Earnings Call Transcript - CCEP Q4 2024

Operator, Operator

Thank you all for joining us on this lovely day today. I am here with Damian Gammell, our CEO; and Ed Walker, our CFO. Before we begin with our opening remarks, I remind you 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 UK, U.S., and Dutch financial authorities. A copy of this information is available on our website, www.cocacolaep.com. Prepared remarks will be made by Damian followed by Q&A. 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 CCP on our Australia/Pacific and Southeast Asia business unit, APS, as if the Coca-Cola Philippines transaction had occurred at the beginning of last year rather than in February when the acquisition completed. Following the call, a full transcript will be made available as soon as posted on our website. I will now turn the call over to our CEO, Damian.

Damian Gammell, CEO

Thank you, Sarah, and many thanks to everyone for joining us today. I’d like to start off with a recap on our strategy, which continues to deliver. Our value creation is clear with 2024 being another solid year for CCEP and a year that saw us further diversify with the addition of a great market in the Philippines. I’d like to start today by thanking all of my colleagues at CCEP for their ongoing energy, hard work, and continued commitment to our customer and to our business. As always, this is underpinned by our strong and aligned relationships with both the Coca-Cola Company and Monster, and our other brand partners. We will touch on many of these themes today, all of which contribute to our TSR of more than 160%. So, just turning to our key messages. We enjoyed a great finish to a solid year with robust top and bottom-line growth. We are more geographically diversified with the strong performance of our higher growth APS markets helping offset some softer volumes in Europe, which reflected some strategic delistings, mixed summer weather, which we’ve touched on before, and softer demand in our away-from-home channel. I am particularly happy to have grown share ahead of the market and led on value creation for our customers. Alongside ongoing productivity gains, we drove impressive comparable free cash flow of over €1.8 billion. Looking ahead, we have strong investment and commercial plans in place to drive growth, both in Europe and APS in categories that continue to grow. We are therefore confident that we will deliver on our mid-term growth objectives. Our full year ‘25 guidance, combined with the resumption of our share buybacks also announced today, demonstrate our ability to deliver continued shareholder value. Now to some of the key performance highlights. We delivered a great top-line performance, reflecting underlying volume growth with transactions ahead of volume and solid gains in revenue per unit case. This was driven by revenue and margin management initiatives and our continued focus on our price and promotion strategies. The NARTD category grew in volume and value in both Europe and APS. We grew our value share by 40 basis points in the home channel, while also making gains in away-from-home and critically online. In the Advantage survey, with our customers, CCEP was registered again as a top-tier supplier. Our strong top-line performance, together with the delivery of our efficiency programs, drove a solid operating profit growth of 8%, with operating margin expansion in both Europe and APS, and diluted earnings per share growth of 6.5% on a comparable and FX-neutral basis. Again, we generated impressive comparable free cash flow of €1.8 billion after investing over €1 billion across our business in the areas of capacity, technology, and digital, and also supporting the early return to our target leverage range. We delivered healthy dividend growth and have today announced a new €1 billion share buyback program. As ever at CCEP, we remain focused on great people, great brands, great execution, all done sustainably. I will now share a few brief highlights on these topics for last year. As ever starting with our people, we continue to build the capabilities of our teams. Our partnership with the London Business School has upskilled over 500 of our executive leaders. We continue to be recognized internally and externally. We saw record scores in our engagement survey placing CCEP amongst the best of its peers as a great place to work. Recently, the Top Employers Institute recognized CCEP as a top employer across many of our markets. Finally, committed to building an even more