We are one of the largest bottlers of non-alcoholic beverages in Europe, operating in 28 countries in three continents with a total population of 585 million people. In 2013 we sold over 2.1 billion unit cases, generating net sales revenue of €6.9 billion.
Coca-Cola HBC has the most diversified footprint in the Coca-Cola System. No single market dominates our business, with the largest country in our portfolio, Russia, representing around 19% of total volume for the year ended 31 December 2013. Accordingly, Coca-Cola HBC is not dependent on any one country. Our diverse but balanced geographic footprint, offering exposure to both mature and emerging markets alike, is an important strength, as it requires us to be innovative in responding to a wide range of market needs and conditions.
We group our geographical markets into three segments:
- Established countries: Austria, Cyprus, Greece, Italy, Northern Ireland, Republic of Ireland and Switzerland.
- Developing countries: Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia.
- Emerging countries: Armenia, Belarus, Bosnia and Herzegovina, Bulgaria, FYROM, Moldova, Montenegro, Nigeria, Romania, Russian Federation, Serbia and Ukraine.
The segregation into these three segments is based on a wide range of criteria, including:
- Socio-economic similarities
- GDP per capita
- Per capita consumption of sparkling beverages
- State of development of the local beverage market.
Austria, Cyprus, Greece, Italy, Northern Ireland, Republic of Ireland and Switzerland.
These countries have traditionally enjoyed a relatively high degree of political and economic stability and have broadly similar economic characteristics. They typically exhibit high levels of disposable income per capita, which enhances the affordability of our products, especially our more profitable single-serve packages designed for immediate consumption.
Macroeconomic and trading conditions have deteriorated in some of our established markets in the last three years, particularly in Greece, the Republic of Ireland and more recently Italy The ongoing sovereign debt crisis in the European Union and particularly in the Eurozone has resulted in a slowdown and, in many cases, a contraction in the real GDP of the established countries. At the same time, deteriorating consumer confidence and rising unemployment had an adverse impact on consumer demand.
Established countries are generally characterised by high consumer sophistication. The most important trend generally affecting the future consumption channel in the established countries is an increasing concentration of the retail sector. This is further accentuated by a shift in demand towards at-home consumption, in recent years reflecting the reduction of disposable income in most territories in the segment. Activation at final points of sale is also a key focus of Coca-Cola HBC’s sales and marketing efforts in these territories.
Coca-Cola HBC sells its products in its established countries through a combination of wholesalers and the Group’s direct delivery system. The Group has taken certain initiatives to consolidate its production network by rationalising facilities, through consolidation, relocation of manufacturing lines, and streamlining of warehouses. The established countries that have principally benefited from such initiatives include the Republic of Ireland and Northern Ireland, Austria, Italy and Greece.
Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia.
All of the developing countries have market-oriented economies. Coca-Cola HBC’s developing markets generally have lower disposable income per capita than its established markets and continue to be exposed to economic volatility from time to time.
Macroeconomic conditions had been positive in years prior to 2008, with all countries experiencing positive real GDP growth. However, economic growth has slowed or reversed in the last three years as a result of the global financial and credit crisis. Currency fluctuations can have an impact on the Group’s net sales revenue in the developing countries, particularly in times of high economic volatility. The entry of all of the developing countries, other than Croatia, into the European Union, has resulted in increased political stability due to their gradual alignment with the principles, objectives and regulations of the European Union.
These countries are typically characterised by lower net sales revenue per unit case than its established countries. The Coca-Cola Company’s products were introduced in the early 1990s in most of the them, where they have since become established premium brands. Consumers in some developing countries continue to move away from tap water and homemade drinks to branded products as beverages of choice. In addition, consumers in these markets have shown an increasing interest in branded beverages associated with well-being and fitness, such as water and juices.
The non-alcoholic ready-to-drink beverages market tends to be fragmented in these markets, with no single market participant typically holding a leading share in more than one market category. In addition, consumers tend to be more price-sensitive than in the established countries. Consequently, Coca-Cola HBC’s products often face competition from local non-premium brands, which, in a number of cases, have been present in the market for many years and remain popular with consumers.
Coca-Cola HBC believes that its developing countries offer significant growth opportunities for both its sparkling, still and water beverages and Coca-Cola HBC is committed to maximising these opportunities by introducing existing and new products, flavours and packages in both the future consumption and the immediate consumption channels. Coca-Cola HBC plans to support the increased presence of its products across both the future and immediate consumption channels with its route-to-market systems and the increased availability of coolers and other cold drink equipment.
Armenia, Belarus, Bosnia and Herzegovina, Bulgaria, FYROM, Moldova, Montenegro, Nigeria, Romania, Russia, Serbia and Ukraine.
These countries are exposed to greater political and economic volatility and have lower per capita GDP than the developing or established countries. As a result, consumer demand is especially price sensitive, making the affordability of Coca-Cola HBC’s products even more important. The global financial and credit crisis has exacerbated such structural issues in the emerging countries. Coca-Cola HBC seeks to promote its products through a strategic combination of revenue growth management, packaging and promotional programmes taking into account local economic conditions.
These countries were the first to be affected by the global financial and credit crisis of 2008. Since then, Coca-Cola HBC has not experienced concrete and sustained evidence of recovery. Even though GDP appears to have stabilised and in some cases returned to growth in 2012 and 2013 in some of these Territories, unemployment remained at relatively high levels and currencies were quite volatile during the period.
Most of the countries are characterised on average by lower net sales revenue per unit case than the established and developing countries. Consumers in some emerging markets are moving away from tap water and homemade drinks as their principal beverages and have shown an increasing interest in branded beverages. In some of Coca-Cola HBC's emerging countries, consumers are showing particular interest in juices and branded waters.
In general, the emerging countries have a relatively undeveloped distribution infrastructure and a fragmented retail sector. In order to expand the availability of our products, our priority has been to establish reliable distribution networks through a combination of its own direct delivery system and independent distributors and wholesalers where this is economically more efficient. We also focus on improving the availability of chilled products by placing coolers and other cold drink equipment in the market.
Coca-Cola HBC believes that its emerging countries provide significant growth opportunities. Some of the factors that influence these growth opportunities include relatively low consumption rates, population size (especially in the Russian Federation, Nigeria and Ukraine) and favourable demographic characteristics, notably the larger proportion of young people in Territories such as Nigeria who typically consume a higher amount of Sparkling beverages.