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Conversation with our Chairman & CEO

Further Together

CEO CHAIRMAN

"We want to build on the best of both businesses, in key areas like sustainability, digital transformation and our people."

- Sol Daurella, Chairman

How did CCEP perform in 2021 and what are you most proud of achieving in the year?

S: We continued to demonstrate the resilience of our business and our ability to operate with agility in such a rapidly changing environment. I am proud of how our colleagues have continued to support our customers, consumers and communities. I’d like to extend my sincere gratitude to everyone at CCEP for their incredible commitment and hard work throughout the ongoing pandemic. Last year was also an exciting year for everyone connected to the business. In May, Coca-Cola European Partners completed the acquisition of Coca-Cola Amatil and changed its name to Coca-Cola Europacific Partners. This transaction solidifies our position as the largest Coca-Cola bottler by revenue and creates a platform for accelerated growth and returns. This combination of two great Coca-Cola bottlers is exciting and we can now grow together by combining the talent, learning and best practices of two fantastic companies, both with a strong shared sustainability focus. A more diverse and inclusive culture will translate into new thinking and new ideas and our people will have even more opportunities to grow and develop.

D: 2021 was an extraordinary year for CCEP. We are a stronger, more diverse business, built on great people, great service and great beverages – done sustainably. Solid top line recovery, value share gains, operating margin expansion and remarkable free cash flow generation demonstrate our strong performance in a challenging environment. Our results also reflect the successful acquisition and integration of CCL, a fantastic business to have acquired, at the right time, and we look forward to an even brighter future together. Together with TCCC and our other partners, our focus on core brands, in market execution and smart revenue growth management initiatives solidified our position in 2021 as the largest fast moving consumer goods (FMCG) value creator. In 2021, we created over €13 billion in retail value(A) for our home channel customers, a year on year increase of €600 million. Coca-Cola Zero Sugar, Coca-Cola Original Taste, Monster and Fanta were all top 10 non-alcoholic ready to drink (NARTD) brands for absolute value growth. We also continued to make progress on our ambition to reach net zero emissions by 2040 and we are investing in making our packaging more sustainable. We continue to challenge our Sustainability commitments, bringing them forward where possible as evidenced by us achieving our 50% rPET commitment in Europe two years early.

How is the integration of Coca-Cola Amatil progressing?

D: We are well underway with the integration and I am extremely pleased with the progress we have made since the Acquisition. We now have a significantly bigger growth opportunity, having acquired a strong business with momentum and potential. We have a broader and more balanced footprint and the number of consumers who can enjoy our drinks is now over 600 million.

S: The Acquisition has allowed us to bring together two great companies. In doing so, we’ll be able to go further and faster in pursuing our shared vision for growth, through our consumer led portfolio, collaborative customer relationships and innovation to meet changing consumer needs. I am excited by the prospect of what we can learn from each other and the opportunities to grow our business that this creates.

D: Following the Acquisition we established a new segment within our operating model named Australia, Pacific and Indonesia (API). This structure ensures we remain close to our customers, communities and stakeholders. It allows us to make the most of our deep local insight, experience and market understanding, and meet the specific needs of our stakeholders. We have key talent in place. Peter West leads the new API segment. Peter was previously the Managing Director of Coca-Cola Amatil, Australia. He has extensive knowledge of the FMCG sector and a proven ability to work with customers and partners to drive growth and deliver results. I am extremely pleased with the quick progress we were able to make when integrating API into the wider business. Our pre-existing organisational structure enabled us to extend our combined central functions to support the new segment. From a digital perspective, we have started on the journey to bring our people, systems and processes together to allow us to collaborate to enable us to go further, together.

S: We’ve developed a proven and successful playbook in Europe. We have a track record of creating value in developed markets – like Australia and New Zealand – through strong revenue growth management, route to market transformation and leading commercial capabilities. Indonesia’s growth potential is particularly exciting, with CCEP now working in one of the world’s most populous and dynamic emerging markets. We want to build on the best of both businesses with our people – in key areas like sustainability, digital transformation and outlet execution – to drive growth and scale faster. We will also further strengthen our strategic relationships with TCCC and our other franchise partners.

How are you developing your future ready and entrepreneurial culture within CCEP?

S: Our success is driven by our great people at CCEP. I’m consistently impressed by their expert local knowledge and passion for our brands and our business. I’m grateful for all they do every day to serve our customers and communities. I’d also like to thank Damian and his leadership team who are helping to create a winning and inclusive culture. I’m also grateful to my fellow Directors for their contribution over the year. I’d like to take this opportunity to thank Irial Finan who stepped down from the Board during 2021, for his outstanding contributions to our business. We welcomed Manolo Arroyo as a new member of the Board in 2021. Manolo brings a wealth of extensive experience working in the Coca-Cola system and as the Chief Marketing Officer at TCCC. His strategic marketing, commercial and bottling expertise will be an asset to the Board. We have introduced platforms across our geographies to enable our people to share their questions and feedback, and connect with our leadership on all topics relating to our sustainable growth and innovation. This feedback culture and ability to share ideas through various platforms and surveys enables great ideas to rise to the top. We continue to value and invest in our early career talent and support initiatives that help young people gain employability, skills and confidence. This includes offering internships, apprenticeships and graduate programmes. We have also launched three new inclusion, diversity and equity (ID&E) learning modules on practising inclusive leadership, starting an ID&E conversation and allyship. We’ve been working hard to create a workplace where everyone feels welcome to contribute and be at their best. We want to create an environment that empowers everyone to thrive, where everyone can contribute to the growth of CCEP and where everyone feels respected and able to share their ideas and perspectives.

