Q3 2014 Earnings Conference Call
Calin Dragan, Chief Executive Officer
Michael Coombs, Chief Financial Officer
November 6, 2014

Forward-Looking Statements
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”.

•
•
•
•
•
•
•

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 aninvestment 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 2014 Earnings Conference Call
Supporting Presentation
Introduction• Overview and Key Messages• What’s Working and What Can We Do Better?
• Transforming our Business2014: A Year of Investment & Positioning for Growth• Q3 and YTD 2014 Results

Outlook for Full-Year 2014
• Revised Full-Year Plan
• One+ Roadmap for Growth• Key Takeaways
3

Coca-Cola East Japan
Revising full-year estimates after disappointing summer

 Q3 performance strongly impacted by unseasonal weather and weaker consumer
sentiment following the April 1 consumption tax increase.
 Fourth consecutive quarter of volume and value share growth, despite challenges.
Driving volume share growth ahead of value share growth in the quarter.
 Coffee volume growth in all channels; convenience store volume up, vending down.
 Delivering synergy capture and cost savings offset by operational delays of new
production lines and higher distribution costs.

 YTD volume growth +0.6%, comp. revenue* -1.0%, comp. OI ¥6.6 billion
 New full-year comparable OI expected to be flat vs. prior year We remain focused on our One Plus Roadmap for Growth*adjusted for structural change

4Reflections on our Performance
What Can We Do Better?

Action Plan

MarketVolume and value share gains
continue, even in a toughenvironment.

Continued pricing pressure.
Need a more “rational”
pricing approach as an industry.

Strong focus on the rightbalance between volume andvalue.

Rapid legal integration of subs:
production, logistics, equipment
done; legacy bottler entities and“white” vending on track

Aggressive pace of integration
creates new challenges as we
implement new processes androutines by function

Coke One+ ERP system to golive in Q2 2015. Continued
dismantling of old legal entity
structure.

Continuing to capture synergies
and identify new savings
opportunities

Delays in full capacity of newlines. Weak summer volumes
led to lower synergy capture.

All new lines are now fully
operational in Q4. Will apply
learnings from 2014 as we
install new lines in 2015.

Investing in capacity andcapabilities. Positioning for
future growth.

Wide capability gaps to get toworld-class. Logistics still awork-in-progress.

Continued emphasis on building
capabilities through training andhiring. New global bottler talent
to tackle Logistics.

Capabilities Capacity

What’s Working?

Structure

What’s working and what can we do better?

5

Transforming the Business
Making progress on our integration commitments
Structure Functional management and operation of business from Day One
 Legal integration of subsidiary entities:
 4 Production companies done 3 Logistics and 4 Equipment subsidiaries done Legacy bottling entities proceeding on plan “White” vending businesses approved by BOD
 Route-to-Market rollout ongoing Call center consolidation complete
6Transforming the Business
Making progress on our integration commitments
Capacity Five new production lines and two new in-line PET blowers installed
Some delays in full operational capacity of new production lines
 Shutdown of operations at two manufacturing plants complete In-house production of new Tokuho/FOSHU tea started in Q3. Insourcing ofoverall production capacity continues as planned.
 Successfully bond offering of ¥14 billion to fund investment needs

Capabilities New performance evaluation and incentive program People development
 Leadership, commercial skills, English language, diversity
 Employee voluntary separation program (VSP) Coke One+ ERP system development and deployment on track7

Investing for New Business Development
Building customer relationships for the future
Net Full-Service Vending
Machine Placements

Q3

New Customer Outlets• Branded assets• Immediate
consumption (IC)• Indoor focus• Cashless• Low energy use

1.5X
vs
PY

Net Cooler Placements

2.6X
vs
PY

2.6X
vs
PY

2.8X
vs
PY

YTD

Q3

YTD

+10%
vs
PY
Q3

+20%
vs
PY
YTD

8

Continuing to Innovate in Q3 & YTD Q4
Focus on IC; Partnering with customers
Georgia
GohobiLoungeHappy Bottle
Campaign

Coca-Cola
Orange

Fanta
Seasonal
Flavors

Schweppes
Fruit Vinegar
Zero

SummerDesignEmerald Mtn
Blend Renewal

Illy Caffe
Mocha

Georgia
Ice ShotGeorgia
HawaiianIce Breeze

Schweppes
Apple Malt

Georgia
ShakinKaradaSukoyakacha W
Hot & Multipack

Glaceauvitaminwater
relaaaax

Kochakaden
Royal Milk Tea
Flavors

POWERADEFUEL X

Solar Flare

HI-C Flavors

Real Gold
Flavor Mix

FRESCA
Lemon
Georgia
K’s BREAK

Georgia
CraftsmanCoffeeGeorgia
On/Off Switch

Schweppes

Luana
White Honey
Latte

Georgia
Mild
Café Latte

9

2014
A YEAR OF
INVESTMENT &POSITIONING FORGROWTHQ3: A Disappointing Summer…
Cool weather & weak consumer sentiment
YTD Volume by Quarter

