Coca-Cola Europacific Partners - H2 2022

Transcript

Operator (participant)

Hello, and thank you for standing by. Welcome to today's Coca-Cola Europacific Partners Q4 and FY 2022 results conference call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. I must advise you that this conference call is being recorded. I would now like to hand the conference over to Vice President of Investor Relations and Corporate Strategy, Sarah Willett. Please go ahead, Sarah.

Sarah Willett (VP of Investor Relations and Corporate Strategy)

Thank you all for joining us today. I'm here with Damian Gammell, our CEO, and Nik Jhangiani, our CFO. Before we begin with our opening remarks on our results for the fourth quarter and full year 2022, a reminder of our cautionary statement. This call will contain forward-looking management comments and other statements reflecting our outlook. These comments should be considered in conjunction with the cautionary language contained in today's release, as well as the detailed cautionary statements found in reports filed with the U.K., U.S., Dutch, and Spanish authorities. A copy of this information is available on our website at www.cocacolaep.com. Prepared remarks will be made by Damian and Nik and accompanied by a slide deck. We will turn the call over to your questions. Unless otherwise stated, metrics presented today will be on a comparable and FX neutral basis throughout.

Any growth rate will be also presented on a pro forma basis with a full year financial year of Coca-Cola Europacific Partners behind us. Please note that pro forma growth rates will no longer be relevant when talking about FY 2023 and beyond. Following the call, a full transcript will be made available as soon as possible on our website. Finally, before I turn over the call to our CEO, Damian Gammell, if you live in GB, please not worry about the recent news coverage about the much-loved brand and one of my personal favorites, Lilt. It is not disappearing, but being rebranded as Fanta Pineapple & Grapefruit. On that positive note, over to you, Damian Gammell.

Damian Gammell (CEO)

Thank you, Sarah. Many thanks to everyone joining us today. Before we start with our key messages, I'd particularly like to thank all of my colleagues at CCEP for their incredible commitment and hard work throughout what was our first full year as Coca-Cola Europacific Partners. Indeed, what a great year it has been. I am delighted with our financial performance, achieving strong top and bottom line growth with revenue and profits both ahead of 2019 levels, value share gains, and a very impressive free cash flow generation. This has allowed us to pay a record dividend to our shareholders. As a diverse and sustainable bottler, we firmly believe we are well placed for growth in 2023 and beyond. We also operate within a resilient and growing category with great brands that our consumers continue to love.

We will continue to invest and innovate in these brands and their packaging, supporting a solid growth platform for all our customers. We're confident in the future and are fully committed to the higher midterm objectives announced at our Capital Markets Day in November. Finally, we are very proud of our strong relationship and alignment with The Coca-Cola Company and all our other valued brand partners. This slide and graphic will be familiar. We have a clear but vital purpose to refresh Europe and API, and critically, to make a difference for all our communities and our stakeholders. We have a clear focus around great people, great service, great beverages, all done sustainably for a better shared future. Now I'd like to touch on each of these areas as we look back at 2022.

CCEP's ambition for growth and sustainability depend on our great people and the well-being and safety of our colleagues remains our number one priority as a company. We finished 2022 with a world-class safety performance. We are committed to encouraging all our employees to live happy, healthy lives so that they are engaged at work and able to perform at their best. I am pleased many of you got to see this for yourselves during the market and plant tours as part of our recent capital markets event in London. We now offer a new employee assistance program or EAP in all markets, providing all our employees with access to counseling, advice, or specialist information. This continues to be recognized externally too.

I am pleased that we are recently included on the 2023 Bloomberg Gender-Equality Index for the third year running. This demonstrates our commitment to gender diversity and equality and fostering an inclusive culture for everyone at CCEP. We continue to encourage a culture of innovation and improve our digital tools in the workplace. We were awarded gold at the U.K. Employee Experience Awards in recognition of our progress. Great service remains a key priority and is a critical driver of our performance. Once again, we were the largest creator of value in the retail channel for our customers within FMCG in Europe and in NARTD and API, according to Nielsen. In Australia, we were the largest value creator within the alcohol category two, gaining over 250 basis points of value share in the RTD space.

I'm extremely proud of the way we successfully navigated supply chain challenges throughout the year and importantly, continued to invest ensuring our products were available on shelf and online and maintaining our high levels of customer service. This year, we installed four new lines and upgraded two existing lines, helping us to meet the growing consumer demand for our beverages, whilst also delivering a range of sustainability benefits. For example, our new state-of-the-art can line in Moorabbin, Victoria, is able to make up to 1,700 cans per minute in a variety of formats, including mini cans, while also using less water and less energy than our existing lines. In recognition of world-class customer service and execution, the Netherlands were the runner-up in the annual Global Coca-Cola Bottler Competition, the Candler Cup.

We've seen some great activation, particularly around the World Cup and throughout the really important festive periods of Ramadan and Christmas. On digital, we continue to accelerate our B2B platforms, hitting record revenues of EUR 2 billion in 2022. That was up 50% versus 2021. Finally, through our ventures program, we recently partnered with two universities who will be undertaking academic research into direct air capture at our sites to help us reduce carbon emissions on our journey to net zero. We are extremely privileged to make, move, and sell the best beverages in the world, and we continue to recruit new shoppers across our portfolio. In fact, in Europe, over 75% of households purchased from our NARTD portfolio in 2022. That's up 70 basis points versus last year.

You will recall that we rolled out a new taste, new look, and a new campaign for Coca-Cola Zero Sugar across our markets throughout 2021. This has been a great success, driving volume growth of 10% in 2022, or an impressive 23.5% when you compare to 2019. Coca-Cola Creations were also a great success in 2022, with more excitement and new flavors to come this year. Within flavors, new Fanta flavor launches and the latest What the Fanta campaign continued to drive excitement for our consumers, particularly over Halloween. We also launched Sprite Lemon Plus with added caffeine in Australia, with really promising early results. Monster continued to gain share through innovation, with more flavors launched in the juice and ultra ranges during 2022.

In coffee, we launched a new Costa Frappé range, in Australia, Suntory's -196 Double Lemon, a brand that has proved really popular in Japan, continued to deliver solid growth. All of this will continue to be done more sustainably. Our This is Forward commitments were extended to our API markets in 2022, resulting in a unified action plan for CCEP. We continue to make great progress against our commitments and are taking action where it matters most. In Europe, we launched tethered closures on our PET bottles in seven markets, with more to follow in 2023. This new design, which includes a lighter weight neck, is estimated to save at least one gram of plastic per bottle, equating to approximately 15,000 tons of CO2 and over 9,000 tons of plastic a year by 2024.