inclusive and diverse culture, we welcomed another 9,000 colleagues of CCEP with the seamless integration of the Philippines business. On our brands, we are extremely privileged to make, move, and sell the world’s most loved brands, in which we continue to invest to make them even better and to appeal to even more consumers. Category highlights are included in today’s release. Overall, it’s fantastic that in Europe, for example, Coca-Cola trademark remains the biggest FMCG brand with Monster being the third fastest growing. We delivered innovation across the board through packaging, flavor extensions, special collaborations, and much more. A bit later, I will share some of the brand plans in place for 2025. As a bottler, great execution is always a key priority for us at CCEP. We continue to create leading value for our category, adding well over €1 billion of value to our retail customers. Activation both in-store and online is key. Last year was a standout with the summer’s iconic sporting events, namely the Olympic and Paralympic Games in Paris, the EURO’s in Germany, and the America's Cup in Barcelona providing us with a powerful platform. We also increased our share of cold drink space with even more cooler placements, helping our brands reach more households and improve our share across our categories. Our customers and consumers rightly expect our products to be made to the highest quality and safety standards. In that context, we recently had a small issue with some products manufactured in Belgium late last year. This was deeply unfortunate, but we are pleased that this was quickly resolved and has led to appropriate learnings being incorporated into our product safety and quality procedures with new protocols put in place. Now on to our sustainability highlights for which we continue to be recognized externally, including retaining our inclusion on CDP’s A List for Climate for the ninth year and maintaining our MSCI AAA ESG rating. We are also recently included in Sustainalytics ESG top-rated companies for 2025, which rated CCEP number one in the food and beverage category. We continue to invest in sustainability-focused technology to support our decarbonization journey. For example, Avalo is using AI to develop a low-carbon sugar crop with higher yields and improved drought resistance. Just one example of how this sustainability journey makes CCEP a better business. Before I hand over to Ed, I’d like to call out the Philippines, which will soon reach its first birthday in the CCEP family. What a year it was having delivered double-digit volume growth. Underlying market demand in the Philippines was strong, which with great execution drove nearly 300 basis points of value share gains to a record high at an impressive 75% Sparkling and 50% NARTD share. This translates into a very healthy operating margin expansion of around 200 basis points. I’ve said it before, but the more time I spend in the market, the more excited I become about the addition of the Philippines into the CCEP family. We see lots of opportunities, both long and short-term, which will be led by the Coke trademark. We also see opportunities in other areas such as low and no sugar energy and our recently launched ARTD brands. Our strong focus on capital allocation and our long-term mindset will ensure we will invest in this exciting business to support and lead the market’s long-term growth expectation. Given the positive outlook, we are accelerating some of our CapEx plans in that market. I know many of you are coming to our Capital Markets event in the Philippines in May, where the leadership, local teams, and I look forward to showcasing this market. We will also be bringing Indonesia to Manila. On Indonesia, while the Philippines had a standout year, our Indonesian volumes were significantly affected by geopolitical events. However, we saw encouraging sparkling growth in less affected parts of the country, and the transformation of our route to market has progressed well. We will ensure Indonesia continues to be fit for the future. I wanted to recognize the fantastic efforts made by our Indonesian business in this challenging environment, but also to reiterate that we continue to believe in an exciting long-term opportunity in this market. Given the context, business performance is naturally behind plan, leading to a non-cash impairment charge in our full year ‘24 results. Ed will touch more on this shortly. So now I’d like to hand over to Ed to take you through our financials in more detail.