+3.4%
+2.0%
Q1

Q2

NSR
+0.6%

NSR
+1.5%

Q3 Volume by Month

NSR
-4.1%

Tough prioryear volume
cycling,
extendedrainy season

Q3

Jul

More cool
weather,
Focus onvolume sequentially
recovery improving
NSR/BAPC

Aug

Sep

-0.7%
-2.4%

YTD volume +0.6%
YTD NSR -0.9%

-3.5%

NSR
-3.0%

NSR
-4.8%

Q3 Highlights• Share gains continue• Cooler-than-averagesummer impacted
volume andprice/mix-3.1%• Consumption tax
impacting consumerpurchase decisions

NSR
-4.4%

• Industry-wide
inventory pressure*NSR=comparable Net Sales Revenue, adjusted for structural change such as Mikuni Wine; *Volume=BAPC, Bottler Actual Physical Cases

11

Q3: Continued Share Gains
Outperforming the industry in a tough quarter
Q3 Market Share*(NARTD Beverages)

vs. Prior Year
Q3
YTD

Strong Q3 share gains in colas, water, teas & coffee

Volume+0.9+0.7

Q3 vol share growth outpacing val share growth
due to promotional activities & weaker IC volume

Value

+0.6

+0.6

YTD volume composition: IC 73% vs. FC 27%

Volume Share vs. Prior Year

*Source: Intage, OTC channel
IC= Immediate Consumption, FC= Future Consumption

Value Share vs. Prior Year

12

Challenging Channel Mix in Q3
Vending down; CVS volume growth led by recent launches
Channel Volume Growth

Q3 2014 Volume By Channel(% of total volume)
Vending
(VM)
28%

Other
11%

Eating &Drinking
13%

Q3 VM volume impacted by cool
weather & CVS.
Outdoor VM -9%, Indoor VM -1%

Supermarket
23%

Drug &
Discount
Convenience 11%
Store (CVS)
14%

Total BAPC Volume Growth• Q3 2014 -2.4%• YTD 2014 +0.6%

Tokuho tea, sparklingwater and coffee
launches
vs. prior
year

CVS

D&D

Nat’l SM

Local SM

VM

Eat & Drink

Q3 2014

+10%

+2%

-10%

-4%

-6%

-2%

YTD 2014

+6%

+7%

even

+1%

-3%

-2%

* BAPC (Bottler Actual Physical Cases)

13

Uneven Category Performance
Growth in tea, water & coffee; Sparkling, sports hit by weather
Q3 2014 Volume by Category(% of total volume)
Sparkling Other
(SSD)
11%
26%

Tea
21%

Sports14%

Category Volume Growth
Q3 coffee
growth in all
channels

Juice 4%
Coffee
13%
Water
11%

Total BAPC Volume Growth• Q3 2014 -2.4%• YTD 2014 +0.6%

YTD FOSHU tea+1.5 million cases

YTD sparkling water+1.5 million cases

vs. prior
year

NST

Water

Coffee

SSD

SportsJuice

Q3 2014

+7%

+10%

+6%

-4%

-19%

-3%

YTD 2014

+8%

+9%

+2%

even

-9%

-6%

* BAPC (Bottler Actual Physical Cases); NST (Non-Sugar Tea)14

Q3 2014 Results
A disappointing summer and lower synergies••••

Negative change in gross profit driven by revenue mix and impact of weather and macro environment
COGS decrease in Q3 not enough to offset decline in net sales revenue
SG&A includes benefit from accounting change and reflects cost controls and lower personnel costs.
Net income reflects in extraordinary expenses related to voluntary product recall activity, delayed ramp-up of new lines, etc.

2014 Q3

2014 Q3

2014 Q3

2013 Q3

ActualOne-time
items

Comparable

Comparable

in million yen

Sales Volume(BAPC) (,000 cases)
Net Revenue

84,381--

Vs. PYDiff%

84,38186,459-2,078-2.4

152,106--

152,106

159,482-7,376-4.6

83,373*--

83,37385,970-2,597*-3.0

68,733--68,73373,512-4,779-6.5

61,127*-204

60,92364,414-3,491*-5.4

Operating Income

7,606

204

7,810

9,098

-1,288-14.2

Profit Before Tax

6,255

1,572

7,827

8,992

-1,165-13.0

Net Income

3,827

1,072

4,899

5,552

-653

-11.8

COGS

Gross Profit
SG&A* Includes JPY 564 million accounting change benefit in COGS and JPY 2,465 million benefit in SG&A
Note: 2013 volumes have changed slightly as a result of data and system standardization. The impact is not deemed material

15

Drivers of Q3 Operating Income
A disappointing summer and lower synergies
SCM Synergies
in COGS

Net +1,780

Net +727

In million JPY-1,249-3,322

9,098+2,522

GP impactof mixBasesynergy• Weather/macro capture
trends: -1.9B est.
• Vol/price/mix:-1.4B est.

