FY 2014 Earnings Presentation
Calin Dragan, Chief Executive Officer
Michael Coombs, Chief Financial Officer
February 16, 2015
(Posted to CCEJ website on February 13, 2015)

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

Coca-Cola Contour Bottle 100th Anniversary

Calin Dragan, Chief Executive Officer
Michael Coombs, Chief Financial Officer
May 13, 20143

Full-Year 2014 Earnings Presentation
Introduction• Overview and Key Messages• Transforming our Business2014: A Year of Investment & Positioning for Growth• Q4 and Full-Year 2014 Results

One+ Roadmap for Growth

Outlook for Full-Year 2015
• Full-Year Plan
• Key Takeaways
4

Coca-Cola East Japan
2014: Encouraging results in a tough year Progress in Q4 after a tough summer. FY results slightly ahead of revised plan.
 Five consecutive quarters of volume and value share growth, despite
challenging environment. Starting 2015 from a stronger position.
 Launches and innovation drove continued coffee, tea & water growth Rapid transformation & integration work continues; No legacy bottlers remain Delivered strong synergies and cost savings in Q4 to offset production line
delays earlier in the year and ongoing price-mix pressure Full-year price/mix impacted by unseasonal weather and weak consumer
sentiment after the April 1 consumption tax increase Announced planned acquisition of Sendai Coca-Cola Bottling Company
5Real Transformation of the Business
Making progress on our integration commitments
Structure Functional management and operation of business from Day One. New functionalrole sorts and routines have stabilized.

 After only 18 months, legacy bottler integration complete. No legacy bottler
entities remain. 23 of 26 legal entities from Day One are being integrated: 4 Production companies integrated January 1, 2014
 3 Logistics and 4 Equipment subsidiaries integrated July 1, 2014
 4 Legacy bottling entities integrated January 1, 2015
 8 “Mixed” vending businesses integrating as of April 1, 2015

 Announced planned acquisition of Sendai Coca-Cola Bottling Company
 Route-to-Market rollout ongoing and starting to deliver results
 Call center consolidation complete

6Real Transformation of the Business
Making progress on our integration commitments
Capacity Five new production lines and two new in-line PET blowers installed Shutdown of operations at two manufacturing plants complete
 Insourcing of production capacity continues as planned– targeting ~95% in 2015
 Successful bond offering of ¥14 billion to fund investment needs
Capabilities

 Pay-for-performance incentive program in place and directly linked to results Investing in people development
 Leadership, commercial skills, diversity, operational excellence (OE)
 Connect our people to the global network of 250+ Coca-Cola bottlers

 Employee voluntary separation program (VSP) Coke One+ ERP system back-office deployment on track for April 2015

7

2014
A YEAR OF
INVESTMENT &POSITIONING FORGROWTHFull-Year Results Clearly Impacted by Q3
Quarterly Highlights

2014 Volume & NSR* by Quarter
Full-Year 2014
Volume +0.4%
NSR -1.0%

+3.4%
+2.0%
Q1

Q2

NSR
+0.6%

NSR
+1.5%

NSR
-4.1%

NSR
-1.4%

Q3

Q4

Q1

• Consumer loading before tax rise
• Historic snowfalls in Feb impacted
immediate consumption channels

Q2• Volume decline in April after tax rise
• Vending price change rollout plancomplete by end of quarter

Q3• Cool summer impacted volume andprice/mix, consumption tax impacted
consumer behavior• Industry-wide inventory pressure &discounting

Q4• Continued price pressure partly offset by
implementing price, terms & conditions• NSR impacted by weakness in vending
as CCEJ maintained pricing after tax rise

-0.2%
-2.4%

Q4 aheadof revised
plan*NSR=comparable Net Sales Revenue, adjusted for structural change such as Mikuni Wine; *Volume=BAPC, Bottler Actual Physical Cases

9

A Return to Share Growth in 2014
Entering 2015 from a stronger position
Q4 Market Share*(NARTD Beverages)

vs. Prior Year
Q4
2014

Volume

+0.8

+0.7

Value

+0.4

+0.5

Volume Share vs. Prior Year

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

Strong Q4 share gains in colas, coffee, tea and water
Full-year volume composition: IC 74% vs. FC 26%
Expect to hold 2014 share position in 2015

Value Share vs. Prior Year10

An Evolving Channel Mix• Growth in CVS; Differences in indoor vs. outdoor vending• VM channel impacted by price rise after tax hike
Channel Volume Growth

