Coca-Cola East Japan
Q3 & Year-to-Date 2016
Earnings Conference Call
Calin Dragan, CEO
Jawahar Solai, CFO
November 14, 2016
(Posted to CCEJ Website November 11, 2016)
コカ･コーライーストジャパン株式会社
www.ccej.co.jp

CCEJ Q3/YTD 2016

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 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 by management;• 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.

コカ･コーライーストジャパン株式会社

2

CCEJ Q3/YTD 2016

Q3 & YTD 2016 Earnings Presentation
Introduction•Overview and Key Messages
Third Quarter and Year-to-Date (YTD) Results•Volume, Share and Financial Results
Outlook Toward Rest of the Year
•Initiatives and Remarks

コカ･コーライーストジャパン株式会社

3

CCEJ Q3/YTD 2016

Successful Integration Model Delivering Results

 Strong results year-to-date—upward revision to full-year targets on September 9
 Reported operating income up 2.3X prior year; Net income up 2.7X prior year Growth in both value and volume share Gross margins improved as we continue to deliver significant supply chain savings
 Revenue Growth Management (RGM) efforts drove 4th consecutive quarter of
positive gross profit from volume, price & mix
 Further optimized and simplified operating model. Integration of Coca-Cola East
Japan Products into CCEJ completed on October 1
 Agreed proposed business integration with CCW on September 30—Coca-Cola
Bottlers Japan Inc., the world’s 3rd largest bottler by revenue, expected to beestablished on April 1, 2017

コカ･コーライーストジャパン株式会社

4

Q3/YTD 2016
Sales Results
コカ･コーライーストジャパン株式会社

CCEJ Q3/YTD 2016

Balanced Growth in Volume and Value
Reported Volume

Q1 Highlights

YTD 2016+5.8% (+3.3%*)• Strong start to the year– maintained positive momentum
from Q4 2015 in Q1• Benefit from Sendai acquisition in prior year

Q3 2016+1.4%

Q2 Highlights• Volume growth led by product innovation• Growth in Drug & Discounter, Supermarket & Convenience
Store channels• Category performance led by Water, Coffee, Tea

+16%

+6%*

+3%
Q1

Q2

+5%
+1%

+0%

-0%

Q3

Jul

Aug

Q3 Highlights• Continued growth of key new products• Vending exclusive products and Coke ON contributed tostabilized vending channel profitability

Sep* Comparison of volume
growth assuming Sendai was
integrated in January 2015

コカ･コーライーストジャパン株式会社

6

CCEJ Q3/YTD 2016

Three Points that Led to Q3 Success in Marketplace
1. Growth of key new products
2. Aggressive rollout of vending machine
exclusive products
3. Strong in-store execution

コカ･コーライーストジャパン株式会社

7

CCEJ Q3/YTD 2016

Initiatives to Stabilize Vending Channel are Working
Per Machine Performance
Vending task forces, exclusive products and strong
in-store execution successfully stopped per machinevolume downtrends in Q3+0%

Coke ON Promotion
Volume approx.

Better than non Coke ON enabled machines

30,000Coke ON enabled machine installation completed by the end of Q3

Approx.

Targeting-+3%

55,000 Placement by the end of 2016

VM for WomenJOC Olympic Support VM

CCEJ’s per machine volume YoY of existing vending machine by month,from April 2015 to September 2016

コカ･コーライーストジャパン株式会社

8

CCEJ Q3/YTD 2016

Retail Pricing Trends• Starting to see a change in retail price downtrend on Coca-Cola 1.5L
• Coca-Cola 1L PET launch delivering good results
Coca-Cola 1.5L Retail Price

Coca-Cola 1.5L & 1L Retail Price
1L launch

1.5L (2016)
1.5L (2015)
1L

2012

2013

2014

2015

2016

Actual retail price at certain supermarket customers’ outlets.
From June to August

コカ･コーライーストジャパン株式会社

Actual retail price at certain supermarket customer’soutlets. From week of May 22 to Week of September 19.