Ed Walker, CFO

Thank you, Damian, and thank you all for joining us today. Firstly, to our financial summary. We delivered revenue for the year of €20.7 billion, an increase of 3.5% and in line with our guidance. While comparable volumes were flat for the year, underlying volumes were up 0.7% taking into account the effect of strategic delistings, principally Capri-Sun in Europe. As Damian mentioned earlier, we also felt the impact of adverse weather in Europe, particularly during Q2 and Q3, contributing to softer volumes, especially in the away-from-home channel. Volumes in Europe were down 2.4% or 1.4% on an underlying basis. Volumes in APS were up 4.9%, driven by the Philippines, but also reflecting impressive growth in the Pacific Islands and Papua New Guinea. We delivered strong revenue per case growth of 2.7%, reflecting positive headline pricing and promotional optimization with a focus on consumer price relevance, all built on data and insights. We had favorable brand mix, which was partly offset by geographic mix driven by the strong growth in the Philippines, which is coming from our lower revenue per unit case. Cost of sales per unit case increased 2.6%, in line with guidance, cycling high single-digit growth in ‘23. This reflects our increased revenue per unit case, driving higher concentrate costs through our incidence pricing model and inflation in manufacturing, offset by the mix impact from the stronger growth in the Philippines, which has a lower cost of sales per unit. A breakdown of this is all provided in the appendix to the presentation. OpEx as a percentage of revenue was 22.5%, an improvement of 50 basis points. All these elements combined drove operating profit for the year of €2.7 billion, up 8% and an operating margin of 12.9%, an expansion of around 50 basis points. On a reported basis, operating profit declined by just under 9%, reflecting higher business transformation costs to support our growth and productivity programs and the €175 million non-cash impairment charge relating to the carrying value of the Indonesian business unit, which Damian referred to earlier. We delivered diluted earnings per share of €3.95, up 6.5% on a comparable and FX-neutral basis. This was driven by our operating profit growth, partly offset by the higher non-controlling interest and interest charges, both driven by the Philippines and by a higher effective tax rate in line with guidance. Comparable free cash flow generation continues to be a core priority for us, delivering an impressive €1.8 billion. Our return on invested capital increased by 50 basis points to 10.8% driven by the increase in profit after tax and our continued focus on capital allocation. Finally, on shareholder returns, we paid a total dividend per share of €1.97, up just over 7% for the year. Now on to efficiency and productivity where we have a proven track record of delivery. Our current program aims to deliver between €350 million and €400 million of efficiencies by 2028. In its first year, we have delivered around €80 million earlier than planned and ahead of our original guidance of €60 million to €70 million. Around half of this came from supply chain initiatives in Europe and Australia, alongside further leveraging our digital and shared-service capabilities in Bulgaria. Looking ahead to 2025, while we still expect to see inflationary pressures on the business, particularly in labor, we are confident of continuing to drive further efficiencies in line with our plans. One example relates to the further optimization of our German network, leading to the closure of the Cologne site and the consolidation of warehousing facilities which will also generate carbon benefits. All the benefits of these programs and the cash restructuring costs to deliver them are included within our guidance. Turning now to free cash flow, a core priority for us. The €1.8 billion of comparable free cash flow generated translates into a very healthy free cash flow conversion to net profit. This bridge lays out the key components, including ongoing cash restructuring costs, as I mentioned earlier. Recognizing the importance of targeted investments, we spent around €1.1 billion on CapEx on supply chain, digital and technology, as well as more cold drink equipment. Examples include new can lines in GB in Australia, a new PET line in Papua New Guinea, and the new RGB line in Germany. We