Coca-Cola Bottlers Japan Holdings Inc.
First Quarter 2019 Earnings Presentation
May 16, 2019

Calin Dragan, President
Bjorn Ulgenes, Vice President & Chief Financial Officer(Posted to CCBJH website on May 15, 2019)Forward-looking statements
The plans, performance forecasts, and strategies appearing in this material are based on the assumptions and judgment of the management ofCoca-Cola Bottlers Japan Holdings Inc. (CCBJH or Company) in view of data obtained as of the date this material was released. These forecasts may
differ materially from actual performance due to risks and uncertain factors such as those listed below.

Risks and uncertain factors are not limited to the items listed below. They are also included in our annual securities report, or “Yuka Shoken
Houkokusho”.
• Agreements with The Coca-Cola Company and Coca-Cola (Japan) Company Limited.
• The quality and safety of products• Market competition• Natural environment, such as climate, disaster, water resources, etc.
• Legal environment• Leakage or loss of information• Change of economic conditions, such as personal consumption, currency exchange rates, prices of raw materials, fair value of assets, etc.

• Business integration, streamlining and optimization of business processes, etc.
• Uncertain factors other than those above
The information in this presentation is provided for informational purposes and should not be construed as a solicitation of an investment in our
securities.
CCBJH undertakes no duty to update any statement in light of new information or future events. You should rely on your own independent
examination of us before investing in any securities issued by our company.

2

Coca-Cola Bottlers Japan Holdings Inc. (CCBJH)First Quarter (Q1) 2019 earnings presentation

Situational analysis: Reflection on first 60 days
Q1 2019 summary and business update
Full-year revision and outlook for the rest of the year
Q&A
3

Situational analysis:
Reflection on
first 60 days

Q1 2019 performance: A challenging start to the year
• Volume down 2%, reflecting disruption from 2018 flooding and supply capacity, also
underperforming product launches and renewals in Q1. Focus on minimizing value
share impact despite volume pressure.
• Business Income loss of 4.1 B yen reflects negative channel mix as well as expected
negative annual phasing with elevated supply chain expenses during recovery year.
• Operating loss of 12.8 B yen, including 8.7 B yen one-time expenses in Q1 from
implementation of voluntary retirement program. Announced downward revision to
full-year forecast reflecting first-quarter results and outlook for rest-of-year.
• Price hike negotiations successfully concluded for large PET products.

• Investing to rebuild and expand supply capacity. Two new aseptic lines completed in
Kyoto and Kumamoto.
• Completed 25 B yen share-buyback program end of February.
5Reflection on first 60 days

“Doing things right, but are wealways doing the right thing?”• Solid progress on CCBJH integration,
disappointing business results• Japan Coke System dynamicallychanging itself in face of rapid change• Current business performance requires
structural & process change andcontinued investments in support of a

Changes now; More to come• Board evolution toward
best-in-class• Organization & culture change• First to announce price hikedespite short-term pain
• Investing for today andtomorrow• Work underway on updating
strategic business plan target

renewed growth mindset
6

Reflection on first 60 days: Old to New
A call to action to modernize and lead
Need to be more agile to meet constant change• Fast-paced population migration toward urban areas• Changing consumer trends• Disruption of traditional production technologies and distribution
model• Old vending service model becoming less relevant

Enabling the shift from old to new• IT infrastructure• Revamped business processes
7New Board of Directors approved at March 26 AGM
Governance structure supporting a renewed growth mindset
Toward best-in-class
Governance, Independence
and Diversity in terms ofgender, nationality, relevant
professional Experience
Governance & Independence
Executive
Directors

Independent Outside directors in
Audit & Supervisory
Directors
Committee (ASC)Diversity and Professional Skillset
Women onthe Board

Nationalities

Coke System
Experience

Finance/Audit

FMCG

IT/Manufacturing

6

5

3

6

2

56%

33%

67%

22%

2

4

4

3

22%

44%

100%

33%

Figures indicate # of applicable directors. Figure in nationalities indicates # of nationalities of board of directors

