Earnings Call Transcript - CCEP Q1 2024

Sarah Willett, Vice President of Investor Relations and Corporate Strategy

Hello. 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 and our first-quarter trading update, a reminder of our cautionary statements. This call will contain forward-looking management comments and other statements reflecting our outlook. These comments should be considered in conjunction with the cautionary language contained in today's release, as well as the detailed cautionary statements found in reports filed with 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. They will also be presented on an adjusted comparable basis reflecting the results of CCEP and our Australia, Pacific and Southeast Asia business unit, APS, as if the Coca-Cola Philippines transaction had occurred at the beginning of this year rather than in February when the acquisition completed. Following the call, a full transcript will be made available as soon as possible on our website. I will now turn the call over to our CEO, Damian.

Damian Gammell, CEO

Thank you, Sarah. And a big thank you to everybody for joining us today. So to our first quarter. I'm pleased with how the year started, reflecting our great brands and great in-market execution, all supported by our great people at CCEP. I'd like to, therefore, start by thanking everyone at CCEP for their continued hard work and commitment to our business, also our customers and our brand partners who support CCEP. So now to take a quick look at Q1. We achieved solid top-line growth of 5.3%, with volume growth of 2% and revenue per case of 3.4%. This reflects a more balanced revenue growth compared to last year to the volume and, of course, price mix. Our volumes reflect strategic choices we made in our portfolio, the cycling of strong volume growth in Europe, and a great start to the year in APS, especially in the Philippines and U.S. market. Our diversity today truly makes us a stronger and more robust business, with around 30% delivered by our APS operating unit. So given a good start to the year and our confidence in the balance of the year, we're also today reaffirming our guidance for full year 2024, which I will touch on a bit more later. So first on volumes, up versus last year and versus 2022. Volume growth versus last year was driven by APS, up 8.1%. Given the size and the context of CCEP, we are now providing a bit more disclosure of Australia and Pacific versus Southeast Asia, as you will have seen in today's release. The strong momentum in Australia and New Zealand continued over the summer period despite tough comparables, cycling a strong Q1 last year, benefiting from industry-wide supply constraints as well as the last quarter of our strategic bulk water exit in Australia, effective from Q2 last year. Excluding the impact of this strategic exit, underlying volume for Australia and Pacific would have been broadly flat. And from a brand perspective, we saw good volume growth in the Coca-Cola trademark, Fanta and Monster. Now I'll turn to Southeast Asia. The Philippines had a strong start to the year, delivering double-digit volume growth with solid share gains. Although we were cycling our softest quarter of last year, underlying market demand remained strong. And given our proven track record of integrating new markets, you will not be surprised that the Philippines has transitioned seamlessly into the CCEP family since the deal closed in late February. From a brand perspective, we saw double-digit volume growth in our Coke trademark and solid growth in Fanta and Sprite. And we also launched Monster and Predator in the energy category. Indonesia also delivered good volume growth, with the SKU rationalization now complete, delivering encouraging Sparkling volume growth of over 10% alongside transaction growth, albeit supported by an earlier Ramadan festive period. The recent launch of Coca-Cola Zero Sugar and Sprite Zero also remains encouraging. And alongside Sparkling, we continue to look at the ready-to-drink tea opportunity as part of our long-term transformation journey with the Coca-Cola Company. Whilst Europe volumes were down 1.4%, we were cycling our toughest comparable of last year. If you recall, we delivered 5% volume benefiting from the tail end of COVID recovery in Northern Europe, Germany and Iberia. We did see a slower start in what is typically the smallest quarter for our away-from-home channel, but we were cycling volume growth of 8.5%, and, of course, the weather also played a part. In contrast, our home channel volumes grew versus last year. On a 2-year view, total volumes for Europe were 3.4%, and from a brand perspective, we saw volume growth in Coca-Cola Zero Sugar, Sprite, Powerade and Fuze Tea. Alongside Australia, as I mentioned just now, volumes in Europe also reflect our strategic portfolio choices, including our transition out of the Capri Sun brand, which started in March this year. These are the right decisions, as we continue to be more choiceful on where we want to play for the long term to ensure we continue to grow our business both profitably and sustainably. Excluding the impact of these exits, underlying volume for Europe was up on a 2-year basis of around 4.1% versus 2022. Consumer spending has held up reasonably well. We fully understand that some of our consumers are