are also entering the build phase of our new unified SAP architecture, having successfully completed the design phase. Finally, driving working capital benefits remains a core focus for us. I am pleased that we delivered yet another year of benefits, taking the cumulative amount to more than €1.5 billion since 2017. This impressive free cash flow generation has driven sustained deleveraging over time. This enabled us to return to our target leverage range of 2.5x to 3x EBITDA one year ahead of plan, which brings me to our capital allocation framework, unchanged. We remain focused on ensuring we maintain a strong and flexible balance sheet, operating within our leverage range and with a strong investment-grade rating. We continue to benefit from a balanced debt maturity profile with an attractive total weighted average cost of net debt expected to remain around 2%. We touched already on CapEx and restructuring spend, with our guidance on capital investment unchanged for ‘25, which implies well over €1 billion of spend to support our growth plans. Of course, we remain alert to value-accretive M&A should the opportunity arise. Finally, as Damian referenced earlier, we are committed to delivering shareholder returns. These comprise our annual dividend payout ratio of around 50%. As of today, our new share buyback program of €1 billion will be executed over the next 12 months. Before I move on to our guidance for ‘25, I wanted to share a few comments on two well-trailed portfolio changes that will increase our alignment with the Coca-Cola Company and unlock further growth opportunities. The first is the transition from Nestea to Fuze Tea. Following its successful rollout in Europe, Iberia is the last market to change to this better and bolder platform in the growing tea category. As you would expect, this has been well planned. Distribution is going well with both home and away-from-home customers, supported by great marketing. The second relates to the end of our partnership with Suntory Global Spirits, running until the end of June in Australia, and the end of December in New Zealand. This paves the way for the start of the multi-year transition to launching ARTD offerings, as we’ve seen in Europe and the Philippines, now extended to the Coca-Cola Company’s recently acquired popular vodka-based Billson’s brand. Just to note that both of these exciting changes are reflected in our full year ‘25 guidance. A brief reminder of our mid-term objectives: these are unchanged and we remain confident in their delivery, as Damian mentioned earlier. This brings me to our full year ‘25 guidance, reflecting our current view of the market conditions and is aligned with these mid-term objectives. Touching briefly on some areas by exception. We expect revenue growth of approximately 4% to be more balanced between volume and revenue per case compared to last year. From a phasing perspective, in Q1, we will annualize the impact of the Capri-Sun strategic delisting, Easter this year will fall in Q2 versus Q1, and we have two fewer selling days in Q1 compared to last year. On cost of sales, we expect this to grow by around 2%. Our concentrate costs are tied to our revenue per unit case growth and we anticipate broadly flat commodity inflation on which we are approximately 80% hedged for the full year ‘25. We do continue to see inflationary pressures in labor within manufacturing, partly offset by our combined efforts on efficiency. We have the throughput tax impacts from the GB soft drinks excise tax changes announced late last year, with the offset within revenue, and finally, the mix benefit of higher anticipated volume growth in the Philippines, given its lower cost of sales per unit case. Our effective tax rate for the year is expected to be around 26%, up from 25% last year, reflecting differences in the mix of taxable profits across our markets and our current assessment of uncertain tax positions. We expect to generate at least €1.7 billion of comparable free cash flow, and our new €1 billion share buyback program will commence imminently to be executed over the next 12 months through to February ‘26. We broadly expect any accretion this year flowing from the 12 months of the share buyback to be offset by the anticipated higher effective tax rate and the growth in non-controlling interest given the positive outlook in the Philippines. Now back to Damian.

