the Amatil transaction as the right transaction at the right time. The more time I spend at the company, the more excited I am about the opportunities ahead. I firmly believe that it was not only the right deal, but truly a lot. The API business had a perfect first part with revenue and profit ahead of 2019 and is developing rapidly with its strategic priorities. We have already made great progress in scaling down our promotional aid in Australia, with little effect on volumes. It is also wonderful for our customers. We provide two-way learning and more productive practices in spaces such as IT infrastructure and knowledge analytics. And our president Sol Daurella and I recently visited New Zealand and Indonesia, which are the benchmark for world-class execution, and we hope to bring the teachings back to Europe as well.
And I’m even more excited about the transformation opportunity in Indonesia, as I recently spent some time there with a full board of directors. And the reorientation of our portfolio is well advanced. We have now virtually abandoned beer and cider in Australia as planned, with most of the revenue coming from the sale of our CCEP-owned NARTD brands, with some brands in New Zealand and Fiji still in circulation. All of this is in line with the long-term expansion plans we continue to expand with. The Coca-Cola Company to better align our portfolio by focusing more on the core business. Therefore, it is clear that the prospect of API expansion is significant and I look forward to sharing more at our capital markets event later this year.
So, on that note, I would now like to talk to Nik to communicate in more detail about finances. I happen to you, Nik.
Nik Jhangiani
Thank you, Damien. Thank you all for joining us today. Let me begin by presenting our financial summary. We achieved a total turnover of 8,300 million euros, a growth of 17%. delivery in a few moments. Our CMV consistent with the construction of unit boxes increased up to 5. 5%. This is due to consistency with commodity prices, as well as concentrate prices, which naturally increase in line with the expansion of earnings in line with the unit currency through our occurrence price model. It is clear that our combination, as you have seen, is much more favourable. in utility, this has also had an effect on the CMV, partially offset by the benefits of recovering our constant production prices given the accumulation of volume.
We delivered a consistent and comparable coin source at €1. 1 billion, up 29%, reflecting expanding counterfeit coins, gained advantages from our ongoing power systems, and our ongoing efforts to manage discretionary spending. Our comparable effective tax rate has increased to 24. 5%, which I will return to later. In total, this translates into comparable diluted currencies in line with a constant percentage of €1. 61, up 32% on a pro forma comparable basis. Generating free money remains a key priority and we achieved an impressive €1. 3 billion in the first part of the year. This is explained through the strong expansion in the constant advantage of withating, as well as through some phases of capEx with some larger projects materializing in the current part of the year.
And as you know, operating capital is still a priority for us and I’m very happy that we were able to generate around €400 million in profit in the first part of the year, with a noticeable improvement in our days in payment and stock in the API as our Bounce allocation is implemented in this region. That said, we expect to see some reversal of running capital gains in the current part of the year, basically due to inventories. It is prudent to build our stock of graded protection on key raw fabrics to ensure continuity of source and shelf availability given the logistical and supply chain constraints we will continue to face.
And despite everything in line with shareholder profitability, we paid a first part of the dividend consistent with the percentage of € 0. 56 that we declared in the first quarter and that was paid in May. As a reminder, this has been calculated as 40% of the 21st year dividend, the interim dividend of the moment part that will be paid with reference to the annualized general payment rate of the existing year’s dividend of around 50%. Now, if I move on to our featured benefits. The strong earnings expansion was driven through an increase in volume and, more importantly, through the continued expansion of our earnings on a case-by-case basis.
Unsurprisingly, the maximum significant improvement was the recovery of our volumes away from home, given that last year’s base was still affected by lockdown restrictions. That said, we’re pleased that our out-of-home volumes have returned to 2019 degrees in part of the year, with rapid consumption traction, a rebound in tourism in several of our markets, and of course, the onset of smart weather this summer in our markets. The internal channel’s advertising momentum continued, reaping benefits from increased housing opportunities, as well as continued expansion in online groceries, with volumes up 7. 5% compared to 2019 in the first part of the year. This means that overall volumes increased by 13% in the first part of the year or by 4. 5% compared to 2019.
Revenue consistent with the unit fund increased by 4. 5% in the first part of the year, up 6% from 2019 levels. This reflects the strong expansion in out-of-home meals, but also reflects our profit expansion control initiatives, with an overall price, package, and positive logo combination. Now let’s move on to OpEx and our power programs. As a reminder, our power savings and the combined benefits announced in advance total €350 to €395 million and we are still on track to achieve this. In fact, some of the benefits of the blend have been learned at a faster rate than we first think, so we now expect to reach about 85% of the savings by the end of this year.
