Earnings Call Transcript - CCEP Q3 2023

Operator, Moderator

Hello, and thank you for standing by, and welcome to today's Coca-Cola Europacific Partners Q3 2023 Trading Update Conference Call. I must advise you that this conference call is being recorded today. I'd now like to hand the conference over to Vice President of Investor Relations and Corporate Strategy, Sarah Willett. Please go ahead, Sarah.

Sarah Willett, Vice President of Investor Relations and Corporate Strategy

Thank you all for joining us today. I'm here with Damian Gammell, our CEO; and Nik Jhangiani, our CFO. Before we begin with our opening remarks, a reminder of our cautionary statements. This call contains forward-looking management comments and other statements affecting our outlook. These comments should be considered in conjunction with the cautionary language contained today as well as the detailed cautionary statements found in reports about the U.K., U.S., Dutch, and Spanish authorities. A copy of this information is available on our website at www.cocacolaep.com. Prepared remarks will be made by Damian, we will then turn the call over to your questions. Unless otherwise stated, metrics presented today will be on a comparable and FX-neutral basis throughout. Following the call, a full transcript will be made available as soon as possible on our website. So I will now turn the call over to our CEO, Damian.

Damian Gammell, CEO

Thank you, Sarah, and thank you to everyone joining us today. I'm very pleased that 2023 continues to be a strong year for CCEP. We've delivered year-to-date revenue growth of 8.5%, reflecting solid growth in revenue per unit case as we continue to drive price and mix through our smart and successful revenue growth management strategy. Excluding our strategic portfolio alignment choices, primarily in Indonesia, but also the exit of bulk water in a number of markets, underlying volumes also grew around 0.5%. Again, we grew transactions ahead of volume in Europe, Australia, and New Zealand. Following a strong first half, we achieved top line growth of 4% in the third quarter with solid revenue per case growth of 9%, reflecting positive headline price across all markets and our continued focus on promotional spend optimization. Favorable brand mix also contributed led by the outperformance of our Monster portfolio. Volumes in Europe declined by 4%. As previously flagged, we were cycling a strong summer with volumes up 12% last year. This was largely driven by the weather, which was mixed across Europe, most notably in G.B., Northern France, and Northern Europe across the key summer months of July and August. We saw improved performance in September, and on the two years back, volumes in Europe in Q3 were up around 7.5%. In API, the solid momentum in Australia and New Zealand continued with both markets and volume growth. This reflected continued solid execution supported by fantastic Women's World Cup activation focusing on trademark Coca-Cola and Powerade. Australia's volume growth was achieved despite strategically listing within our bulk water portfolio as we flagged at the half year. Excluding this, Australia volumes would have been up around 2.5%. This volume growth was offset by Indonesia, with API volumes overall declining by 7%. As highlighted previously, consumer spending in Indonesia remains under pressure, impacted by wider market inflation and the reduction in fuel subsidies. And as you all know, we are in the early stages of our long-term transformation journey in this really exciting market. We've successfully executed our portfolio rationalization plans. We now have a much tighter portfolio focused on winning and sparkling and ready-to-drink tea. This rationalization of a significant number of our SKUs started late last year, and so continue to impact this year's third quarter. As you expect, we're fully aligned with the Coca-Cola company on our brand priorities in Indonesia, a good example being the recent launch of Coca-Cola Zero Sugar and Sprite Zero. A really great opportunity for the future and off to a promising start. Beyond the brand portfolio, we're executing our wider playbook. We're currently preparing a new price-pack channel strategy for 2024, incorporating a deeper understanding of the Indonesian consumer sensitivities and affordability. This alongside working on building out new drinking occasions across the calendar. And we are starting to take the right decisions to reengineer both our cost base and route to market to be fit for the longer term, which will be starting to roll out in Q4. Early days, despite all of this change, we're beginning to see progress. We will share more detail on our transformation journey in due course. Now to the NARTD category overall year-to-date. It remains resilient, growing in value terms by 7% in Europe and 9% in API. Within the category, we've delivered value share gains both in-store and online and volume share gains ahead of value. And in Europe, around 75% of households purchased from our NARTD portfolio, up 50 basis points versus last year. We again retained our position as the largest value creator for our retail customers within FMCG in Europe, delivering over EUR 600 million of absolute revenue growth year-to-date. And with NARTD in Australia and New Zealand, we were also ranked #1 supplier in the FMCG Retail Customer Advantage survey results in six of our markets this year. However, we are not complacent. Although consumer spending has held up reasonably well, we fully understand that some of our consumers are feeling the pressure. We are seeing some shifting into retailer brands across a few categories, less in colors and flavors, and more shopping at discounters. This