continuing to feel the squeeze. We continue to focus on the needs of our consumers, driving great execution both in the home and away-from-home channels and working closely with our customers to remain affordable and relevant for all of our consumers. We've great brands across a broad price pack 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 a more affordable offering for those that need it. One example is in Spain, where we activated a popular and affordable price point on our iconic 2-liter pack in the home channel to continue to drive frequency and household penetration and address some of those cost of living pressures. And in GB, we worked in partnership with Domino's to activate a Win a Pizza promotion, driving positive results, thereby supporting value share gains within the away-from-home channel. So our top-line performance really demonstrates the strength of our brands and the resilience of our category. In fact, the NARTD category continues to be one of the best performing categories across FMCG, growing in value terms over 6% in Europe and 18.5% in APS. I did mention earlier that I'm confident about the rest of the year and beyond. We are building on our momentum as we head into Europe's key summer selling season, including many great opportunities, as you know, to engage and excite our consumers. Our plans are fully in place to leverage the Euros in Germany, the Paris Olympic and Paralympic Games, and the 37th America's Cup in Barcelona. So lots of excitement ahead for our consumers in Europe. Moving now to revenue per unit case, which was up 3.4%. This reflects our continued focus on revenue growth management, positive headline price and ongoing promotional spend optimization through data and analytics. Favorable pack mix also contributed to growth, led by the outperformance of Monster. In Europe, our revenue per unit case was up 5.6%. We continue to benefit from the pricing we took in the second half of last year in GB and Germany, and have already successfully executed pricing across most of our other markets. In APS, revenue per unit case was up 0.2%, reflecting headline price increases, but offset by the geographic mix. This was driven by a strong volume growth in the Philippines, which is at a lower revenue per unit case. For Australia and Pacific, revenue per unit case grew more in line with Europe. We continue to believe that with our great brands, our best-in-class capabilities, we will continue to at least maintain our broader share of the category. Overall, we gained value share both in-store and online in NARTD, and we continue to create value for our retail channel customers within FMCG and NARTD. For example, we've delivered over EUR 2.6 billion of value growth over the last 3 years in Europe. On our portfolio, we continue to invest in our core brands and launched focused innovation, all in line with expanding our portfolio by focusing on where we want to play for the long term. Our Coca-Cola trademark performed well, up 2.4%. In Europe, we launched our lemon flavor extension available in both regular and Zero variants. Monster outperformed, driving overall energy volume up 7.5% on top of the impressive 15% growth it delivered last year. Fantastic innovation continues to drive recruitment and distribution, building on the launch of Monster Green Zero and the launch of Monster Bad Apple and REIGN Storm. Our sports volumes grew 4.3% despite the strong growth last year led by Powerade across all European markets. This was supported by great activation and continued favorable consumer trends into the sports category. We will continue to build on this momentum, and have an exciting pipeline of sporting events in the coming months to leverage for the brand. And finally, in ARTD, as we diversify our business to address different need states, we are building on the excitement and encouraging results of Jack Daniel's and Coca-Cola, having now launched Absolut and SPRITE in GB, with further markets planned over the coming quarters. So now back briefly to our full-year outlook. Given our good start to the year, delivering volume and revenue per unit case growth and our confidence in the balance of the year, we are today reaffirming our guidance for the full year 2024. We continue to anticipate full-year revenue growth of around 4%, again more balance between volume and price mix compared to last year, our operating profit growth of around 7%, supported by our ongoing efficiency programs and our strong free cash flow generation of around EUR 1.7 billion. Our guidance combined with today's interim dividend declaration of EUR 0.74 per share clearly demonstrates the strength and resilience of our business, as well as of our confidence in delivering shareholder value. We are well placed for the full year 2024 and beyond, continuing to invest for the long term, our disciplined investments in our people, our portfolio, our digital capabilities and, of course, our sustainability agenda. You will see a few sustainability highlights in today's release. To close, I would again like to thank our customers, our brand partners, and our great people at CCEP, whose hard work and commitment mean we are able to go further together to deliver for all of our stakeholders. Thank you for your time today. Nik and I will now be happy to take your questions. Over to you, operator.