We remain committed to basing our charge base on pre-pandemic levels. And you can see it here. As a percentage of our earnings, our OpEx continued to decline not only compared to last year, but especially compared to 2019. Going forward, we will continue to manage prices very strictly, but, of course, we expect an accumulation in our volume-related operating expenses, as well as some inflationary pressures in spaces such as hard work and transportation. And as we continue to invest for the future, our investment in MSDs has naturally increased to increase our profit expansion given the recovery. So, let me now turn to the updated forecasts for the 2022 total that reflect the current state of the market. First, income. We now expect comparable pro forma expansion of 11% to 13% compared to 8% to 10% in the previous forecast.
This reflects the more productive effects of the first part I just experienced and our confidence in our profit expansion control projects for the rest of the year. The timing starts the year well, helped through the continuation of smart weather, as well as the continued recovery of activity outside the home and tourism. But we remain well aware of the more dubious outlook for the customer as we enter the post-summer period, but I warn you with issues that we don’t yet see symptoms of a renewal in customer behavior and buying habits.
From a modeling perspective, volume expansion will be weaker in the current part of the year, reflecting a more complicated comparison as the out-of-home services channel began to recover last year. And in terms of form, we expect our full year earnings expansion to be more volume-driven, as evidenced by our first part of the year. Recently, additional overall value increases and promotional efficiencies are being discussed and carried out across all markets in the current part of the year to help offset some of the unprecedented inflationary increases. Pressures we are seeing in the industry, namely aluminum, gas, electric power and other key crude materials, adding conversion prices. an effect on their prices for the time being part of this year.
These pressures overall will be much greater in the current part of the year across all of our markets and, as always, we are very surgical in the way we observe those increases in our brands, packages and channels that can remain relatively inelastic employing the robust RGM features we have developed over the years. And we’re not looking to fully transfer those charge increases to our consumers to make sure we continue to handle affordability and relevance to our shoppers and consumers, which is even higher in key markets like France and Germany given increased exposure to the domestic channel. where we want to be aware of this dynamic of relevance and affordability.
As always, we will continue to work with our consumers to optimize our recommended value, diversity, and package architecture, so we can expand our categories and, more importantly, focus on creating shared value. And, of course, we will continue to focus on our own efforts to manage our charge base and ensure continued expansion of earnings and losing money in the future. Moving on to COGS and it’s transparent that those comments are based on what we know today. We now expect the unit box-consistent COGS to increase by around 7. 5%, more weighted towards the current part of the year, as you can see in this chart. This slight buildup from our previous direction of 7% mainly reflects very small movements driven by fuel prices and strength, as well as a bit consistent with concentrate prices impacted by the higher accumulation of overall value expected for the time being, as I just said. .
This is consistent with our occurrence pricing style and, as a reminder, represents approximately 50% of our total sales charge, which is similar to earnings growth. that starts from two and are now covered at around 90% for this year. As for the outlook for 2023, as you know, commodity markets remain incredibly volatile. Please note that conversion charges still represent a part of our overall exposure to raw materials.
And here, we and our suppliers continue to feel the effects of emerging energy costs and will continue to work with them to manage this properly. We are now covered in around 55% of our exposure to raw fabrics for next year at the point of organisation and closer. We will continue to look for the right cause thresholds to further block our exposures based on market conditions. Considering all this, at this point, our most productive estimate is that of the maximum single-digit commodity inflation for the 2023 total. According to our impact on pricing style as we price more and combine in the market in the future.
While it’s too early to provide full direction for 2023, all of those points combined will result in increased pressure on the COGS consistent with the box unit next year, this isn’t expected in the degrees we’ve noticed in 2022. Of course, we will continue to look at all levers to continue to help our profitability with a focus on creating prices for all our stakeholders. And, as always, we’ll keep you posted on that outlook for 2023 in due course.
Now back to our remaining tips. With our cash upgraded in third class, as well as our most recent view of COGS across the unit box, we now expect operating profit expansion of between 9% and 11%. That said, we still expect an overall operating source of cash for the full year 2022 to be above 2019 levels, albeit with a decreasing margin, wonderful good fortune in the context of so much uncertainty and volatility in the market and, most importantly, we show that we are managing all the levers in our P.
We will continue to think again about our dubious fiscal scenario for the rest of the year. Given the strong functionality of our loose money in the first part of the year, we are now raising our steerage for 2022 from at least €1. 5 billion to at least €1600 million, well above our medium-term target of €1250 million. This equates to an existing loose return on capital of 6. 6%. And given this strong focus on raising better money and operating capital, we remain confident that we will return to our leverage target diversity of 2. 5 to 3. 0 times through 2024 while remaining fully committed to our strong investment quality rating. Our balance sheet is strong and we will continue to monitor the markets to identify opportunities to further optimize our debt design and maturities.
So that’s it for me for now. I’ll move on to Damian for a few more comments before moving on to the questions and answers. Damien?
