Coca-Cola East Japan
Q3 & YTD 2015
Earnings Call
Calin Dragan, CEO
Michael Coombs, CFO
November 9, 2015

www.ccej.co.jp(Posted to CCEJ Website November 6, 2015)

Forward-Looking Statements

Q3 & YTD 2015

The plans, performance forecasts, and strategies appearing in this material are based on the assumptions and judgment of the
management of Coca-Cola East Japan Co. Ltd. (CCEJ) 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”.

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•
•
•
•
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Intensification of price competition in the marketplace
Change in economic trends surrounding our business
Major fluctuations in capital markets
Fluctuations in currency exchange rates, particularly with respect to the value of the Japanese yen and the U.S. dollar
Increases in prices of raw materials
Change in the tax environment
CCEJ's ability to realize production efficiencies and to implement capital expenditures at the levels and times planned bymanagement;
CCEJ's ability to market and distribute effectively
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.
CCEJ 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Q3 & YTD 2015 Earnings Call

Q3 & YTD 2015

Introduction• Overview and Key Messages• Incorporating Learnings and Progress to-date

Third Quarter and Year-to-Date Results• Share, Volume and Financial Results

Outlook for Full-Year 2015
• Revised Full-Year Plan
• Key Takeaways

3Q3 and YTD Overview and Key Messages

Q3 & YTD 2015

October 7 revision of full-year performance targets
Growth in YTD volume, revenue and operating income, including the benefit of the
Sendai Coca-Cola Bottling Company integration in the second quarter
Improving gross margins, as we deliver manufacturing and procurement synergies
Two quarters of negative market share partly due to pullback on promotional pricing
in FC (future consumption) packages well as aggressive competitor activity (pricing,product launches)

Transformation of our business continues•

Commissioned one new production line in Iwatsuki and a new bottle can filler in Tokai•

Stabilized initial operation of new Enterprise Resource Planning (ERP) system “CokeOne+” after Q2 rollout•

Continued smooth integration of Sendai people, processes and systems into CCEJ
4

Full-Year Estimate Revision (announced October 7, 2015)

Q3 & YTD 2015

Full-year reported operating income growth forecast revised to +13% (from +51%)•

Softness in vending channel persists due to channel mix shift since consumption tax rise.
Poor summer weather in Kanto region also a factor.

•

Continued strong competitive environment (pricing pressure, new product launches)•

Under-delivery of planned supply chain savings due to incremental logistics activity after ERP launch.
Now expect approximately 2.8 billion yen in net supply chain and procurement savings in 2015.

Task forces established to address priority areas•

Vending value proposition (pricing, cost structure)•

Supply chain synergies (fully leverage new production lines and further optimize logistics network)•

Cost to serve (complete review by channel to evolve RTM from phase 1- standardization, to phase 2optimization)5

Incorporating Learnings and Progress

Q3 & YTD 2015

Actual results have differed from original assumptions, primarily in topline performanceand industry competition and pricing trends.
This masks real underlying progress:
•
•
•
•
•
•

High efficiency of new lines and further production insourcing
Pricing, terms & conditions (PTC) discipline
Smooth integration of legal entities and Sendai
Initial full deployment of standardized Route-to-Market (RTM)
Evolving relationship/role sort with Coca-Cola system companies
Improved data visibility & control for decision support through systems

Now finalizing our 2016 business plan, incorporating learnings from last three years,
underlying progress and current market situation, and will announce it when we release
our full-year 2015 earnings.

6

Priority Issues – Dedicated Task Forces

Q3 & YTD 2015

Vending

Synergies

Situation

Situation

Vending channel value proposition
less appealing with consumers• Majority of Commercial grossprofit lag in 2015 due to vending• Price gap with other channels• Volume per machine declines andlower outdoor VM profitability

Ongoing synergy capture offset by
topline erosion and unplanned costs• Delayed start to logistics synergy
programs due to ERP turbulence• Inefficient inventory movements• Need better visibility of slowmoving inventory• Current Route-to-Market rollout
focused on implementing astandard model of service (onesize fits all)• No major cost savings yet from
ERP (optimize labor cost;eliminate unnecessary work)