Operator, Operator

The first question today is from Matthew Ford from BNP Paribas Exane.

Matthew Ford, Analyst

My question was on Southeast Asia and the performance you've seen there. So clearly, very strong growth in the quarter. And this is, I suppose, the first real quarter of Philippines and Indonesia, both making a positive contribution. There was quite a lot going on there, whether it was the early timing of Ramadan, the comps in the Philippines. But I was just wondering if you could kind of pick it apart and say what are you most pleased with in those markets? How much of the growth that we've seen in Q1 should we be thinking about kind of extrapolating forward into Q2 and beyond? And how much of that growth was kind of benefiting a little bit from kind of low-hanging fruit, for example, in the Philippines? Any thoughts you have there would be great.

Damian Gammell, CEO

Well, actually, Nik and I are just back from Indonesia. We were there last week to spend time in the business. So it was great to be there after a good first quarter. So clearly, the guidance reflects how we see those markets for the rest of the year. I do think it's great that we could enjoy such a strong quarter. There are a couple of elements to call out. One, Ramadan was earlier. So we did benefit in Indonesia from having an earlier Ramadan. And secondly, as I called out in my comments, we had a weaker Q1 last year in the Philippines, so the comps were beneficial. Having said that, the underlying momentum in both of those businesses is strong. What I'm particularly happy with is the Philippine integration has gone really well and the business has performed strongly and the team feels very much part of CCEP now, obviously our largest market. So a lot of excitement there. And clearly, we've made a lot of changes in Indonesia and we will continue to do so. So we're still on a transformation path in Indonesia. Our next big focus is on the tea category. I feel pretty good that we've focused more on Sparkling over the last 18 months. We've seen that in our results, both in terms of volume and transactions. We'll now, with the Coca-Cola Company, look at our tea platform. So more work to do in Indonesia, but clearly happy for the team, and particularly locally, to see the results that we could deliver in Q1. So yes, a strong quarter helped by comps, early Ramadan. But that underlying momentum we've reflected in our full year guidance. I hope that helps, Matt.

Manik Jhangiani, CFO

So Matt, just to give you some numbers, you're seeing much higher growth in the Philippines for the comparisons, but I believe that will normalize. When you consider the category growth around 7% to 9%, we are aiming to return to that on a full-year basis, which is largely driven by volume. In Indonesia, as Damian mentioned, we had a great start with Sparkling and expect to continue performing well throughout the year, likely maintaining similar levels moving forward. This is factored into the guidance we have provided and maintained.

Operator, Operator

We'll now take our next question, and this is from the line of Simon Hales from Citi.

Simon Hales, Analyst

So it's been a promising start in Europe for the year, even with some challenging volume comparisons. Could you discuss how Q2 is beginning and the evolution of consumer confidence? Are there any indications of improvement? Additionally, as we progress through Q2 and Q3, Damian mentioned the upcoming activation related to the Olympics and the Euros. How should we view the impact of that on your business? Is it primarily focused on building the brand, or does it present a chance to increase both volume and, importantly, value growth during that time?

Damian Gammell, CEO

When we focus on Europe, several points stand out. We had strong performance in the first quarter last year, making comparisons challenging. I'm very satisfied with how our unit price per case has progressed in Europe. The growth in our pricing mix has been impressive and positions us well for the remainder of the year. Regarding volume in Europe, there are two main aspects to highlight. First, our retail volume has remained robust, and we are continuing to generate significant value both online and in-store. However, we have observed slower activity in the out-of-home channel, which we anticipate will improve as we enter the second quarter and move into summer. Particularly in Northern Europe, we have yet to experience a full spring, and many are looking forward to sunnier days and a typical summer. We believe we are gaining market share in away-from-home settings, and we have secured some promising customer partnerships. As that sector opens up, we expect to see substantial benefits. Regarding your earlier point, we have several initiatives aimed at engaging our customers and consumers during the summer, such as the Euros and the Olympics. While these opportunities primarily serve to build our brand and strengthen our connections with both new and loyal consumers, we also leverage them for increased promotional space, activations, and ultimately to boost volume and revenue. This is a key consideration as we refine our guidance for the upcoming year.