Q4 2014 Volume by Channel(% of total)
Others11%

Vending(VM)
30%

Supermarket(SM) 20%

Eating &Drinking
15%

Convenience
Store (CVS)
14%

Total 2014 BAPC
Volume Growth• Q4 -0.2%• FY +0.4%

Q4 & FY
Indoor vending
volume even

Drug &
Discounter
(D&D)
10%

Q4 CVS channel growthacross categories, led bywater, tea, coffee
vs. 2013

CVS

D&D

Nat’l SM

Local SM

VM

Eat & Drink

Q4

+10%

+8%

+3%

+1%

-5%

-3%

Full Year

+7%

+8%

+1%

+1%

-3%

-2%

* BAPC (Bottler Actual Physical Cases)

11Channel Mix Drives Category Performance• Growth in coffee, tea & water led by innovation• Sparkling and sports volumes impacted by vending channel
Q4 2014 Volume by Category(% of total)
Sparkling(SSD) 27%

Tea
22%

Others11%

YTD ilohas sparklingwater +1.9 million cases

Juice
6%

Coffee18%
Water
Sports 10%
6%

Total 2014 BAPC
Volume Growth• Q4 -0.2%• FY +0.4%

Category Volume Growth

YTD FOSHU tea+2.2 million cases

vs. 2013

NST

Water

Coffee

SSD

Sports

Juice

Q4

+6%

+12%

+2%

-2%

-10%

-11%

Full Year

+8%

+10%

+2%

even

-9%

-6%

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

12

Investing in Marketplace Execution
Building customer relationships for the future
Net Full-Service Vending
Machine Placements(Indoor 2X Outdoor)• Cashless• Low energy use

Q4

New Customer Outlets• Branded assets• Immediate
consumption (IC)• Indoor focus

1.7X
vs
PY

Net Cooler Placements

2.4X
vs
PY

2.3X
vs
PY

Full Year

Q4

2.8X
vs
PY

Full Year

+3.5%
vs
PY
Q4

+17%
vs
PY
Full Year

13

Drivers of Q4 Operating Income
A strong quarter following a call to action in Q3• GP impact better than plan due to renewed focus on pricing terms &conditions and better volume performance• Supply chain recovery after production line delays• Reduced incentive payout, in line with new pay-for-performance plan

-1,805+3,617

SCM Synergies in COGS+920

In million JPY

CCEJP GP
impact:GP impact-1,006• Decline lessthan projected2013 Q4
Comparable
Operating
Income-905+2,717-604
Other subs

+830

Production
insourcing,new lines
now running+263
Depreciation Non-recurring
expensesvs. PY• COGS -1,568• OPEX -237

Net +3,547
BasesynergycaptureQ4 2014+4,893 vs PY

SG&A
OPEX -10%
DME +21%(logistics,
equipment)-140
Divestingnon-corebusinesses

3,887
Impact ofaccountingchange• COGS 903• OPEX 2,714• Cost controls• Personnel
savings frompension &incentives• DME in linewith plan; Up
due to cyclingof prior year

Depreciation
Net +1,812

2014 Q4
Comparable
Operating
Income14

Fourth Quarter 2014 Results
2014 Q4

2014 Q4

2014 Q4

2013 Q4

ActualOne-time
items

Comparable

Comparable

in million yen

Sales Volume(BAPC) (,000 cases)

Net Revenue

66,576-

Vs. PYDiff%

66,576

66,699-123-0.2

122,698-

122,698

126,006-3,308-2.6

64,809*-64,80968,898-4,089-5.957,889-57,88957,108781+1.4

54,265*-263

54,002

58,114-4,112-7.1

Operating Income

3,624

+263

3,887

-1,006

4,893-

Profit Before Tax

3,565

+289

3,854

-1,4965,350-

Net Income

2,538

+81

2,619

-865

2,099

-

COGS

Gross Profit
SG&A* Includes JPY 903 million accounting change benefit in COGS and JPY 2,714 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 Full-Year Operating Income
Solid results in our first full year of operations
Depreciation
Net +1,442

SCM Synergies
in COGS

FY 2014+234 vs PY+174 vs plan

Net +5,435

In million JPY-2,611-6,4808,046

GP impact2013 FY
Comparable
Operating
Income

OPEX
-2%

DME
+7%
In linewith plan

Impact of• Cost controls
weak Q3 &• Personnel
delayed rampsavings from VSP,
up of new lines pension &10,240• Better than plan
• Weather/macro
trends/C-tax:-3.0 B est.
• Vol/price/mix:-3.5 B est.