9

CCEJ Q3/YTD 2016

Continued Market Share Recovery and GrowthMarketShare
Value
Volumevs. Prior Year

Q3 2016+0.3+0.6

YTD 2016+0.3+0.6

Value Share vs. Prior Year

• Value and volume share growth momentum continues• Value share gains in Drug & Discounter and Supermarket
channels• Volume share gains in Water and Coffee
Volume Share vs. Prior Year

Source: Intage, OTC channel, NARTD beverages

コカ･コーライーストジャパン株式会社

10

CCEJ Q3/YTD 2016

Performance by Channel
Q3 Volume by Channel

Channel Volume Growth(% of total)
Others12%Vending (VM)
25%

Supermarket
(SM)
23%

Convenience
Eating &Drinking (E&D) Store (CVS)15%
12%Drug &
Discounter
(D&D)
13%

vs. PY

CVS

D&D

Nat’l
SM

Local
SM

VM

E&D

Q3 2016

+3%

+10%

+2%

+1%

-3%

even

YTD 2016

+8%

+18%

+5%

+5%

+1%

+4%

*Comparison of volume growth assuming Sendai was integrated in Jan. 2015

Volume YoY: Q3 +1.4%; YTD +5.8% (+3.3%*)
Q3 Performance Drivers• Drug & Discounter growth across beverage categories• Growth in Supermarkets led by new launch in Coffee and Water• I LOHAS Water & Sparkling growth in Vending. Smartphone-enabledmachines and exclusive products contributed to stabilize profitability• Eating & Drinking impacted by cycling of new outlet expansion

コカ･コーライーストジャパン株式会社

vs. PY

CVS

D&D

Nat’l
SM

Local
SM

VM

E&D

YTD 2016

+6%

+15%

+2%

+4%

-2%

+2%

Volume YoY: +3.3%

11

CCEJ Q3/YTD 2016

Performance by Category
Q3 Volume by Category(% of total)
Juice 4%Sports
13%

Water
11%

Others11%

Category Volume Growth

Sparkling(SSD) 26%

Coffee
14%

Teas
21%

vs. PY

NST

Water

Coffee

SSD

SportsJuice

Q3 2016

Even

+13%

+2%

+3%

-8%

Even

YTD 2016

+6%

+19%

+10%

+4%

-6%

+5%

* Comparison of volume growth assuming Sendai was integrated in Jan. 2015

Volume YoY: Q3 +1.4%; YTD +5.8% (+3.3%*)
Q3 Performance Drivers• Balanced water growth between premium I LOHAS and 2L package
Mori no Mizu Dayori brands.
• Sparkling soft drink growth driven by Coke, Fanta and Canada Dry• Coffee growth supported by new launches and customer-exclusives• NST growth driven by renewed Sokenbicha

コカ･コーライーストジャパン株式会社

vs. PY

NST

Water

Coffee

SSD

SportsJuice

YTD 2016

+4%

+16%

+6%

+2%

-7%

+2%

Volume YoY: +3.3%* NST (Non-Sugar Tea)

12

Q3/YTD 2016
Financial Results
コカ･コーライーストジャパン株式会社

CCEJ Q3/YTD 2016

Drivers of YTD Strong Operating Income Growth
Q3 YTD 2015
Comparable
Operating
IncomeSupply Chain
Savings

DME-2,602Gross Profit
Impact ofVolume,Price/Mix+1,863

8,719• Organic volume
growth +3.3%• New products,
better pricing
environment+8,486• Deliveringstrongmanufacturing,logistics &distribution
andprocurement
synergies• Higher volume• Upfront
spending related
to global
campaign andCoca-Cola
SummerCampaign• Investing in
more profitablevending
placements

Other
OPEX

Other
Subsidiaries+1,393-934• Labor related
expenses, etc.
decreased,
partially offset
by increased
delivery,outsourcing
expenses, etc.
associated withvolume growth• Adjusting for
impact of Q1
2015 Sendai OI

Depreciation

Q3 YTD 2016
Comparable
Operating
Income+1,868• CAPEX timing
and plan review• Full-year capex
now expected to
be 40B• Includes benefitof change ofuseful lives for
Production
equipment

18,793

Unit: Million JPY

コカ･コーライーストジャパン株式会社

14

CCEJ Q3/YTD 2016

Q3 YTD 2016 Financial Results Summary
Significant Operating Income Improvement• Balanced volume & commercial revenue growth • Revenue impacted by lower sales to other bottlers • Improved
gross margin • SG&A led by decrease in labor and logistic/distribution, partially offset by marketing investment
Q3 YTD 2016
One-time
items