Operator, Operator

We'll now take our next question, and this is from the line of Lauren Lieberman from Barclays.

Lauren Lieberman, Analyst

I have two questions. First, I want to follow up on Simon's earlier point. I noticed the wording in the release statement indicating that you're maintaining guidance despite a changing outlook. Could you provide an update on that outlook and your insights on consumer behavior? Additionally, regarding affordability and managing your portfolio in relation to premiumization versus affordability, what key performance indicators do you use to assess your position on affordability? Is it based on transaction growth or purchase frequency? What do you consider the best measure for evaluating your performance on that metric and consumer engagement with the brand?

Damian Gammell, CEO

Lauren, you consistently manage to ask two questions. I'll start with the second one. We have been analyzing affordability across our entire portfolio, focusing particularly on household penetration, which we track very closely. This is crucial for maintaining and growing our household penetration, which reflects our brand's strength. As we consider this, it's important to have the right product at the right price. In the recent release, I mentioned our intentional decision to adjust the pricing of our 2-liter pack in Spain in collaboration with the Coke Company. This decision is based on extensive data and analytics to better understand the price elasticity of our brands at various price and pack points. We're also concentrating on transaction growth, especially as we enter the summer season in Europe, which indicates that we are providing more drinks to more people. Additionally, we are monitoring volume, as both of these factors contribute to healthy volume growth for the remainder of the year. To summarize, our focus is primarily on household penetration, transaction growth, and the resulting volume. Regarding the macro environment, there are a few key points. The non-alcoholic ready-to-drink category is extremely strong. In Europe, it remains one of the most resilient and fastest-growing categories. Despite a dynamic landscape, we believe the category is performing well and demonstrating resilience. We are also gaining market share, a metric we closely monitor. Our greatest concern is how cost-of-living pressures, especially in Northern Europe, will evolve throughout the year, alongside the macro political challenges we face. Despite these challenges, our extensive efforts over the years have resulted in more product offerings at a wider range of price points for consumers in Europe. Furthermore, the impressive digital marketing work by the Coke Company is enhancing the connection with our brands, boosting our confidence as we look toward 2024 and even 2025. This is our perspective at this time.

Operator, Operator

We'll now move on to the next question, and this is from the line of Edward Mundy from Jefferies.

Edward Mundy, Analyst

To expand on Lauren's question, your volumes in Europe are performing exceptionally well, and you've achieved impressive revenue per case not only this quarter but consistently over the past few years. Historically, you've mentioned that pricing accounts for only about two-thirds of that revenue. As you look ahead to Europe over the next three to five years, how much more can be done regarding packaging and category management?

Damian Gammell, CEO

Yes, I believe we've been very selective, especially regarding our headline pricing. As we consider the midterm, we aim for a balance of one-third price, volume, and mix, which is a healthy target. We've observed some growth in price, and volume is also picking up, which we are pleased about. Looking ahead in Europe, I still see opportunities for improvement in our market mix. There are promising category opportunities emerging, such as Powerade. The sports category presents a significant and profitable opportunity for us in Australia, and energy drinks are continuing to perform well, particularly in the single-serve segment, which bodes well for the future. ARTD represents a small segment of our business in Europe but is substantial in Australia, providing valuable insights for our midterm growth plans. We have numerous innovations resulting from our partnerships with the Coca-Cola Company and other firms. Additionally, our flavor portfolio currently has a lower relative share compared to our cola, presenting further growth potential. Overall, I am optimistic about the growth possibilities across all our European markets. I anticipate a more balanced growth approach and believe we've performed well in terms of price and mix. We want to see volume contribute more significantly to our revenue in Europe. Inflation remains a factor; although it has slowed, we still find it necessary to adjust our headline prices carefully. We have made informed decisions that have helped support volume growth in Q1. Therefore, there is much potential for midterm growth, and when considering the Philippines, Indonesia, Australia, and New Zealand, where the category is even stronger, it reinforces our favorable midterm outlook.