D: Our people strategy, [email protected], sets out how we are building a winning culture where a diverse range of talents can grow and collaborate together. We encourage an environment where different perspectives and insights are valued at all levels of the organisation, and we have put inclusion right at the heart of our working culture. We have a focus on agile ways of working and creating an ownership mindset, where people feel empowered and confident to take appropriate risks and win together. We have provided training to develop core capabilities in leadership, commercial and customer service and supply chain. We continue to progress plans for working flexibly as we emerge from the pandemic.

How are you promoting the health, safety and wellbeing of your colleagues?

S: Our people’s physical, mental and social wellbeing remain our priority and we continue to promote this in our workplace. Amid the stress and disruption caused by the COVID-19 pandemic, it’s more important than ever that we look after our people’s wellbeing and mental health. We have grown our Wellbeing First Aider initiative to build an internal support network for mental health.

D: Despite our focus and drive for continuous health and safety improvement, tragically four colleagues lost their lives in 2021 and one colleague lost their life in early 2022 while working for CCEP. Four fatal incidents occurred in Indonesia and one in Belgium. My heart goes out to their families, friends and colleagues. The safety and wellbeing of our people is vitally important. We have learned lessons from these terrible tragedies. It is our aim that the health of our colleagues, both physical and mental, is not detrimentally impacted by working at CCEP. We aspire for all employees to feel happy, healthy and to work with integrity and respect, enabling us all to thrive at work and in our home lives.

How is CCEP developing its digital capabilities?

D: Technology is not only shaping the way that our consumers and customers interact with us, but also how we operate as a business. It is becoming increasingly important to modernise the way that people connect and communicate with each other in a more digital workplace. Using technology will enable us to become more efficient, and help us drive revenue and manage our costs. At CCEP we are evolving into an ever increasingly data driven organisation as we effectively and consistently utilise data in our decision making process across all levels of the organisation. Our journey to become the world’s most digitised bottler will benefit all areas of our business. From the way we procure, to platforms we use to drive sales, using digital technology will unlock growth and new opportunities. We will also be able to use data analytics to improve our demand and supply chain planning, enabling us to continue to make the drinks consumers want, when they want them. To improve our demand planning, we are combining machine learning and advanced analytics to improve performance for case fill on time, forecast accuracy and manufacturing adherence.

S: Digital technology and innovation have always been a key focus for CCEP, and we are continually looking for ways to improve our service and making it even easier to do business with us. We’re turning data and analytics into a competitive differentiator. This will be delivered by evolving our data and analytics team and capabilities, harmonising our data foundations so data can be managed as an asset, driving a company wide awareness and interest in data, and executing our multi year strategic roadmap to incrementally derive business value from data. We are also investing in our workplace tools to promote collaboration across our teams.

D: Over the past two years we’ve seen significant behavioural shifts in society. Changes in how people live, shop and work continue to inform how we serve our customers and get our products to consumers. This gives us an opportunity to leverage our digital capabilities and grow our business, as well as create even more value for our customers and retail partners. Our customer portal My.CCEP.com is an important part of our digital acceleration. It is helping us be the best online partner to our customers and drive revenue growth for our business. The platform is now live in all of our European markets, following its successful launch in Germany at the end of 2021. With 76,000 customers, we’ve doubled the amount of customers on the platform since last year. Changes in routines brought many new shoppers into the online grocery channel. In many markets our online share of soft drinks is higher than in store, reflecting our dedicated efforts to drive e-commerce sales together with our customers. Through our innovation investment programme, CCEP Ventures, we aim to identify and implement transformative ways of doing business. Business to business (B2B) e-commerce is just one exciting growth area that is a focus for CCEP Ventures. We also continued to grow through our first ever direct to consumer platform Your Coca-Cola in GB. This platform allows consumers to stock up on their favourite drinks brands as well as popular, harder to find products like Diet Coke Caffeine Free, often in slightly larger packs than those currently available through traditional retail channels. This move will help us tap into the rapid growth of online shopping and offer consumers even more choice. Digital solutions will help us continue to win with our customers and grow our business. The COVID-19 pandemic has shown the important role digital platforms play for customers and consumers, and we will continue to harness this opportunity.

What progress has CCEP made with its sustainability commitments?