Damian Gamall
Thank you Nik. So, in spite of everything, to recapitulate our key messages. We had a perfect first part with expanding hard currencies, percentage price gains, and our out-of-home volumes in line with 2019. This, along with our continued focus on getting better efficiency, allowed us to increase our year-round targeting for coins, profits, and losing money today. dubious surprise. Finally, we look to the future to welcome you to our London office for our Capital Markets event on November 2nd and 3rd. room.
So thank you very much. Now we would like to open for questions. To your operator.
Q&A session
Operator
Thank you. [Operator Instructions]. The first comes from Edward Mundy’s line of Jefferies. Ask your Array
Edouard Mundy
Good afternoon, Damian and Nik. Monsieur, listen, I perceive that you still do not see a change in customer habits, but compared to previous periods of customer weakness. Can you see how the company is different in terms of portfolio, virtual platforms?, as well as visitor relationships, and then how are you helping you navigate a potentially more complicated environment?
Damian Gamall
Hello, Éd. Oui. Je I think we are very aware and, as expected given the uncertainty, we are doing a lot of research on what is going on with consumers, our buyers and indeed the component of our clients’ strategy. I think some pillars that we’ve built over the years give us the confidence that we can navigate it. I think it’s clear that we’re seeing higher earnings and volumes coming from outside the house. I mean, it was a headwind for us COVID, but notoriously it brings a much more balanced and notoriously a little more inelastic profit flow. So, that’s good. I think we see the grocery store, we’ve been very focused on creating prices for our customers.
And we’ve increased the category, we’ve increased the margin, and I think that positions our lopass as a key pricing driving force for our customers. And I think it’s a smart position to be at a given time, however, it’s transparent that when you’re going through maybe harder times, I think the margin increases in the price of our given time, however, it’s transparent that you’re moving into maybe harder times, I think margin affects the price of our lopass, it is a great asset when we look for the future. In this context and if you move to one of our specific outlets now, I think we’ve done a very smart job by having a much more balanced package architecture, so I discussed this in my ready comments. Therefore, we are aware of having a price in a more balanced package architecture.
Therefore, I commented in my previous comments, we are aware of having costs at all levels of value and therefore our RGM paints have balanced our package and now in retail. And I think it not only allows us to manage promotions more appropriately and efficiently, but they allow consumers to engage with our logos in other degrees of value. I think that’s very important. And then, more or less, the last facet is that our sales of Monster and the Coca-Cola company continue to invest in this category. Far ahead of previous years and I think that’s also vital because when other people make decisions, the logo costs and loves. the logo we have built is of vital importance.
So, think that all this gives us confidence. And that said, we look at the economic challenges of the past, the category continues to perform very well, especially the tail and if there are some moves towards personal etiquette, it tends to be in the taste. So we are aware of this and we will adapt accordingly. So, I think that whole team will allow us to handle that. We haven’t noticed it yet from their point of view and yet it’s transparent that things will be replaced quickly. So we’re ready.
Edouard Mundy
Okay, Damien. Et just as a quick follow-up. I mean, you discussed in part the winds that you have from an execution perspective. If you had to identify what drove the acceleration of the market share from 10 bp to 30 bps in the first part of the year, what would you put it on?
Damian Gamall
Oui. Je, I think you’re even looking inside Sparkling and its and then most of our markets have noticed more powerful Ed functionality, and I think it’s on the back. We continue to invest in 2021 and continue to focus on the long-term fitness of the category. We continue to work well with our customers. And obviously, we have a lot of innovation. I mean Coke Zero, the new packaging has been phenomenal; there’s a wonderful flavor innovation of Fanta; Monster’s diversity continues to innovate and grow. Therefore, there is no single explanation of why and I think it is only the result of a number of other projects over many years; it’s nothing that’s happened this year.
We had a strong sharing dynamic. Obviously, we’ve been injured away from home with COVID, but that time we’ve shifted our business to be more focused on retail and have probably subtleized our approach and execution, which is now reflected in some of the market’s percentage increases. And obviously, we’re very satisfied with that and we’re going to see that continuity here, Ed.
Nik Jhangiani
And I think our visitor service degrees have also been very strong in terms of guaranteed availability on the shelves, which is wonderful compared to a lot of our competitors. .
Edouard Mundy
Super. Thank you.
Operator
Thanks. We will take our next Array. It comes from Citi’s Simon Hales line. Ask your Array.
Simon Hales
Hello, Damian and Nik, Sarah. Nik, maybe one more for you. But can you tell us a little more about your sensitivity about how you, like us, lead directly to other possible movements of the European type of fuel prices?with the accumulation of stocks and I will ask you what the effects are in the current part of the year, as you took that volume from a prospective perspective of the fuel source and the disruption of the supply chain. Can the total movement of 10% or 15% be only when we think about the H2 margin making plans until 2023?