CCEJP GP
impact:+2,807Basesynergycapture+5,573-1,975incentives (payfor performance)-1,906
Other subs
(logistics,
equipment)+1,118-207
Divestingnon-corebusinesses

Expenses due to (Mikuni Wine)
product launches
and additional
distribution-4,131

Impact ofaccountingchangeDep
vs. PY

Non-recurring
expenses• COGS -3,014• OPEX -1,117• COGS 1,028• OPEX 4,545

10,474• Full-year results slightly ahead of revised plan
• Of 3.5 B GP impact from vol/price/mix, approx. 2.5 B*
reflects industry pricing; 1.0 B reflects CCEJ-led activity• Delivering supply chain synergies and OPEX savings*Intage OTC data

2014 FY
Comparable
Operating
Income 16

Full-Year 2014 Results
2014 FY

2014 FY

2014 FY

2013 FY

Actualin million yen

One-time
items

Comparable

Comparable

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

284,989-

Vs. Revised
Plan

Vs. PYDiff%%

284,989283,777+1,212+0.4+0.3

523,299-523,299533,602-10,303

-1.9

+0.1

283,963*-

283,963

286,998-3,035-1.1

N/A

239,336-

239,336

246,604-7,268-2.9+0.0

229,979*-1,118228,861

236,364-7,503-3.2

N/A

Operating Income

9,356+1,118

10,474

10,240

+234

2.3

+1.7

Profit Before Tax

6,545+4,098

10,6439,080+1,56317.2+0.4

Net Income

3,434+2,541

5,975

5,693

+282

5.0

+1.3

COGS

Gross Profit
SG&A

OI margin 2.0%

OI margin 1.9%

*Includes JPY 1,028 million accounting change benefit in COGS and JPY 4,545 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

One+
Roadmap
for GrowthOne+ Roadmap for GrowthRemaining focused on the journey to World-Class
2015: Roadmap for Growth still Appropriate• Financial results have shifted out by one year
• Pace of improvement will not change• Focus on delivering in 2015, 20162015-20162012-20142012-2013
Forming& Storming
Forming
Define & deploy new

business model
Speed ofintegration:
250+ projects

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

2018- Tokyo Olympic
Games & Beyond
2016-2017

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

19

Critical Learnings for the Future

Capabilities Capacity

Structure

MarketWhat’s working and what can we do better?
What’s Working?

What Can We Do Better?

Action Plan

Volume and value share gains
continue. Good execution of
Route-to-market plan rollout

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

Strong focus onbalance between
volume and value. Emphasis
on price, terms, conditions.

Rapid legal integration ofsubsidiary companies

Aggressive pace of integration
can create new challenges.
New processes & routines byfunction

Coke One+ ERP system phase I.
Prioritize and track progress on
big bet integration initiatives

Continuing to capture synergies
and identify new savings
opportunities

Delays in full capacity of newlines. Logistics optimization
requires investment.

Will apply learnings from 2014.
Continue to optimize plant/
logistics/distribution network

Active transformation.
Positioning for future growth.

Capability gaps to get toworld-class.

Building capabilities throughtraining and hiring.
People, processes & systems

20

FULL-YEAR
2015
OUTLOOKOur 2015 Targets

Reasons to Believe• Majority of cost synergy initiatives already in-flight• Commercial targets realistic; Assume continued pricing pressure
and partial recovery of impact of 2014 weather and tax rise
• People, processes & systems in place and better prepared vs. 201422

Full-Year 2015 Plan Overview
Macro
Environment• Recovering economy a positive for market growth
but with added pressure from labor cost inflation• Input costs impacted by Forex, partly offset bylower energy prices

NARTD Market
Environment• Low single-digit market growth• Ongoing channel mix shift• Continued pressure on retail pricing

CCEJ Initiatives

•
•
•
•

Manage price/mix
Increase focus on revenue and gross profit
Continue to extract supply chain synergies
Stabilize capacity, capabilities and structures for2016 and beyond
23

2015 Major Initiatives by Function
Commercial• Targeted expansion of vending; Growth in Convenience Stores• Revenue Growth Management (RGM) through strengthened
OBPPC and pricing, terms & conditions• Complete Route-to-Market deployment