Q3 YTD 2016

Q3 YTD 2015

Comparable

Comparable

243,952-

243,952

Net Revenue

438,645-

COGS

229,807

Gross Profit

Q3 YTD 2016
Reported

Vs. PYDiff%

230,587+13,365+5.8

438,645425,530+13,115

+3.1

-116

229,691

227,997+1,694+0.7

208,837+116

208,953

197,532+11,421

+5.8

SG&A

191,092-932

190,160

188,813+1,347+0.1

Operating Income

17,745

1,048

18,793

8,719

10,074+115.5

4.0%

-

4.3%

2.0%

+2.3

-

in million yen

Sales Volume(BAPC) (,000 cases)

OI Margin
Profit Before Tax

17,125Net Income

11,138• Capital Expenditure: 27,615M JPY / Reported Depreciation and Amortization: 16,527M JPY• One-time items mainly expenses related to the 3rd party transaction costs for proposed
integration with Coca-Cola West

Note: Previous year volume shown above may be slightly different from what we shared in the previous year, as part data standardization related to the implementation of
the new ERP system, CokeOne+.

コカ･コーライーストジャパン株式会社

15

CCEJ Q3/YTD 2016

Supply Chain Synergies: Examples of Contributors
Truck loading space improvements

Accelerated Manufacturing Efficiency• Manufacturing cost per case has been decreasing
Logistics and Distribution Efficiency Improvements• Improved truck and cube utilization•+17% increase

More efficient truck loading• Decreased non-productive inventory moves
•

1625

1410

+18% increase

Cross dock conversion
BeforeAfter

More direct shipments to our sales centers and customers• Cross dock operation•

Significant space, equipment and labor savings in sales
centers through timely delivery

コカ･コーライーストジャパン株式会社

16

Outlook toward
Rest of the Yearコカ･コーライーストジャパン株式会社

CCEJ Q3/YTD 2016

Extensive Marketing Activities in Q4
Coca-Cola Winter Campaign and “Ribbon Bottles”

Georgia Campaign

I LOHAS Flavor Extension

Coke ON Music

Japanese pear “Nashi” flavor

コカ･コーライーストジャパン株式会社

18

CCEJ Q3/YTD 2016

Remarks for the Rest of Year
• Q4 2016 results• Expect cycling from prior year

• Capex plan update• Full-year Capex will be approximately JPY 40 B

• Proposed business integration with Coca-Cola West• Appointed Vikas Tiku as CCEJ’s Vice President and Chief
Integration Officer

コカ･コーライーストジャパン株式会社

19

CCEJ Q3/YTD 2016

CCEJ One+ Roadmap for Growth
2018- 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
growthコカ･コーライーストジャパン株式会社

Norming
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

20

Appendix
コカ･コーライーストジャパン株式会社

CCEJ Q3/YTD 2016

Drivers of Q3 2016 Operating Income
Q3 2015Comparable
Operating
IncomeSupply Chain
Synergies

Gross Profit
Impact ofvolume,price/mix

+772

7,810

• Volume grew
+1.4% YoY
• Improvement in
profitability+4,186

DME

Other
OPEX

Other
Subsidiaries

-336

+604

+171

• Moderateincrease resulting
from upfront
spending by Q2• Labor related
expenses, etc.
decreased
partially offset
by increased
delivery,outsourcing
expenses, etc.
associated withvolume growth

Depreciation

Q3 2016
Comparable
Operating
Income+736• CAPEX timing
and plan review• Full-year capex
now expected to
be 40B• Includes benefitof change ofuseful lives for
Production
equipment

12,211• Delivering strong
manufacturing,logistics &distribution andprocurement
synergies

Unit: Million JPY

コカ･コーライーストジャパン株式会社

22

CCEJ Q3/YTD 2016

Q3 2016 Financial Results Summary• Slight decline of revenue due to decrease of sales to other Coca-Cola bottlers • Improved gross margin driven by strong supply
chain efficiency improvement • SG&A decrease led by cycling of PY (labor, logistics, etc.), partly offset by marketing investment

Q3 2016

Q3 2016

Q3 2016

Q3 2015

Vs. PY

Reported

One-time
items

Comparable

Comparable

Diff

%

in million yen

Sales Volume

92,093-92,09390,787+1,307+1.4

Net Revenue

163,117-

163,117

163,480

-363

-0.2

COGS

84,389-84,38987,946-3,557-4.0

Gross Profit

78,727-78,72775,534+3,193+4.2

SG&A

66,835-319

66,51669,456-2,940-4.2

Operating Income

11,892319

12,211

6,078+6,133

100.9

7.3%

-

7.5%

3.7%

+3.8

-

(BAPC) (,000 cases)

OI Margin
Profit Before Tax

11,950Net Income

7,914• Capital Expenditure: 17,732M JPY / Reported Depreciation and Amortization: 5,557M JPY• One-time items mainly expenses related to the 3rd party transaction costs for proposed
integration with Coca-Cola West

Note: Previous year volume shown above may be slightly different from what we shared in the previous year, as part data standardization related tothe implementation of the new ERP system, CokeOne+.