8Building a workforce and workplace for the future
Organizational culture supporting a renewed growth mindset
Welcoming 385 new grads in 2019

Sawayaka Style - Smile Together

Largest intake ever (+118 versus PY)
Diverse, with ~30% women; Balance ofcollege, high school grads

Respect diversity, positive thinking
Build comfortable work environment
Casual dress
introduced“san” campaign“Thank you”
badge

Productivity &creativity
Friendlyenvironment
Attract talented
people9

Rebuilding supply network & investing for future growth
Toward normalized production capacity by Spring 2020
2019
Two new manufacturing lines
commissioned
February: Kyoto Plant (#3 line)

Hakushu Warehouse- Provisional operation
started- Installing automatedwarehouse equipment

Saitama Mega Distribution Center

March: Kumamoto Plant- 14 billion yen
investment, to becommissioned
February 2021
- Construction startedExpanding private fleet capacity

2020~
Manufacturinglines underconstruction- Kyoto Plant(#2 line)- Hakushu Plant

Logistics &Distribution- Kumamoto
auto- WH
- Hakushu autoWH- Private fleet(60 trailer
trucks)Spring 2020
- Hiroshima Plant(2 lines)- Zao Plant (1 line)

2021~
Saitama Mega DC

10But all of this is not enough…

We must “do the right thing” for the long-term,
while getting the day-to-day rightWork underway to update mid-term plan and targets• Stabilize and return to growth• Revenue targets with growth aspirations• Build competitive advantage as efficient and lowest-cost operator• Balanced volume and value share growth• Financial framework for value creation11

Q1 2019 summary andbusiness update

Q1 2019 results vs. 2018 (IFRS)
Operating loss includes one-time expenses related to voluntary retirement program
2019 Q1
Revenue2018 Q1

YoY

198,733

205,614

-3.3%

110

112

-2%

104,131

104,686-0.5%

94,602

100,928-6.3%

98,140101,021-2.9%

Business Income (Loss)(4,059)(192)-

Operating Income (Loss)(12,824)(192)-

Net Income (Loss)(8,002)(290)-

Beverage Business Sales Volume (Million Cases)
COGS

Gross Profit
SG&A

YoY

Health Care & Skin
Care Business

198,110-2.7%

Revenue(1,744)-2019 Q1

2018 Q1

Revenue

192,767

Business Income (Loss)(4,774)Beverage BusinessBusiness Income

Unit: Million JPY
Net Income (loss): Net income (loss) attributable toowners of parent.

2019 Q1 2018 Q1

YoY

5,966

7,504

-20.5%

714

1,552-54.0%13

Q1 2019 Drivers of business income performance in IFRS
Q1 2018
Business
IncomeVolume, Price& Mix*

DME(Fixed DME only)

Commodity
pressure

Manufacturing

OthersHealthcare &Skincare-0.2

Q1 2019
Business
Income

-4.1
-4.7

-0.1

+0.1

+0.3
-0.8

+1.5
Volumedecline -2%(Vending -4%,
CVS -3%)

Unit: B JPY

Cycling of Q1
2018 DME
spending driven
by PyongChang
Winter Olympics
campaign, newproduct launches

Commodity
pressure
lower thaninitialexpectation

Increased
packer fee
partially offsets
continued
focus onmanufacturing
efficiency
improvement(Rounded off less thanunit)

*Include variable costs related to commercial activities and adjustment for IFRS, etc.

