Coca-Cola Europacific Partners plc Q3 FY2026 earnings call

• Strategic Execution: The company continues to execute its focus strategy, broadening the beverage portfolio with investments in faster-growing categories such as zero-sugar options, hydration, and energy drinks.
• Brand Performance: Coca-Cola trademark volumes grew by 2%, led by Coke Zero Sugar (up 10% YTD) and Diet Coke (up 5% in GB). Sprite performed strongly due to global NBA tie-ups and new flavors. Energy brands, particularly Monster, grew by over 20% in key markets, supported by innovations like Ultra White.
• Innovation and Portfolio: There is a strong demand for zero-sugar variants across the portfolio. The company is leveraging access to global innovation pipelines from The Coca-Cola Company and Monster.
• Channel Expansion: Significant wins were achieved in the Non-Alcoholic Ready-to-Drink (NARTD) away-from-home channel, including partnerships with SSP, Domino's, and Marriott International.
• Cost Management: Despite an inflationary cost environment, the company utilized hedging, productivity savings, discretionary cost control, and disciplined pricing to absorb pressures without changing full-year guidance.
• Investment in Growth: Record levels of investment are being maintained behind growth initiatives, including technology, AI, and cold drink availability (coolers), which supports mix and premiumization.

The company reported a 5.8% increase in revenue on an FX-neutral basis, driven by 3.6% volume growth and improved revenue per case. In Europe, volumes increased by 2.3% with revenue up 5.2%, supported by strong performances in Iberia and GB, despite temporary disruption in Germany during September. In the Asia Pacific and Southeast (APS) region, volumes grew significantly by 6.4%, with revenue increasing by 7.8%. Australia and New Zealand saw 7.2% revenue growth, while the Philippines maintained solid momentum with mid-single-digit volume growth. Indonesia delivered strong double-digit volume growth, marking a positive outlook for the market.

• Full Year Guidance: Management confirmed that full-year guidance remains unchanged, despite an increase in the cost of doing business and higher operating costs in H2.
• 2027 Outlook: While specific numerical guidance for 2027 was not provided, management expressed confidence in managing future cost headwinds through a combination of productivity, R&MG capabilities, and disciplined pricing. They aim to be up to 80% covered on hedgeable commodities by year-end.
• Dividend Policy: A second-half dividend of €1.42 per share was declared, maintaining an annualized payout ratio of approximately 50%. The current $1 billion share buyback program will conclude this year.

• Geopolitical and Cost Inflation: Uncertain geopolitical environments, including the situation in the Middle East, have created an inflationary backdrop impacting both commodities and logistics costs.
• Customer Disruption: Temporary operational disruption occurred in Germany during September due to negotiations over commercial terms, though this has been resolved.
• Regulatory Changes: Potential impacts from upcoming regulatory changes, such as the sugar tax in Germany, the Deposit Return Scheme (DRS) in Great Britain, and potential new taxes in the Philippines, require ongoing monitoring and strategic playbooks.
• Consumer Behavior: While value consciousness is present, it has not materially shifted shopping behavior yet; however, balancing affordability and premiumization remains a critical challenge.

Q: UBS asked about the resolution of the Germany retailer dispute and whether current revenue-per-case acceleration is sufficient to manage 2027 cost headwinds.

A: CEO Damian Gammell confirmed the one-month disruption in September is fully resolved, with normal trading and pricing in place through 2027. CFO Ed Walker stated that while 2027 presents more headwinds than 2026, they are manageable via P&L actions, productivity, and disciplined pricing, noting we are well-positioned compared to 2022/2023 levels.

Q: Jefferies sought details on the capabilities strengthening the 'flywheel' of consumer excitement, customer value, and shareholder returns, plus specifics on Indonesia's performance drivers.

A: Gammell attributed confidence to the robust brand portfolio, global innovation pipeline, and tech/AI investments enhancing decision-making and manufacturing efficiency. For Indonesia, he highlighted successful supply chain restructuring, new route-to-market models, and portfolio innovation (including sports and Nutriboost) driving sustainable double-digit growth ahead of Ramadan.

Q: BNP Paribas inquired about the Philippines' post-typhoon trends and the anticipated impact of upcoming regulatory changes like the German sugar tax and UK DRS.

A: Gammell noted the Philippines delivered solid growth despite a soft base, with margin expansion balanced against top-line growth. Regarding regulations, he emphasized preparedness: Germany's sugar tax playbook involves reformulation and pack-price management; the UK DRS benefits from learnings in Portugal and Ireland; and Philippine tax clarity is expected early next year.

Q: Wells Fargo asked if the current consumer backdrop limits the ability to use pricing/RGM as an offset to inflation, or if productivity must lean harder, and requested insight on sustained energy category growth.

A: Gammell affirmed that pricing and RGM remain robust tools, aided by tech-driven elasticity modeling. He explained energy growth is driven by consumer-centric propositions (sugar-free, flavor variations) expanding usage occasions. Walker added that productivity remains a consistent part of the plan but is not disproportionately relied upon compared to previous years.

Q: Rothschild & Co asked for breakdown of Coca-Cola trademark growth drivers and strategies to revitalize Fanta.

A: Gammell identified Coke Zero Sugar and the new 'Zero Zero' variant as primary growth engines, alongside Diet Coke recovery in GB. He noted a shift from large PET to smaller formats/cans. For Fanta, he acknowledged muted performance and outlined plans to drive revival through flavor innovation, pack innovation (moving to 500ml cans), and collaboration with The Coca-Cola Company.