-1,795CCEJP GP
impact:Low
production
volume anddelayedramp-up of
new lines

Q3 2014-1,288Depreciation

+770
SG&A
DME +2.1%
OPEX -2.8%+3,029-1,472+24
Other subs

• Cost controls(logistics,
equipment)• Personnel
savings from and expenses
due to product
VSP andlaunchespensionDivestingnon-corebusinesses(Mikuni Wine)+204

Depreciation Non-recurring
expensesvs. PY• COGS -978

Impact of • OPEX -271
accountingchange• COGS 564• OPEX 2,465

7,810• Of 1.4 billion GP impact from vol/price/mix, approx. 0.9B* reflects continued
industry price competition; 0.5B reflects CCEJ-driven activity in Q3• Delivering manufacturing synergies, but partially offset by lower Q3
production volume in CCEJP due to weak summer and delays in fulloperational capacity of new production lines

2013 Q3 Comparable
Operating Income• OPEX savings from cost controls and lower personnel costs* Intage OTC data

2014 Q3 Comparable
Operating Income

16

YTD 2014 Results
2014 a year of investment & positioning for future growth• Revenue mix reflects slight volume growth, weather, tax increase, competitive pricing and mix pressure• COGS not enough to offset revenue mix pressure. Revenue includes 0.8 ppt impact from divesting• YTD operating income includes positive net 1.9 billion yen due to changes in accounting policy• Net income reflects in extraordinary expenses primarily related to restructuring costs (VSP), etc.
2014 YTD

2014 YTD

2013 YTD

ActualOne-time
items

Comparable

Comparable
Estimate

Diff%

218,412217,078+1,335+0.6

in million yen

Sales Volume(BAPC) (,000 cases)
Net Revenue

Vs. PY2014 YTD

218,412--400,601--

400,601

407,596-6,995-1.7

219,154*--219,154

218,100+1,054*+0.5

181,446--

181,446

189,496-8,050-4.2

175,714*-855

174,859

178,250-3,391*-1.9

Operating Income

5,732

855

6,587

11,246-4,659-41.4

Profit Before Tax

2,980

3,810

6,790

10,576-3,787

-35.8

897

2,459

3,356

6,323

-2,697

-46.9

COGS

Gross Profit
SG&A

Net Income* Includes JPY 125 million accounting change benefit in COGS and JPY 1,831 million benefit in SG&A
Note: 2013 volumes have changed slightly as a result of data and system standardization. The impact is not deemed material

17

Drivers of YTD Operating Income
2014 a year of investment & positioning for future growth
SCM Synergies
in COGSYTD 2014-4,659Net +2,358

In million JPY
Depreciation
Net -370-2,972-5,575+5,330-88
CCEJP GP
impact:11,246

GP impactof mixBasesynergy• Weather/macro capture
trends/C-Tax:-2.7B est.
• Vol/price/mix:-2.9B est.

2013 YTD Comparable
Operating IncomeLow
production
volume anddelayedramp-up of
new lines

SG&A-1,773
DME +3.2%
OPEX even Other subs
• Cost controls(logistics,• Personnel
equipment)savings from and expenses
VSP anddue to productpensionlaunches+1,956-67
Divestingnon-corebusinesses(Mikuni Wine)-2,326

Impact of
Depreciationaccounting
vs. PYchange+855
Non-recurring
expenses• COGS -1,446• COGS 125 • OPEX -880
• OPEX 1,831

6,587• Of 2.9 billion GP impact from vol/price/mix, approx 2.0B* reflects continued
industry price competition; 0.9B reflects CCEJ-driven activity YTD• Delivering manufacturing synergies, but partially offset by lower Q3
production volume in CCEJP due to weak summer and delays in fulloperational capacity of new production lines• SG&A savings from cost controls and lower personnel costs* Intage OTC data

2014 YTD Comparable
Operating Income

18

FULL-YEAR
2014
REVISEDOUTLOOK

Drivers of Revised Full-Year OI Estimate
2014 a year of investment and positioning for growth
Depreciation
Net +1.4

Supply Chain
Net +4.0

Personnel
Net +2.8

+5.9
-3.0
+7.0

-7.1

Logistics

-2.0

+10.2
Marketing(DME)
GP impactof mix2013 FY
Comparable
Operating
IncomeSCM
synergies

+1.9

+0.9
Peopleother
Headcount(pension,
reductions
overtime,(VSP, etc.)
temps)

In billion JPY

-4.5
-0.2

Incremental
OPEX,
Accounting depreciation
other
subs,
changenon-KO
impact(+0.6 people
development)