Decrease oflabor expenses
driven by
retirement
benefitintegration
partially offset
by increased
logistics &distribution
expenses

Mainly driven
by decline ofsales inmail/weborder channel

14

Q1 2019 channel and category volume performance
Volume down 2% vs. PY driven by vending decline, time lag in recovering OTC shelf space after last year’s supply constraints, underperformance of
newly-launched and renewed products
Wholesale revenue per case in D&D improved by less priority on large PET water, CVS supported by FOSHU Ayataka. Vending decline partly driven bystrategic coverage increase of “one-coin” price point coffee to drive transaction growth as well as sparkling volume decline.
By channel, weak performance of new launches and renewed products impacted all sale channels. SM & D&D declines reflect less OTC shelf space
after last year’s supply constraints. Coffee grew in CVS supported by expansion of Georgia Japan Craftsman, but offset by weak hot product sales due
to warm winter. VM declined but Georgia Grand Bito & Deep Black coffee and small 170g can growth helped to moderate recent volume trends.
By category, Sparkling volume decline mainly driven by weak product renewals, including Coca-Cola Peach. FOSHU Ayataka green tea and Ayataka
Chaba no Amami contributed to non-sugar tea growth. Coffee volume recovered to even, supported by Georgia Japan Crafstman and Deep Black.
Water decline mainly driven by cycling of prior-year new launches and weak iLohas flavored waters, as well less priority on Large PET water pack size.

By channel

VM
25%

Supermarket (SM)

-1%

-2

Drug & Discounter (D&D)

-2%

+16

Convenience Store(CVS)

-3%

+2

Vending (VM)

-4%

-11

Retail & Food (R&F)

Even

-3

Vs. PY

Others
1%

R&F
24%

VolumeRevenue percase (Yen)

SM
22%
D&D
12%
CVS
16%

By category
Juice
7%

Others10%

Vs. PY
Sparkling26%

Coffee22%

Non-sugar
tea
21%

Water
Sports8%6%VolumeSparkling-4%

Non-sugar tea+3%

Sports

-3%

Water

-14%

Coffee

Even

Juice

+5%

Note: Sales volume doesn’t include alcohol. Revenue per case doesn’t include DFR (deduction from revenue)15

Q1 2019 OTC market share and retail price trends
OTC Market ShareOTC Retail PriceMarket Share (vs. PY, PP)

Value

Volume

Q1

-0.9

-1.2

Value

Q2 2018

Q3 2018

VolumeQ4 2018

Q1 2019

Volume share decline mainly due to residual
impact of supply constraints from last year.
Continued focus on balancing volume andvalue share performance

OTC Retail Price(Jan. to Mar., JPY per bottle)

Vs. Market
AverageVs. PY

Small PET

+2.7

-0.3

Large PET (2L PET)

+21.0

+2.3

Continued higher retail price vs. market
average in both small and large PET, as impact
to value share has been minimized comparedwith volume share decline

Value share growth in coffee category
Source: Intage SRI

16

CAPEX & depreciation in Q1, financial framework initiatives

Capex & depreciation

Share buy-backContinued investments for growth, in line with plan
- Manufacturing lines- Warehouses- Fleet vehicles- Vending machines- Coke One ERP system- Completed 25 B yen sharebuyback program end of
February, including 13 B yen
buy-back in 2019

(B yen)Q1 20192019 Plan

Capex

24.7

99.8

Depreciation

13.8

57.6

Shelf registration- For bond issuance filedon April 25

ERP: Enterprise Resource Planning

17

Full-year revisionand outlook for the
rest of the year

Revising 2019 plan to reflect Q1 actuals and rest-of-year outlook
2019 initial plan

Current status and outlook

2019 Revised Targets

Revenue even

Volume even

Expected 1H volume impact
from customer price increase.
Continued negative channel,
package mix

VALUE aheadof volume

Focus on minimizing value
share impact despite volume
pressure. Q1 value -0.9 pts,
volume -1.2 pts

VALUE aheadof volume

99.8 billion yen

Investing to recover and growmanufacturing capacity,
optimize logistics network andcomplete ERP rollout

99.8 billion yen

Business
Income (BI)18.5 billion yen

Recovery, building foundation
for growth. New BI baseline
for mid-term plan targets tobe announced in August.