Damian Gammell, CEO

Thanks, Ed. Just turning to what we talked about earlier, we are confident in our ability to deliver approximately 4% revenue growth in 2025 and beyond. This will be driven by these four levers balanced between healthy underlying volume and revenue per unit case growth. Before I share some examples of what gives me confidence for this year, I wanted to call out that we exited 2024 with a good December and that this has continued into January. On our portfolio, there is a lot to be excited about across our great brands and as always, consumer-led and consumer-focused. For Coca-Cola Original Taste and Zero Sugar, new flavors continue with the addition of lime, and later in the year we will see new fruit eye-catching graphics across our packs. The new Diet Coke campaign, 'This Is My Taste', fronted by our new brand ambassador, Jamie Dornan, is gaining momentum. For Fanta, there will be a choice of flavor extensions, including Tutti Frutti. In Energy and Monster, as well as new additions to the juice range, we are excited about the new collaboration with Lando Norris and the McLaren F1 team. We continue to expand our portfolio to capture new opportunities in areas such as sports and ARTD, as Ed referenced. In sports, I was excited to hear about the young Spanish star and parade fan, Lamine Yamal, who has entered into a multi-year deal as a team parade athlete. This will resonate well with our consumers, build affinity, and drive preference for this terrific brand. In ARTD, we are continuing to build our presence in this growing segment with the launch of Bacardi and Coca-Cola and adding new flavors to existing ranges like Absolut and Sprite watermelon. Now to our customers. Our customer relationships are always front and center, providing a great retail foundation to be the number one Absolut revenue growth creator. Full year ‘25 pricing is largely in place, including GB in Germany, executed late last year, with other negotiations well advanced. We continue to leverage our best-in-class revenue and margin growth management tools and capabilities across our broad pack offering. Some recent customer wins include Alsea, a multi-brand restaurant franchise operator in Spain, Subway in GB, and Gerry’s Grill, a 110-plus restaurant chain in the Philippines. I touched on earlier, we are fanatical about in-market execution and activation, whether in-store, online, or in outlet, all to drive distribution of our great brands and visibility every day. We love creating engaging displays, especially around key holiday events, all well planned across the calendar year, all driven by the largest sales force in FMCG, nearly 9,000 in total, powered by technology, enabling more contact with more customers. We are investing in more coolers this year, aiming to add over 100,000 across our Coke trademark and Monster. We continue to accelerate our digital capabilities, adding better functionality to our B2B portal, myccep.com, to make life easier for our customers. We believe there are few eB2B platforms in Europe, delivering annual revenue of nearly €2.5 billion in the FMCG space. We are also improving our forecasting accuracy with machine learning and AI. In Germany, for example, 80% of our SKUs no longer require human intervention, driving best-in-class forecasting accuracy and a 2% improvement year-on-year. Better forecasting means more cases delivered to our customers on time and in full. Geographically, our diversification across 31 markets, with leading market positions makes us stronger, evidenced by our performance last year. Going forward, we ultimately recognize that volume and revenue growth in Europe is critical for CCEP across Sparkling, Energy, and other NARTD. We are excited by the balance of exposure we now have to high-growth markets, building our capabilities. This includes not only the Philippines and Indonesia but also Papua New Guinea and the Pacific Islands. They represent half of our markets, having grown revenue last year by around 10%, clearly demonstrating their power as an organic top line accelerator for CCEP. To conclude, we are very well placed for 2025 and beyond. We are confident we have the right strategy, done sustainably, to deliver on our mid-term growth objectives. Our full year ‘25 guidance, combined with the resumption of share buybacks, demonstrates the strength of our business and our ability to deliver continued shareholder value. We look forward to sharing more on our exciting future at our Capital Markets event in Manila in May. Thank you very much. Ed and I would now be very happy to take your questions. I’ll hand the call back over to you, operator.

Operator, Operator

Thank you. The first question comes from Mitch Collett from Deutsche Bank UK. Please go ahead. Your line is now open.

Mitch Collett, Analyst

Hi, Damian. Hi, Ed. Hi, Sarah. My question is a very quick one. Can you give some color on why you’ve chosen to increase the free cash flow guide? Is that all driven by operating profit or are there other lines within cash flow that are helping you to have a higher level of free cash flow going forward? Thank you.

Ed Walker, CFO

Thanks, Mitch. Yes. We’ve increased the guidance to at least €1.7 billion. Obviously, we did €1.8 billion in 2024, which we are very pleased about. It’s really just the increased confidence that we have in the business and the ability for the business to generate operating profit growth and value and then us to convert that into free cash flow. We are keeping some flexibility within that because, as we said in the prepared remarks, we have over €1 billion of CapEx investment planned and we are keen to invest to unlock that growth across our markets. So yes, we are pleased to be saying at least €1.7 billion for 2025.

Mitch Collett, Analyst

Very clear. Thank you.

Operator, Operator

Thank you. We will now take our next question. Please standby. And the next question comes from Matthew Ford from BNP Paribas Exane. Please go ahead. Your line is now open.

Matthew Ford, Analyst

Thanks. Afternoon, Damian and Ed. My question is just on, I suppose, the Philippines and Indonesia. It’s sort of two in one really. But on the Philippines, I just want to get a sense of how you finished the year. You talked about solid trading in Q4 and you spoke overall about trends improving across or continuing to perform well in Q1, but just to get a sense of how the Philippines is going and what your expectations are for the year? And then just on Indonesia, clearly, still a difficult market to operate in. Just be great to get an update on the boycotting situation and if you have seen any improvement in the last weeks and months there? Thanks.