channel has been and will remain a core focus for CCEP where we continue to grow and gain share. Our consumer-centric approach remains focused on maintaining affordability and relevance for all consumers. We have great brands that our consumers love across a broad pack price architecture, which enables shoppers to access our products across a wide spectrum of price points. It is essential now more than ever that we continue to balance premiumization for those that seek it, with more affordable packs for those that need it. For example, in France, we activated additional promotional activity across our large PET zero range of Coke, Fanta and Fuze Tea over the summer months. We continue to invest in our brands, Coca-Cola Zero Sugar being a great example. We delivered fantastic activation for the Women's World Cup, as I mentioned just now, and launched an AI-generated limited edition Coke creations. Volume in the third quarter for Coca-Cola Zero Sugar was up 1% and gained value share of 50 basis points. Monster continued to outperform in the third quarter, driving overall energy volume growth of 12% versus last year. Fantastic innovation continues to help drive recruitment and distribution, including securing Monster and Burger King in G.B. from November. We also launched Monster Green Zero Sugar. This has been well received and is soon to be launched across all our markets. In fact, so advanced are today's low sugar reformulations, I challenge you to try it alongside your regional and see if you can tell the difference. As you know, Jack Daniel's and Coca-Cola was launched earlier in the year and has enjoyed great momentum across a number of markets. In G.B., it is now the #1 value brand in the alcohol ready-to-drink segment. On sustainability, I wanted to share the recent news that CCEP's carbon emission targets have been validated by the science-based targets initiative across all of our markets, including API. This includes both our 2030 30% greenhouse gas reduction and our long-term 2040 net zero target, thus confirming that our company-wide climate ambitions are in line with the latest climate science and crucially in line with SBTi's 1.5-degree pathway. A couple of examples of how we continue to reach our carbon footprint are provided in today's release. On to our great people, earlier this year, I mentioned we were recognized as one of Australia's best places to work for 2023 from over 700 nominated organizations. Last month, we were also recognized as a top employer in Europe by the Top Employers Institute. So I'd like to take this opportunity to thank all of my great colleagues at CCEP for their hard work and dedication to our customers and to our business. Now on to the full-year. We raised guidance with our first half results. Given our strong year-to-date performance, we are very pleased to be reaffirming our full-year guidance. We're also declaring our second half dividend of EUR 1.17 per share. This level of dividend maintains an annualized payout ratio of approximately 50%, representing an absolute full-year dividend increase of almost 10% versus last year. This collectively demonstrates the strength of our business and our ability to continue to deliver shareholder value. For the remainder of this year, we expect the NARTD category to return to volume growth. And in October, we have seen a return to solid volume growth across our markets. We are now focused on executing our exciting plans as we head towards Christmas from the summer season in API to the winter season in Western Europe. Looking now to next year. We remain confident in the resilience of our categories despite some of the ongoing macroeconomic and geopolitical volatility. Whilst it's too early to provide detailed guidance, which we will be providing with our full-year results in February, we do expect our top line growth algorithm next year to be more balanced between volume and price mix compared to this year. And there is much to be excited about as we look forward to 2024. Following the Women's World Cup down under this year, we are excited about leveraging the Coca-Cola Company's sponsorship of big sporting events next year in Europe, again in our markets. The Euro football championships in Germany, the Americas Cup in Barcelona and of course, the Olympics in Paris, last held there a hundred years ago, a great platform for all our brands, but especially parading. From a cost perspective, we are now over 70% hedged for 2024 on our basket of commodities. We continue to work through our plans, so we are seeing significantly higher sugar pricing for next year, in part offset by lower pricing elsewhere. We are excited about what lies ahead. We have fantastic brands in the NARTD category, which we expect to continue to be robust into 2024. We have increasing exposure to the fast-growing ARTD category, and we are already excited about the Absolut Vodka and Sprite coming to Europe early next year. And as you know, we have geographic expansion underway with the proposed joint acquisition of Coca-Cola Beverages Philippines. As a reminder, this will create an even more diverse footprint, support Indonesia's transformation journey while underpinning our midterm strategic objectives. We have been working closely with the Coca-Cola Company as we continue finalizing the agreements. And so we remain on track to close the transaction early next year. We look forward to sharing more in due course. To close, I would like to thank our customers, our brand partners and, again, our great people whose hard work and commitment mean we are able to go further together for all our stakeholders. Again, thank you for your time. Nik and I would now be happy to take your questions.