15.4 billion yen

Dividend

Full-year 50
JPY/share

Reflecting consistent focus onshareholder returns, despitetransition period for business

Full-year 50
JPY/share

Revenue
growthValue share
CAPEX
investment

Revenue +1%

Volume -1%

19

Q2 new launches, campaigns, initiatives
New products, renewals, campaigns
Expanding coverage of Georgia
Japan Craftsman to all channels

Leveraging the Coca-Cola system’s unique partnership assets

New era name“Reiwa” promotion

Leverage Coca-Cola’s official sponsorship of the Japan Rugby National Teams,
Tokyo 2020 Olympic and Paralympic Games

Vending initiatives

Coke ON

Drive vending channel transaction growth

Renewal launched in April

Introduced Coke ON IC
Coke ONpromotion in
office locations

Increase Georgia Japan
Craftsman coverage

Vending exclusive products, small
170g SOT can, 100 Yen offerings

Joined MONET Consortium
Exploring new vending business opportunities in Maas (mobility as a service)20

Update on announced customer price increase
Toward new growth mindset, but near-term volume impact• Customer negotiations successfully
concluded• Expect increases in wholesale revenue toramp up through rest of year
• Business plan reflects negative impact onvolume performance in 1H as priceincreases initially take effect.
• Will continue to monitor market reaction

CCBJI large PET products wholesale price andYoY volume trend(Excluding water, 1st week of March to 1st week of May)
Wholesale price

Volume YoY

VolumeYoY

2019actualWSP

2018
actualWSP

2019
Planned
WSP

21Supply chain outlook

CCBJI aseptic demand & production capacity
2019• Enough capacitywith high cost copackers, new lines• No upside tocapacity if higher
demandHigher inventories to ensure supply, but
capacity limits and higher costs in 201922 M cases annualized capacity lost by Hongo damage+3% vs. PY
Inventory
30 M cases
Aseptic production
volume expected2019

Annualized 2019new capacity bothinternal & external

Building inventory
early to meet peakseason demandContinued pressure on supply chain costs
Increased
outsourcing costs

HigherTransport costs

Higherwarehouse costs

due to extra
contract packer fees

due to longer
shipping
distancesby building andmaintaining higher
inventory levels

Increased rate of labor cost

2020

2019

• Normalized
product supply• Sufficient capacity
to meet growing
demand2020

Earlier and higher inventory build
Aseptic products inventory

30%+ vs. PY••

Building Inventory levels to ensure supply
On average 30%+ higher than PY
JAN

FEB

MAR

APR

22

Voluntary retirement programHigh acceptance rate with increase in expected one-time cost in 2019

Final results announced on April 16 with higher
acceptance rate than initial expectations• # of applicants: 950• One-time expenses in Q1: 8.7 billion yen• 2019 expected cost savings: 5.7 billion yen• Annualized cost savings: ~7.7 billion yen

23

Revised full-year 2019 forecast
IFRS

New 2019

Beverage Volume

Original 2019

Variance

-1%

even

Revenue

923,300

936,100-1.4%

Business Income

15,40018,500-16.8%

Operating Income

8,800

12,700-30.7%Net Income

5,200

7,200

-27.8%

28.91 Yen

39.97 Yen

-11.06 Yen

EPS
Beverage Business

Health Care & Skin
Care Business

New 2019

Original
2019

Revenue

895,900

906,100-1.1%

Revenue

27,40030,000-8.7%

Business Income

10,00013,100-23.7%

Business Income

5,400

5,400

-

Variance

New 2019

Orignial
2019

Variance

Unit: Million JPY, except for EPS
Net Income: Net income attributable to owners of parent24

2019 Revised business income forecast (IFRS)
New baseline for midterm plan target
23.3

-1.3

-0.3

Unit: B JPY(Rounded off less than
unit)

-0.2

Business Income• Lower volumes & negative productmix, negative volume impact fromprice increase in Q2• Elevated supply chain cost andcapacity constraints limit our ability
to recover in balance of year

-3.2

-3.1
+0.1

15.4

Operating Income• Higher one-time costs due tovoluntary retirement program

2018
Business
IncomeVolume, price& mix*

DME(Fixed DME only)

Commodity
pressure

Manufacturing*Include variable costs related to commercial activities and adjustment for IFRS, etc.