What We are Doing Now

What We are Doing Now

What We are Doing Now• Stop value decline by evaluating
different price/pack combinations
on a pilot basis, including vending
exclusive• Evaluating total cost base, fromcost of machine to cost-to-serve• Focus on growing indoor businessand removing/moving
unprofitable placements• Remapping of complete logistics
network– opportunity for 2016business plan
• Full utilization of new production
capacity; no expected disruptions• Focus on energy & utilities saving• Leverage ERP to manage P&L
accountability for better controlof slow-moving inventory

Cost Structure
Situation• Complete review of cost-to-serveby channel and geography (i.e.
high density vs. low density)• From RTM phase 1 (standardize)to RTM phase 2 (optimize)• Restructuring commercialorganization to optimized service& cost model• Indirect procurement at CCBSC

7

Q3 & YTD 2015
Results

www.ccej.co.jp

Year-to-Date Volume PerformanceYTD Reported Volume

Q3 Reported Volume

by Quarterby Month

YTD volume+6.8% (-0.1%*)

+11%
+1.5%

Q1

Q3 Highlights

+9.0%

+9%

+11%
+7%

--0.4%*--1.2%*

Q3

July

Sendai Bottler acquisition
effective April 1

August• Changeable weather: A
tale of two summers• Continued soft results invending channel• Competitor promotions,new product launch
activities continue
Weather data in Tokyo(vs. PY, Source: Metrological Agency)+4.4%*-+1.7%*-+1.3%*

Q2

Q3 & YTD 2015--2.2%*

Hot weather
SeptemberSlow start,in first half
Cool, wetLess promo
of monthweather; Pricing
activity in SM
discipline& Discounters

Jul

Aug

Sep

Ave. Temp.
(Celsius)

-0.6

-1.0

-0.6

Precipitation
(mm)

+129

-1.5

+348

Q4 Outlook• Solid start in October• Market share recovering* Organic volume growth, not including Q2 acquisition of Sendai bottler

9Share Loss amid Strong Competition
2015
Market Share*

Q3

YTD

Volume
Value

-1.0
-0.8

-0.4
-0.4

vs. Prior Year

Volume Share vs. Prior Year

Q3 & YTD 2015

• Share gains in teas, sports and coffee• Challenges in sparkling due to competitor launches
and water due to pullback on 2L PET package• 6 out of 8 quarters volume & value share growth

Value Share vs. Prior Year

* Including Sendai Bottler (now South Tohoku Region)
Source: Intage, OTC channel, NARTD beverages

10New Products & Retail Pricing Trends
New Product Performance (YTD)
Per SKU volume weaker than prior year
Volume/SKU# of SKUs

Q3 & YTD 2015

OTC Retail Price
CCEJ average price declined vs. prior year, but our
retail pricing is above market average, especially inlarge PET, where we have maintained price discipline
CCEJ OTC Retail Price(As of October 18, 2015)

Last 12 Weeks

YTD

Large PET

-1.6

-2.4

500ml PET

-1.4

-1.8

CCEJ OTC Retail Price(As of October 18, 2015)

2014
SKU: Stock Keeping Unit

2015

vs. Prior Year (in Yen)

vs. Market Average (in Yen)
Last 12 Weeks

YTD

Large PET

+13.3

+14.2

500ml PET

-0.1

+0.6

Source: Intage, OTC channel, NARTD beverages

11Volume Performance by Channel

Q3 & YTD 2015

Q3 Volume by Channel

Channel Volume Growth(% of total)
Others11%
Vending(VM)
27%
Eating &Drinking(E&D)
13%

Including Sendai

Supermarket(SM)
23%
Drug & Discounter
(D&D)
12%
Convenience
Store (CVS)
14%

Total Volume, including Sendai
Q2 +9.0%; YTD 2015 +6.8%• CVS growth led by tea, water, coffee.
• Drug & Discounter, Supermarkets reflect lesspromotional pricing and pullback in 2L water• Vending weak due to channel mix shift andweather.
• Eating & Drinking growth led by outlet expansion