Operator, Moderator

We'll now take our first question from Edward Mundy at Jefferies.

Edward Mundy, Analyst

So my question is really around, I think you mentioned in your opening comments that you're seeing fourth quarter volumes coming back into growth. But at the same time, you saw a little bit of a shift into own label and not in the discount channel. So is it really a major shift in the consumer environment? Or is it just a sort of slightly sluggish environment? And as part of the same question, could you remind us about your target today versus, say, five years ago as you lean into a potentially weaker consumer environment? And how do you think about your portfolio, your data analytics, and then also your relationship to your key customers?

Damian Gammell, CEO

That was a good one question, Ed. You managed to fit in quite a few. So maybe just back to volume. So yes, so as I called out, I mean, we have seen volumes recover as we come out of the summer. And I think if you look, it's really a Northern European dynamic, and it was really in July and August, where we saw softer volumes predominantly on the back of really poor weather and also in the context of that 12% comp from last year. So I think you got to look at it in and around. We did see volumes recover in September, and we're seeing volumes recover again in October. So from that perspective, that gives us confidence on our volume outlook for the rest of the year and our guidance. Turning to retailer brands. We've continued to gain share. So we do see retailer brands growing, but we're also growing and growing faster in terms of gaining share in value and volume. So again, nothing surprising relative to some of the consumer pressures that we've seen in terms of cost of living and inflation. And we did, on the back of some of the tools that you called out, benefit from having a much broader pack offering in retail than we would have had five years ago, a much better understanding of where the consumers and shoppers who are feeling that pressure live and shop. So we could really make sure we could offer the right pack price architecture. And that's been a pretty consistent theme since really the middle of last year. And I think that's allowed us to grow our household penetration, which we've done in Europe, and it's allowed us to grow share. So as we've talked about previously, we have really been mindful of reflecting the pressures on some of our consumers to our pricing and promotional calendar, and that's held up well. So despite that bad weather, we did gain share. The category is growing. So we're very pleased with that. And I do think through our investment in technology, which has been a multi-year journey, it has given us access to those insights and that data analytics to allow us to continue to tailor our promo pricing and strategy smarter. And as I mentioned, just to come back, I think we have seen a different volume dynamic in Europe in October and September. So that's obviously something we're pleased to see.

Operator, Moderator

We'll now move to our next question. This is from the line of Lauren Lieberman from Barclays.

Lauren Lieberman, Analyst

After Ed asked all the questions, I'm not quite sure what to say. One thing I noticed in the release today was some positive commentary on the non-CSD part of the portfolio. The strong growth in brands like Fuze, Monster, and even the Jack and Coke launch in G.B. stood out. I'm curious, in this slightly tougher consumer environment, if you could share insights on the resource allocation towards non-CSD categories. Do retailers show more or less interest in these higher price point items? Any thoughts on resource allocation and focus across different segments of the portfolio outside of CSDs would be appreciated.