In Australia and Indonesia, we invested in new PET recycling facilities. These collaborations are a step forward towards creating a circular economy for PET and will continue to further accelerating our journey towards the ultimate goal of using 100% recycled or renewable plastic. Four more of our production facilities became carbon neutral in 2022, totaling six to date across different markets. Our progress continues to be recognized, and we are proud to have retained our coveted CDP and MSCI ratings for the seventh consecutive year. CCEP was also recognized for its sustainability leadership within the Coca-Cola system by winning the prestigious 2021 J. Paul Austin Award. Finally, I have the pleasure in sharing that CCEP recently became a member of the Ellen MacArthur Foundation, an important partnership as we continue our efforts to transition to a circular economy.

All in all, a great year of progress. Turning now to our 2022 performance highlights. We're really pleased with our top-line performance. The continued recovery of away from home and further growth in the home channel helped drive a 9.5% increase in comparable volumes. Our continued focus on Revenue Growth Management, and in particular, our efforts to actively manage headline pricing and optimize promotions across our broad pack offering, drove solid revenue per unit case growth of 6%. This is ahead of pre-pandemic levels but below realized cost inflation, reflected in our margins as we continue to prioritize relevance and affordability of our brands for the consumer. We continue to win with our customers, and this momentum is evidenced by our NARTD value share gains and value creation.

Our continued focus on driving efficiencies, which Nik will cover in more detail shortly, helped drive solid operating profit growth of 12.5%. This all resulted in an impressive adjusted free cash flow generation of EUR 1.8 billion, enabling us to pay a record dividend to our shareholders. As mentioned earlier, we've made great progress on sustainability initiatives, and I'd now like to hand over to Nik to talk in more detail to the financials. Nik?

Nik Jhangiani (CFO)

Thank you, Damian, and thank you all for joining us today. Let me start by taking you through our financial summary. We delivered total revenue of EUR 17.3 billion, an increase of 15.5%, and our COGS per unit case increased by 9%, both of which I'll come back to shortly. We delivered comparable operating profit of EUR 2.1 billion, up 12.5%, reflecting our solid top-line growth, the benefit of our ongoing efficiency programs, and our efforts on managing discretionary spend. In line with our guidance, our comparable effective tax rate increased to approximately 22% from 21% in 2021. This is largely due to differences in the mix of taxable profits across our different territories and the reassessment of our uncertain tax positions.

This resulted in comparable diluted earnings per share of EUR 3.39, up 14%. Free cash generation continues to be a core priority. We delivered an impressive EUR 1.8 billion on an adjusted basis during 2022, and I'll cover that in more detail in a few moments. Finally, on shareholder returns, we paid a total 2022 dividend per share of EUR 1.68, up 20% versus 2021. In absolute terms, this equates to total dividends paid of approximately EUR 760 million, which as Damian mentioned, is the largest payment in our company's history. Now if I turn to our revenue highlights, the strong growth in our revenue was driven by both an increase in volume and importantly, our revenue per case.

Unsurprisingly, the most significant improvement has been in our away from home volumes, given last year's base was still impacted by lockdown restrictions. That said, we are pleased that our away from home volumes have broadly returned to 2019 levels, with traction in immediate consumption and the rebound in tourism. GB has been the standout here with away from home volumes in double-digit growth versus 2019, and Iberia with strong recovery to slightly above 2019 levels as well. Strong trading in the home channel continued, benefiting from the increased at home occasions as well as continued growth in online grocery, with volumes up 4% versus 2021, or up 6.5% versus 2019.

Volumes were slightly softer in the fourth quarter, up 1.5%, impacted by some customer disruption in Germany, as well as tougher prior year comps. Excluding this customer disruption, volume growth in the home channel would have been positive in the fourth quarter versus the -1% detailed in the release. I am pleased that we were able to resolve this customer negotiation during the quarter. As Damian referenced earlier, our priority is and will continue to be to lead the category for sustainable value creation for all our customers. Moving now to revenue per unit case, which grew by 6% for the full year, reflecting the strong growth in away from home, but also testament to our revenue growth management initiative with positive headline price, pack, and brand mix.

Unsurprisingly, pricing took a bigger role in 2022 compared to previous years, given the inflationary environment. We successfully implemented both our first and second-round headline pricing strategies across all markets. I'll update on 2023 shortly. Revenue by segment is also referred to here. You can see more detailed commentary by geography in the release, at a headline level, Great Britain and Iberia were the standouts, with both Europe and API ahead of 2019 levels on a revenue basis. Moving now to COGS per unit case, which increased by 9%, slightly ahead of our 8.5% guidance. This difference was primarily driven by higher concentrate costs as a result of our incident pricing model.

This is, as you know, directly linked to our revenue per unit case growth, which was stronger than anticipated as a result of our successful RGM and second-round pricing initiative. As expected, we saw commodity inflation in the low 20s, in line with our guidance, reflecting higher aluminum and rPET pricing, as well as the impact of higher gas and power pricing on our conversion costs, this part being more second-half weighted. Moving to OpEx and our efficiency programs. We have now delivered over 90% of our full year 2021-2023 program, which ultimately will amount to approximately EUR 375 million of benefits in total. We will deliver the final EUR 30 million during 2023.

In November, we announced a new efficiency program aiming to deliver EUR 350 million-EUR 400 million of incremental savings by full year 2028. As a reminder, these benefits will be weighted towards 2024 and beyond. You can now see on this slide that as a % of revenue, our OpEx continued to decline in 2022, reflecting our extremely disciplined focus on driving efficiencies throughout the cost base, more than offsetting our underlying cost inflation, as well as the increase in our volume related costs, and of course, TME, which has naturally increased to support our top line growth. Importantly, our OpEx has declined not only compared to last year, but more importantly, around 200 basis points lower as a % of revenue compared to 2019.

Going forward, we will continue to manage costs very tightly, but do anticipate further inflationary pressures in areas like labor and haulage, as well as a certain element linked to volume growth this year. Turning to free cash flow in more detail, a hugely important metric for us and for you as well. We generated EUR 1.8 billion of adjusted free cash flow in full year 2022, and this slide lays out the key components. Recognizing the importance of targeted investment, we spent approximately EUR 600 million in CapEx, excluding leases, on supply chain, digital and other technologies, as well as cold drink equipment. As you know, working capital remains a core focus for us, and I'm really pleased that we delivered yet another year of significant benefits.