Nik Jhangiani
Hello, Simon. Yes, the query is correct and it is very complicated to give you a transparent position on this. I think if I look at the second part and the fourth quarter in particular, I think we do a couple of things and it’s more about making sure we have substitutes in terms of what we can use. So I think if you take a market position like Germany, we’ve made sure to have contingency plans in place for the availability of herbal fuel or fuel oil. And all of our plans will have dual fuel boilers available or cellular boilers to allow us to have other energy resources to use for this.
I think looking at the 23rd, will also help us see other renewable energy resources in some of our plans and how we’re expanding and expanding our degrees there. Obviously, one of the demanding situations we’re in is a little bit more with our suppliers to make sure they have contingencies and contingency plans good enough that they can continue to provide us with critical ingredients and packaging to make sure we get back to that point to make sure we have the product available on the shelf. So a lot of moving parts I still think we’re well placed, as you’ve noticed in terms of what we’ve been able to offer so far and how we continue to work on what’s probably the most volatile and fragile chain of origin. But as well as the maximum productive we can. I think that’s reflected in our service grades compared to a lot of our competitors.
Simon Halès
they gave it to me AND then just a follow-up. While we move mainly to the current capital movement that stood out, it has now surely exploited some of the benefits of the first part that we have seen. You may have assimilated the loose money flow you said in the first part of the year. Very impressive. Construction and forecasts for the full year are quite limited. Is it really all current capital that depresses the delivery of H2 money flow or anything else in the money flow that we deserve to be aware of?
Damian Gamall
Oui. Je, honestly, it’s really a very small detail. Because it’s literally as if we’re restricting ourselves to existences and what we have to do with them. Some of that is definitely similar to the CapEx phase and I think as we go over our plans for this year, some of the biggest projects are coming at the moment. And that’s one detail. And the detail of the moment is the slight effect on current capital expenditures. But it is clear that this is a very falsified delivery and I will continue to say that even the updated forecasts, remember, are a very falsified figure in terms of loose money flow for the whole year compared to our medium-term target of $1. 25 billion. We are therefore very pleased with the progress that has been made.
Simon Halès
I understood, excellent. Thank you.
Operator
We would take our nextArray Y comes from Brian Williams of Bank of America. Ask yourArray
Brian Williams
Thank you, consistent withator. Hi, guys. So Nik, just a query about I guess the gross advantage or the gross margin and I guess it has two parts. First, in the first part of the year given the strength of volume in volume expansion. a contribution to wisdom costs, I suppose, or to relief in CVMP inflation consistent with the cash unit on a net basis. And then, I guess if we look at the current part of the year, given that it turns out that we’re still in expanding cash with more volume reasons. Is that something that is remembered when we take a look at the upcoming COGS inflation in the current part of the year?So the genuine question is what advantages do you get from volume leverage?
Nik Jhangiani
Well, that’s clearly a big merit when you think about the fact that 15% of cogS is the production component and is consistent on large components and related to the label of large components, it rarely is. So there’s a power detail to that, however, it’s clear that when you regain that volume, it takes advantage of the tailwind again for us from the COGS attitude consistent with the unit box. And this is also the case in the current component. I think that, of course, that does not compensate for the demanding situations that are seen in the broader attitude of commodity inflation. So overall, if you look at the first component of the year, we’re very pleased with what we’ve been able to offer. given our coverage position. It is evident that this will increase in the current part of the year if we think about the tension of the raw fabrics we are hunting. So yes, that’s the short answer, Brian.
Brian Williams
Okay, yes. And Nik, just to stick to that. Just like we think about style: we’re designing next year, does maintenance on the base get that kind of advantage, and again, we don’t know exactly what volume expansion you’d see?like next year. But just looking to figure out whether or not it deserves to stay at the base and we’re designing it or we deserve to think about the option of reducing volumes next year which may be like a margin of wind against crude.
Nik Jhangiani
So, look obviously here and when, without giving a recommendation for 23, we expect expansion and volumes for 23. So, this obviously remains at our base and deserves to be accelerated, but keep in mind, the headwind has there as well as hard work looks at inflation, that’s fine. And we want to continue to focus on power gains to offset the inflation prices of hard work as well as volume expansion. Therefore, it will be those two points that deserve to continue helping in terms of power and volume expansion.
Brian Williams
they gave it to me Well, thank you Nik.
Operator
Thank you. We will take our next Array. It comes from the Charlie Higgs lineage of Redburn. Ask your Array.
Charly Higgs
Hello, Damian, Nik, if you want. I won a consultation on Australia where, in the 3 to 5 years of the pandemic, the market has been quite difficult, both in volume and revenue, the expansion of the case is free. But it turns out that you have already controlled credit volumes and the source of income in a mid-single-digit range. So, maybe you can tell us some of the first things you replaced there, Damian, maybe what you saw in your scale on the site that may be applicable in Europe. And to what extent do we deserve to move in the direction of portfolio optimization downwards in Australia. Thank you.