Damian Gammell, CEO

I believe that when we talk to our retailers across all markets, the enthusiasm for the sparkling category has remained strong. The value it brings to us and our retailers continues to be remarkable. The positive response in Australia, following the changes we've implemented after the acquisition in New Zealand, indicates a very healthy sparkling and non-alcoholic ready-to-drink business. From a resource allocation standpoint, whether it's with the Coca-Cola Company on Fuze or with Monster and their offerings, we aim to expand and diversify our portfolio, which is reflected in our investments. We have been strongly investing in the Energy category for the past couple of years, and this trend continues into 2023. Our innovation pipeline is excellent, with promising early results for Jack and Coke, especially in Great Britain, which represents a new segment with favorable margins for us and our retailers. There's significant interest in our alcohol-reduced ready-to-drink offerings, including the potential launch of Absolut Sprite. We have also been selective in our strategy, exiting certain categories like dairy to concentrate on Fuze, particularly in Western Europe, where the tea category offers better margins and relevancy. Therefore, we will keep innovating in tea. Looking ahead beyond 2023, we plan to continue investing in our sparkling portfolio, especially in sugar-free options, expand the Energy category with Monster, capture more market share in the Tea category in Europe with Fuze, and selectively introduce our alcohol-reduced ready-to-drink products across Europe. We are also keeping an eye on opportunities in Australia and New Zealand. These four focus areas give us confidence in our midterm growth strategy, guiding our resource allocation.

Manik Jhangiani, CFO

And I would just add one more, which is advanced hydration. You've seen Aquarius in Spain, Lauren, that continues to perform very well and Powerade out in Australia and New Zealand and bringing back a lot of those learnings into Europe as well, which should be great.

Operator, Moderator

We'll now move on to the next question. This is from the line of Bryan Spillane from Bank of America.

Bryan Spillane, Analyst

I wanted to follow up on the press release mentioning that transactions are increasing faster than volume in both segments. Could you provide more details on this? Is it related to channel mix or are consumers perhaps choosing smaller packs over larger ones due to cost-saving measures? As we look ahead to 2024, should we expect a continued trend towards smaller pack sizes?

Damian Gammell, CEO

Thank you, Bryan. There are several factors influencing our performance. Our single-serve business remains strong in both retail and away-from-home settings, driving good transactions for us and our retailers. Even amid consumer challenges, there is still a significant group of consumers across our markets who appreciate premium options. We're seeing strong performance from our smaller retail packs at a higher price per liter, including mini and multipack cans, which are driving transactions more than volume. In large PET, our affordability packs, like the 1 liter or 1.25 liter, are thriving, especially in the discount channel, supporting the trend of transactions outpacing volume. Looking ahead to next year, we expect a more balanced relationship between volume and price mix. It's important to note that while consumers are feeling some price pressure on single bottles and smaller retail packs, the opportunity for premiumization remains strong, along with a robust away-from-home business that enhances our single-serve sales. All of these factors contribute to our growth in transactions.

Operator, Moderator

We'll now move to the next question. This is from the line of Mitch Collett from Deutsche Bank.

Mitchell Collett, Analyst

And my question is on COGS. You said that you're 70% hedged for 2024. I think at the stage, you said that the element of COGS, where you were a bit less hedged was sugar. And you also said in your prepared remarks that sugar is one of the inputs that has gone up. So can you give us at this stage, your best estimation of the COGS headwind or tailwind for '24? I think you said that you thought it would be slightly up, and therefore, a slight headwind?

Manik Jhangiani, CFO

Yes. I believe that overall hedge coverage is at 70%, as Damian mentioned in the prepared remarks, which applies to both Europe and API. Specifically for sugar, the coverage is slightly higher, around 75%. However, this coverage will still present a headwind compared to '23 and '22, likely offsetting gains in other areas. As the year progresses, we will refine our estimates and provide more details. It's worth noting that commodities make up about 30% of our total COGS, while other factors align with revenue growth as mentioned. Based on what Damian noted, we expect a more balanced return on volume and rate mix compared to the last few years. On manufacturing costs, although we are experiencing salary inflation, we remain focused on our competitiveness program and have set new targets. Consequently, while there may be some headwinds, we will offer additional insights as we approach the end of the year.