vs. Prior Year

CVS

D&D

Nat’l SM

Local SM

VM

Eat & Drink

Q3 2015

+10%

+11%

+8%

+4%

+7%

+21%

YTD 2015

+14%

+8%

+3%

+3%

+4%

+17%

Organic Volume
Excluding Sendai 
Q3 -0.4%; YTD -0.1%

vs. Prior
Year

CVS

D&D

Nat’l
SM

Local
SM

VM

Eat &
Drink

Q3 2015

even

-1%

-5%

-2%

-3%

+13%

YTD 2015

+6%

-1%

-7%

-2%

-4%

+11%

12

Volume Performance by Category
Q3 Volume by Category

Category Volume Growth(% of total)
Sparkling (SSD)
26%
Teas
21%

Others11%

Sports14%

Q3 & YTD 2015

Including Sendai

Juice
4%
Coffee
14%

Water
10%

Total Volume, including Sendai
Q3 +9.0%; YTD 2015 +6.8%• NST growth due to success of recent launches• Water performance reflects less 2L promotions• Coffee led by customer-exclusive brands• SSD & Sports Drinks impacted by weather, vending• Juice growth led by new outlet expansion

vs. Prior Year

NST

Water

CoffeeSparkling

SportsJuice

Q3 2015

+10%

even

+17%

+8%

+7%

+18%

YTD 2015

+11%

+4%

+11%

+4%

+4%

+13%

* NST (Non-Sugar Tea)

Organic Volume
Excluding Sendai 
Q3 -0.4%; YTD -0.1%

vs. Prior
Year

NST

Water

Coffee

SSD

SportsJuice

Q3 2015

+3%

-10%

+4%

-2%

-3%

+8%

YTD 2015

+5%

-3%

+2%

-3%

-5%

+6%

13

Q3 & YTD 2015
Financial Resultswww.ccej.co.jp

Drivers of Third Quarter Operating Income

Q3 & YTD 2015

In MM JPY

-1,708+573-291

Supply Chain
Savings

DME**• 1.6B yen
manufacturing &procurement• VM weakness &synergies,
pricing pressure.
partially offset
Also negative mix by logistics &from food service distribution& customerexpenses
exclusive brands• In line withplan

GP Impactof Mix & Vol.

7,810

• -0.4% organic
volume

-449

+684

-539

OPEX

Other
Subsidiaries

Depreciation
vs. PY• In line with plan

• VM locations• Sendai• FV East Japan• COGS: +10• SG&A: -549

6,078

• Key accounts

2014 Q3
Comparable
Operating Income

2015 Q3
Comparable
Operating Income*Adjusted for 204 million in Q3 2014 and -265 million in Q3 2015 non-recurring expenses**DME: Direct Marketing Expenses

15

Third Quarter 2015 Results

Q3 & YTD 2015

• Improving gross margin driven by manufacturing and procurement efficiency • SG&A increase led by continued marketing investment,
logistics & distribution, depreciation, Sendai integration, etc. • Tax rate increased by revisiting deferred tax accounting

2015 Q3

2015 Q3

2015 Q3

2014 Q3

ActualOne-time
items

Comparable

Comparable-

90,783in million yen

Sales Volume(BAPC) (,000 cases)

90,783

Vs. PYDiff%

83,313

7,470

+9.0

163,480-

163,480

152,106

11,374+7.5

87,946-

87,946

83,373

4,573

+5.5

75,534-75,534

68,733

6,801

+9.9

69,191

265

69,45660,923

8,533

+14.0

Operating Income

6,343

-265

6,078

7,810

-1,732-22.0

Profit Before Tax

5,771

288

6,059

7,827

-1,768-22.6

Net Income

3,192

185

3,377

4,899

-1,522-31.1

Net Revenue
COGS

Gross Profit
SG&A

BAPC (Bottler Actual Physical Cases)*Adjusted for 204 million in Q3 2014 non-recurring expenses
Note: 2014 volume was revised in our Q4 2014 earnings announcement as a result of data and system standardization.

16

Drivers of YTD Operating Income

Q3 & YTD 2015

In MM JPY

GP Impactof Mix & Vol.

Supply Chain
Savings-2,705+2,870+3,224-1,872
DME**

6,587

• -0.1% organic• 5B yenvolumemanufacturing• VM weakness && procurement
pricing pressure.
synergies,
Also negative mix
partially offset
from food service
by logistics && customerdistribution
exclusive brands
expenses• In line with
plan

-609
OPEX
In line with plan

• “Big Bet” brandlaunches• VM locations• Key accounts

2014 YTD
Comparable
Operating Income+1,224
Other
Subsidiaries• Smoothintegration of
Sendai

Depreciation
vs. PY8,719• COGS: +599
• SG&A: +2,625• Cycling prior year
accountingchange in Q1• FV East Japan