Damian Gamall
Yes. A very exciting market and I am pleased to be there and say the hand. And I think to pay tribute to Peter and the Australian team that were involved in the acquisition, they had already started making adjustments in the Australian market founded, as you call it, several years of stagnation and lack of expansion. So clearly, when we look at some of those issues that we’ve taken on over the last 12 months, the portfolio came out, I think, as a condiment for volume expansion and, ironically, because it allows us to focus on the categories that are being developed and not be distracted by plays and beer or cider. So, there is definitely a merit in concentration. There is a lineup merit that comes now with Coke Company, as we have executed the sales of the brand.
So now we know very well how to win in flavors, a category in which we fight. And we have taken ambitious steps based on European learnings and based on some of the paintings Peter has made in Australia at levels of promotional value. So, this has obviously allowed us to expand our profits. And with Coke Company, I think Coke Zero in Australia also had a wonderful year. So a number of other drivers of expansion and obviously we’re also reaping benefits from relaxing restrictions from COVID and other people. going out, dining, drinking and forming a large component of the way of life when they are outdoors. So, in fact, it helps. But it is a very sustainable expansion in volumes and profits with which I am satisfied.
In terms of learning, I think some spaces that I really enjoyed in our Australian company are a very clear focus on the position or the advantage in the shares. So I think the team has worked a lot at the channel point looking at the movements charge and it’s had an effect on that, everything we’re looking for for Europe. A lot of wonderful paintings and data analysis and we get advantages from a lot of data stored in the category, not just in our business. I have to like it, Peter and the team have been very segmented into what consumers specifically want, not just what consumers want from stores, however our consumers really want to focus on anything, that’s all we took and Steven and the GB team looked specifically at that for the UK.
So a pretty wide range. Something we’re going to be talking about when we’re in combination in November. I think this will be a topic on Financial Markets Day that we can percentage a little more about the more productive practices that have gone both ways. But I am very convinced that the commitments I have made are many, not only because we are buying a wonderful company, but it is a wonderful year, because it will make Europe more powerful and I think I see this more and more as a realidad. Suite. Et is exciting.
Charly Higgs
Thank you, Damien. Es very helpful. And then, just a quick follow-up for Nik. As for the charge savings resulting from the combined benefits that are occurring faster, is it the way to read that all will be achieved in 2022 and none in 2023?
Nik Jhangiani
All I said was that there is an acceleration and now we expect to have delivered about 85% of the overall profits we announced for the $350 million to $395 million through the end of 2022. So, that’s obviously particularly more of the savings that are coming in 23 and 24, I’d like to push that back in 2023. That’s the plan.
Charly Higgs
Perfect. Thank you so much.
Nik Jhangiani
UH Huh.
Operator
We will take our nextArray And he comes from Sanjeet Aujla of Credit Suisse. Please ask your Array
Sanjeet Aujla
Hello, Damien and Nik. Just a query about fees. Can you give us an idea of the magnitude of the awards you bring to the current part of the year compared to what you did this year?And it seemed like you were taking a bit of a cautious turn towards France and Germany in particular, maybe looking for a more affordable technique there. So, I’d like you to elaborate a little bit on that. Is there anything to do with what you see with the customer today?Thank you.
Nik Jhangiani
Non. Je goes back to the first question. But to your question at the time, no, I was just talking more about the fact that it’s transparent that the loading pressures that we’re seeing across our market and that France and Germany have a larger domestic market compared to some of our other market places, so we just have to be vigilant and vigilant about that. Nothing yet that. So obviously I think the smart news is that we’re looking at some of the markets in Northern Europe as well as Spain and Portugal. We were able to set our charges in July and now it’s on the marketplaceplace. So that’s wonderful news. The agreements that await us now are actually the France that is live as we speak and they deserve to be concluded this month.
And then you have Germany and Britain following that. I would say that the value construct is going to vary in our markets notoriously depending on the combination of channels, the combination of logos, and it will vary as I said and Damian said that we’re not really just taking a constant value construct across channels and across all the logos and packs. We’re very surgical in terms of how we see it based on packages with logos, internals and elasticities and then we come back to the broader comment about also getting involved in remaining affordable and applicable to our consumers and buyers. I mean, the smart news is that I think we’re an affordable product that clearly has strong logo values, a strong love for the logo, and in the end, taste and quality are vitally important, rarely are. Therefore, we remain very excited about the category in general and the strength of the category and what we have noticed that the package falls in terms of the continued functionality of the category. And so, that’s where we are.
Sanjeet Aujla
Super. Et just a quick follow-up of Indonesia. And obviously there were some phases between the first and second quarter in terms of the Ramadan calendar. But can you give us a concept of the scale of the portfolio that you’re simplifying and eliminating, what effect has that had?