This included a notable improvement in API as we rolled out our proven working capital initiative in that region. For example, we have now aligned API's annual incentives to Europe so that incorporates free cash flow as a targeted measure, which has naturally encouraged more focus on delivering improvements. This has helped drive approximately EUR 120 million of working capital improvements in API since the acquisition, taking the cumulative amount, including Europe, to approximately EUR 1.2 billion since 2017. A remarkable performance. Finally, you will see our reported free cash flow also includes the benefit of a VAT tax refund in Spain amounting to approximately EUR 250 million. We have excluded this from the adjusted free cash flow to allow for better comparability given the unusual nature of this item. Now to our leverage and balance sheet.

We ended 2022 with a net debt to adjusted EBITDA ratio of 3.5x, demonstrating the pace of deleveraging since we closed the Amatil transaction in May 2021. Given our strong focus on driving cash and working capital improvements, we remain confident that we will reach the top end of our target leverage range of 2.5-3x by the end of 2023, while remaining fully committed to our strong investment-grade ratings. We have a strong and flexible balance sheet and as a reminder, we won't need to refinance any of our existing debt for another two plus years, which is certainly helpful in the current volatile rates environment. Moving now to API and an update on some of our portfolio initiatives.

We have now exited beer and cider in Australia as planned, the majority of the proceeds have been received from the sale of our CCEP-owned NARTD brands as well. We have a more streamlined portfolio in Indonesia focused on our core sparkling and tea categories, which has allowed us to manage our supply chain more efficiently and deliver even better service to our customers across key calendar events like Ramadan and the Chinese New Year. Indonesia is a hugely exciting and attractive market for us, we're really pleased to announce the purchase of The Coca-Cola Company's 29.4 minority stake in our Indonesia business, increasing CCEP's ownership to 100%. This was for a total consideration of EUR 282 million.

Please note that this price includes a significant amount of cash on the local balance sheet and represents KO's fair share of that cash. While this transaction will be EPS accretive, it will have a minimal impact at a group level for full year 2023. This now simplifies our ownership structure while demonstrating our commitment to the future of this exciting market. In fact, the more time Damian and I spend in Indonesia, the more excited we get about the opportunities ahead. This is a market with a fantastic growth opportunity in the NARTD category of over 10% a year. We've already seen promising results from some of our portfolio initiatives, evidenced by a 7% increase in revenue per unit case versus 2019.

We're looking forward to the longer-term value creation opportunities that this market offers as we continue to reshape our route to market to be fit for purpose. Let me move on to guidance for full year 2023, which now reflects our view of the current market conditions. We expect revenue growth of 6%-8% and COGS per unit case growth of approximately 8%, both of which I'll talk to more on the following slide. With our continued focus on OpEx management, we will look to deliver operating profit growth of 6%-7%. From a phasing perspective, we anticipate low single-digit operating profit growth in the first half, reflecting the COGS per unit case comps.

Please note that these growth rates are all provided on an FX neutral basis and whilst too early to provide specific FX guidance, for modeling purposes we do expect to see a translational FX headwind for the year at current rates. We will of course continue to update you as the year progresses. On interest, we do expect a small increase versus 2022, given the impact of higher rates on our floating note exposure at around 10% of our debt, as well as the loss of interest income associated with the net cash outflow from the Indonesia minority buyout. As I referred to last year, we do anticipate an upward trend on our effective tax rate, driven by known tax rate increases.

We therefore expect our ETR to increase to around 23% this year, with the U.K. tax rate increase from 19%-25% effective from April this year being the main driver. We will continue to update you on our expected ETR, including our assessment of any uncertain tax positions as the year progresses. We will continue to maintain our progressive dividend payout ratio of approximately 50%. Finally, we expect to deliver free cash flow of at least EUR 1.6 billion after our CapEx, which this year are expected to be in the range of 4%-5% of revenue, excluding lease payments. Let me now provide a bit more color on our revenue and COGS guidance.

In terms of shape, revenue growth will be mainly price mix led, driven by our anticipated headline price increases in 2023, combined with the annualized impact of last year's second round of pricing. We will also continue to focus on driving promotional efficiency, all of which will help us to offset some of the inflationary pressures that we're still seeing across the industry. Our main priority is to remain affordable and relevant to the consumer, and as such, we continue to manage the business for the longer term with overall realized pricing tracking below inflation to date. We have great brands which our consumers love, and on the back of ongoing investment and innovation in brands, product and packaging, our category and brands continue to support a solid growth platform for all our customers. The NARTD category remains resilient to date.

Ultimately, we believe we can at least maintain or grow our share of the category led by our great brands and best-in-class capabilities and execution, all underpinning our guidance of 6%-8% revenue growth this year. Our customers will continue to share in our success too. We've made structural changes to our business in recent years, which has positioned us more favorably from a volatile macroeconomic environment. As you know, approximately 40% of our volumes come from a more inelastic away-from-home channel, which is naturally somewhat more resilient in challenging times. In the home channel, we've made bold strategic decisions in recent years, targeting value over volume and improving the underlying profitability of the channel. We've step changed our recommended price pack architecture to address different consumer needs and now confidently play across a spectrum of package formats and recommended price points.

We also continue to actively manage our headline pricing and optimize our promotions through smart RGM. We feel good about our category and our leadership position within it. Despite what we see as a very dynamic external environment, recent trading has not indicated any significant changes in the underlying consumer demand. Moving now to COGS, clearly these comments are based on what we know today. We expect COGS per unit case to increase by approximately 8%, weighted more to the first half, given the comps from last year as previously disclosed. This reflects higher concentrate costs tied to our revenue per unit rate growth, which as we mentioned earlier, will be the main driver of revenue growth this year.

You'll notice on this chart that concentrate now accounts for approximately 45% of our total COGS versus the 50% previously indicated, given the inflationary pressures we saw in 2022 through the commodities line. We now anticipate commodity inflation of approximately 10% versus mid-teens previously communicated, as we've seen some respite in spot prices for certain raw materials such as aluminum. Our indirect exposure to the higher energy and transport costs continue to drive inflation through our conversion cost line, accounting for approximately half of our total commodities exposure. From a hedging perspective, I'm pleased to say that we're now approximately 85% hedged for 2023 and approximately 45% for 2024. We will continue to see other inflationary pressures within COGS, such as labor, gas, and power, mainly through the manufacturing line.

Clearly, all this guidance is based on what we know today, given that there is still some volatility, particularly in our indirect non-hedged commodity exposure. We will continue to update you as the year progresses. On that note, I'll pass back to Damian, who will share a bit more on what you can expect from our portfolio this year. Damian?