2015 YTD
Comparable
Operating Income*Adjusted for 855 million in YTD 2014 and 1,030 million in YTD 2015 non-recurring expenses**DME: Direct Marketing Expenses

17

YTD 2015 Results

Q3 & YTD 2015

• Improving gross margin driven by manufacturing and procurement efficiency • SG&A increase led by marketing investment,
logistics, Sendai integration • YTD taxes decreased due to additional deferred tax assets for integration of subsidiaries in Q2
2015 YTD

2015 YTD

2015 YTD

2014 YTD

ActualOne-time
items

Comparable

Comparable-

230,577in million yen

Sales Volume(BAPC) (,000 cases)

230,577

Vs. PYDiff%

215,923+14,655+6.8

425,530-

425,530

400,601+24,929+6.2

227,997-

227,997

219,154

8,843

+4.0

197,532-

197,532

181,446

16,086+8.9

189,843-1,030188,813

174,859

13,954+8.0

Operating Income

7,689

1,030

8,719

6,587

2,132

+32.4

Profit Before Tax

5,903

2,733

8,636

6,790

1,846

+27.2

Net Income

4,181

1,759

5,940

3,356

2,584

+77.0

Net Revenue
COGS

Gross Profit
SG&A*Adjusted for 855 million in YTD 2014 non-recurring expenses
Note: YTD 2014 results include JPY 805 million in COGS and JPY 3,850 million in SG&A due to the write-off of residual value ofexisting tangible fixed assets related to a change in accounting policy
Note: 2014 volume was revised in our Q4 2014 earnings announcement as a result of data and system standardization.

18

Outlook for Full-Yearwww.ccej.co.jp

Revised Full-Year Outlook (announced October 7, 2015)

Q3 & YTD 2015

Vs. PY2015 FY

2015 FY

2015 FY

2014 FY

Revised Estimate
in million yen

One-time
Items

RevisedComparable
Estimate

Comparable
ResultDiff%

Sales Volume*(BAPC) (,000 cases)

303,685-

303,685

281,586

22,099+10%Net Revenue

562,500-

562,500

523,299

39,201+7%

Gross Profit

263,800-

263,800

239,336

24,464+10%

Operating Income

10,600+1,337

11,937

10,474

1,463

+14%

Profit Before Tax

8,300+3,467

11,767

10,643

1,124

+11%

Net Income

5,800+2,505

8,305

5,975

2,330

+39%

Note: 2014 volume was revised in our Q4 2014 earnings announcement as a result of data and system standardization.

20

Drivers of Full-Year Revised OI Estimate

Q3 & YTD 2015

In million JPY+2,697-2,543+2,883-1,881DME**

10,474

GP Impactof Mix & Vol.

Supply Chain • In line with
Savings
previous plan

• Weakness invending• 6B yenmanufacturing& procurement
synergies
partially offset
by logistics &distribution
expenses• Negative mix
from foodservice &customerexclusive
brands

2014 FY
Comparable
Operating
Income**DME: Direct Marketing Expenses-1,288+1,595OPEX

Other
Subsidiaries• IT costs up
duringtransition year
for CokeOne+
ERP• Smoothintegration of
Sendai• FVEJ

Depreciation
vs. PY• COGS:+634• SG&A:+2,063

11,937

Revised FYCAPEX now
approx. 48Byen

2015 FY
Revised Comparable
Operating Income Estimate

21

Fourth Quarter Key Marketing Initiatives
Coca-Cola Bottle 100th Anniversary

Coca-Cola
Lime

Q3 & YTD 2015

Coca-Cola Winter Promotion

Winter Song
Bottles

Coca-Cola
AluminumContour Bottle
Winter Design

Georgia 40th Anniversary / Vending Hot Drink Activation / iLohas Peach / Aquarius Cold Prevention

Enjoy Warmer Coffee This WinterVM +2°C Up Campaign

22Key Takeaways

Q3 & YTD 2015

2015 is a second full year of fundamental transformation
Market situation has been tougher than we had anticipated (competition, lasting
impact of consumption tax hike, etc.)