Operator, Moderator

We'll now take our next question. And this is from Bonnie Herzog from Goldman Sachs.

Bonnie Herzog, Analyst

I had a quick follow-up on Bryan's question. Could you clarify if transactions were positive in the quarter and if they accelerated versus Q2? And then on pricing, you recently implemented additional price in Germany and the Netherlands. So could you touch on how that's been received, any pushback from consumers?

Manik Jhangiani, CFO

So to clarify, depending on the market, with volumes down 4%, our transactions were actually lower than that, indicating a decline. The decline in transactions was less steep than the drop in volume. In response to your question about whether transactions were in positive territory, some markets, such as Iberia and Germany, experienced positive transaction growth even though volumes were down. However, this varies across different markets, influenced by the mix of product types. There tends to be more volume growth in larger PET packages, but fluctuations may arise with single packs versus multipacks, based on consumers' purchasing behaviors, including possibly shopping more frequently. This provides some clarification on the matter.

Damian Gammell, CEO

And sorry, Bonnie, your question on pricing, sorry, could you repeat that for me, please?

Bonnie Herzog, Analyst

Yes, sure. Just asking about the additional pricing you put in Germany and the Netherlands recently. So just hoping to hear a little bit of color on how it's been received, any pushback from consumers and quite frankly, thinking about the ability to put through rate next year?

Damian Gammell, CEO

Yes, we are quite satisfied with our overall pricing in 2023 and believe it positions us well for 2024. There are still a couple of customers in the Netherlands with whom we are finalizing discussions, but in all our other markets, including Germany, we anticipate a strong finish to the year in the fourth quarter. The pricing strategies we implemented in 2023 will provide benefits in 2024, especially with later-year pricing allowing us to capture the full-year advantage next year. We are also confident that we will be able to raise prices again in 2024, and we are currently working on strategies for that. We find it important to balance generating value for our customers while remaining relevant to some consumers and shoppers who may be more value-focused due to current economic conditions, particularly in Western Europe. Meanwhile, Australia and New Zealand continue to show solid performance as we approach summer, and in Indonesia, we are beginning to see positive signs in our business, which we are pleased about. Overall, we are in a strong position on pricing as we near the end of the year.

Manik Jhangiani, CFO

To break it down by market, Bonnie, as Damian mentioned, we implemented pricing changes in the U.K. in June, and Germany and the Netherlands will follow in September and October. This strategy positions us well for a full-year benefit. The primary markets where you'll notice pricing changes, as Damian pointed out, are Iberia and France in the first quarter. It's also important to note that our pricing approach will be much more balanced compared to previous years, which is encouraging for managing our customers as well as addressing the needs of consumers who are more value-focused, particularly in the context of current macroeconomic conditions.

Operator, Moderator

We'll now take our next question. This is from Eric Serotta from Morgan Stanley.

Eric Serotta, Analyst

Damian, could you provide some insights on the impact of your recent promotions and how consumers have reacted in those areas where you have increased your promotional efforts? It's clear that your promotional strategies have become more effective compared to previous years. How does the consumer response align with your expectations and past trends? Additionally, you mentioned a shift towards store brands in certain categories. What changes have you observed among retailers in terms of adjusting shelf space in response to this shift?