Damian Gammell (CEO)

Thank you, Nik. Indeed, we have plenty to look forward to with some great plans in place with all our brand partners. We will continue to invest in Coca-Cola Zero Sugar with some fantastic activation planned around the FIFA Women's World Cup in Australia and New Zealand. In flavors, we'll continue the excitement with What the Fanta, launch Kirks Orange in Australia, and refresh Sprite across Europe with a new irresistible taste. Our Smooth campaign will drive consumers to try a great tasting Costa ready-to-drink range. Innovation will continue to be a core driver of our growth and energy. We will launch even more flavor extensions and the first ever energy coffee offering in Australia with Java Monster Loca Moca and Java Monster Mean Bean. Of course, we're extremely excited to be launching our Jack Daniel's & Coca-Cola assortment in GB, Spain and the Netherlands.

Hopefully, many of you were able to sample this at our recent capital markets event. If not, watch out, it'll be here soon. Before we close, I wanted to take this opportunity to recap the new objectives we set as part of our capital markets event in November. We have a lot to do, but as we build on our current momentum, I'm confident that we have the right strategy to deliver on these ambitious targets. Finally, to recap our key messages. 2022 was another successful year for CCEP, with strong revenue growth, share gains, and further value creation for our customers. This, alongside our continued focus on driving efficiencies, drove solid bottom line growth and free cash flow, enabling us to pay a record dividend to our shareholders. Importantly, we continue to accelerate our sustainability investments and invest in our ongoing digital transformation.

We are operating in a dynamic environment, as the leader in what is a resilient and growing category, we are confident in our plans for 2023 and are firmly committed to our ambitious agenda Midterm objectives. Of course, the foundation of success is great alignment and partnership we have with The Coca-Cola Company and our other brand partners. To close, I'd like to once again thank all of my colleagues at CCEP, can rightly be very proud of what we all achieved in 2022. Thank you very much. Nik and I will now be happy to take your questions. Over to you all.

Operator (participant)

Thank you. We will now begin the question and answer session. As a reminder, we kindly request only one question per analyst. If you would like to ask a question, please press star one one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star one one again. Once again, please press star one one if you wish to ask a question. Please stand by while we compile the Q&A queue. This will only take a few moments. Our first question comes from the line of Ed Mundy from Jefferies. Please ask your question.

Ed Mundy (Senior Research Analyst)

Afternoon, Damian. Afternoon, Nik. Just got one question. You saw some pretty strong revenue per case in Q4. Could you talk about progress in pricing so far year to date and the cadence of pricing through 2023, you know, given your joint value creation model with key customers?

Damian Gammell (CEO)

Thanks, Ed. Good morning or good afternoon. Yeah, so we've been, you know, really pleased, I suppose, going back a number of years at CCEP and our focus around revenue growth management and our NSR or per case realization. I think even during COVID, it was one of the highlights of being able to deliver strong NSR or per case growth. On top of that, we've seen our customers also expand their margins as well, which I think is great for our business and for theirs. You know, clearly we're in the middle of negotiating pricing for 2023. We've successfully landed it in a number of our markets, so we're very pleased with that. We've got the flow through of our pricing from the second half of 2022.

It was unusual for us to go back, you know, to the market for a second price increase, and that's something that will remain an option as we look at 2023 again as well. As we, you know, see how the year turns out, clearly it's something that we look at again. Overall I'm quite pleased with where we are today as we're in February. Some of our markets, Iberia, Nordics and Australia, are already done. France is clearly under negotiation at the moment. We had a great 2022 in France and, you know, clearly we, you know, we looked at being the best value creator for our customers within FMCG. In France with a good balance between price mix and volume.

We also know that those cost headwinds that Nik outlined in at the beginning remain in 2023, and so it's critical for us to kind of price against that going forward. Again, I come back, I suppose what's good is we've seen our volume hold up. We've recruited more households, we've gained market share, and our customers, in most cases, have expanded their margins. I think, you know, that's a pretty good formula for long-term value creation for us and our customers. More to come on pricing as we go through 2023, and obviously it's something we'll update as we get through the first quarter.

Ed Mundy (Senior Research Analyst)

Thanks, Damian. I suppose as part of the same question, as opposed to taking a second question, you know, I think in the opening remarks you indicated that, you know, recent trading has not really indicated any significant changes in underlying consumer demand and volumes are holding up. Why do you think consumption for your products is holding up so well?

Damian Gammell (CEO)

I can't say that they taste great, Ed. I think that's the first reason. You know, I think it's a robust category and I think, you know, we've invested, as have our partners, particularly The Coca-Cola Company and Monster, sustainably over a number of years. I think, you know, that solidifies that consumer preference. I think on top of that, I think, you know, Monster and the Coke company continue to improve their marketing and product innovation. If you look at our brands on shelves now in Europe, Australia, in Indonesia, I think they look fresh, they look young, you know, they taste great. We've innovated a lot around sugar-free. I think that continues to open up the category to new users.

We've broadened our portfolio. If you look at where we're now playing, we're participating in more categories. You know, on top of that, I'd say as a bottling business, we've continued to drive better execution and customer service. It's hard to pick one single element. I also think that we, you know, did a good job in 2022 managing price realization with affordability. I remember on some of our calls last year, you know, there was a question around were we taking enough price. I think we were pretty consistent saying that we wanted to balance the midterm with the short-term cost headwinds. I think we took the right level of pricing, which allowed us to continue to promote our brands and keep them accessible for our consumers.

Yeah, I suppose what I feel good about is it's not one standout action. I think it's, you know, a myriad of good decisions over a number of years, and a category that people continue to enjoy on a daily basis. I think that's part of its resilience. I think you also see that we're looking to connect much more on the digital platforms, on social media. I think some of the new assets, particularly around brand Coke and Coke Zero, whether it's on the gaming side or on music, continue to kind of build out that preference. A bit of a long answer, Ed, but, you know, there's a lot in there, and I think it's reassuring for our investors that that's over multiple years.

It's not just one thing we did in 2022.

Ed Mundy (Senior Research Analyst)

Great. Thank you.

Operator (participant)

Thank you. We will take our next question. Our next question comes from the line of Eric Serotta from Morgan Stanley. Please go ahead. Your line is open.

Eric Serotta (Equity Analyst)

Great, thank you. Just a quick housekeeping item and then a question. In terms of the customer dispute, and I apologize if you answered this already, but what's the state of that? Has that been resolved? If so, what was the timing on that? Then the main question I had was looking at cash flow. Nik, you've spoken about the further opportunity in the past, and you gave some pretty healthy midterm guidance. Can you talk a bit about where API is in working capital metrics versus the rest of the portfolio and the scope for both API and the rest of the portfolio to free up additional cash over the next few years?