Change versus Previous 2014 Estimate•

Negative mix due to channel trends, weather, consumption tax primary driver of revised
estimate (~80% of total difference)•

Many puts and takes related to ongoing transformational work and accounting change+1.2
Nonrecurring
expenses+10.3(Coke One,
integration)2014 FY
Estimated
Comparable
Operating
Income20

Revised Full-Year 2014 Plan
Flat Operating Income in a tough year
Vs. PY2014 FY

2014 FY

2014 FY

2013 FY

Revised Estimate

One-time
items

Comparable
Estimate

Comparable

Diff

%

284,000

283,777

+223

+0.1

in million yen

Sales Volume(BAPC) (,000 cases)

284,000

Net Revenue

523,000-

523,000

533,602-10,602-2.0

Gross Profit

239,300-

239,300

246,604-7,304-3.0

Operating Income

9,100

1,200

10,300

10,240+60+0.6Profit Before Tax

6,100

4,500*

10,6009,492+1,108+11.7

Net Income

3,200

2,700

5,900

5,693

+207

+3.6

OI margin
2.0%

OI margin
1.9%-*Reflects estimate of extraordinary items related to employee VSP and restructuring initiatives related to the CCEJ integration
Note: 2013 volumes have changed slightly as a result of data and system standardization. The impact is not deemed material21One+ Roadmap for GrowthRemaining focused on the journey to World-Class
Q3: A disappointing summer
2014: A year of investment & positioning for growth
2015-20172014-20152013-20142012-2013

Storming

Forming

Define & deploy
new bus. model

Speed ofintegration: 250+
projects

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

2018- Tokyo Olympic
Games & Beyond

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

22

Key Takeaways Market: Q3 was a disappointing quarter, but we continue to gain
share and we will do what is right for the long-term with anappropriate balance between volume & value.
 Structure: The aggressive pace of integration continues, but hascreated some challenges as we implement new processes androutines by function. ERP system development underway.
 Capacity: Delivering synergies against our initial target, but also
experiencing added cost and delays as we ramp-up our new
infrastructure. We will learn from 2014.
 Capabilities: We still have capability gaps to get to world-class.
There is still much work to be done and we will continue investing in
training and strategic hiring.

23

APPENDIX

Glossary
OBPPC

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

IC

Immediate Consumption. Purchase or sell beverage for consuming it immediately. It also means the
products/SKUs for IC (for example, cans and small PET packages under 1L) and channels that consumers
purchase the beverages for IC(for example, vending machine and convenience stores channels).

FC

Future Consumption. Purchase or sell beverage for future consumption in home, etc. It also means the
products/SKUs for FC (for example, large-sized package and multi-pack of small packages) and channels that
consumers purchase the beverages for FC. (for example, supermarket and drug & discounter channels).

HORECA

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

CDE

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

Coolers

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

Dispenser The equipment installed in restaurants to serve the consumers a specified amount of beverage in cup either
in chilled or hot.

RTM

Route-to-Market. A framework, a process, a philosophy, a proven approach to growing profitable volume.

25

THANK YOU
Q3 2014 Earnings
Conference Call
November 6, 2014

COCA-COLA、コカ･コーラ、COCA-COLA ZERO、FANTA、ファンタ、FUNMIX、ファンミックス、SPRITE、スプライト、
REAL GOLD、リアルゴールド、REAL、リアル、REAL ENERGY、リアルエナジー、GEORGIA、ジョージア、ご褒美ブレイク、
EMBLEM、エンブレム、BLUX、ブラックス、GREEN PLANET、グリーンプラネット、爽健美茶、そうけんびちゃ、黒冴、くろさえ、AQUARIUS、アクエリアス、VITAMIN GUARD、ビタミンガード、DAY-START、デイ・スタート、綾鷹、あやたか、一、はじめ、
茶織、さおり、茶流彩彩、さりゅうさいさい、煌、ファン、QOO、クー、ぷるんぷるん、MINUTE MAID、ミニッツメイド、GOONEW、グーニュー、MONE、モネ、紅茶花伝、KOCHAKADEN、LOVE BODY、ラブボディ、I LOHAS、い・ろ・は・す、
森の水だより、からだ巡茶、からだすこやか茶、COCOTEEN、ココティーン、BISTRONE、ビストローネ、OLO OLO、オロオロ、
POWERADE、パワーエイド are trade marks of The Coca-Cola Company.
CANADADRY、カナダドライ is a registered trade mark of Canada Dry Corporation Limited.
GLACEAU VITAMINWATER、GLACEAU are registered trade marks of Energy Brands Incorporated.
DR PEPPER、ドクターペッパー is a registered trade mark of DP Beverages Limited.
SCHWEPPES、シュウェップス is a registered trade mark of Atlantic Industries.