Damian Gammell, CEO

Thanks, Eric. So I suppose on a fairly top line level, I think the metrics that we're pleased with is we've gained value share. So that promo strategy is leading to a higher share of value in most of our markets, and we've gained volume share ahead of value. So I certainly think in a high pricing inflation environment, you've got to look at your volume because I think that's a stronger reflection of your consumer franchise. And clearly, we want to retain our shoppers and our consumers. And I think we called out that our household penetration has also gone up. So I think they are the two metrics that give me confidence that, that more advanced promotional analysis tools and mechanics are really landing well with our consumers and also with our retailers. And I think getting to your second comment, I think that's continuing to support us maintaining our shelf share or growing it across our retail footprint. So we have seen retailers across many categories allocate some more space. We haven't seen that in beverages. We have seen more focus on leaflets. Clearly, some of our retailers are promoting that as part of a basket of retailer brands, which is normal when you get into times of purchasing pressure with the shoppers. But we haven't seen that impact our space. In fact, we're growing our space on the floor through more displays, more ready-to-sell displays. We've got more listings, particularly in the discounter channel. So we're very conscious of that because we think protecting our space and growing it is critical. And I think as long as we're gaining value and volume share and generating more profit for our retailers, it's also in their interest to protect our brand portfolio because clearly it generates significant value. So we keep a close eye on it. It hasn't changed dramatically in the last six months. I mean, this is something we've talked about coming out of 2022. We were conscious of it. I think we've talked about it on every call, and we've continued to gain value and volume share. And retailer brands have gained as well, but clearly not at our expense. And I think that's the most important thing for us. Thanks, Eric.

Operator, Moderator

We'll take our next question. This is from Charlie Higgs from Redburn Atlantic.

Charlie Higgs, Analyst

I've got a question on Australia, please. And I'm just wondering if you could provide maybe a little bit more color on the Q3 performance. I know you said volumes are up 2.5% year-to-date, which implies a pretty strong performance despite trimming the water brand and a pretty tough comp last year. Just any color on coconut, sugar, how the Sparkling flavors are performing off, they've been repositioned? And then maybe just how you think about Q4 with the upcoming deposit return scheme in Victoria coming in?

Damian Gammell, CEO

Thank you, Charlie. Regarding the second part, I believe we are quite prepared as an industry for the container deposit system to be implemented in the last major state in Australia. We have gained considerable experience, so I don't anticipate any significant effects in Q4. Once we move past this, I feel confident about our position in Australia. Generally, I'm pleased with our Australian business; the adjustments we've made to our flavor portfolio following the acquisition have proven effective. We're gaining market share in flavors, with both the Kirks and Fanta brands performing well. The top-line numbers in Australia reflect our decision to exit very low-value water packaging and brands, as well as bulk water, based on our learnings from Europe. Excluding those, our volume growth in Australia is looking robust, as is our market share performance. Overall, we are well positioned heading into the summer and Q4. Coke Zero is continuing to perform exceptionally well, and we are optimistic about having a successful summer in both Australia and New Zealand. As for the container deposit scheme, I see it as the last major hurdle, and once we get through it, we will experience a more normalized environment as we enter 2024.

Operator, Moderator

We'll take our next question. This is from the line of Simon Hales from Citi.

Simon Hales, Analyst

I wonder if I could just ask you a little bit more about Indonesia, again, Damian. I mean clearly, we know the Q3 volumes are weak, given the SKU rationalization. But could you just talk a little bit more about some of the underlying trends that you're seeing at the consumer end, a number of companies have been flagging some weakness in the consumer in Southeast Asia, maybe less so in Indonesia. But I'd just be curious on what you're seeing there and how you think about the outlook from a consumer offtake standpoint? And just to clarify in relation to that, you mentioned that you are going to be reengineering the cost base in Indonesia starting in Q4. Does that mean that a cost reduction or incremental cost going in or just a reallocation of existing costs?

Damian Gammell, CEO

I definitely never means a cost reduction, Simon.

Simon Hales, Analyst

So do I.