Damian Gammell (CEO)

Eric, I might take the first question. Thank you. Good morning. That customer situation was resolved in Q4. We've come into 2023 in a good place. It was mainly in Germany, but that's now resolved. And it really impacted Q4, early December. As you saw in our results, we still had a very strong Q4 on the back of that. I'll hand over to Nik to talk about free cash flow.

Nik Jhangiani (CFO)

We, and we did call out actually, when you exclude the impact of that disruption, actually, Q4 was in a nice level of growth. As Damian said, it had a quite a short-term impact of about five-six weeks. On free cash flow, listen, I think we've hopefully demonstrated our commitment on that key metric. As I highlighted, we've delivered, you know, over EUR 1.2 billion in benefits from working capital. Only since the acquisition of API, which, you know, we all seem to forget was only about a year and a half ago, we were able to deliver about EUR 120 million of benefits by taking some of the actions that we took here in Europe.

From an angle of where are we, I think, there is some more opportunity both in Europe and API differences in terms of where we would get that. On Europe, I would say our focus is gonna be over the next couple of years as we roll out our collaborative demand and supply planning, how do we look at the optimal inventory levels and how that might then translate into some unlocking of cash benefits. In API, I think it's a continuation of some of the work that we've done in Europe around all three elements of receivables, payables, and inventory. Some of it is some of the housekeeping, some of it is around terms renegotiation, and looking at what's fit for purpose relative to competition in those markets as well.

I think that's factored in, as we said, into our midterm guidance of at least EUR 1.7 billion. Clearly you see, we guided towards at least EUR 1.6 billion for 2023. I think that's just a couple of drivers as we step back up to normalized levels of CapEx. Clearly, the type of benefits that we've seen in the earlier years on working capital will probably not be as strong given what we've delivered. Then obviously, as we also look at the elements around how we deliver on new targets for efficiency programs, there will be some restructuring cash as well. We feel really good about, you know, that number as well, and we'll continue to update you during the course of the year, both for 2023 and beyond.

Eric Serotta (Equity Analyst)

Great. Thank you. I'll pass it on.

Operator (participant)

Thank you. We will take our next question. Our next question comes from the line of Lauren Lieberman from Barclays. Please go ahead. Your line is open.

Lauren Lieberman (Managing Director)

Great, thanks. Good morning, everyone.

Nik Jhangiani (CFO)

Morning.

Lauren Lieberman (Managing Director)

I just wanted to ask a bit about API, 'cause volume, you know, I know there's a lot of pricing, but volumes did come in a bit light and then down. I'd just love some color on volumes there and kind of the outlook on how that changes from here. Thanks.

Damian Gammell (CEO)

Sorry, Lauren. Good morning. On API, was that the question?

Lauren Lieberman (Managing Director)

Yeah, the API volume.

Damian Gammell (CEO)

Yeah. We're pretty happy with the full year volumes coming out of API. If you're looking at Q4 in particular, I think, you know, it was again, a strong quarter for Australia, New Zealand and Indonesia if you exclude some of the SKU rationalization work that we've been working on. As you recall, as part of the strategic review post the acquisition, we've been working with the Coke company to, you know, be much more choiceful around what categories we wanna participate in in Indonesia. We've really landed on two, no surprise, sparkling being our number one priority and secondly, tea. Beyond that we've, you know, exited a number of higher volume categories, but very, very low or negative margin categories, predominantly water, cups and some SKUs in other categories that really were not generating value.

You know, that certainly was the right decision when we look at our business for the medium term, but obviously impacted volumes. Beyond that, I think there were some comps in Q4 if you go back to Europe from December 2021, where we really started to see a bigger reopening. We had the Edeka issue we talked about. I think if you just look at the full year, we're pretty happy with the volume momentum that we've seen coming into 2023. You know, if you look at any of the market metrics for January in Europe in particular, you know, we see quite a healthy start to the year in 2023 as well. Pretty happy with our volume performance overall.

Lauren Lieberman (Managing Director)

Okay. Just, I guess, clarifying on API fourth quarter, ex the SKU rationalization, do you have a sense for what volumes would have looked like? In terms of looking forward, definitely saw the great comment in the press release about current trading conditions. Guess there's a view that, you know, Europe escaped the worst because, you know, it was a warm weather, you know, warm weather winter, so less pressure on European consumers broadly in terms of what their wallet needed to cover. A concern that sort of the realities of inflation are still yet to really materialize in terms of consumer behavior. How are you thinking about that? I know right now things seem fine, but I'm just curious on your view of the European consumer as we move forward.

Damian Gammell (CEO)

Back to your question on API. I think if you looked at it, you know, the average of the year would have been pretty much, you know, where our Q4 would have come in. We're not gonna give specifics around the value of the SKU rationalization. I think if you look at our Australian, New Zealand businesses, you know, maintained single digit growth in those periods. Nothing beyond really what happened in our Indonesian SKU decision. On the European consumer, you know, we continue to be mindful of the challenges they're facing. I think you've outlined quite nicely what we're continuously looking at in terms of the impact of inflation on their spending. We haven't seen that impact our category yet. We clearly it's something we're mindful of.

It's reflected in our pricing strategy for 2023. It's reflected in our promo strategy. You know, we continue to earn the right to price, I think is our motto. You know, whether it's through innovation or marketing, you know, we've got to justify to all our consumers if they need to pay more for our brand. We're very mindful of it. We haven't seen it yet. We've clearly seen some retailers reposition and focus on their own brands. That's clearly something that we've seen in the second half of 2022. I believe that will continue into 2023. That's on the back of those challenges that you've outlined. So far, we see a very, you know, solid consumer. We recruited a lot of new households last year.

Yeah, I suppose we're still mindful that some of those challenges haven't gone away. We're making sure that when we do take decisions around price and promo, that we do so with that context. Then we'll see where we go as we come into the summer. It's been a good winter, relatively speaking. You know, obviously spring is on its way in Europe. Let's see what that brings.

Lauren Lieberman (Managing Director)

Great. Thanks so much.

Operator (participant)

Thank you. We will take our next question. Our next question comes from the line of Sanjeet Aujla from Credit Suisse. Please go ahead. Your line is open.

Sanjeet Aujla (Equity Research analyst)

Hey, Nik, Damian. Just coming back to the 6%-8% organic revenue guide, I think at the Capital Markets Day, you outlined an expectation for the category to grow high single digit in value, mainly driven by pricing. Just against that context, are you embedding in any volume declines in your 6%-8% outlook for 2023?