Operator, Operator

We'll now take our next question. This is from the line of Bonnie Herzog from Goldman Sachs.

Bonnie Herzog, Analyst

I had a question on your acquisition of the Philippines. Just curious if you could talk a little more about where things are surpassing your initial expectations, I guess, for the deal thus far? And then maybe where things have been a little bit more challenging than what you guys anticipated? And then, finally, could you talk a little bit more about how accretive this could be to both the top and the bottom lines?

Damian Gammell, CEO

I'll start with the first few points and then ask Nik to comment on how beneficial we believe this is. We are very happy with the results. Strategically, this acquisition introduces a new dynamic for CCEP. It clearly expands our presence in the Asia Pacific region and enhances our operations in Indonesia, as we are gathering valuable insights from the Philippines that we can apply in Indonesia and vice versa. What's exciting is the strong brand presence and consumer loyalty in the Philippines, supported by a dedicated team known as the Tigers who are highly enthusiastic about the business. We recognized this commitment prior to the acquisition, and it has continued to impress us. The refillable product line is a significant aspect of our volume there, which we are embracing and learning from. From a challenges perspective, we haven't encountered anything unexpected since our entry. We see opportunities to enhance our key account work in both Europe and Asia Pacific, and modern trade in the Philippines continues to experience growth, in line with trends in many markets. We are investing in our supply chain to improve both capacity and customer service levels, and we believe there are opportunities for diversification into different product categories over time. We have recently launched energy drinks with Monster and Predator, which is exciting for us, along with other initiatives. Overall, we are very pleased with our progress, notably with strong leadership from Garreth, our CEO there. Now, I'll hand it over to Nik to provide some additional insights.

Manik Jhangiani, CFO

Yes, I think Bonnie, Damian has covered many aspects that reinforce our confidence in that market. From an NARTD perspective, we anticipate continuous growth in the range of 7% to 9%, which is very appealing. Within that, we're strong in the Sparkling sector, which makes up over 50% of the category, unlike Indonesia. Our per capita consumption is on the rise, so we see excellent opportunities for growth in sparkling products, and the team is performing exceptionally well. This success is partly due to our diverse packaging strategy, including refillable options and PET. We're also expanding into the Zero category, which is experiencing significant growth. In many respects, this is a developed market with attractive growth prospects in various categories. Damian mentioned energy and ARTD; we’re also selectively involved in premium water, and we have a juice and dairy business that align well with the growth of modern retail in that market. This will clearly enhance our top-line performance going forward. We’ll continue to keep a close watch on developments over the next few years, and we expect to see positive results from volume growth and new categories, many of which carry higher revenue per case. This will impact our profitability positively. Moreover, when considering the cost base and existing commodity challenges in this market, which is rather contained, we anticipate dual benefits from top-line leverage and potential cost reductions on the commodity side, bolstered by our scale for improved margins. Overall, we see these elements as very beneficial. Additionally, we perceive valuable insights that we can apply to Indonesia, creating common growth platforms in two large Southeast Asian markets. So there are many positive outcomes linked to that acquisition from a broader perspective.

Operator, Operator

We'll now take our next question, and this is from the line of Mitch Collett from Deutsche Bank.

Mitchell Collett, Analyst

You had very strong growth for Sprite this quarter, and I think you say in the release that's driven by great execution across all your key markets. Can you provide a bit of color on what that great execution is? And is it something you can put on other SKUs, perhaps within flavors or even translate across to Coca-Cola?

