Supply Chain

Supply chain overview

We produce and distribute more than 2 billion unit cases of our products annually across our territories. Our supply chain therefore plays a central role in our business and is responsible for the company’s procurement, planning, manufacturing, engineering and sustainability. In all our processes we minimise our environmental impact and consider sustainability in our value chain - from sourcing raw materials and manufacturing the end product to distributing it to our customers.

Our success lies with our people's expertise, our absolute focus on quality and our continuous investment in advanced technologies.

Our mission is to become the leading supply chain function in our industry in terms of customer service and cost efficiency. To achieve this, we focus our efforts on keeping our people engaged, excelling in sustainability, reducing our costs and building best-in-class customer service and responsiveness.

Marcel Martin Coca‑Cola HBC Supply Chain Director

PRODUCTION

To produce our products, we use water, sweeteners, sugar, beverage concentrate and glass, aluminum, PET resin or carton packaging plus energy for the overall manufacturing process. We source these using sustainable practices and seek to use them efficiently. In 2019, we achieved 74% certification of agricultural ingredients under Sustainable Agriculture principles and we are working towards 100% certification by 2025

As a strategic partner to The Coca-Cola Company, our plant and logistics assets allow us to prepare, package and deliver our products to meet the demands of customers and consumers.

Operating in a fast-paced, dynamic business environment, our manufacturing footprint spans 23 of the 28 countries in which we operate, providing The Coca Cola Company with state-of-the-art local production and distribution systems. In our 56 plants with in total 279 production lines we produce annually more than 12.5 billion litres of beverages (2019).  


56

plants

279

production lines

98

distribution centres



Top-in-class quality assurance

Quality and food safety are a must for us. We have built a quality and food safety culture in our organisation over many years, highlighting the importance of maintining consumer trust.

This approach extends to our suppliers, too. We require tier 1 suppliers to gain certification to the following standards: ISO 9001 (quality), ISO 14001 (environment) and OHSAS 18001 (health and safety). Ingredient and packaging suppliers must also achieve certification to FSSC 22000 for food safety and the Global Food Safety Initiative (GFSI).


We have re-stated our zero tolerance for failure to meet standards and deployed a maturity continuum measurement, with stringent processes in place to minimise the occurrence of quality issues. However, when they do arise, we have robust processes and systems in place so we can deal with them quickly and efficiently, ensuring that our customers and consumers retain confidence in our products. As the result of best-in-class industry benchmarking, each of our markets has developed tailored plans to support and further develop our quality and food safety culture.

Quality and food safety remain our top priorities, to make sure we meet customer and consumer expectations while delivering against our cost leadership commitments. This is why we commit to it publicly in our Quality & Food Safety policy.

Health & Safety

The health and safety of our people and partners always comes first. It is managed as a principal risk, emphasising the critical importance of ensuring the wellbeing of everyone in our workplaces.

We conduct annual health and safety weeks in all our countries to build knowledge and capabilities and strengthen the awareness about health and safety among our emplyoees. As an example, in 2019 our internal health and safety campaigns provided helpful information addressing stress at work, machine safeguarding, ergonomics and warehouse traffic safety.  

Transforming, innovating and digitalising our supply chain

To ensure our business is fit for the future, we are investing in advanced technologies and transforming and digitalising many of our supply chain processes.

Operating in 28 diverse markets, our aim is to build a borderless supply chain that operates effectively, efficiently and enables us to imbed innovative technologies, fast. We are applying innovation within our supply chain to expand our technical capabilities while ensuring productivity and cost, energy and water savings.

To do that, we’re investing in advanced technology that will optimize our infrastructure and transform our existing plants into efficient mega-plants that can effectively serve a country or an entire region. This requires us to utilize new and different technologies and processes. 


We are committed to developing our business sustainably and to respecting the environment. This means we support sustainable plants and warehouses and focus on developing innovative processes and solutions for our products and processes.

Since 2010, we have consistently reduced our carbon emissions and water consumption per litre of soft drink produced. As we look to reduce our carbon emissions further, we are exploring all available green energy technologies. In 2019 alone, we invested around €6m in energy saving projects at our operations and we have reduced our energy consumption (measured per litre of produced beverage) by 31%, and water use by 22% since 2010. 

Our Mission 2025 sustainability targets include goals for reducing energy consumption and associated emissions. Through a set of projects and innovative solutions implemented across our value chain, we saved 262,038 tonnes of CO2 in 2019 compared to 2018 and increased the use of renewable electricity by 7.7% across our markets:

• In Austria and Switzerland, we are using more power from the sun. In 2019 we installed one of the largest photovoltaic systems in Austria on the roof of our production and logistics centre in Edelstal. This will save around 725 tonnes of CO2 per year compared with conventional energy production, equivalent to the annual emissions of 400 mid-size cars. The photovoltaic system on the roof of our Swiss mineral water warehouse was originally installed for the benefit of the community, supplying energy for 64 households.