Supply Chain • ¥5.3 billion net SCM synergies••

SupportFunctions•••(insourcing production/logistics; network optimization)
Operational stability of five new production lines in 2014
and complete installation of four additional lines
Lay groundwork for distribution optimization
People development, process standardization, systems
stability, performance culture
Coke One+ go-live phase 1 and start phase 2
Indirect procurement management with Coca-Cola West24

Strong Marketing & Innovation Plans“Big Bet” launches of Coke Life and Tsumugi Tea
Q1

Q1

Coca-Cola Bottle 100th Anniversary

Georgia Campaign

Coca-Cola LifeNew Flavor Launch

Aluminum Can Rollout

Georgia Campaign
The world is madeup of someone’s
work

Q1

Aquarius Cold Prevention

I lohasGeorgia New Flavor
Mitsuboshi Presso(Three-Star Presso)

FOSHU Tea

PEKO RAKU Crushable PET

KaradaSukoykacha W

New Cup VendingNew
cup vending
machine

TSUMUGI Oolong Tea

25

Full-Year 2015 Plan
1% OI margin improvement, in line with One+ Roadmap
Vs. PY2015 FY

2015 FY

2015 FY

2014 FY

Estimate

One-time
items

Comparable
Estimate

Comparable

Diff

%

287,763281,586+6,177+2.2

in million yen

Sales Volume*(BAPC) (,000 cases)

287,763

Net Revenue

535,700-

535,700

523,299+12,401+2.4

Gross Profit

256,100-

256,100

239,336+16,764+7.0

Operating Income

15,600-15,60010,474+5,126+48.9

Profit Before Tax

13,200+2,50015,70010,643+5,057+47.5

Net Income

8,100+1,500

9,600

5,975

+3,625+60.7-

OI margin
2.9%

OI margin
2.0%*Volume conversion rates across legacy bottler entities were standardized in 2015 as part of the implementation plan for the new ERP
system, CokeOne+. PY variance and 2014 volume shown above also reflect this change. 2013 volume using this conversion rate is 280,380.

26

Drivers of FY 2015 Operating Income
FY 2015+5,126 vs PY-1,908DME+6,010• “Big Bet” brandlaunches• VM locations• Key accounts

+502
OPEX

In million JPY+1,744SCM
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+1,188-2,411• Cost inflation offset
by procurement
efficiencies

Othersubsidiaries

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

15,600• IT costs up duringtransition year for
CokeOne+ ERP• Personnel(labor cost inflation,
cycling lower prioryear incentive
payment, strategic
hiring)2015 FY
Comparable
Operating
Income27

2015 Modeling Reminders
 Quarterly profit phasing• Majority of full-year Operating Income generated in third quarter Prior year impact of accounting policy change (depreciation and useful life)• Q1 2014 write-off of remaining salvage values approx. ¥4.6 billion

 Capital Expenditure• Production lines/plants, Coke One+ ERP, cold drink equipment, fleet
Capex*

Depreciation

Unit: Billion JPY

2014 Actual

2015 Plan

2014 Actual

2015 Plan

COGS Capitalized

23.6

29.6

7.2

7.9

SG&A Capitalized

25.8

35.5

16.7

14.8

TOTAL

49.4

65.1

23.9

22.7

*Capex includes assets under construction.

28

Milestones in 2015
Structure Planned acquisition of Sendai Coca-Cola Bottling as of April 1, 2015
 Entity integration of “mixed” vending operation businesses Complete RTM (Route-to-Market) deployment
 Indirect procurement initiative together with Coca-Cola WestCapacity Installation of four new production lines and further insourcing of production &logistics volume
 Accelerate sales center consolidation
 Equipment refurbishment centers consolidation
Capabilities

 Coke One+ ERP system phase one go-live; Start phase two
 People development
 Leadership, commercial skills, English language, diversity
 Aggressive recruiting where capability gaps exist

29

APPENDIX

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 all of 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
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
business consulting services, developing and maintaining the information
systems to support Coca-Cola System. 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 and food-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 nonCoca-Cola products as well as Coca-Cola branded products. Jointly owned by
CCJC and all the bottlers in Japan.

31

Glossary
CDE

Abbreviation of 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 and restaurants. It willserve 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.

FC

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

OBPPC

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

The Coca-Cola System’s way to develop people and culture around productivity which allows higher financial
Operational
Excellence (OE) value achievement by driving 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.

32

THANK YOU
FY 2014 Earnings
Presentation
February 16, 2015