Business model and prospects
Our business model and strategy, outlined on page 10 of the Integrated Annual Report, documents the key factors that underpin the evaluation of our prospects. These factors include our:
- attractive geographic diversity;
- strong sales and execution capabilities;
- ability to innovate;
- market leadership;
- global brands; and
- diverse beverage portfolio.
The ongoing Russia-Ukraine conflict and Middle East tensions as well as the prospect of heightened geopolitical instability resulting from changes in the US and its relationships with other countries, could continue to impact global supply chains, create foreign exchange and commodities volatility, and exacerbate economic challenges in our markets. We observed an appreciation in the Nigerian Naira, Russian Rouble and Egyptian Pound, but we remain vigilant, as geopolitical tensions and global tariffs can create risk aversion and introduce foreign exchange volatility.
While the Board considers that our markets will continue to face changes over the medium to longer term, it believes that our diverse geographic footprint, including a balance of well-established markets and exposure to emerging markets that have low per capita consumption and therefore greater opportunity for growth, and a proven strategy, in combination with our leading market position, offer significant opportunities for future growth.
Our Board has historically applied and continues to apply a prudent approach to the Group’s decisions relating to major projects and investments. From 2021 to 2025, we generated free cash flow of €675 million per year on average.
Key assumptions of the business plan and related viability period
The Group maintains a well-established strategic business planning process which has formed the basis of the Board’s quantitative assessment of the Group’s viability, with the plan reflecting our current strategy over a rolling five-year period. The financial forecasts in the plan are based on assumptions for the following:
- key macroeconomic data that could impact our consumers’ disposable income and consequently our sales volume and revenues;
- various scenarios relating to the ability of governments in key markets to manage the economic conditions in their countries;
- key raw material and other input costs;
- the impact of climate change, particularly associated with the transition to a lower-carbon economy and the costs of carbon under multiple climate scenarios (see also page 194 of our Integrated Annual Report for more information on our quantitative assessments of the impact of climate change);
- the impact of ongoing conflicts such as the Russia-Ukraine crisis and ongoing instability in the Middle East;
- foreign exchange rates, including the economic conditions affecting the Egyptian Pound, the Nigerian Naira and the impact of the Russia-Ukraine conflict on the Russian Rouble; spending for production overhead and operating expenses;
- working capital levels; and
- capital expenditure.
The Board has assessed that a viability period of five years remains the most appropriate. This is due to its alignment with the Group’s strategic business planning cycle, consistency with the evaluated potential impacts of our principal risks as disclosed on pages 189 to 195 of our Integrated Annual Report and our impairment review process, where goodwill and indefinite-lived intangible assets are tested based on our five-year forecasts.
Assessment of viability
Qualitatively and quantitatively, we analysed the output of our robust enterprise risk management, internal business planning and liquidity management processes, to ensure that the risks to the Group’s viability are understood and are being effectively managed.
The acquisition and integration of CCBA will occur (subject to satisfaction of conditions, including regulatory and merger control approvals) during the period covered by the viability statement. Any potential impacts to the Group over the five-year period as a result of the agreed acquisition of CCBA identified through the due diligence and operational review process performed as well as the acquisition business case, together with the mitigation actions that would be available to management in a downside scenario, have been taken into account for the purpose of the viability assessment.
The Board has concluded that the Group’s well-established processes across multiple streams continue to provide a comprehensive framework that effectively supports the operational and strategic objectives of the Group. It also provides a robust basis for assessment and confirmation of the Group’s ability to continue operations and meet its obligations as they fall due over the period of assessment.
Supporting the qualitative assessment was a quantitative analysis performed as part of strategic business planning. This assessment included, but was not limited to, the Group’s ability to generate cash.
We have continued to stress test the plan against several severe but plausible downside scenarios linked to certain principal risks as follows:
Scenario 1:
The impact of changes to foreign exchange rates was considered, particularly the depreciation of foreign currencies including the Egyptian Pound, Nigerian Naira and Russian Rouble, also considering effects from the Russia-Ukraine conflict and other geopolitical developments.
Principal risks: Foreign exchange fluctuations and macroeconomic conditions, and Geopolitical and security environment.
Scenario 2:
Lower estimates for sales volumes for various reasons including the continuing difficult economic conditions in our markets and the ability of governments to manage these, including the impact of the ongoing Russia-Ukraine conflict.
Principal risks: Foreign exchange fluctuations and macroeconomic conditions, and Geopolitical and security environment.
Scenario 3:
Continued stakeholder focus on issues relating to sugar and packaging resulting in the potential for discriminatory taxation.
Principal risks: Product-related regulatory changes and taxes, and Cost and availability of sustainable packaging, suppliers and sustainable sourcing.
Scenario 4:
Higher input costs including raw materials and energy costs.
Principal risks: Cost and availability of sustainable packaging, suppliers and sustainable sourcing, and Foreign exchange fluctuations and macroeconomic conditions.
Scenario 5:
Lower sales volumes driven by climate change including higher costs of water, the projected costs of carbon emissions and the impact of extreme weather on our production and distribution under multiple climate scenarios.
Principal risks: The impact of climate change on the cost and availability of water, Managing our carbon footprint, Business interruption.
The above scenarios were tested both in isolation and in combination. The stress testing showed that due to the stable cash generation of our business, the Group would be able to withstand the impact of these scenarios occurring over the period of the financial forecasts. This could be conducted by making adjustments, if required, to our operating plans within the normal course of business, including but not limited to adjustments to our operations, including capital expenditure, and temporary reductions in discretionary spending.
Following a thorough and robust assessment of the Group’s risks that could threaten our business model, future performance, solvency or liquidity, the Board has concluded that the Group is well positioned to effectively manage its financial, operational and strategic risks.
Viability statement
Based on our assessment of the Group’s prospects, business model and viability as outlined above, the Directors can confirm that they have a reasonable expectation that the Group will be able to continue operating and meet its liabilities as they fall due over the five-year period ending 31 December 2030.