• We have installed photovoltaic power (solar energy) in our plants at Oricola, Nogara and Marcianise in Italy.

• We use energy from 14 CHP (Combine Heat and Power) plants which produce energy in an efficient way and thus optimise our combined heat, cooling and power consumption in our plants. 

• We tackle emission reductions throughout our value chain, including Company vehicles. For example, our 180 pool vehicles in Switzerland are powered by compressed natural gas, forming the country’s largest biogas vehicle fleet. In comparison to similar vehicles using diesel, biogas-powered vehicles emit 15% less CO2. 

• All initiatives run at our operations and distribution helped to reduce scope 1&2 emissions rate (measured per litre of produce beverage) by 51% compare to 2010. Our emissions targets are approved Science Based Targets.

New, automatic line changeovers reduce idle production time and free up volume capacity, effectively expanding our production line capacity by nearly 1% per year. These lines support smaller runs of new products, helping us supply niche market segments and respond to rapidly changing consumer preferences. 

Thanks to the introduction of augmented-reality smart glasses in our production plants and warehouses, we’ve been able to provide remote expert support to our people. One recent example of this was in Moscow, where we started our new PET line using this technology.

Smart glasses XAssist technology has also enabled remote virtual quality, health, safety and environment visits at our plants across the business, which has proved invaluable during COVID-19 lockdowns. 

New augmented reality technology helps us manage the complexity of our expanded 24/7 portfolio. The technology aids our warehouse colleagues in pulling inventory from stock and packing it for customer delivery, enhancing the speed and accuracy of our service.

We implemented augmented reality vision picking in seven warehouses in 2019, leading to around 10% increase in productivity and a 99.9% picking accuracy for customer deliveries. This successful implementation encouraged us to expand its use during 2020 in 8 more sites located in Bosnia Herzegovina, Croatia, Ukraine, Czech Republic, Italy, Hungary, Poland and Russia. In 3 of these locations (Zagreb, Kiev and Moscow) we switched from paper picking to vision picking directly. 10 more locations are planned to be rolled out in 2021.

We have identical advanced planning systems across all markets allowing real time information, cross-country coordination, optimisation and remote work from any location. Digital cockpits allow online performance reviews, measurements and monitoring of key trends in the supply chain area.

We have also invested and fully implemented an advanced multi-echelon inventory optimisation tool. It supports to manage increasing supply chain risks due to economic uncertainty, customer expectations and demand volatility. Enhancing inventory in multiple stages allows to reinforce service levels while optimising working capital.

In the area of demand forecasting we will introduce machine learning algorithms to enhance the commercial planning processes. The level of accuracy, transparency and replicability of this technology is improving continuously, and we plan to expand our capabilities and tools in this area in order to advance our end to end planning optimisation from supplier to consumer.



Optimising infrastructure to support a 24/7 portfolio

Optimising and developing our infrastructure also supports our expanding 24/7 portfolio. By centralising our production planning system for the whole Group, with each plant serving regional needs, we have been able to meet market demand with speed and agility. This is supported by expanding production capacity in targeted markets, including Nigeria and Russia, where we anticipate strong future growth.

We have also upgraded production lines to support product innovation. For example, we invested in a new premium glass packaging line for FUZETEA in the Czech Republic and Romania and for Coca-Cola Energy in Hungary, as well as investments to support the production of Cappy Lemonade and Coca-Cola signature mixers in Romania.

In Italy we recently invested in new production capabilities for different package sizes, a new aseptic PET line at our Nogara plant to accommodate Adez in our expanded 24/7 portfolio and new TriBlock technology in a PET line in our Marcianise plant. TriBlock technology helps us use production space more efficiently and reduce water and energy consumption.

To manage the increased output from our mega plants and the complexity of our expanded 24/7 portfolio, we continued investing in automation for our high-capacity warehouses. Automated warehouses, and automatic guided vehicles, improve both efficiency and service quality.

Sustainable sourcing

The sourcing of our raw materials accounts for a large portion of our economic, operational and environmental footprint, and the behaviour of our suppliers directly impacts our sustainability performance. We therefore consider our suppliers as critical partners, as well as contributors to the ongoing and sustainable success of  our business.

As part of the Coca-Cola System, we have a uniform approach to sustainable agriculture, which is rooted in the principles of protecting the environment, upholding human and workplace rights, and helping to build more sustainable communities. These principles are showcased in The Coca-Cola Company’s Sustainable Agriculture Guiding Principles, which provide guidance to our suppliers of agricultural ingredients.