We are taking urgent action with task forces to address specific priority areas
Vending machine strategy and value proposition
Continued synergy capture; focus moving from manufacturing to logistics
Review of cost structure
There is still much work to be done. We remain committed to transforming ourbusiness for growth23

APPENDIX

www.ccej.co.jp

CCEJ One+ Roadmap for Growth

Q3 & YTD 20152018- Tokyo Olympic
Games & Beyond
2016-20172015-20162012-20142012-2013
Forming& Storming
Forming
Define & deploy new

business model
Speed ofintegration:
250+ projects

Identifying
synergies &positioning for
growthNorming
Refine &optimize new
business model

Accelerating

Performing
Approaching
global bottler
performancelevelsProcess re-engineering
Exploiting new& launch of ERP systemarchitecture as
while delivering firstcompetitive
results
advantage to drivesynergies & growth

Meet & exceed
world-classbottler levels

A world-class
Japanese bottler
on the world stage

25

The Coca-Cola System

Q3 & YTD 2015

A powerful partnership driving growth of the Coca-Cola business
The Coca-Cola system in Japan consists of the Coca-Cola (Japan) Company (CCJC), bottlers and other related companies.
CCJC, as the franchise owner, is responsible for supplying concentrate and beverage bases (coffee beans, tea leaves, juices, etc.) for allof Coca-Cola’s brands, as well as R&D, innovation, and marketing and brand development.
The bottlers, including CCEJ, as franchisees, are responsible for manufacturing, distribution and selling the finished products. We all are
working together with our system partners to grow the Coca-Cola business by optimizing our overall operations through more efficient
production and distribution, marketplace execution that is firmly focused on the consumer, faster response to market preferences,enhanced customer service, and rigorous quality control.
Other Coca-Cola System Related Companies in Japan
Coca-Cola Tokyo Research &Development Co., Ltd. (CCTR&D)

Product development and technical support to respond to the needs of the customer inJapan. A wholly owned subsidiary of The Coca-Cola Company.

Coca-Cola IBS Co., Ltd. (CCIBS)

Providing business consulting services, as well as developing and maintaining theinformation systems to support Coca-Cola System companies in Japan. Jointly owned by
The Coca-Cola Company and all the bottlers in Japan.

Coca-Cola Business Sourcing Co.,
Ltd. (CCBSC)

Providing joint procurement of raw materials, packaging, equipment, indirect material,etc., for Coca-Cola System companies in Japan. Jointly owned by The Coca-Cola Company
and all the bottlers in Japan.

Coca-Cola Customer Marketing
Company (CCCMC)

Business negotiations window for nationwide retail, convenience stores, supermarket andfood-service chains as well as developing proposals for sales promotions and storefront
activities. Jointly owned by CCJC and all the bottlers in Japan.

FV Corporation Co., Ltd. (FVC)

Sales negotiations window for national chain vending operators, and deals non-Coca-Colaproducts as well as Coca-Cola branded products. Jointly owned by CCJC and all thebottlers in Japan.

26

Glossary of Frequently Used Terms

Q3 & YTD 2015
Q2

CDE

Abbreviation of Cold Drink Equipment. Vending machines, coolers and beverage dispensers, etc.

Coolers

The equipment with Coca-Cola’s logos which keeps beverages at an appropriate temperature (chilled and/or hot) for immediate
consumption, and ready for selling them at the storefront of retail outlets and restaurants. It serves as point-of–sales advertising, too.

DME

Abbreviation of Direct Marketing Expenses. Sales promotion-related expenses reported in advertisement & sales promotion expenses
and partly in sales commissions of SG&A.

FC

Abbreviation of Future Consumption. Purchase or sell beverage for future consumption in home, etc. It also means the products /SKUs for FC (for example, single packages 1L or more and multi-pack of IC packages) and channels that consumers purchase thebeverages 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 (for example, single packages less than 1L as well as fountains) and channels that consumers purchase the beverages for IC(forexample, vending machine, convenience stores channels, etc.).

OBPPC

Abbreviation of Occasion, Brand, Package, Price, Channel. A segmentation strategy tailored to consumption opportunities in fiveareas: occasion, brand, package, price and channel.

Operational
Excellence (OE)The Coca-Cola System’s way to develop people and culture around productivity which allows higher financial value achievement bydriving sustainable improvement using common language and tools as well as focusing on business priorities.

RTM

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

27

THANK YOU
Coca-Cola East Japan
Q3 &YTD 2015 Earnings Call
November 9, 2015
<Inquiries>
Investor Relations
Coca-Cola East Japan
ir@ccej.co.jp+81-3-5575-3797
http://investor.ccej.co.jp/

www.ccej.co.jp