Nik Jhangiani (CFO)

No, we're not. I mean, again, we've given you a range there for a specific reason. It's early in the year. We actually do expect volume to grow. I think as I also highlighted, we want to at least maintain, if not grow our share as well. Our focus is on getting that right balance between the two elements that might be a little different in terms of shape versus what you saw in 2023. Part of that goes back to some of those pricing comments that Damian made earlier in terms of what we did in 2022 that has that carry-on impact, what we've already landed, and then obviously what's to come during 2023 as well. That's the way we've looked at it.

Just to be clear, we are looking at volume growth as well on the back of obviously very strong 9% volume growth in 2022.

Sanjeet Aujla (Equity Research analyst)

Got it. That's very clear. Just a quick follow-up on commodities. Nik, when you look at spot commodities today, are they below where you've hedged for 2023 or any color you can give us there would be really helpful.

Nik Jhangiani (CFO)

It will vary obviously depending on the commodity and you know, those move up and down. For instance, we were well covered on something like sugar, and I don't think that pricing has actually moved against us. It's been well positioned. Aluminum, we were obviously layering on. If you look at an average price, you know, it's probably there or thereabout. We'll continue to see how the rest of the year plays out, where we still have an opportunity because we've kept about 20% open depending on the commodity type, right, because we're about 85% hedged. I think we've done a good job locking in on gas and power on the direct spend side, which was obviously the biggest concern. The element that's residual is really around that conversion cost element and the supplier pass-through.

When you really look at, you know, the COGS unit case, and I'm just giving you literally a broad perspective right now, we've guided to that circa 8% overall on COGS per case. You could be looking at a point up or down depending on how things trend, and we'll continue to update you on those. More importantly to your question, I think we're looking beyond 2023 as well, and what do we do for 2024 and 2025? That's where I think you'll start seeing some of that bigger benefit starting to come through.

Sanjeet Aujla (Equity Research analyst)

Very clear. Thank you.

Operator (participant)

Thank you. We will take our next question. Our next question comes from the line of Mitch Collett from Deutsche Bank. Please go ahead. Your line is open.

Mitch Collett (Director and Equity Research Analyst)

Thanks, good afternoon, Damian, Nik and Sarah. I'd also like to ask about commodities. Your hedge coverage for 2023 at 85% is quite a lot above where you were this time last year when I think you were 57% covered. I think you also said, Nik, that the coverage for 2024 is 45%. I guess first, can you just comment on why the coverage is higher? I appreciate we've been through a period of unprecedented volatility, although I know it's early to talk about 2024, given that you're 45% covered, I wondered if you'd be able to make any comment at all on the likely headwind or tailwind for 2024 from commodities. Thanks.

Nik Jhangiani (CFO)

Yeah. I mean, to your question around why we covered more, I think, you know, we saw leaving things open for as long as it was and the fact that it was rising and there continues to be uncertainty, you know, where we saw opportunities, and we've always talked about the fact we put in triggers in place and don't just, you know, try and take our number up from, let's say a 40 to an 80 in one go. I feel good about our approach. It's been measured. It's been looked at carefully across each of the commodity types, looking at, you know, is there backwardation? Is there contango effect? Should we lock in some now, or should we wait?

I think it puts us in a much better position in terms of what we control, to be able to understand then, how we need to be thinking about, obviously pricing, and back to Damian's point, over a multi-year period again, right? That also helps us as we look at 2024 with the coverage that we have and, you know, we're just under 50% covered there, which gives us the opportunity to continue to look at the market. Based on what I see today, and if those trends continue, clearly you would expect that to be a tailwind in 2024. Quantum, hard to quantify right now.

Mitch Collett (Director and Equity Research Analyst)

Understood. If I can follow up just hypothetically, if you do move to a tailwind, how would you expect pricing and promo and I guess revenue growth management more generally to behave if you start to get a tailwind from inputs?

Nik Jhangiani (CFO)

Well, I think it comes back to a point that Damian made earlier, right? We've had a very disciplined approach to how we think about Revenue Growth Management initiatives. We wanna balance, you know, and get that spectrum from affordability to mainstream to premiumization. That's back to, again, pack diversification through the various channels. I think we always have that promotional mechanic to play with as we look at what might be happening. Keep in mind, you're looking at one element, which is commodities. There's other elements that drive inflation as well, right? That we need to be looking at across the levels of our P&L. It's not like suddenly everything turns into a deflationary environment. We haven't seen that, you know, in terms of wage inflation, haulage, logistics, et cetera.

You gotta look at it holistically as opposed to just the commodity space.

Damian Gammell (CEO)

I think just to build on Nik's comment, I mean, we're also looking at, you know, in most of our markets, circa 40% of our revenues coming from outside of retail. I suppose that's quite a different dynamic to most CPG businesses. You know, we do enjoy diversification, not just on the package side, which we've been really focused on over a number of years to make sure if you go into a supermarket or convenience store, most of our markets, you're gonna see a lot of different pack sizes from minis all the way up to value packs. That allows us to play a lot better with pricing on that affordability mindset, also on premiumization, which, you know, we haven't walked away from.

Despite some of those consumer challenges, there are a lot of consumers who are still happy to trade up. We wanna make sure we capture that. You'll still see glass packaging, premium mini cans, and smart promo pricing. For example, in Australia, our promo percentage discount has gone from 50%-40%. We've actually gone below that in some periods and not seen a drop off, so that's encouraging. Then on the other side, we've got our away from home business, which, you know, was our challenge during COVID for all the reasons we know.

Clearly having 40% of your revenues coming from outside retail gives us, you know, a lot more levers and tools to deal with some of those commodity headwinds and other inflationary points, including labor, which, you know, we can't forget that, you know, clearly we're seeing labor inflation also increase in Europe and that's something that we're mindful of, keeping our employees engaged and committed to our business. We've a lot of tools and I think we've demonstrated to Nik's fair, the disciplined approach to using them. They're well in place now after a number of years of really focusing on them.

Mitch Collett (Director and Equity Research Analyst)

Got it. Thank you.

Operator (participant)

Thank you. We will take our next question. Our next question comes from the line of Charlie Higgs from Redburn. Please go ahead. Your line is open.

Charlie Higgs (Equity Research analyst)

Hey, Damian, Nik, hope you're both well. I've got a question on Indonesia, please. I mean, clearly quite a big impact on the Q4 volumes. Can you maybe just give an update on Indonesia? You know, how's the reception been to the whole product and SKU trim? How are you feeling ahead of Ramadan this year, where you normally see that sparking uptick? You know, how is the route to market development going? Then maybe if you just talk a bit more about the sale of the stake to The Coca-Cola Company. Does it confer any other benefits other than just simplifying the ownership structure and the reduced minority challenge? Thank you.