Damian Gammell, CEO

Yes. I mean I think it follows on from a number of years of strong growth and continued growth on our Coca-Cola Zero. And then Fanta has been a big contributor to our growth if you look over a number of years in Europe. And then with Sprite, we've been working with the Coke Company on kind of a number of initiatives. So obviously, a new visual identity and labeling, which we think has refreshed the look of the brand. A really, really good tasting Sprite Zero formulation. And I think both of those have just given the brand a little bit more relevance to consumers. That's allowed us to get a bit more space in store, space in our coolers. And the brands responded well. So yes, it's pretty much a playbook that we probably came to Sprite after Coke and Fanta. We always felt Sprite was an opportunity that we'd under leveraged particularly in Europe and indeed across other markets. Interesting to see Sprite Zero now in Indonesia. And as Nik said, we'll probably look at, as we build out a Zero portfolio in Philippines, what role Sprite can play. So yes, a combination of upgrade of visual identity and brand imagery, and what's always critically important in our industry, a great-tasting product, particularly on Zero. And I think that's really been the driver of that performance.

Operator, Operator

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

Eric Serotta, Analyst

Hoping you could give a little bit more color on your thinking in terms of Europe away-from-home. I know you called out the weather, the comps. And to be fair, it's a small seasonal quarter in the first quarter for Europe. Just wondering how you're thinking about the rest of the year, particularly given the easy comps in the third quarter. And then specifically, I have heard some reports about some QSR traffic weakness in some of your markets in Europe. Is that anything you guys have seen? And how material is QSR for you?

Damian Gammell, CEO

We faced challenging comparisons in the away-from-home sector this quarter. Looking ahead, especially in Northern Europe, weather has had an impact. However, overall, the macroeconomic indicators are looking positive. For instance, tourism data suggests Spain could see record visitor numbers and hotel bookings. We have strong assets that should benefit our away-from-home channel, particularly with major events like the Olympics and the Euros in Germany approaching. While it's true that we’ve noticed a slowdown in foot traffic at some QSR locations, it's just one of many channels we operate in away-from-home. Our customers are optimistic about a stronger second and third quarter this year. The slowdown varies by market, with regions experiencing more adverse weather seeing the greatest impact. The first quarter is typically small for away-from-home, and we anticipate market activity will pick up as we enter the summer season in Europe. We're confident in our assets in Europe that will drive performance in away-from-home. This area remains a focus for us, and we have a good market share and capabilities. It is important for us to see consumers getting out more, and we expect that to increase as we progress through the second quarter.

Operator, Operator

We'll now take our next question, and this is from the line of Sanjeet Aujla from UBS.

Sanjeet Aujla, Analyst

Just following up on Indonesia, I would like your overall assessment of the consumer there. You have discussed the end of SKU rationalization and mentioned a weaker macro environment throughout last year. Additionally, I would like to know how your recent price point changes are affecting the situation and whether you are seeing the kind of response you anticipated.

Damian Gammell, CEO

Last year was challenging for the macro environment in Indonesia, but we have seen improvements since the election. The category is growing in ARTD, which is encouraging. We are focused on our core Sparkling products and are pleased with the performance of Zeros, especially in the modern trade. We've made pricing decisions that align with affordability opportunities in Indonesia, which has contributed to strong transaction growth and good Sparkling growth. We intend to maintain these price points for the rest of the year, as we believe they support category growth. Overall, it's been positive, though we recognize that we have work to do in tea. We're refining our route-to-market, knowing there's significant potential for improvement in Indonesia. Additionally, we are considering expanding our package portfolio into RGB based on insights from the Philippines. This is a long-term journey, but the potential rewards are substantial. If we achieve even a fraction of the per capita consumption seen in the Philippines, the business could grow significantly. We're committed to creating a sustainable business that is profitable and environmentally responsible, and we're taking steps towards that goal. It's been a good start, and Ramadan has certainly had a positive impact.

Manik Jhangiani, CFO

Yes. Additionally, I want to mention that regarding consumer insights, there will be ongoing spending influenced by potential government changes tied to the upcoming election. This is beneficial for boosting consumer confidence. Combined with our efforts to enhance brand relevance and the right affordability strategy, we are optimistic about the market opportunity. As Damian noted, this is a journey that will take several years.