Damian Gammell, CEO

Yes. Thanks, Matthew. Maybe I’ll start with Indonesia. Our business has stabilized very well there in light of some of those geopolitical challenges. It’s a big country, one of the reasons we remain very excited about it for the long-term. What’s interesting is there are certain areas more impacted than others, where we see less of an impact; we see our brands growing high single-digit to mid-teens. So, I think that gives us confidence that the changes we have made in terms of route-to-market, our pricing strategies, and the marketing push with the Coca-Cola Company are working. We will continue to keep a close eye on the situation. As it improves over time, I think the changes that we’ve been able to make in the last year will really pay off. I’m particularly excited as we move into Ramadan with a great campaign around Sprite. On the Philippines, we had a great year last year, great finish to the year. Christmas is a huge occasion in the Philippines, and our teams locally made the most of it, recording volumes that continue into 2025. We would see the Philippines in line with our mid-term guidance, so high-single-digit growth. We have talked many times that one of our priorities is margin expansion, and we are seeing that coming through. The capital we are deploying is unlocking that capacity. Looking forward to another very strong year from that business. Thank you, Matthew.

Operator, Operator

Thank you. We will now take our next question. Please standby. And the next question comes from Eric Serotta from Morgan Stanley. Please go ahead. Your line is now open.

Eric Serotta, Analyst

Good morning. Good afternoon. Thanks for taking the call—taking the question. I’m hoping you could give some color on what you are seeing in energy, 6% change growth you called solid or strong, but it’s certainly a slowdown from what we have seen over the past few years. Any color on energy as 2024 unfolded and your expectations for 2025?

Damian Gammell, CEO

Yes. Thank you, Eric. Energy was still the standout category, looking at growth across most of our markets. I see it continuing to lead that. On a percentage level, it may be slightly down. We are looking at expanding energy into newer markets such as Indonesia and the Philippines. I touched earlier on the pipeline of innovation coming from Monster. It’s a very exciting and innovative category for us. I see it returning to more high-single-digit growth. I don’t see anything in the category that points to a sustained slowdown. In fact, I think it’s getting more competitive. A lot of people are investing in the category, which will generate growth. Clearly, this places an emphasis on us to be at our best with the Monster Company, which we are.

Operator, Operator

Thank you. We will now go to our next question. Please standby. And the next question comes from Lauren Lieberman from Barclays. Please go ahead. Your line is now open.

Lauren Lieberman, Analyst

Great. Thanks. Hi everybody. In the release, you flagged some away-from-home weakness in Europe. I would like to talk about plans to help support that channel this year, particularly in light of what remains a pretty stretched consumer backdrop and you have had a lot of other beverage companies broadly talking about the challenges in that outlet.

Damian Gammell, CEO

Thanks, Lauren. I would call out a couple of areas. One, the brand innovation that we showed earlier will definitely play into that channel by bringing excitement to consumers and to our customers. We have got specific programs, particularly on the Coke trademark that I won’t discuss in detail, coming into the summer. You will see targeted initiatives against the consumer in the away-from-home segment. Our pricing has moderated in that channel, making it relevant to consumers. We will step up our cooler investments, which is key support for the away-from-home channel. Many of our digital-led campaigns will focus on helping our customers drive incidents in-store and drive traffic. We are also winning a lot of new business in the away-from-home area. I see 2025 being a better year in away-from-home, particularly in Europe. The steps we have taken will support that growth. I look forward to the summer, which will definitely unlock growth.

Operator, Operator

Thank you. We will now take our next question. Please standby. And the next question comes from Edward Mundy from Jefferies. Please go ahead. Your line is now open.

Edward Mundy, Analyst

Just coming back to the volume piece within Western Europe, I mean you managed to generate about 8% EBIT growth in 2024 despite European volumes down nearly 2.5%. I know you don’t guide for volumes, but if you were to get a percentage of volume growth in Europe, would there not be favorable implications for EBIT, given some of the operating leverage that would kick off? I am trying to square that circle with regard to your 7% EBIT growth and your higher free cash flow guidance as well.

Damian Gammell, CEO

Go ahead, Ed.