Damian Gammell (CEO)

Hi, Charlie. I was in Indonesia early January. It was my first market visit after the new year, and I continue to feel great about that business. I think, you know, the, the changes that you called out in Q4 on a relative scale are quite minor, for the group. I think we've made the right choices, around people. We've got a team led by Jorge there that continues to, you know, look at that business for the medium to long term strategically. We're very happy with what we've done on that side. We've made some good decisions around portfolio management with The Coca-Cola Company and, as I mentioned earlier, being much more choiceful around where we believe we can create the right to win, in sparkling and in tea.

We haven't done that yet, so that's work in progress. We have, you know, made some good decisions, that really allow us to run our supply chain better. Ultimately, putting less through our supply chain is helping us improve customer service. It's helping us to be more productive, on our lines, which over time helps us manage capital better. I'm very happy with that. Clearly, we're well set up for Ramadan. This week, actually, we have a big MIT across Indonesia, you know, to continue to, you know, get everybody into the market for that period. I think, you know, again, we're set up for a great Ramadan.

Obviously beyond that, we are looking at what choices we can make on our route to market, and that's probably something that we'll be able to come back to in the second half of this year. We've been running some tests. We've been doing some modeling around what changes we could make. As you can appreciate, those type of changes are significant. We believe there are moves that we can do to create better value for us and indeed for our customers. That's something we'll probably finalize in the first half of this year and talk a bit more in the second half.

Nik Jhangiani (CFO)

Charlie, on your question around it.

Around ownership, I mean, I think it was twofold. I mean, one, I think it comes back to Damian's point around we feel really great about that business. You know, that minority stake was something we'd always looked at as an opportunity to take a hundred percent at the right time. For us, this was a great time in terms of, you know, some of the changes we've been able to make and what we're looking at going forward. I think it also comes back to probably The Coca-Cola Company feeling good around, you know, our ability to run this operation well, and hence, you know, their own view of being able to sell that balanced stake to us. I think it works for both sides.

Charlie Higgs (Equity Research analyst)

Great. Thank you very much.

Operator (participant)

Thank you. We will take our next question. Our next question comes from the line of Robert Ottenstein from Evercore ISI. Please go ahead. Your line is open.

Robert Ottenstein (Senior Managing Director)

Great. Thank you very much. Two questions, please. One, I'd like to follow up on your comment that retailers are putting maybe a little bit more focus on their own brands. Can you please remind us what the, you know, whether, first of all, whether that is a general comment or a comment in terms of beverages? You know, roughly what the kind of private label, your private label exposure is in key markets, and a little bit more detail in terms of what you mean by focus. Thank you.

Damian Gammell (CEO)

Hi, Robert. It's a general comment across multiple categories. I think it's not just in beverages. In fact, in beverages, the private label share is lower than it is in most other categories. I think over a number of years in Europe and in Australia and New Zealand, we've demonstrated a value creation of brands in beverages. Typically what you'll see across all of our markets is that the private or retailer brand share within beverages is lower than it is in other categories. I think that's a good starting point for us. It is obviously part of their proposition to offer value and therefore they do it across all categories. Beverages is one of many, many categories that they've that they have. It's always been around, so this is nothing new.

I think we should also understand that retailer brands in Europe in particular have been part of the landscape for many, many years. In typically in terms of value share, it differs by market, but it's obviously significantly lower than where we sit. So far we've gained share. I think this is not a new phenomenon. That really kicked off over a number of years. We saw it kicking up a bit in the second half of last year as some of those inflationary pressures came into our markets and retailers responded. Despite that, we gained share in the second half of the year. I think our value creation story, that smart RGM, good customer service, and the continued investment.

The margin story on our brands is very, very strong for our retailers. I think ultimately, that's what drives growth. That's what we're focused on. Fully recognizing that, you know, they will continue to have to manage some of their value propositions for their business, and that's something that we've seen. Again, it's nothing really new. It does kind of peak and trough particularly when you get some of the more macro headwinds for consumers. So far, we feel pretty good about where we are. Obviously, it's something we keep a close eye on.

Nik Jhangiani (CFO)

Robert, just to add one point to Damian's comments, is around when you do look at NARTD, there are certain subcategories that have much more private label penetration. If you like, take a look at juices or waters, they already have a high share. Keep in mind, that's not typically where we're playing. In fact, we've exited some of those. The categories, you know, from a value perspective that we're a lot more focused in on, we're not necessarily seeing the same level of pressures. As Damian said, we're constantly monitoring that to ensure that we remain relevant to a broad consumer base.

Robert Ottenstein (Senior Managing Director)

Okay. Sure. Can you I mean, you know, you guys have been doing this for a long time, you know, just in terms of historical perspective, you know, what happened, you know, in, in prior downturns, you know. Let's just say for sparkling, I mean, did private label go from maybe 5% of the market to 10? Can you put just kinda, you know, some rough ballparking of sort of, you know, worst case scenarios or what you've seen and, which markets are most exposed?

Damian Gammell (CEO)

Yeah. I mean, it's not that extreme historically. I think what you'll see is typically. Again, as you said, it does differ by market. You may see private label on a volume side picking up a point of share, which, you know, overall, on a value side will be a lot lower given their pricing. Clearly, they also face some of the same commodity headwinds that we've faced. We're also seeing private label pricing move as well because of, you know, all of the commodity impacts that Nik outlined. They face the exact same. We're also seeing that happening. You're looking in that range. I suppose, you know, it's pretty consistent across our markets.

You know, if I look back and we have looked back, and we've seen, you know, what's happened in previous years where, you know, consumer spending has been challenged, you're looking at a small share move, Robert. Nothing, nothing too dramatic.

Nik Jhangiani (CFO)

Again, just on that pricing, keep in mind that as a relative level, that COGS impact is significantly higher for them, so their absolute pricing has had to move a lot more.

Damian Gammell (CEO)

Yeah.

Nik Jhangiani (CFO)

Just keep that in mind as well.

Damian Gammell (CEO)

Obviously, it doesn't impact that 40%+ revenues that I talked about earlier outside of retail. Again, compared to other CPGs who've got 80%, 90% of their revenue locked in retail, you know, we're well balanced. I think that also gives us confidence to deal with that going forward.

Robert Ottenstein (Senior Managing Director)

No, thank you. That's great perspective. Just my last question. Could you please give us an update on your digital initiatives and to what extent you're implementing kind of real micro-targeting of coolers and displays and other sorta ways that that's improved your execution?