コカ･コーライーストジャパン株式会社

23

CCEJ Q3/YTD 2016

The Japan Coca-Cola System Continues to Evolve
Together with the customer, consumer, competitive landscape
1956-99

2001

2006

17

14

12

bottlers

bottlers

bottlers

Tokyo

Tokyo

Tokyo

Tone

Tone

Tone

Mikuni

Mikuni

MikuniCentral Japan(CCCJ)

CCCJ

SendaiSendai

Fuji

2001

Chukyo

2013

8

6

5

bottlers

bottlers

bottlers

2013

CCEJ

2015

CCEJ

1999

West Japan(CCWJ)

Sanyo

MikasaMikasa

Kinki

2002
2006

CCW

Kinki

Minamikyushu

Minamikyushu

Minamikyushu

Shikoku

Shikoku

Shikoku

Hokkaido

Hokkaido
Hokuriku

1984

CCW

2015

CCW

Shikoku
Hokkaido

Hokkaido

Hokkaido

Hokuriku

Hokuriku

Hokuriku

Hokkaido

Hokuriku

Michinoku

Michinoku

Michinoku

Okinawa

Okinawa

Okinawa

Hokuriku

Michinoku

NaganoMichinoku

Okinawa

Michinoku

Okinawa

Okinawa

2013

2017

CCBJI

SendaiSendai
Kitakyushu

2017

2015

コカ･コーライーストジャパン株式会社

CCEJ Q3/YTD 2016

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 anddistribution, marketplace execution that is firmly focused on the consumer, faster response to market preferences, enhanced customer service, andrigorous quality control.
Other Coca-Cola System Related Companies in Japan
Coca-Cola Tokyo Research &Development Co., Ltd. (CCTR&D)
Coca-Cola IBS Co., Ltd. (CCIBS)
Coca-Cola Business Sourcing Co.,
Ltd. (CCBSC)
Coca-Cola Customer Marketing
Company (CCCMC)FV Corporation Co., Ltd. (FVC)

コカ･コーライーストジャパン株式会社

Product development and technical support to respond to the needs of the customer
in Japan. A wholly owned subsidiary of The Coca-Cola Company.
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.
Providing joint procurement of raw materials, packaging, equipment, indirectmaterial, etc., for Coca-Cola System companies in Japan. Jointly owned by The CocaCola Company and all the bottlers in Japan.
Business negotiations window for nationwide retail, convenience stores, supermarket
and food-service chains as well as developing proposals for sales promotions andstorefront activities. Jointly owned by CCJC and all the bottlers in Japan.
Sales negotiations window for national chain vending operators, and deals non-CocaCola products as well as Coca-Cola branded products. Jointly owned by CCJC and all
the bottlers in Japan.

25

CCEJ Q3/YTD 2016

Glossary of Frequently Used Terms
CDE

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

DME

Abbreviation of Direct Marketing Expenses. Sales promotion-related expenses reported in advertisement & sales promotion expenses andpartly 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 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 fountain) and channels that consumers purchase the beverages for IC (for example,
vending machines, convenience store channel, etc.).

OBPPC

Abbreviation of Occasion, Brand, Package, Price, Channel. A segmentation strategy tailored to consumption opportunities to drive
revenue growth in five areas: 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 by driving
sustainable improvement using common language and tools as well as focusing on business priorities.

PicOS

Abbreviation of Picture of Success, which outlines standards and examples for making ideal market place execution and market place
activities including product deployment, CDE and advertisement placement, vending machine faces and column management, etc.

PTC

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

RGM

Abbreviation of Revenue Growth Management, an overall strategy and process to grow revenue and profit

RTM

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

コカ･コーライーストジャパン株式会社

26

THANK YOU
Coca-Cola East Japan
Q3/YTD 2016 Earnings Conference Call
November 14, 2016
<Inquiries>
Investor Relations
Coca-Cola East Japan

ir@ccej.co.jp+81-3-5575-3797
http://investor.ccej.co.jp/

コカ･コーライーストジャパン株式会社