Operator, Operator

We'll now take our next question, and this is from Bryan Spillane from Bank of America.

Bryan Spillane, Analyst

I would like to comment on two things. First, there have been concerns on our end regarding the potential increase in can costs due to aluminum sanctions. I've noticed that one of my competitors, Monster, received a downgrade related to this issue. Should we be worried about commodity costs in general? Second, as we look back at how the first quarter performed and consider the year ahead, could you provide an update on how we should think about the phasing of our models for the first and second halves of the year?

Manik Jhangiani, CFO

Okay. We'll address that first. The phasing relates to the comparisons, and it's mostly weighted toward the first half comps that we'll be cycling through. Q1 was significantly stronger, but it was a smaller quarter. The first half of last year also remained strong. As Damian mentioned, consider the events coming up. There will be preparation for those events, which are mainly in July and August, with the America's Cup extending into September and October. You'll definitely see a positive impact in Q3, especially as Q3 was weaker last year, combined with these activatable events. So there will be a much stronger performance in the second half, particularly in volume and revenue. Regarding your first question, we aren't experiencing any of those impacts yet. We're well positioned for this year and into next year with many of our contracts. We continue to collaborate with our suppliers to create more flexible tolling arrangements, which gives us better visibility and tracking of recycled material usage. This is an opportunity as we're currently around the 50% mark, and there's potential to increase that to 80%. While this is encouraging, we need to keep an eye on the situation since market fluctuations can occur due to various issues in the U.S. However, there's no immediate concern for us at this stage.

Operator, Operator

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

Robert Ottenstein, Analyst

Congratulations on a terrific quarter. A couple of follow-ups. You mentioned, I think, that you had some share gains in Europe. You mentioned that Sprite is getting more shelf space, I guess, in Europe. I was wondering if you could elaborate on both of those themes. Any more details at all in terms of volume or value share in major markets? Any quantification of that? And any more details in terms of where you're getting shelf space. And in terms of kind of the shelf space sets and the changes in that, is that something that's largely done now or still coming into the markets?

Damian Gammell, CEO

We have observed share growth in Europe, particularly in our energy category, alongside our core Sparkling offerings. We aim to continue outpacing market growth, which remains our main focus. There are several factors driving this. Regarding shelf share and space, it's an ongoing effort for us. We collaborate with retailers to enhance our shelf presence. Since the establishment of CCEP, we've been concentrated on delivering value to our customers, allowing us to gain more shelf and cooler space. As we approach summer, we are particularly focused on increasing our share of cold space, driven by two initiatives: our cooler placements, which are evident in our capital investments, and our efforts to expand in our customers' coolers. Many of our European retailers have their own chilled space at the front of their stores, where we participate but also see potential for increasing our presence based on our sales rates and profitability. Additionally, as we explore new categories and enhance our brands like Powerade in the energy segment, we intend to secure more space for these growing brands. This expansion supports our growth across all brands, including Sprite.

Operator, Operator

We'll now go ahead with our next question. This is from Richard Withagen from Kepler Cheuvreux.

Richard Withagen, Analyst

I just want to go back to the Philippines. You mentioned a good performance on the Coke trademark, also the entry in the energy category. So a couple of months into the acquisition, what will be the biggest bet for you in the next 1 to 2 years and why?

Damian Gammell, CEO

To maintain our momentum is certainly a key focus for us. We've had a strong quarter, and the Coca-Cola business has seen consistent success over the years. It's essential that we remain affordable, and supporting our RGB business is a significant priority. We will keep working with our teams to enhance efficiencies in our supply chain and ensure we have the right resources in place. We indicated during our acquisition that we would see increased capital invested in supporting our RGB initiative. Affordability will play a big role in this, and we are keen to expand that affordability into new categories like Zero, as previously mentioned. Furthermore, we aim to find ways to boost our bottom line growth and margins. We are seeing stronger performance in some of our more profitable products, such as PET and energy categories we've introduced. Thus, we are striving for a balance between affordability, top line growth, and a focus on improving our bottom line. As Nik mentioned, this approach will benefit both aspects of the business. Overall, there is a lot of work happening in these areas, which is where our current focus lies with the team.

