Coca-Cola East Japan
Q1 2015 Earnings
Conference Call
Calin Dragan, CEO
Michael Coombs, CFO
May 12, 2015

www.ccej.co.jp

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 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

Q1 2015 Earnings Conference CallIntroduction• Overview and Key Messages• Transforming our BusinessFirst Quarter Results• Share, Volume and Financial Results

Integrating Sendai Coca-Cola Bottling Company• Revised Full-Year Plan
• One+ Roadmap for GrowthSecond Quarter Milestones• Marketing Activities and Key Milestones
3

A Solid Start to the YearQ1 comparable operating loss improved by 3.6 billion yen vs. prior year,
including cycling the impact of the accounting policy change in Q1 2014.

Revenue performance in line with volume, reflecting improved price/mix inthe quarter.

Sixth consecutive quarter of volume and value share growth. Focus on value.
Launches and innovation drove continued growth in tea, water & coffee.
Delivering manufacturing synergies, partially offset by some continued impactof line efficiency issues and product write-off from end of 2014.

4

First Quarter 2015
Results

www.ccej.co.jp

Transforming the Business in Q1

Rapid organizational transformation & integration continues; acquired Sendai
Coca-Cola Bottling Company, consolidated eight subsidiaries into FV East Japan.

Phase One of ERP System operational. Fine-tuning and “hypercare” IT support
ongoing. Working to ensure stable continuity of supply during transition.

Developing capabilities for pricing, terms & conditions management to improve
price/mix.

Restructuring indirect procurement into Coca-Cola Business Services Company
Evolution of the leadership team
CCEJ Commercial Transformation selected as a top-three finalist in global Coca-Colasystem competition
6

Q1: Marketing & Innovation Platforms
Q1

Q1

Coca-Cola Bottle 100th Anniversary

Georgia Campaign

Emerald Mountain Blend

Coca-Cola Life

Aluminum Can Rollout

Schweppes Citrus

New Flavor Launch

Georgia Campaign
The world is madeup of someone’s
work

Q1

I lohas Renewal

FOSHU Tea

Georgia New Flavor
Mitsuboshi Presso(Three-Star Presso)

PEKO RAKU Crushable Large PETTSUMUGI Oolong Tea

Aquarius Renewal

KaradaSukoykacha W
7

Balanced Volume & Value Share Growth
Q1 2015 Market Share*
Volume
Value

+0.1
+0.2

Volume Share vs. Prior Year

Value share growth ahead of volume share
Lower share growth vs. prior year, in line with plan
Share gains in cola, tea, sports and water

Value Share vs. Prior Year

*Source: Intage, OTC channel, NARTD beverages

8Channel Performance
Q1 2015 Volume by Channel

Channel Volume Growth(% of total)
Others12%Vending(VM)
31%

Supermarket(SM) 20%

Drug &
DiscounterIndoor Vending
volume +1%(D&D)

Eating &Drinking
14%

Convenience
Store (CVS)

Eating & Drinking
led by new outlet
growthCVS growth led bywater, tea, coffee

9%

14%

Q1 2015 Total Volume -1.5%
Cycling Q1 2014 volume growth of +3.4%
ahead of consumption tax increase• Convenience Stores cycling -5%• Drug & Discounter cycling +14%
• National Supermarkets cycling +16%
• Vending and Eating & Drinking cycling 0%

vs. Prior
Year

CVS

D&D

Nat’l SM

Local SM

VM

Eat & Drink

Q1 2015

+14%

-5%

-15%

-5%

-2%

+4%

FY 2014

+7%

+8%

+1%

+1%

-3%

-2%

* BAPC (Bottler Actual Physical Cases)

9Category Performance
Q1 2015 Volume by Category

Category Volume Growth(% of total)
Sparkling(SSD) 26%
Tea
22%

Juice
6%

Others11%

Successful launches
driving tea growth
Sparkling decline
led by vending & cycling
prior year launches

Coffee19%
Sports Water
7%
9%
Water growth driven bysmaller pack ilohas brandQ1 2015 Total Volume -1.5%
Cycling Q1 2014 volume growth of +3.4%
ahead of consumption tax increase• Non-Sugar Tea (NST) cycling +10%
• Water cycling +9%• Coffee cycling -2%• Sparkling cycling +4%• Sports drinks cycling +10%

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

vs. Prior
Year

NST

Water

CoffeeSparkling

SportsJuice

Q1 2015

+5%

+2%

+2%

-5%

-16%

even

FY 2014

+8%

+10%

+2%

even

-9%

-6%

* BAPC (Bottler Actual Physical Cases)

10Drivers of First Quarter Operating Income
2014 Q1
Comparable
Operating Income

2015 Q1
Comparable
Operating Income
Depreciation
vs. PY

In million JPY• COGS +789
• OPEX +3,645• Cycling prior year
accounting change

Supply Chain
Synergies-5,176*

GP Impactof Mix & Vol• Improved
price/mix offset
by lower volumes• Cycling volume
demand ahead of
consumption tax
increase in April,2014• Deliveringsynergies, stillsome impact
from line
efficiencies &product writeoff related to
2014

+912

-1,598*DME**
In line with plan:• “Big Bet” brandlaunches• VM locations

OPEX

Vs. PY
+3,578In line with plan:• Key accounts• Distribution cost
due to higher
volumes at CVS-662• Placement ofcold drink
equipment

-486
-913

+4,434

Other
Subs• Vendingoperations, etc.