Damian Gamall
Oui. Je, to be honest, had a bigger and faster impact than expected. So, I think we’ve obviously aligned ourselves with two main categories; Sparkling wine and tea. I think what we saw during Ramadan and it really continued, after Ramadan, is that it allowed a sales force and a supply chain and really our consumers to align with two categories, where we think we were given the strength of the brand. This simplifies our business a bit and frees up the supply chain to cope with this peak around Ramadan. Clearly, a long-term purpose is to minimize the peak because we have built a larger company outside of Ramadan. it’s the strategy when I work with local groups and the Coca-Cola Company. So it added up to an average effect and ran faster than expected. The local team did a wonderful job.
I think our consumers perceive this because for many years they have noticed that we try to compete with several categories with very limited success. And now I’m starting to see the expansion of Sparkling and obviously when you look at the Sparkling category and the margin. the design for them is also more attractive. So we continue to focus on that, but most of the paints are already made and already on the market. the opportunity to invest not in six categories but in one category of Sparkling Wine, and then in the tea moment. So, yes, it has been a huge driving force of our progress in Indonesia. And as I said about myself and Nik, we were there and we made wonderful purchases from the groups and from our consumers. And because of that, they executed it faster than I thought. So it was a wonderful surprise.
Sanjeet Aujla
Thank you very
Operator
We will take our nextArray Y comes from Bonnie Herzog of Goldman Sachs. Ask yourArray
Bonnie Herzog
Hello thank you. Hello World. I just hope you can communicate about any adjustments you make to your value limit under pressure to ensure greater accessibility for consumers, under all stresses. I’m curious about how temporarily you can put it in your wallet and maybe how long. you want for those things. As we think about the middle of this moment, how we think about the evolution of your mix, any key calls the region founded on that outdoors. Thank you.
Damian Gamall
Hi Bonnie. Yes, I mean, it actually goes back to what I talked about. I think over the years we’ve created a much broader package, I mean a portfolio of B brands in retail where, if we start to see that the tension would be there, it’s obviously more retail. So, I think it gives us the existing SKUs on the shelves and if you stop at one of our outlets through CCEP, you’ll see our branded packaging architecture that represents premiumization in terms of glass, multipack, to offers for more value-conscious customers around giant 6 x 1 1/2 multipack in PET or multipack. So what we’ve noticed in COVID is that our business has turned a lot more to retail, so we’re going to see a lot more momentum for multipack cans and evidently it’s a package that, if we look at the customer, becomes more value-sensitive.
It’s conceivable that we would replace our promotional orientation with our consumers and draw more on some of those pricing packages. The good news for us is that the price packages are now at a point of decreasing reduction and in fact they would have noticed it 4 or five years ago. , in Europe we have done the same thing now and in Australia. Thus, we can continue to offer price and margin to our consumers. And I think that’s imperative and also for our shareholders. In terms of deadlines, and it’s pretty flexible once they’re on the shelves, so I think we’re in a smart position. This can range from 4 to 12 weeks, depending on the visitor you’re talking to, so we’re pretty flexible. We don’t see anything significant. replace and we are already entering the time part of the year.
Some have been very strong. Once we get to Christmas, it will be the next big peak of our business. As long as our portfolio has a tendency to evolve towards larger packaging, as other people enjoy Christmas and celebrate it at home. Anyway, it’s already in our mixing plans. it will be then in 2023, let’s see a significant movement on the customer side towards a higher price until we replace concentrated packages in 2023. But it’s something we can update later in the year.
Bonnie Herzog
Well, I do that. Useful. Thank you.
Operator
Thanks. We will take our next Array. It comes from Fintan Ryan of JPMorgan. Ask your Array.
fintan ryan
Hi, Nik, Damian. Es just a query from me, please. I regret this slight increase in price. But when it comes to the verbal exchange you’ve had lately with customers, are you still sure you can take some other pricing circular from the beginning in 2023. And presumably, in a way, it has taken the trend of fruit on hand and in relation to cost. How do we deserve us to think about the balance between absolute costs, product diversity and promotional intensity, until 2023?And do you see changes in the competitive environment of the competition perhaps more or less more at safe costs in your giant market?
And let’s also assume that, given some of the pressures and costs of energy, will this be a fair assumption that it will be more or more competitive when it comes to prices in Europe compared to the API market if we take a look at next year?
Damian Gamall
Hello, Finan. You did well to answer 4 questions in one. So let me make sure we make sure we answer them. And since I think we’ve already called it, I mean our pricing strategy is several years. So, I mean, I think we’ve done a smart job and we’re still managing costs well for several years. in what we’re going to have to take in 2023 as well. So, we don’t see any clear difference based on some of the topics he’s described, the constant uncertainty about energy costs, the inflation of hard work, which Nik talked about. So, transparently, we control our pricing strategy for several years. As I said in previous calls, would you like the boost with our consumers and with our consumers?