Manik Jhangiani, CFO

Yes. I would like to add that we have observed significant growth in modern trade. This is an area where we can leverage many of our capabilities. We have also recently welcomed a new team member who specializes in modern trade. Their expertise in key account management and joint business planning will be instrumental in accelerating our growth in this sector. I see this as a major opportunity for us moving forward.

Operator, Operator

We'll now take our next question. This is from Philip Spain from JPMorgan.

Philip Spain, Analyst

I appreciate your comments about optimizing your promotional spend, but I want to understand if you've noticed any increase in promotional activity from your peers or competitors in the market. Are they acting rationally? If they have increased their promotional efforts, how do you plan to respond to that?

Damian Gammell, CEO

I think different competitors behave in various ways, and we haven't noticed any significant increases. In Great Britain, there may have been a slight uptick, mainly due to some new branding from one of our competitors. Overall, our promotional frequency and intensity have remained steady. We're leveraging data and analytics to use it more effectively. We likely have a wider range of promotions in the market, and we believe that is advantageous for us. When it comes to defining rational behavior in this context, it varies. However, if you examine the NARTD and Sparkling category as a whole, the industry is experiencing good year-on-year revenue per case growth. This growth is obviously supported by our promotional strategy. So, while there aren’t any structural changes, there can be variations from quarter to quarter, which is likely what we're observing.

Operator, Operator

Now we have one more question today. Our last question is from the line of Charlie Higgs from Redburn Atlantic.

Charlie Higgs, Analyst

I've got one just on the portfolio, please, and how you're feeling about that. We'd seen quite a few SKU trims and exiting water in various markets. Now you're relatively happy with the portfolio as it stands. And is there maybe scope to add more? I know that Coca-Cola Company has been talking about scaling some of their bets. They bought BODYARMOR. You've been speaking quite positively about sports drinks today. Is there maybe room for BODYARMOR in any of your markets? And then if I could just squeeze one in. Has there been any new updates on the London listing changes?

Damian Gammell, CEO

Yes, a great question. First, I'll talk about the portfolio. So I think we've made right choices across a number of categories, I suppose, particularly water, where we've over a couple of years exited the bulk water and low value-added. We continue to put pressure on our business to simplify our SKUs on our core sparkling range. I think we did a lot in the last number of years, but I think it's an area that we can continue to analyze and drive a bit more efficiency. I think that's critically important to do the second part of your question, which is really to look at other categories or brands that we can add into our portfolio. So a couple of those that we're happy with is obviously Powerade. We continue to add a lot in energy. We continue to add on our core, particularly flavors on cola. And we've got a number of in and out activations on Fanta. So creating space for those new brands and variants is critical. So in parallel with adding, we've got to continue to be disciplined around what we're putting through our supply chain. From a broader category perspective, we're excited about sports. We are looking at BODYARMOR. We continuously engage with the Coca-Cola Company to look at global innovation and what could land well in Europe or Asia Pacific. So that's something we'll continue to evaluate. I think as we go into the rest of this year, I think we're well set up in terms of innovation and brands. So I think BODYARMOR may be something we'd look at as we look into '25 and beyond. But clearly, it's an ongoing conversation with our brand partners, both Coke and Monster. On the listing, no news. We're waiting like you are. So I think once we get an update, it's something that we'll all kind of reflect on. So no news on that at the moment.

Operator, Operator

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

Damian Gammell, CEO

Thank you, operator. And again, thank you, everybody, for joining us today and the questions. So just to close out our call, a good start to the year with volume and revenue per unit case growth versus last year ahead and versus 2022. As you've heard from both myself and Nik today, we are truly a more diversified business now, including the great market in the Philippines. We are confident in the balance of the year supported by a great summer of events. So please visit our markets if you can. We have a lot going on as we head into the summer in Europe. So today we're pleased that we're reaffirming our guidance for the full year 2024. And obviously, look forward to seeing you and speaking to you again at the half year. So thanks, everybody, and have a great rest of the day.

Operator, Operator

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