OthersHealthcare &SkincareBusiness
Income2019
RevisedBusiness
IncomeForecast
25

Key takeaways

Key takeaways
2019: A call to action to modernize and lead
• Not satisfied with current businessperformance• Implementing structural & process change
and investing to support a renewed growthmindset• New 2019 outlook is starting point for
updated mid-term plan, to be shared inAugust2019 Milestones
March 26
Annual General Meeting;
New management and
BOD members approved

April 1
Completion of customer
price rise negotiations
May 15Reflection on 1st 60 days;
2019 revision to be starting
point for mid-term plan
August 2019
Expect updates to
mid-term targets

27

Q&A

Appendix

Volume by package
Q1 2019
Volume:-2%
Powder
3%

Others
7%

Syrup
13%

S-PET
36%

Bottle Can
6%

Can
14%

vs PY

L-PET
21%

Volume

S-PET

Even

L-PET

-1%

Can

-1%

Bottle Can

-18%

Syrup

-1%

Powder+9%

S-PET：PET under 600ml
L-PET：PET above 1.5L
Sales volume doesn’t include alcohol30

We are part of the global Coca-Cola system
An enduring and effective partnership

Coca-Cola (Japan) Company
•
•
•
•
•

BrandsInnovation
Global perspective
Consumer focus
Superior insight

•
•
•
•
•
•

Customer focus
Local expertise
Best-in-class execution
Finished goods production
Logistics and distribution
Cost optimization

31Glossary of key terms
Business
IncomeA measure of our underlying or recurring business performance after the adoption of IFRS. Business Income deducts cost of goods and SG&A fromrevenue, and includes other income and expenses which we believe are recurring in nature.

DME

Abbreviation of Direct Marketing Expenses. Sales promotion-related expenses, including advertisement, rebates, sales commissions, etc.

FC

Abbreviation of Future Consumption. Purchase or sell beverage for future consumption in home, etc. It also means the products / SKUs for FC (forexample, single packages 1L or more and multi-pack of IC packages) and channels that consumers purchase the beverages for FC. (for example,
supermarket, drug & discounter channels, etc.).

HORECA

Abbreviation of Hotel, Restaurants and Cafeteria. Generally means sales channels of these kinds.

IC

Abbreviation of Immediate Consumption. Purchase or sell beverage for consuming it immediately. It also means the products / SKUs for IC (forexample, single packages less than 1L as well as fountain) and channels that consumers purchase the beverages for IC (for example, vending
machines, convenience store channel, etc.).

PTC

Abbreviation of Price, Terms and Conditions, an internal guideline for setting appropriate transaction conditions with customers, frequently used inconjunction with RGM.

RGM

Abbreviation of Revenue Growth Management, an overall strategy and process to achieve profitable revenue growth.

RTM

Abbreviation of Route-to-Market. A framework, a process, a philosophy, a proven approach for driving profitable growth.

Channel definitions

Vending

Retail sales to consumers through vending machineSupermarket

Wholesale to supermarket chains customers

Drugstore & Discounter

Wholesale to drugstore and discounter chains customers

Convenience Store

Wholesale to convenience store chains customers

Retail & Food

Wholesale to grocery store, liquor store, eating & drinking establishments (HORECA), online
sales channels customers, etc.

OthersWholesale to customers other than above

32

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Investor Relations
Coca-Cola Bottlers Japan Holdings Inc.
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