So, I think we’ve been very attentive to the prices we’re taking, the package and the channel that Nik mentioned as motivated through smart data, insights and understanding. price proposal to keep the category healthy and make sure we are increasing the price for our customers. Therefore, this will continue until 2023. Therefore, there will be no changes. We’re investing more in promotion, if you take a look at our numbers. So obviously we came back here with a strong retail business, we have a strong business outside the home, so our promotion is expanding because our volumes are expanding. So, we’ve redistributed our promotion service to smarter promotions and continue to invest in promotional pricing because we think it’s smart for the category, it’s smart for our customers, and it gives us a tool to take care of some of those prospects. headwind of the customer if it comes.
So we’ve been pretty protective of that investment. We’ve tried to keep spending it smarter and you see it in expanding our net unit revenue. But it’s transparent that it’s a lot, as Nik continues to remind us, our sales reps, it’s vital funding and that stimulates our activity, but it also gives us the flexibility for 2023 if we wanted to implement this. And that’s something we’ll continue to see. And from a European and API point of view, the desires are clearly a little different, but we would see similar methods in New Zealand and Australia around our value promotion.
And so, there is not a big difference, which is also, I think, encouraging since we concluded the agreement. So a long and yet obviously more worthwhile answer in 23 and continued investment in the right packages and channels to make sure we continue to push this very healthy category. And we will continue to increase costs for our customers. And if we have to make more important decisions when it comes to promotion, we now have that cost to play with and we will continue to make it smarter. Decisions. Nik, I don’t know if you need to upload something to that. I think you covered it, I’m fine.
Nik Jhangiani
Super. Thank you very much for the multi-question.
Operator
Thank you. We will take our next Array. He comes from the lineage of Lauren Lieberman of Barclays. Ask your Array.
lauren lieberman
Hello thank you. Hello or smart afternoon. And I just need to make another inquiry about managing earnings growth, focusing lately on prospects outside the home. And so far, many have discussed glass and glass construction in the statement. I know this will be partly similar to reopening. But I was curious to know if you can tell us how you have a tendency to replace the composition of packages within the account outside the home. The degree of evaluation and concentration over the past two years, if you think there is any kind of structural replacement in the composition of those perspectives. I think it would be useful and attractive to communicate about that as well. Thank you.
Damian Gamall
It is ok. Thank you, Laurent. Yes, I guess if we go back to the pre-COVID period, if I can communicate like that. So, or maybe even going back to the origin of CCEP. I mean, one of the expansion drivers that we knew in Europe was the combination of home packaging and they saw that we are offering many more features to our consumers and consumers around premium glass and we can offer offers in particular. Here we have big corporations like Spain, Belgium and now New Zealand, where we see and can demonstrate the strength of having a healthy mix of packages outside the home. And we have established passes in our European corporations to continue to reflect this. And we have made investments. So if you move to Germany, we will now offer 4-5 other sizes of glass containers and this investment will extend over several years. We have now moved our entire portfolio to France and RGB.
Therefore, it is transparent to our sales force and what we believe is vital abroad, supporting now with fresher investments, MSDs, promotions and advertisements. Therefore, you will see much more glass advertised now in Europe. And then make sure that the pricing design for our consumers is in place and that the margin and RGB design based on the costs they sell at are very healthy. Therefore, there is a story of intelligent benefit for the customer. Our biggest challenge has been to continue to meet demand. So, to get our supply chain and continue to invest in glass and RGB to meet that demand. So, this will continue as I said, it’s several years and we’re also seeing the return of HoReCa after COVID. now there are some more high-end offerings on the market, which also play with this high-end glass and tin proposition.
And yes, it will be part of our history for several years. It’s because we have a lot of potential for expansion. If you look at you’ve been to Spain, look at our market there and look at other markets, it’s clear that we have a way to go, which is wonderful. I’d like to call GB and I think if you look at our market in GB, Steven and the team have done a wonderful job of providing a transparent solution in GB. So next time you’re in London, we hope to show you some more.
Nik Jhangiani
November, soon.
lauren lieberman
Excellent. Exact, as far as possible. Okay, thank you very much.
Operator
Thanks. We would take our next Array. He comes from Robert Ottenstein of Evercore ISI. Ask your Array
Robert Ottenstein
Great, thank you very much. And congratulations on the perfect results. I was just wondering if you could remind us of your package combination in Europe. So, just a European question in components, the combination between PET, glass, aluminum. And then, I know you talked about this above as part of your discussion with your suppliers, however, can you give us more main points about your trust in the glass source in worst-case scenarios with herbal gas?Thank you.