Damian Gammell, CEO

Yes. We are likely slightly ahead of our expectations. In Q3, we implemented a restructuring initiative in Indonesia, effectively downsizing the organization, which was part of our plan. We have developed a transformational strategy for Indonesia, beginning with our brand portfolio. This was crucial because, as we've discussed before, we were trying to manage too many categories, leading to SKU rationalization. Consequently, 70% of our volume reduction in Indonesia has stemmed from that. The remainder reflects the weaker macro environment for consumers, which has impacted affordability due to rising fuel costs and general living expenses. We have seen a slight improvement recently; moving from September into October has shown positive signs, and we expect this trend to continue for the rest of the year. However, affordability will remain a key aspect of our strategy in Indonesia. We are finalizing a new pack price structure for 2024, which will be informed by our experiences in 2023 regarding affordability and the significance of price points. Overall, the macroeconomic outlook for Indonesia looks strong; with GDP and per capita population growth, there is substantial opportunity within our category. This does not alter our mid- to long-term goals; however, consumers have faced a tougher shopping environment this year, albeit improving towards year’s end. Our transformation journey is progressing to its next phase with the implementation of a new route-to-market model, which we believe will better facilitate long-term growth. Following the restructuring, we are excited to start rolling out this new model. We also continue to evaluate different pack formats, including refillable glass, and currently have two lines in Indonesia. We are exploring how to leverage this packaging, which has been successful in other markets like the Philippines, to drive growth. A lot has been happening, and the results in 2023 may not fully capture the extent of the changes our team has made in Indonesia, for which I commend them. The positive news is that we are starting to see these changes yield results as we approach Q4. I'm looking forward to being there in Jakarta next week. Thank you, Simon.

Operator, Moderator

We'll now take our next question. This is from Robert Ottenstein from Evercore ISI.

Robert Ottenstein, Analyst

Two quick follow-ups and then my main question. Just to follow-up, can you be any more specific in terms of Europe, September, October on volumes? I know it's picked up nicely, but can you be any more specific in terms of the volume growth? Also, can you be any more specific in terms of the actual pricing you got in Germany? So those are the follow-ups. And then the main question is, can you please give us a sense to the extent you can, of any new learnings in terms of the Philippines, how that business is looking now? So how as you get it next year, what sort of momentum there is in that market? And with the competitive dynamics look like there? I know you've got an extremely strong position there, but is there a private label? What are the competitive dynamics?

Damian Gammell, CEO

Thanks, Robert. You also did a good job like Ed about getting four questions in. Just on the Philippines, I mean, clearly, we haven't closed that. So I think it's probably a topic that we'll come back to once we've closed. I think the questions you've raised will be better positioned to kind of get into the detail of that once we've closed the transaction. As I said, we're targeting that very early next year. And clearly, we'll give a bit more color on how we see those topics from competitive landscape, retailer brands, et cetera. But obviously, it's too early for us to comment specifically on that. Other than to say what we've said already, we think the Philippines is a fantastic Coke business in Asia and demonstrates a great opportunity for both CCEP and the Aboitiz Group together once the deal closes. So if you can give me a few more months, then I'll come back and happy to get into the detail in the Philippines, but as I said, better to do that once we've got the transaction closed. On the earlier questions, I mean, we're not going to give specific numbers on volume and pricing. All I can say is that we're pleased that we've seen solid volume growth back in Europe, both coming out of September and even more in October. So I think that's good news. And on the pricing, I think we've landed it in Germany, and we feel, as I've talked earlier, it's sensible pricing in the context of our cost pressures, which are real, and we continue to deal with, but also in terms of protecting that consumer franchise and shopper base.

Operator, Moderator

We'll now take our next question from Brett Cooper from Consumer Edge.

Brett Cooper, Analyst

If we look back a few years and look at retail data, it would seem that retailers have taken more price on your products than you've gotten out of those, and that may not be the case in all categories across consumer staples. So I was hoping you could offer some insights into where retailer margins on your products today, if there's any significant deviation by market? And then just any insights into how that positions you into '24 and beyond?

Damian Gammell, CEO

Thanks, Brett. That's a great point. We've observed that in our developed markets, particularly in Australia and Western Europe, as well as New Zealand, retailers have increased their pricing. This has resulted in margin expansion. Although retailers decide their retail prices, this trend has led to several benefits. Notably, CCEP has created significant value for our retailers, evident not just in revenue transactions but increasingly in profit as well. Going back over two years, one of the key factors behind CCEP's success, established in 2016, was recognizing that the Sparkling category in Western Europe needed to grow, which was our top priority. The second priority was to enhance the value we offer our customers. Our pack pricing strategy enabled our customers to raise their shelf prices slightly more than we did, contributing to margin growth. This has positioned both the category and CCEP favorably for growth and focus, whether it’s in-store presence, promotional space, or online visibility. We believe that retailers across all our markets have achieved solid margin percentages for our brands, and they will likely continue to raise prices, remaining mindful of the implications for shoppers and consumers.