Ed Walker, CFO

Yes. Thanks, Ed. It’s still very early in the year. We are here in February. As we look forward, we want to give guidance we are confident in delivering for the year. You are correct, 4% is above the 3.5% we did in 2024. When we look at the mix of that revenue for ‘25, we think more of it will come from volume and less from revenue per case. As you move through the P&L, that has less of an accretive effect because we need to account for the cost of that volume. That’s why we are maintaining the approximate 7% guidance for the year and the same for free cash flow. We want to maintain flexibility this year and have lots of opportunities to invest cash to unlock growth for the future.

Damian Gammell, CEO

As you would expect, as we focus on volume, if I speak to my supply chain colleagues, what gets them most excited is more volume going through our plants, and getting that leverage that Ed talked about. You will see a more purposeful focus on quality volume in Western Europe in ‘25. This starts with a robust level of investment in the away-from-home channel. A lot of the marketing innovation from the Coca-Cola Company and Monster will support volume growth.

Edward Mundy, Analyst

2024 was a year of a lot of support that didn’t fully materialize from a volume standpoint because of a washout summer. It feels like 2025, you have almost got a lot more innovation than you normally would need to sort of lap the sporting summer, but given that you didn’t have the benefit from the summer of sports, the setup for 2025 volumes is quite favorable.

Damian Gammell, CEO

We planned ‘25 back in ‘23. We had higher expectations for ‘24 based on significant assets, leading to strong volume growth in ‘24. That didn’t quite materialize as we hoped. However, it provided the catalyst to ensure ‘25 has the campaigns and cycling behind those assets. You are seeing Fanta innovation, Diet Coke particularly in GB, and a great summer campaign I can’t detail yet for Coke. Also, innovation across other brands, leading to one of the most exciting marketing product calendars we have had for a while. I believe this will stimulate growth in Europe, especially.

Operator, Operator

Thank you. We will now take our next question. Please standby. And the next question comes from Sanjeet Aujla from UBS. Please go ahead. Your line is now open.

Sanjeet Aujla, Analyst

Hi Damian and Ed. My question is really around the pricing and promo strategy in Europe. I think you called out some adjustments made in the away-from-home channel. How are you thinking about the home channel? Is the mantra still to price in line with CPI despite a more favorable input cost environment? Any context there would be helpful.

Damian Gammell, CEO

Yes, Sanjeet. You are spot on. We have a good discipline on pricing, taking what we believe are good, relevant price moves annually. We will continue to do that, broadly in line with CPI. Beyond that, we have significant investments deployed in our P&L and promotions, making sure every percent of that works more effectively to add both to the P&L and top line growth. That’s also true for Australia and New Zealand. We continue using data analytics and in-market testing for relevant price points, particularly on promotions. Yes, CPI is a good benchmark for our pricing.

Sanjeet Aujla, Analyst

To clarify your point on change in promo strategy on multipacks, is that reallocating or stepping up promo to support that pack?

Damian Gammell, CEO

No, it’s reallocating. We have a lot of investment deployed already. It’s about continuing to invest smarter, testing new ideas to see what resonates with the shopper.

Operator, Operator

Thank you. We will now take our next question. Please standby. And the next question comes from Bryan Spillane from Bank of America. Please go ahead. Your line is now open.

Bryan Spillane, Analyst

Hey, good morning or afternoon everyone. Can you hear me?

Damian Gammell, CEO

Yes, Bryan.

Ed Walker, CFO

Hi Bryan.

Bryan Spillane, Analyst

Okay, great. Sorry about that. Hey Damian, just kind of a bigger picture question. Since you’ve taken over as CEO, I think the enterprise value in the business has doubled. And also the free cash flow has effectively doubled as well. Can you give us some perspective on what it would take to double again over the next 8 years? How much of it comes from acquisitions, and how much comes from operational? Just trying to give people a perspective on how this business can actually compound returns.