+293
*Adjusted for 408 million in Q1 2014 and 341 million in Q1 2015 non-recurring expenses**DME: Direct Marketing Expenses

11First Quarter 2015 Results2015 Q1

2015 Q1

2015 Q1

2014 Q1

ActualOne-time
items

Comparable

Comparable

in million yen

Sales Volume(BAPC) (,000 cases)

59,010-Vs. PYDiff%

59,01059,884-874-1.5

110,220-

110,220

111,915-1,695-1.5

58,846-

58,84661,552-2,706-4.4

51,374-

51,37450,362

1,012

+2.0

53,313-341

52,97255,539*-2,567-4.6

Operating Income-1,939341-1,598-5,176

3,578-

Profit Before Tax-2,674

1,031-1,643-5,121

3,478-

Net Income-1,543663-880-3,977

3,098-

Net Revenue
COGS

Gross Profit
SG&A*Adjusted for 408 million in Q1 2014 non-recurring expenses
Note: Q1 2014 results include JPY 805 million in COGS and JPY 3,850 million in SG&A due to the write-off of residual value of existing tangible fixed
assets related to a change in accounting policy
Note: 2013 and 2014 volumes were revised in our Q4 2014 earnings announcement as a result of data and system standardization.

12

Integrating Sendai
Coca-Cola BottlingCompany
www.ccej.co.jp

Integration of Sendai Coca-Cola Bottling
Sendai joined CCEJ as of April 1, 2015;
Now South Tohoku Region
Full integration planned in 2016+200 million yen Operating Income for 2015 (Q2-Q4)
Expect 1.5 to 2.0 billion yen in synergies
by end of 201714

Revised 2015 Plan Including Sendai
Vs. PY2015 FY

Sendai2015 FY

2014 FY

Previous Comparable Estimate
in million yen(Q2 to Q4)

RevisedComparable
Estimate

Comparable
ResultDiff%

Sales Volume*(BAPC) (,000 cases)

287,763

21,020308,783

281,586

27,197+10%

Net Revenue

535,700

36,200571,900

523,299

48,601+9%Gross Profit

256,100

14,400270,500

239,336

31,164+13%

Operating Income

15,600200

15,80010,474

5,326

+51%

Profit Before Tax

15,700100

15,80010,643

5,157

+49%

Net Income

9,600

**300

9,900

5,975

3,925

+66%

OI margin
OI margin
OI margin
2.9%
2.8%
2.0%
*Due to the slight difference of volume conversion method between CCEJ and Sendai, CCEJ is currently working to apply its unified andstandardized volume conversion method to Sendai. You may expect changes when CCEJ presents actual volume number in the earnings
result. Also, 2014 volumes were revised in our Q4 2014 earnings announcement as a result of data and system standardization.
**Including change of taxes due to government tax reform.

15One+ Roadmap for Growth
2015: Roadmap for Growth still Appropriate• Pace of improvement will not change• Focus on delivering in 2015, 20162018- 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

16

Revised 2015 Operating Income
In million JPY-1,908+200
DME+6,010• “Big Bet” brandlaunches• VM locations-2,411

+502
OPEX

SCM
Synergies• Insourcing

GP impact

10,474• Volume andprice/mix
growth2014 FY
Comparable
Operating
Income• Cycling prioryear coolsummer andtax increase• Network
optimization• New production
lines• Package
lightweighting

Sendai CCBC
Integration• Q2-Q4 2015

• Key accounts+1,744+1,188• Cost inflation offset
by procurement
efficiencies

Othersubsidiaries

Depreciation
vs. PY• COGS -705
• OPEX +1,893

15,800• IT costs up duringtransition year for
CokeOne+ ERP• Personnel(labor cost inflation,
cycling lower prioryear incentive
payment, strategic
hiring)Previous 2015 Estimate

2015 FY
Comparable
Operating
Income17

Second Quarter 2015
Milestones

www.ccej.co.jp

Q2: Connecting with the Consumer
Q2

Coca-Cola Bottle 100th Anniversary

Coca-Cola Life

CCEJ New Website/Plant Tours

Share-a-Coke
Coca-Cola
AluminumContour Bottle
announced

Customer-Exclusive Branded Products

Q2

Georgia
Craftsman SelectGeorgia
Private Reserve
Georgia
K’s BREAK

Q2

I lohasFOSHU Tea

PEKO RAKU Crushable Large PET

I lohas Aloe
I lohasTomatoKaradaSukoykacha W
1L PET

Georgia European Renewal
Concept Cafe
Coffee House
European opens in
Omotesando, TokyoTSUMUGI Oolong Tea

Hajime Green Tea

Using
Japanesetea leaves

Customer
Exclusive
brand

19

Key Milestones

Continued stabilization and utilization of new ERP system; management of stableproduct supply as we fully shift to new system.

Full rollout of new Route-to-Market across 130+ sales centers.
Operational integration of Sendai (now South Tohoku Region) and FV East Japan
Pricing, Terms & Conditions; Promotional optimization

20

APPENDIX

www.ccej.co.jp

The Coca-Cola System
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 thecustomer in Japan. A wholly owned subsidiary of The Coca-Cola Company.

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

Providing joint procurement of raw materials, packaging, etc. as well as businessconsulting services, developing and maintaining the information systems to
support Coca-Cola System. Jointly owned by The Coca-Cola Company and all thebottlers in Japan.

Coca-Cola Customer Marketing
Company (CCCMC)

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

FV Corporation Co., Ltd. (FVC)

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

22

Glossary of frequently used terms
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.

23

THANK YOU
Coca-Cola East Japan
Q1 2015 Earnings Conference Call
May 12, 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