Damian Gamall
Well, only in that. Maybe I’ll take it. Hello, Robert. He will answer the question of the moment. I mean, I just need to say that the alignment with our suppliers based on the demanding situations has been fantastic. I mean, obviously we’re a great visitor to them. But for several years, we have been working to build more strategic relationships and they have done a great job by following not only the demanding situations they discussed related to prices and energy availability, but also our volumes have been a bit more potent than we had originally anticipated. So it worked well. I will give the floor to Nik just to share a little with you about what this combine looks like in Europe.
Nik Jhangiani
Oui. Et, I think it was only based on Damian’s point. I mean the fact that we were able to continue the expansion that we’re seeing in the other packages. the strength of our relationship with them. So, I think if we look to the future, we’ll continue to feel smart about continuity if it’s because. From a combined point of view in Europe, around 55% of our business is in PET. a reminder, we have more than one component in terms of recycled PET that we use in a number of markets that are moving towards 100% rPET, at least for the cellular component of the company or a market like Sweden is 100% rPET in all its packaging. About 30% in cans and that’s where we’ve noticed a strong expansion. And then about 7% to 8% in the glass and after combining each. see in Europe.
Robert Ottenstein
Formidable. Thank you.
Damian Gamall
And I think, in that alone, Robert. Je mean, it’s the volume.
Robert Ottenstein
Yes she is.
Damian Gamall
So if you need to convert that rate into profits, it’s clear that the numbers of some would replace dramatically, with glass and cans in the specific accounting of a much higher percentage of our profits, which we are hunting internally. So, it’s the volume mix. But on the earnings side, it’s even more balanced, with glass and cans playing a bigger role, which brings me back to a lot of questions about the composition of value or how we’re going to deal with potential customer headwinds and demonstrates a much healthier list of functions for our sales force and customers than before.
Robert Ottenstein
Thank you very
Operator
We will take our nextArray Y comes from Eric Wilmer of ABN AMRO-ODDO. Ask yourArray
eric wilmer
Hi Mundo. Me was wondering if I could talk a little bit about the complicated scenario at European airports, especially in July, with the possible domino effect in August. How do you think consumers will behave in this regard, i. e. cancelling or converting their holiday plans?, and also and what would be the effect on its Iberian and French business in the third quarter, which I think is going quite well during this quarter. Thank you.
Damian Gamall
I think the biggest impact is that other people get to airports earlier.
Nik Jhangiani
You may see that I need to say more about our product along the way.
Damian Gamall
I know, we are. I mean, I think proportionally, what you get is very small compared to the duration of our company. And if you just look at our business in Spain, our business in France, which is probably more tourism-oriented and we don’t see any signs of slowing down. In fact, looking for hotel reservations or places to eat and in all of our major cities is difficult. And even in London, I commented that I was in some of the tourist spaces last night in London and they are absolutely full. So, we detected the noise as a long-term can with all the flights, we found that there were demanding situations in Skip-Bo. Maybe a percentage of other people have canceled their vacations, but they often stay home. .
So maybe we’re recovering a little more volume in Holland and our Netherlands and a little less in Spain. But overall, it’s on the edge, actually, and it’s pretty marginal when you look at other people’s volume of movement. And if we look at the tourism figures and in all our incredibly strong markets. Clearly a little less than classical Asia, so it will probably be a credit for next year if it reopens a little more, but in fact we don’t see any dramatic effect on another that probably a few other people complain about the signs of protection. But I think it’s going to be that way. As you said, in fact, in the third quarter, it is likely to extend into the end of the year, as airports continue to face dramatic demand. And again, no curtains on our workforce.
Nik Jhangiani
Non. Et I think our business sets have smart visibility of at least six to eight weeks in terms of order flow and have no real effect on what we see. expansion at least throughout the summer.
eric wilmer
I get it, it’s very useful. Thank you.
Operator
Merci. Je I would now like to turn to the convention with Damian Gammell for his closing remarks. Damien, please go ahead.
Damian Gamall
Thanks a lot. And once back, thank you all for joining us. And I would like to conclude by saying once again a big thank you to all my colleagues at CCEP for delivering what was, as you heard today, a first half. I would also like to thank our consumers for their partnership as we continue to grow in this category and business. And since we talked a little bit on the call, I need to warmly call and thank our suppliers who have obviously mobilized to fulfill a more powerful call for in a more volatile environment and keep our airlines running.
So, another big thank you to our suppliers. Yes, as I wrap up the call, I am incredibly pleased and proud today to be able to raise our forecast for 2022. And to have shared with you the opportunity around our company, as well as to look in the first part of 2022, but how we see the year moving forward and the moves we are also taking to make sure that another year 2023 is a success. I look forward to welcoming you, those who will be travelling to register in London for our Capital Markets Day in November.
Operator
And that concludes our convention today. Thank you.
Damian Gamall
To all, a summer. And I hope to see you in London. Thank you all.