D: COP26 made clear the urgency for businesses to deliver bold climate action. We took a significant step in 2020, by setting an ambition to reach net zero emissions by 2040 and reduce our GHG emissions across our entire value chain by 30% by 2030 (vs. 2019). These are ambitious targets, and we are accelerating the decarbonisation of our business. Our targets are aligned with a 1.5˚C pathway and are approved by the SBTi. This means that we have a credible goal that will require meaningful and sustained action. This year we will update our 2030 science based emission reduction target to include API.

S: Sustainability is absolutely fundamental to everything we do as a business. We will continue to push ourselves to go further, faster to decarbonise our business. Our continued listing on the Dow Jones Sustainability Index (DJSI) reinforces the ongoing progress we are making. In 2021 CCEP was recognised for leadership in corporate sustainability by global environmental non-profit CDP for the sixth consecutive year, securing a place on its prestigious ‘A List’ for climate, as well as water security. CCEP is one of 53 companies globally to have achieved an ‘A’ position for both climate and water, which demonstrated the focus we place on sustainability. In Australia and Indonesia, we are investing in new PET recycling facilities. These collaborations are a step forward towards creating a circular economy for PET and will contribute to further accelerating our journey towards the ultimate goal of using 100% recycled or renewable plastic. In 2021, we completed a three year solar panel project at our production facility Cibitung in Indonesia, the second largest rooftop solar project in South East Asia and the fourth largest in the world. As part of our path to net zero we’ve already transitioned three production facilities to become certified as carbon neutral as part of a pilot programme that aims for at least eight sites to become carbon neutral certified by the end of 2023. We are closely connected to our local communities. We are committed to protecting our environment and support environmental programmes through investment and volunteering. Sustainability is a subject that I personally feel very strongly about. I would like to thank all of our colleagues, customers, partners, suppliers and stakeholders who are working with us to take the action required to tackle climate change. We still have a long way to go and we are determined to work together to achieve our sustainability ambitions.

How is CCEP’s relationship with TCCC developing?

D: CCEP has always been closely aligned with TCCC strategically and the relationship has grown even stronger over the past year. TCCC’s support for the Acquisition was a further endorsement of the strong alignment we have built since the formation of CCEP. The relationship has continued to develop and grow, demonstrated through our agile collaboration and decision making during the year against a challenging backdrop. Together, we ensured the continuity of supply of the products our consumers wanted to buy by prioritising core brands and packs. We also continued to launch and scale new brands into our markets such as Costa Coffee and Topo Chico, which we look forward to developing further in 2022.

S: We worked closely with TCCC following the completion of the Acquisition. We are partnering closely with them to develop value creating plans across the API region. Our strong platform and alignment with TCCC, built on the success of operations in Europe, is an asset that we’re clearly going to translate together into an even better future for our API segment. We have already started to work on reorienting our portfolio in Australia and New Zealand. We have reviewed our portfolio in these markets to assess the size and future growth opportunities within the different NARTD categories. We’ve established a future vision for our portfolio, customer and consumer environment plans that we will use with TCCC to execute and win in the market. Our strong relationship with TCCC is also driving forward our sustainability strategy, which works side by side with TCCC’s World Without Waste strategy.

What’s next for CCEP?

D: We continue to protect our business for the short term and are confident in our ability to mitigate near term inflationary pressures and navigate global supply chain challenges. Key levers are pricing, mix, procurement initiatives and our transformational efficiency programmes. We’re combining these levers with disciplined investments for long-term future growth, particularly in our portfolio, our people, digital and sustainability. The integration of API is well underway, and it is very much now part of the CCEP family as our sixth geographical business unit. We are very excited with the growth plans we are developing with TCCC, both in applying our proven playbook in developed markets as well as unlocking the long-term transformation potential of Indonesia. We will continue to expand our total beverage portfolio while strengthening core capabilities that will drive sustainable success. We will continue to invest in our supply chain. Last year saw us invest €560 million. I would like to thank our people for their extraordinary efforts during the year and our customers, suppliers and all of our stakeholders for their interest and partnership. We are deeply concerned and saddened by the conflict and suffering in Ukraine. CCEP has joined the Coca-Cola system in providing support to the humanitarian relief efforts in Ukraine and neighbouring countries. We are contributing financial aid to the International Federation of the Red Cross and local Red Cross branches, and product donations to refugee centres. We join others across the world in calling for peace to return to Ukraine.

S: We will continue to invest in our people and developing an inclusive and safe environment for people to be at their best. Working with our franchise partners, we have exciting plans for our portfolio, and we are focused on the capabilities and technologies needed to offer our customers a great experience. Above all, we are acutely aware of the challenges facing society and we are committed to building a better future – for our business, for people and for the planet. We are making a difference and believe we have the right foundation to drive sustainable growth and, as evidenced by our 2021 dividend being our largest ever, delivering increased shareholder value. We remain focused on the next stage of our journey and I’d like to thank all our stakeholders and investors for continuing to be a part of it.