Damian Gammell (CEO)

Yeah. I think we outlined some of those initiatives at our capital markets event in November. You know, we continue to invest behind digital analytics. It's driving a lot of our good decision-making. I suppose a couple of areas that I get excited about with the team in particular is promo efficiency. We're being much more targeted around promos and what works, what drives value for us, for our customers, what drives household penetration. We've added a lot of households last year, so I think that's working.

We've taken on board some of the learnings from our Australian business back into Europe around looking at some postcode analytics to understand really where we're doing really well and potentially where we see share opportunities, and then tailor-making our proposition to those particular outlets, whether that's displays, as you called out, coolers, merchandising frequency, promo frequency, or indeed advertising in and around the store. Yeah, there's a lot of different initiatives. We're also, you know, continuing to drive over EUR 2 billion of revenue through our online B2B portal, which I think is one of the biggest globally now. We're adding more services to that for our retailers, they can continue to, you know, use that for a number of initiatives beyond ordering.

A lot happening across the board, Robert, and it's something that we'll continue to invest in. Honestly, we've made great progress, but in many ways, we're still at the beginning. I think every conversation I have with the team, there's a new idea coming up, there's a new initiative. It's a very exciting part of our business. I think we're leading, but I think, you know, honestly, we still have a long way that we can go.

Robert Ottenstein (Senior Managing Director)

Thank you very much.

Operator (participant)

Thank you. We will take our next question. Our next question comes from the line of Brett Cooper from Consumer Edge. Please ask your question.

Brett Cooper (Senior Analyst)

Thank you. I wanted to ask a question more holistically on what's pressured the business as it relates to margins. In 2022, gross margins are down roughly 300 basis points from pro forma 2019 levels. Seems like we have ongoing pressure into 2023, and I appreciate the rationale for not fully covering inflation, but on a EUR 17 billion revenue business that's growing, recovery of that margin is significant to profit and cash flow. I was hoping you could scope the drivers of that decline, and then your thoughts on the ability to recover those drivers over time. Then just finally, a clarification as to whether recovery of those margins are embedded in your long-term targets. Thanks.

Nik Jhangiani (CFO)

Yeah, great question, Brett. I think as we've highlighted a couple of times, we wanna do this in the right way, looking at both what we need to do in the short term, but also what is our mid-term objective. The first piece of data that I would give you that there's nothing that's structurally different in our markets or environment that would not allow us to get to those margin percentages, right? For us, right now, it's been about very much growing absolute cash margins, and I think we've demonstrated hopefully very strong results there. We definitely plan to get back. We will do that in a balanced way. Is that built into our long-term algorithm? Well, part of it is built in when you just think about what we wanna continue driving on an efficiency basis.

Part of it is back to the point that Damian made earlier, that we have been disciplined since we formed so-called Coca-Cola European Partners and now Europacific around smart RGM, looking at opportunities of optimizing promo, looking at pack diversification, you know, the away-from-home channels coming back nicely. We're now back at about flat levels from a volume angle, in that channel. A couple of markets still have an opportunity to get back to 19 levels. You know, we are focused in on that, but I think we've got to look at it, you know, in stages.

Right now we wanna continue ensuring that we are relevant, play across the spectrum in terms of the affordability and the premiumization, and continue to grow more at home occasions, and at the same time, look at what we can do to get more growth in the away-from-home channel and improved profitability in those channels as well.

Brett Cooper (Senior Analyst)

Great. Thanks.

Operator (participant)

Thank you. We will take our next question. Our last question comes from the line of Matthew Ford from Exane BNP Paribas. Please go ahead. Your line is open.

Matthew Ford (VP and Equity Research)

Thank you. Hi. Hi, Damian. Hi, Nik. My question is just on the away-from-home volume performance in Q4. On the release, I think, I think you mentioned that away-from-home volumes in Q4 were 4.5% below 2019 levels. This seems like a little bit of a slowdown from, I think, 2% above in Q3 and something similar in Q2. I was just wondering, you know, what were the drivers of that kind of sequential slowdown? Are you seeing those trends kinda continue into the first one and half months of Q1?

Damian Gammell (CEO)

Hi, Matthew. Well, to kind of give a short answer, no, we don't see them, that as you call it, we don't see a slowdown actually. I mean, I think on some of the comps, obviously in the quarter, things will move around. What we've seen consistently over the full year is a strong reopening of away from home across all of our markets. I think from an outlet level, we're above 90% outlets that have reopened post-COVID, so that's good. We're now seeing traffic continue to, you know, improve. Tourism has come back, you know, so people are flying again. A lot of the drivers, particularly in markets like Spain, with tourism, et cetera, have come back very strong. We see that as a positive going into 2023.

You know, we see that, you know, growing ahead of where we were. You know, nothing that we've seen on away from home to cause any concern at the moment.

Nik Jhangiani (CFO)

Just, you know, just disaggregating that a little bit, I mean, essentially you're looking at flat in Q4, but if you actually look at some of the markets like Iberia, GB, France, those have continued to see good growth, right? I think we'll continue to monitor. Remember, again, you're looking at numbers that are quite different in terms of a base when you're looking at Q4, because it's a smaller away-from-home quarter to begin with, right?

Damian Gammell (CEO)

Mm-hmm.

Nik Jhangiani (CFO)

Relative to Q2 and Q3. And to Damian's point, we've nothing that we're seeing in Q1 to date that would indicate a continuation of that trend.

Matthew Ford (VP and Equity Research)

Great. Thank you.

Operator (participant)

Thank you. I would now like to hand the conference back to Damian Gammell for his closing remarks. Damian, please go ahead.

Damian Gammell (CEO)

Thank you, operator. Again, thank you everybody for joining us today. Hopefully you've shared with you our full year 2022, a great set of results. Again, I wanna take this opportunity to thank everybody who works with us at CCEP on what they do every day to make this business great and continue to grow. As Nik highlighted, you know, we are in a dynamic environment and we've talked to that quite a bit today in the Q&A. You know, we do operate in a very resilient and very much a growing category. I think over a number of years, we've made the right decisions at CCEP to build a great platform, provide integration for our shareholders and our customers.

This has been clearly bolstered by the acquisition of API, and as Nik called out, was our first full year with API. Indeed, we're traveling out there to Sydney to have our board meeting there in March. We're looking forward to getting back into that market again. We are confident about the future and delivering on those midterm objectives we laid out with you in November. Finally, we remain very committed to delivering great service and value creation for our customers, and that remains our priority in 2023. Again, thank you. Look forward to speaking to you again at Q1. Yeah, have a great rest of day, everybody. Thank you very much.

Operator (participant)

That concludes our conference for today. Thank Thank you for participating. You may all disconnect.