Damian Gammell, CEO

It's a big picture question, Bryan. Thank you. A lot of our value creation is organic. We’ve done some productive M&A but ultimately, the key to building the business again is sustained volume and revenue growth, a focus on quality top-line growth. We get good leverage on our P&L, and we have capital and talent. Over the next eight years, quality volume and revenue growth is what we will focus on. The innovation pipeline will expand opportunities in categories. We have not capitalized on segments like sports and Fuze Tea. While M&A is interesting, primarily it will be an organic growth story forward.

Operator, Operator

Thank you. We will now take our next question. Please standby. And the next question comes from Charlie Higgs from Redburn Atlantic. Please go ahead. Your line is now open.

Charlie Higgs, Analyst

Yes. Hi Damian, Ed, and Sarah. I have a question on the balance sheet and the net debt to EBITDA, which has come down very nicely to 2.7x comparable EBITDA. You announced a €1 billion buyback, and I think on my numbers, even with that leverage might fall a little in 2025. Can you tell us how you are thinking about cash allocation over the coming years? I know you have up-weighted capital expenditure, but are you leaving some dry powder for M&A? It doesn’t sound like you are, so just how do you think about the balance sheet?

Ed Walker, CFO

Thanks, Charlie. Yes, good question. We are delighted that we are now back in that leverage range at 2.73 one year early. As we look forward, we want to stay within that 2.5% to 3% range. We are leaving ourselves a little bit of flexibility to allow for more cash investment in the business should growth opportunities arise. But we also want to account for business result variations over time and potential M&A. We don’t want to over-commit now and may need to change guidance later. We see ourselves continuing to operate within that leverage range.

Damian Gammell, CEO

We are happy to announce a share buyback. This leaves cash available for M&A, especially with the cash flow guidance provided. We demonstrate value for the Coca-Cola Company and our shareholders. If opportunities arise, we are interested. NARTD and soft drinks attract many investors.

Operator, Operator

Thank you. We will now go to our next question. Please standby. And the next question comes from Robert Ottenstein from Evercore ISI. Please go ahead. Your line is now open.

Robert Ottenstein, Analyst

Damian, one of the great successes for the Coca-Cola system overall, which you play a key role in, has been the greater coordination between the bottlers in Atlanta and coordination on marketing, planning, and incidents. Can you provide insight into initiatives that the global system is undertaking and how you are participating?

Damian Gammell, CEO

We benefit from evolving marketing approaches from the Coca-Cola Company. This drives higher quality engagement with consumers, and more effective spend connects with more consumers. We are benefiting from a portfolio that aligns with sparkling flavor growth, Diet Coke, and learning from markets like Australia and the U.S. regarding sports and Powerade. It’s about leveraging insights and AI to bridge consumers, customers, and shoppers effectively. Overall, we align well with the Coca-Cola Company's marketing strengths and that supports top-line growth.

Operator, Operator

Thank you. We will now take our final question. Please standby. The last question comes from Philip Spain from JPMorgan. Please go ahead. Your line is now open.

Philip Spain, Analyst

In your prepared remarks, you spoke about accelerating your CapEx plans in the Philippines. What gives you the conviction to accelerate, and what will that investment entail?

Damian Gammell, CEO

The Philippine team, the Tigers, delivered well ahead of our expectations in year one, which gave us the confidence to accelerate our CapEx plans. We are pulling forward a couple of lines in our 5-year plan. It’s not a step up in overall CapEx guidance, as Ed mentioned. We are looking at cooler placements based on volume, investing more in technology, and systems, which are crucial in this high-growth business. Some growth also requires fundamental investments in bottles and cases, particularly for our refillable glass business.

Operator, Operator

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

Damian Gammell, CEO

Thank you. A big thank you to everyone for taking time out to join us today. We closed out 2024 with a great performance. Today, we are pleased to announce our €1 billion share buyback starting Monday. As you’ve heard today, we are excited about investments and commercial plans for quality growth in 2025 and beyond. We look forward to seeing you in Manila in May, where we can showcase the growth of our Philippines business and the changes we are making in Indonesia.