The scale and uniform approach of the Coca-Cola System helps us source our raw materials sustainably, while mitigating business risks. This helps us balance the costs of sustainability by leveraging relationships and initiating new opportunities, ensuring that our agricultural suppliers and their suppliers have a sustainable business. All suppliers are required to meet our Supplier Guiding Principles. These principles communicate our values and expectations of compliance with all applicable laws, and emphasise the importance of responsible workplace practices that respect human rights.

This framework for sustainable sourcing is integrated into internal governance and procurement processes. Our 2025 target for ingredient sourcing is to achieve 100% certification of our key agricultural ingredients against the Sustainable Agriculture Guiding Principles. In 2019, 74% of the key commodities we purchased for use as ingredients were certified, up from 64% in 2018. Our work to certify our key agricultural ingredients will continue to expand in 2020, with close cooperation with suppliers who are still progressing towards certification.


Our suppliers

We consider our suppliers as critical partners, contributing to the ongoing and sustainable success of our business.

As a critical part of our value chain, the performance of our suppliers directly impacts the sustainability performance and commitments of Coca‑Cola HBC.

Under a unified procurement framework, we segment our supply base universe of around 19500 suppliers into direct and indirect spend suppliers (actively used for purchasing transactions in 2019).

  • Direct spend suppliers include ingredients and packaging suppliers.
  • Indirect spend suppliers include categories such as IT, production equipment, spare parts, maintenance services, logistics providers, fleet vehicles, utilities, real estate, facilities management, professional and other consultancy services, personnel and temporary labour.

Coca‑Cola HBC also segments suppliers into three categories based on criticality and potential opportunities:

Group Critical Suppliers are those that fulfil any of the following criteria: high percentage of spend, critical components (e.g. Sweeteners, Juices, Resin, Cans, Glass, Preforms, Closures, Aseptic Packaging), limited alternatives and partnership supporting our business strategies.

Country Strategic Suppliers are those which have strategic importance at a local or regional level.

Both Group Critical & Country Strategic suppliers are considered critical to the overall competitiveness and success of Coca‑Cola HBC.

Tactical Suppliers represent low-volume and/or low-spend suppliers, supplying goods or services where there are many alternative sources available, enabling a flexible supply base.
 

 Supplier Category Suppliers with Spend in 2019
  No. of Suppliers % of total Suppliers % of total 2019 Spend
Group Critical 783 4.0% 37.3%
Country Strategic 2,456 12.5% 20.4%
TCCC 18 0.1% 27.8%
Total Critical Suppliers 3,257 16.6% 85.50%
Tactical 16,334 83.4% 14.5%
Total Suppliers 19,591 100.0% 100.0%

 

 Suppliers Evaluated Suppliers with Spend in 2019
  No. of Suppliers % of total Suppliers
Annual Category Assessment 17011 86.8%
Critical Suppliers (excluding TCCC) 3239

16.5%

(100% of Critical Suppliers  assessed over 3-years cycle)
Total Active Suppliers 19591   

Note: The Coca-Cola Company (TCCC) is not Procurement Addressable

We place significant focus on forming partnerships with suppliers that have supply points located within our countries, both multinational and local while also developing strong local suppliers across our territories. These efforts support our strategy for local sourcing and contributing to socio-economic development in the countries where we conduct business. These suppliers significantly contribute to our business and include key markets such as Russia, Nigeria, Italy, Romania and Poland. Coca‑Cola HBC annual spend with suppliers in 2019 reached €3.3 billion of Direct & Indirect spend and appr. €5.0 billion including concentrates, cold drink equipment and traded goods. Our practice is to source locally, provided that goods and services are available to meet our requirements and quality standards in an economically viable way.

We target over 95% of our spending is local in our countries of operation or from within the European Union, which is considered local for EU countries. In 2019 we had 98% sourced locally representing €3.2 billion spend.

This means transport distances play an important role and through our local sourcing strategy are optimized. As an example, for sugar in the following countries that there is local sugar production & enough capacity i.e. Austria, Bosnia, CZK, Poland, Serbia, Romania, Russia, Ukraine, Belarus, Nigeria, Switzerland we source from the country. For other EU countries, where they have no sugar production, or the capacity of production is limited we source from the closest and most cost-efficient sources within the EU.

Engaging with our suppliers

We collaborate with our suppliers to improve our overall performance and build a responsible and sustainable supply chain.  We actively seek to partner with them in providing new technologies for materials, equipment, packaging, cold drink equipment, vending machines, renewable energy.  With our logistics providers to work on ways to minimize our environmental footprint.

At Coca‑Cola HBC, we are committed to high standards of performance related to human rights, labour practices, minimizing environmental impact, ensuring health and safety, ethical business and unsurpassed quality in our supply chain. Our supplier partners play a critical role in ensuring that we deliver against these standards.