Manik Jhangiani, CFO

No. I was just going to say, just building on Damian's point, I think, Brett, it's actually good from an angle that if you then think about what we've been able to do this year is effectively land pricing, and you can see obviously what the impact is when you think about our revenue per case growth without disruption, right, which also says that they realize the margin and the profit and the cash flow from our category is solid and strong. I think as Damian has also said, we manage the spectrum of pricing, including what we do on promo on those that are more price-sensitive packs or ones where the consumer feels the elasticities a little bit more. So I think that's all helping them, and that should actually position us well as we go into '24 as well.

Damian Gammell, CEO

Yes. I think the other dynamic is that we've continued to invest behind the brands with the Coca-Cola Company. So I think if you look at our absolute marketing investment, it's increasing year-on-year, the quality of that, I believe, is improving online and in traditional. And clearly, that's driving more brand relevance for the consumer, and that supports that slightly higher margin for our customers. So I think that investment piece is critically important as well. Thanks, Brett.

Operator, Moderator

And we'll now take our last question. This is from Charlie Higgs from Redburn Atlantic.

Charlie Higgs, Analyst

Damian, I wonder if you could just comment on Germany, I mean, 9% FX neutral growth, the strongest in Europe in the quarter. I mean, the Monster volume is up 42%. Can you maybe just talk about what the team is doing differently there and what the scope is for the Energy drinks portfolio ahead? And then maybe just a broader comment on the category and the pack mix opportunity left in Germany?

Damian Gammell, CEO

Yes. So the German business has had a number of really strong quarters. I think you quite rightly called out Q3, the Energy performance. So just a couple of perspectives. I mean, the Energy category is large in Germany. It's growing. So our share still has an opportunity to get higher, and we've identified that as a key market with our partners at Monster. I think in Q3, you saw the benefit of innovation coming through in Germany. So we have a really strong pipeline of innovation. We've also looked at some of our pricing and our promo pricing, and we've seen the benefit of that coming in Q3. I mean, the numbers are very high in the quarter. I'd probably just look more at the year-to-date numbers to get a better reflection of the trend, which is still really impressive. So we continue to be a great challenger in that category in Germany on the back of innovation. And I think those new price points definitely helped us unlock some more growth and some more share.

Manik Jhangiani, CFO

Yes, just calling out specifically in Germany, clearly, we've benefited from a recovery in the route to market. If you recall, last year, we did have a disruption there. And this goes back to my point. This year, we've landed pricing and actually had no disruption, which is a very positive story. And then we've also been supported by some new listings in Kaufland as well. So both of those are definitely positive drivers of that volume growth in Q3 in Energy in Germany.

Operator, Moderator

And I would now like to hand the conference back over to Damian Gammell for his closing remarks. Damian, please go ahead.

Damian Gammell, CEO

So again, a big thank you to everybody for joining us this afternoon and this morning. And as you've heard from both myself and Nik, another strong year, 2023, for CCEP, very pleased, we're reaffirming guidance. We are continuing to grow our share and volume ahead of value. Our whole organization now is very much focused on the remainder of the year. And as I've called out, we are pleased to see, particularly in Europe, volume growth returning as we've come out of the summer. Really excited about next year, great pipeline of innovation, both in terms of product packaging, but also a year of great asset activation, particularly in Europe with the America's Cup, the Olympics, and the Euro Football Championship. So a lot for our teams and our customers to get excited about. And we very much look forward to talking to you again in February when we can share with you how the year ended and more importantly, how we see 2024 on the back of a very, very resilient NARTD category. So thank you, and have a great rest of the day.

Operator, Moderator

That concludes our conference for today. Thank you for participating. You may all disconnect.