Given the diversity of countries from which we source, we are well aware that the practices of our suppliers reflect directly on the reputation of the Coca‑Cola System overall and thus we stand committed to maintain high standards of performance across our supply chain.

To ensure proper governance and that our suppliers meet our standards, we have implemented policies including our Coca‑Cola HBC Supplier Guiding Principles (SGP) and Coca‑Cola HBC Sustainable Agriculture Guiding Principles (SAGP). In addition, we have developed an environmental, social and governance supplier pre-assessment process for our strategic buy segment which includes multiple criteria for supplier selection across all main pillars of our guiding principles. We monitor compliance of our critical suppliers by utilizing The Coca‑Cola Company Supplier Guiding Principles compliance audits and EcoVadis CSR Platform. We also recognize supplier certifications as per international standards including ISO 9001, 14001, 50001, FSSC 2200 and OHSAS 18001. For agricultural commodities, we recognize the Rain Forest Alliance, Fairtrade International, BonSucro, Sustainable Agriculture Initiative Platform (SAI Platform), Global G.A.P.  & GRASP certifications.

Our Suppliers acknowledge our Supplier Guiding Principles and are expected to comply as a minimum with applicable environment and local labour laws and core international conventions. These principles also communicate our values, and our expectations for responsible business practices.
 

"We work collaboratively with our vendors on the journey to meet the expectations of our customers and consumers and enable sustainable mutual growth."

Yannis Leousis Chief Procurement Officer

We aspire 100% of our suppliers accepting our SGPs by utilizing our ‘SGP Coverage Triangle’ with three checkpoints throughout the Procure-To-Pay process:

In our own business, we are promoting a 100% quality culture with zero tolerance for failure to meet standards. This approach extends to our suppliers as well. We monitor compliance of our critical suppliers through third party’s compliance audits leveraging multiple credible sources  such as TCCC SGP Audits, SEDEX SMETA 6.0 and EcoVadis CSR assessment platform Suppliers are required to submit corrective actions to the 3rd party audit bodies when a non-conformance is identified during the audits as a remediation activity. In 2019 we have identified 18 Suppliers with significant environmental impact findings, of which all developed corrective action plans and demonstrated improvement through the year. Types of these findings identified: missing supporting documentation over declared practices, policies etc. or missing regular formalised environmental reporting for relevant KBIs, expired or lack of supporting documentation (e.g. ISO 14001, measures on energy consumptions & GHG emissions), no endorsement of external CSR initiatives or principles (e.g. UN Global Compact), not adequate reporting on environmental issues.

In 2019 we have identified 12 Suppliers to have labour & human rights critical findings, of which all developed corrective action plans and demonstrated improvement. Types of these findings identified: gaps in health and safety practices, work hours and wages violations.

We also engage with our suppliers through our joint value creation initiatives, sustainability events, industry associations, workshops on sustainable supply, annual supply chain innovation workshops, materiality survey and CSR platform for ethical and sustainable supply chains. We invest in joint value creation programs, ranging from developing climate-friendly cold drink equipment to increasing local beet sugar production.

Our critical suppliers are invited to subscribe to EcoVadis, a third-party CSR assessment platform, hosting a collaborative network to manage the sustainability performance of suppliers. The platform monitors CSR risks utilizing 21 criteria divided in 4 themes based on international standards as UN Global Compact, ISO 26000, GRI, ILO etc. Starting in 2017 we piloted 140 critical suppliers at the platform and by mid-2020 we have exceeded 600 of critical suppliers assessments with EcoVadis. Our plans are to extend the third-party CSR assessments in order to ensure more objectivity and equity amongst our suppliers.

To increase awareness of sustainability in our supply chain, in 2019 we continued to hold Sustainability Days in Russia, Austria and Hungary hosting strategic suppliers to identify initiatives on both sides that can help further our joint sustainability effort and provide insights to our corporate social responsibility policy, sustainability commitments, achievements and best practices. In 2019 have introduced supply chain innovation workshops with key suppliers where we explore in a joint manner new technologies that promote operational efficiencies with a positive impact on the environment.

Supplier sustainability events

Becoming a Coca-Cola HBC supplier

Coca‑Cola HBC aspires critical suppliers to gain certification to the following standards:

  • ISO 9001 (quality);
  • ISO 14001 (environment);
  • OHSAS 18001 (health and safety);
  • EcoVadis Assessment (ecovadis.com).

Ingredient and packaging suppliers must also achieve certification to FSSC 22000 for food safety and the Global Food Safety Initiative (GFSI).

A prerequisite to become listed as a Coca‑Cola HBC new supplier is to commit to the Coca‑Cola HBC Supplier Guiding Principles, as well as, to the extent these apply to supplier, Coca‑Cola Hellenic Code of Business Conduct and Anti-Bribery Policy. These Policies make clear the values and behaviour we expect and audit in our value chain.

Contact us: