Good day, and welcome to the Coca-Cola European Partners Fourth Quarter 2016 Conference Call. At the request of Coca-Cola European Partners, this conference is being recorded for instant replay purposes. At this time, I’d like to turn the conference over to Mr. Thor Erickson, Vice President of Investor Relations. Please go ahead, sir..

Thank you. And thanks to everyone for being on our call today. We appreciate your interest and for joining us to discuss our results for 2016, and our outlook for 2017. Before we begin, I’d like to remind you of cautionary statements.

This call will contain forward-looking management comments and other statements reflecting our outlook for future periods.

These comments should be considered in conjunction with the cautionary language contained in this morning’s release, as well as detailed cautionary statements found in reports filed with the UK, the U.S., and the Dutch and Spanish authorities. A copy of this information is available on our Web site at www.ccep.com.

Today’s prepared remarks will be made by Damian Gammell, our CEO and Nik Jhangiani, our CFO. Following the prepared remarks, we will open the call for your questions. In order to give as many people as possible the opportunity to ask questions, please limit yourself to one question and we will take follow-up questions as time permits.

Now, I’ll turn the call over to Damian Gammell..

Thank you, Thor. And it's great to join each of you today for our call as we discuss our fourth quarter and full year earnings results for Coca-Cola European Partners.

It’s being nearly 10-months since the creation of our new Company last May, and through the ongoing dedication and skill of the people at our Company, we have made significant progress in a variety of areas, which I will discuss with you today on our call.

Early on, as you many of you are aware, we established the importance of a sustained focus across four key areas of the business, no surprise; first one being business integration on the setting up of CCEP; the second, realizing the operating synergies that we’ve disclosed; thirdly, managing our day-to-day business effectively and efficiently; and finally, all of that leading to us restoring growth profitably in Western Europe at CCEP.

As we review our year, it's clear that we’ve achieved success in each of these key areas; we’ve moved forward quickly with the integration of our territories; we’ve created new platforms for sharing best practice and ideas; and we’ve worked on developing new system routines across all of our markets.

We are very happy to stay on track to deliver our synergy targets, which include a pre-tax goal of between €315 million to €340 million by mid-2019. On this we are making good progress, and in fact we are already seeing the benefits in our results.

And this is very much down to a lot of the pre-planning that went into the creation of CCEP, and the ongoing collaboration of all our employees and territories. We continue to executive at a high level each day, focus on delivering value for our customers and in the process restoring profitable growth to our business.

Today, working with the Coca-Cola Company, we are better positioned to meet marketplace challenges, and we’re even more convinced of the solid opportunity for CCEP to create meaningful value building long term growth. Now, as you’ve seen in our news release this morning, our results include pro-forma comparable diluted earnings per share of €1.92.

This reflects 1% revenue growth or 0.5% volume growth and 5% growth in operating profit, all on a pro-forma comparable currency neutral basis. It is important to remember that many of the numbers we discuss are pro-forma and include results as if CCEP had existed in the periods represented.

Clearly, our full year results reflect the benefits of solid execution of our brand, marketing and operational plans. And indeed, as we’ve mentioned in earlier calls, are more favorable weather environment at key times during the year.

Sparkling brands grew 0.5%, Coca-Cola trademark brands declined 1%, and we’re very pleased that we saw Coca-Cola Zero sugar growing 10%, driven by the highly successful relaunch of the brand as Coca-Cola Zero sugar, which looks and taste more like regular Coca-Cola. Regular Coca-Cola did declined 1.5% for the year.

Together with the Coca-Cola Company, we are addressing the consumption of the brand with a focus on smaller packages, more packed diversification and programs to drive enhanced value perception and relevance combined with increased brand penetration.

Our goal is to grow our core business and add incremental revenue growth by investing in portfolio expansion. Sparkling flavors and energy grew 5% in the year. Energy was a key part of that growth as we continue to executive well against our multi-brand strategy. And we benefited from the expanded distribution of Monster in both Germany and in Sweden.

I am also happy to say that Sparkling flavors results also reflected solid growth in our Fanta brand, which was up nearly 4%, and growth in our ViO Bio and the Sprite brands. Our Still brands grew 2%, driven by growth in sports drinks, water and teas offsetting softness in fruit and juice drinks.

Our water business, led by Aquabana and Smart Water and Chaudfontaine and ViO, grew 3.5%. Now, at the heart of the success of our brand is the strength and success of our operating and marketing programs, and our supply chain.

We’ve made significant progress in these areas throughout the year, and have solid plans in place for 2017 to move our business forward even faster.

As an example, we have a solid sales force effect in program that aims and does increase our impact with our customers, allows us to spend more time identifying opportunities for profitable growth, and allows our sales force to become even more effective and efficient, increasing the customer facing time as we go forward.

We've implemented many customer marketing programs that make our brands more compelling at the point-of-sale, and we are using the great marketing assets of The Coca-Cola Company to drive that consumer's awareness into action. We are also continuing to look for ways to drive growth in other areas of our portfolio.

In Great Britain, we've launched the Honest Tea brand, and we continued to expand in energy with the sugar-free Monster Ultra range. In Germany, we are working with The Coca-Cola Company to leverage the success of our ViO Bio brand with a Sparkling version of ViO Bio lemonade made with organic juice.

Also included is the re-launch of Coca-Cola Zero as Coca-Cola Zero Sugar with new packaging and a new form that tastes more like regular Coke, a cola building on the success of GB, and that will continue to be rolled out across our territories in 2017. Now, let's take a quick look at our guidance for 2017.

As you read our release, we affirmed our prior operating guidance, including expectations of modest low single-digit revenue growth with operating profit and diluted earnings per share growth to be up high single-digits. Nik will provide more details. But I want to note that our outlook reflects continued growth and a solid free cash flow.

This is a significant demonstration of our potential, and reflects our commitment to achieving the value-building growth that ultimately drives shareholder value. Further demonstrating this commitment; today, we announced an increase of over 20% to our quarterly dividend.

As we continue to work to build value, we will also continue to communicate clearly and provide regular updates of the steps we are taking to integrate the business and to achieve long-term value growth.

As part of this communication, I would like to take this opportunity to remind you that tomorrow we will make a presentation to the Consumer Analyst Group of Europe, CAGE, at 2:15 PM GMT. The presentation will be webcast on our Web site, www.ccep.com.

We hope you're able to listen to our presentation or review it later, as it will provide more details on the opportunities we see and our plans to capture these opportunities. Now, in closing, before I hand over to Nik, let me share some key thoughts. First, there are opportunities for meaningful value growth in each of our territories.

We have a compelling business combination, and a clear path to deliver that growth. Second, we returned to growth in 2016 and affirmed our 2017 guidance for high single-digit growth in both operating profit and diluted earnings per share.

Thirdly, we have a solid strategic partnership with The Coca-Cola Company and a shared vision of the future of our business as we continue to expand the brands and packs across the portfolio of opportunities in our territories.

And last but not least, as the leading Coca-Cola bottler and a major European CPG company, Coca-Cola European Partners presents a proven commitment to driving shareholder value, a commitment that was at the very heart of the decision to create this great Company. So thank you very much for your time.

And now I'll turn the call over to Nik, who will share more detail on our financial results and our full year outlook. Thank you.

Nik?.

Thank you, Damian and thanks to each of you for joining us on our call today. For the fourth quarter, CCEP achieved pro forma comparable earnings per diluted share of $0.43, including a negative currency impact of $0.03, an overall increase of 16%.

Revenue grew 4% on a pro forma comparable and currency neutral basis, which includes the benefits of one extra selling day in the quarter versus the prior year.

Fourth quarter revenue per unit case was up 1.5% on a pro forma comparable and currency neutral basis, volumes grew 1.5% on a pro forma comparable basis after adjusting for one additional selling day versus the same quarter a year ago or 2.5%, including the benefits of the one extra selling day.

Operating profit grew 13% on a pro forma comparable and currency neutral basis. Importantly, these results reflect modest margin expansion as operating profit grew ahead of revenue growth, even after excluding synergy benefits of approximately €20 million in the quarter.

For the full year, we achieved diluted earnings per share of €1.92 on a pro forma comparable basis, an increase of 13% on a pro forma comparable basis, including a negative currency translation impact of €0.08 per share.

Full year 2016 revenue increased 1% with full year revenue per unit case growth of 0.5% and volume growth of 0.5%, all on a pro forma comparable and currency neutral basis. Our pro forma comparable operating profit grew 1% or 5% on a pro forma comparable and currency neutral basis.

Excluding the benefits of synergies of approximately 35 million in 2016 in the second half, our operating profit grew approximately 2% ahead of our revenue growth of 1%. As indicated, full year revenue per case grew 0.5% while cost of sales per unit case, was flat, both on a pro forma comparable and currency neutral basis.

This allowed us to achieve moderate gross margin improvement as we continue to balance the favorable cost of goods environment with competitive marketplace programs.

Pro forma comparable and currency neutral operating expenses increased 0.5% for the full year, reflecting the impact of volume growth and wage inflation, partially offset by the benefits of restructuring. Let's now turn to our outlook for 2017.

For the full year, we expect modest low single-digit revenue growth with high single-digit operating profit and diluted earnings per share growth. Excluding synergies, we expect core operating profit growth to modestly exceed revenue growth as we have demonstrated in 2016. These growth figures are on a comparable and currency neutral basis.

At recent rates, currency translation would reduce 2017 full year diluted earnings per share by approximately 2%. We expect free cash flow in the range of €700 million to €800 million, including an expected benefit from improved working capital of at least €150 million.

This free cash flow outlook is after the expected impact of restructuring, integration and deal cost. This reflects the focus we put on core free cash flow generation, reducing our leverage and our dedicated efforts to improve working capital.

Capital expenditures are expected to be in a range of €575 million to €625 million, including €75 million to €100 million of capital expenditures related to the synergy capture. Excluding capital expenditures related to these synergies, CapEx is expected to be less than the 5% of revenues.

Weighted average cost of debt is expected to be approximately 2%, and the comparable effective tax rate for 2017 is expected to be in a range of 24% to 26%. As Damian discussed, we remain on track to achieve pretax run-rate savings of €315 million to €340 million through synergies by mid-2019.

We have already achieved savings of approximately €35 million in the second half of 2016, and we expect to exit 2017 with run-rate savings of approximately one half of that total target. Cash cost to achieve these synergies are expected to be approximately 2.25 times expected savings.

This includes post-close cash cost associated with pre-transaction close accruals as we indicated in December. Given these factors, currency exchange rates and our outlook for 2017, CCEP now expects year-end net debt-to-EBITDA for 2017 to be just under 3 times.

We’re continuously working to find ways to lower costs to achieve our synergies as we manage our business efficiently, leverage the strength of our balance sheet, and diligently work to create shareowner value. A few modeling notes before closing. Quarter one is almost over and we remain focused on our plans for the important summer selling season.

Keep in mind that the first quarter of 2017 has one less selling day than the first quarter of 2016 with the full year 2017 having one less selling day versus full year 2016. Also, the selling period for Easter primarily falls in the second quarter of 2017, given the late timing of Easter this year.

Also included in today’s release our revised quarterly pro forma income statements, these reflects some income-expense reclassifications in Iberia that have been identified as we have gone along through our first full year of closing and now deals with all classifications consistently across our territories; notably, while these are relatively minor shifts between revenue, cost of sales and operating expenses, there is no change to operating profit or below on the income statement.

In the coming weeks, you can expect to see our full year 20-F filings. As we have noted before, the timing of these filings is taking a bit longer as we manage the implications of the merger and the move to the IFRS. During ‘17 and ‘18, we expect to continue to shorten the cycle time for issuing our results.

Finally, we declared our quarterly dividend of €0.21 or an annualized dividend of €0.84, an increase of 23.5% over 2016. This represents an approximate 40% dividend payout ratio at the higher end of our previously stated dividend payout range, and is an indication of our commitment to shareowner returns.

In closing, let me summarize with some key thoughts. First, we remain realistic about the environment and are pleased with our return to growth. However, overall conditions continue to be challenging.

Second, we have a solid history of and a commitment to, managing the levers of our business to deliver value, and we will continue to look for ways to improve growth and drive value.

Third, we’re looking forward to significant new opportunities created by the formation of CCEP and are continuing to work to better position our Company to capture those opportunities.

And finally, we have remain focused on generating cash and creating long-term profitable growth, all in support of our most important goal delivering increasing levels of shareowner value. Thank you for joining us today. And now Damian and I will be happy to answer your questions.

Operator?.

Thank you [Operator Instruction]. And our first question comes from Ali Dibadj of Bernstein. Your line is now open..

A couple of questions, one is just on volume versus price mix.

Could you give us a sense of what you feel the breakout could be going forward, actually in the context of inflation that you have talked about t we’re seeing coming through, maybe competitors seeing a little bit more rational, retailers being a little bit more giving an impact size changes that you’re mentioning, so volume versus price mix? And then a separate question is just dividend versus buybacks.

Clearly, dividend increase interest being impactful here. Can you talk a little bit about your decision making there, versus buybacks and how we should think about that mix going forward? Thank you..

I’ll deal with the first question, and then will pass it on to Nik and he can share with you how we state our view around our policy around dividends, et cetera. We don’t break out specifically to elements around our revenue growth. But as you’ve highlighted in your question, the three areas that we’re focused on are volume, price and mix.

Market-by-market, we make the decisions underneath those three pillars on what's right from a customer and value creation perspective. It's fair to say of the three the one that takes longer to impact is mix.

But as you’ve heard in my commentary and you’ll hear little bit more at CAGE tomorrow, we are very much focused on pack diversification and brand diversification at all of our time we’ll drive a mix benefit. And one more thing that coming through, but again it takes a little bit longer.

On pricing, that is probably being a bigger lever in '16 and we’re quite happy with pricing in '17. So, you’ll probably see a revenue much more focused around price volume with mix playing a role, but obviously it's a longer term burn. But we’re pursuing and focusing on all of those three components.

Nik, do you want to talk about dividends?.

Ali, as you saw, we increased the dividend. But this is very much in line with our stated objectives of an initial dividend payout ratio in that 30% to 40% range. We had about a 35% range as we declared our first made in dividend for CCEP in 2016.

And this is just an indication of a continuing trend to get us probably still at the lower end of what we would call a competitive range in term of dividend payout ratio. I don’t think this in any way changes our outlook on broader cash returns to shareowners.

And the Board, again as we reach appropriate leverage targets and look at other opportunities, would assess what's the best way to return any access cash to shareowners outside of what might be a continued focus on normal sustainable levels of dividends..

Thank you. And our next question comes from Lauren Lieberman of Barclays. Your line is now open..

I was wondering if you could talk a little bit about just the water strategy, timing of potential expansion smartwater beyond Great Britain. And how that would fit in with your existing portfolio of Aqua ViO, et cetera. Thanks..

We've being very pleased with the smartwater performance, particularly in GB. 2016, we really focused on how we enhance our proposition, and we’ve recently just launched Sparkling Smartwater which, as you're aware in Europe, particularly mainland Europe, Sparkling is a big category.

So, we're now looking at expanding that offering to other territories. It's quite a different consumer proposition than our other brands, and its packaging is quite unique. It's only in single-serve. It's quite a premium proposition and it's very much focused in on-the-go.

So we've seen an opportunity for both our existing brand and smartwater to play a role in the market. And as you know the water category in Europe is quite sizable, so a first to have one or two brands in the premiums end of the market is quite feasible. And as we've seen in GB, it does create a different consumer occasion around water.

And again, I think it' back to the fundamentals. It's a great tasting product, its great packaging. It looks very different on shelf. And as we've added Sparkling, we've also expanded our proposition in new consumers. So, we look at that for all our markets. But clearly, it's been a good launch for us in GB so far..

Can just you also talk about the capital requirements for building out smartwater relative to the other products?.

It's not a significant impact in our overall CapEx. We have got the capacity in GB. Like a lot of our new products, there's some slightly different filtration around smartwater. But in terms of absolute CapEx impact, it's minimal.

And certainly, from a value-creation perspective, it isn’t the barrier and from a CapEx perspective, it's in our guidance; so no issue on that..

Thank you. And our next question comes from Kevin Grundy of Jefferies. Your line is now open..

So, first question for me, just on the divergence of growth across your territories. Can you give us a little bit more detail what drove particular strength in Spain and perhaps some of the weakness in Germany? And then if I'm not mistaken, back in December, I think the hope was that all the territories would contribute to growth this year.

Is that still your view? And then I have the follow-up. Thanks..

So just looking at our growth, certainly, we would see all, to your point all of our territories contributing to our growth guidance in 2017. We had a number of factors throughout 2016 that impacted individual markets differently.

As you may recall, at the beginning of the year, we’ve had initial GB around the systems implementation and then in a lot of our markets coming out. So, summer, we actually had late summer and I mentioned that in my comments where we did get the benefit of weather across most of our markets.

If you look at what's driving growth where we're growing there's a lot of consistency. It's certainly is our sugar-free Coke Zero proposition. Certainly, it's Fanta and our flavors are growing pretty much everywhere. Our innovations are delivering growth across all markets, including Germany, ViO Bio, and/or Spain and/or GB with Honest Tea.

And certainly, we've seen a common challenge around Coke Classic in all of our markets. Although, we have seen that brand performing stronger as we brought in more differentiation and offered smaller packs for consumers, and we also believe the brand is benefiting from the One Brand strategy at The Coca-Cola Company.

So fairly common themes across our territories, from a customer perspective; again, we've seen that growth coming across multichannels. We're also pleased to see some of our away-from-home businesses performing a little bit better. So, hard to call out any specific market issue.

I suppose a good news for us is a lot of what works in one market we're seeing work in others, and that kind of goes back to why we created CCEP.

We're definitely seeing transfer of best practice and learning and working; and I suppose to close one of the most tangible examples of that is, if you look at our footprint now and the likes of how across Western Europe; it's made a significant change in 2016; a lot of that comes from leveraging the learning and the relationship at our German business as we created CCEP.

So, hopefully, that answers your question, Kevin..

And if I could just ask one more, just given where we are here in the quarter, and I think the discussion back when you met with the sales side, back in January was around momentum that had continued through January.

I'm just trying to connect that with the scanner data, which didn't look great at least in carbonated soft drinks for the month of January. So, can you maybe comment a bit on what you're seeing and whether the Nielsen data, which was down more than 3% for The Coca-Cola Company, at least in carbonated soft drinks.

Is that representative of what you're seeing at least in January, if not for the quarter? Thanks..

So, just a disclosure, as you know, that doesn't cover the whole market. But it did cover a very important part of the market, so it is a relevant number. But clearly a lot of our volume is not tracked by Nielsen. The data for January is pretty much online. I mean, I think if you look at the industry, we had a slow start to the year in January.

We had a very strong finish to the year as you've seen in our results today. So, we've had a slow January. But the core has improved that just gone on. So we've been pleased with the momentum that we've seen since January. It gives us the confidence to maintain our guidance for the full year. I think Nik mentioned it in his comments.

Clearly, Easter has moved out of Q1 in 2017, and is into the second quarter. So, that will have an effect certainly in our March numbers. But overall, I think January was a challenging month but thankfully, it hasn't continued in February, March.

And we remain confident that we'll have a solid quarter, albeit that we have to take into account that Easter was the big selling period, we’ll move into April. But again, we've got a lot of confidence on what we've seen in February and March and our guidance for the full year is still solid..

Thank you. And our next question comes from Mark Swartzberg of Stifel. Your line is now open..

Damian, one for you on energy drinks and then Nik on the free cash flow. But on energy drinks, Damian, your newer so to speak distributing Monster in Germany and Iberia, it's helping you nicely in those markets. It's more established in Great Britain.

How much runway would you say there is in these two newer markets for the product? And then how would you compare that to the opportunity that's still in front of you for the product in Great Britain? And I don't mean to isolate it entirely from your own energy portfolio. So, any comments on that would be helpful.

And then on the free cash flow, Nik, nice to see the dividend increase, and it seems at least from where I sit the signal a degree of optimism in your free cash flow view, given the kind of revenue momentum you had in the second half of last year and some of the margin performance you’re getting in the cost synergy flow through.

So, are you -- why not increase the free cash flow view, are you being conservative here, is there some headwind beyond a weak January that you’re seeing that you haven’t talked about? Just trying to get a read on why the free cash flow view hasn’t come up a little bit..

I’ll just address the energy question. So, as you pointed out, I mean, we’re further ahead of GB on our energy portfolio, particularly with the Monster brand. In terms of runway for both Germany and Spain, I mean, we see no reason why the size of our energy portfolio can’t get to where we are in GB.

And then if we look at GB, we would argue why it couldn’t get to the same relevance as it is in North America. So both in markets, where we’re up with our higher, let’s say, per capita for CCEP which is GB, it’s still below what we seen in North America, so, the Company see that too.

So we’ve just announced a new Lewis Hamilton product under the Monster brand, which is getting huge connection with consumers and with customers.

Specifically, on markets like Spain and Germany, I mean, we’ll talk a lot tomorrow if you look at our CAGE presentation around opportunities, where we’re not the leading player and the opportunities where we can grow our share. And I think energy is a great example.

There’s a lot of revenue, both in Spain and Germany that we don’t participate within the energy category, simply because we’ve got into those markets later. And we have enjoyed early success in both Spain and Germany with Monster, particularly Monster Ultra sugar-free.

But when we look at our share relative to the market leader or to other brands, for example, we underperformed in multipacks as a specific example in both GB and in Spain and Germany. So, we’ve done a lot of good work segmenting where we can grow profitably within energy.

And then by the true product innovation, like Lewis Hamilton or true pack innovation like multipack capabilities, we believe that gives us a lot of runway for growth in the energy category.

We also benefit from having a multi-brand strategy and in some areas that we’re more comfortable with how that plays out between Relentless, Monster and Burn and now Lew. What I would say candidly that’s a challenge that we’ve got to keep working on with the Company, which is how do we have two or three brands in the energy category.

Clearly, Monster is the winner. But we see a very significant role for our second brand within our portfolio, whether that’s Burn or Relentless, and we’re working on that at the moment. But overall, momentum will continue.

I think the sugar-free variety and Ultra will continue to drive growth, and then we’ve got some execution opportunities in terms of product distribution and multipacks that we’re focused on at the bottler, so a lot of runway to go. And I’d emphasize even in GB, where we are most developed.

So hopefully that answers your question Mark, and I’ll hand over to Nik….

The simple answer, quite honestly, is the fact that the dividend that we have declared was included in our plan. So, the implications for free cash flow really remain unchanged. And I would say to you ultimately, we’re still looking to deliver in the range of €700 million to €800 million of free cash flow.

Keep in mind we’re still in transition from a perspective of the restructuring activities that we are undertaking to deliver on those synergy benefits, which clearly is a shorter-term drain, as well as some of the CapEx related to recapture those synergies, which is over what would be our normal recurring CapEx.

Part of what we're doing to boost that is obviously our renewed focus and our efforts around working capital improvements, which we've indicated will be at least 150 million. So, I think we're doing the right things.

And clearly as you see us come out of the big bulk of what would be the cash spend related to the restructuring, you would see those numbers improve as we go forward..

That's great, and if I could one quick follow-up Nik on, given the objective of being you slightly below three times EBITDA by year-end. You're really going to be looking at an opportunity to either get even more aggressive with your payout ratio or to commence repo, or to do a deal.

So, I think that at least the question on my mind is when you think about the set of alternatives that you either are might be facing.

Is it reasonable to think that your Board would consider a repo authorization by year-end? Or is that just not really in the considerations set because of the opportunities you face either with dividend or M&A?.

Well, listen, I think the opportunities we face with dividend would continue to be what we would see as a steady increase as opposed to a big bang increase there, to get us more in line with what we would see with some of the European peers. So, I think we're competitive, we're probably still at the lower end.

I think the Board will ultimately make a decision based on what are the best uses of that cash given all the needs of the business from a growth perspective, one.

Two, look at what might be out there in terms of other investments that need to be made, including an M&A and what kind of returns those generate versus alternatives of returning cash to shareowners.

Again, what form that cash return takes, we've been very clear that is something that we will continue to look at to determine whether it's more special dividend link or share repo. But more to come on that. But again, ultimately, the Board would decide what's the best use of that cash and what are the alternatives that are out there.

So, I think very much intact with what we've been saying since day one in terms of the strategy on value-creation for shareowners being very much intact..

Fair enough. Great, thank you, Nik..

Just to add to Nik's point. I mean, the Board and ourselves, to Nik's point, it would be foolish to dismiss any avenue of shareholder value return, because the environments that we operate within -- there may not be an M&A opportunity. So to form any view on that now would be way too premature.

So, ourselves and the Board clearly will look at all of the opportunities and nothing is ruled out, that's for sure..

Thank you. And our next question comes from Steve Powers of UBS. Your line is now open..

I guess, first, just given that we're nearly through Q1.

Could you give us some general comments on competitive conditions in Great Britain relative to 2016, and also how your, say you're pricing in shelf space negotiations, have gone with retailers across Europe? I guess, I'm specifically just wondering if there's any callouts that we should be aware of.

And then second, as Damian you were discussing earlier, you definitely start to emphasize more of your aspirations for non-CSD, non-Sparkling initiatives be it smartwater, or Monster, or Innocent or Honest. And The Coca-Cola Company too has been increasing its emphasis on broadening the beverage portfolio across all beverage types.

So, I guess, the question is just to build on Lauren’s question from earlier in the call, as your portfolio broadens into new categories and new package formats. Who funds the investment in principle? And I'm thinking whether it's across production capacity and capability, new distribution, needs, brand building, et cetera.

What portion of that expansion is CCEP's responsibility versus what portion is The Coca-Cola Company's? I guess if you could just talk us through how to think about those dynamics over time, that'd be great..

I'll come back on portfolio, that sounds like a question on how the Coca-Cola system works, that could take the rest of the call. But I'll try to give a short answer in a minute. On pricing and particularly to the U.K., I suppose there was a previous reference to scanner data.

I mean, what you'll see in the year-to-date numbers and coming out of Q4 in '16, our share position in GB has improved, both in the total and within the Sparkling category. If you look at on-shelf pricing in GB, probably the most significant move that we've seen from the customers has been a higher promo price in our category.

So, for our brand specifically, a number of customers have decided to sell our 2 by 175-liter at £2.50 per transaction. Previously, they had decided to sell that at 2, and so that has been a change, as it hits the market in Q1. And clearly, that's a significant change in promo pricing.

You'll also see in a number of our markets, retailers moving to promoting smaller multipacks, particularly in France. In Germany, you'll see the absence of 12 plus 2, which was a standard promotional format 12, 1-liter bottles and two free for a number of years in Germany. That hasn't been seen in the market by customers this year.

So, I think there's a number of proof points around pricing and promo that we’re seeing led by our customers in GB and particularly France and Germany. On your second question, I mean, the great thing about being a bottler is a lot of the cost that you articulated we carry.

And therefore, when we expand our portfolio and add new brands, our packages, we really add that to an existing cost base.

So, if you look at our biggest call side, our capital, our operating expenses, our manufacturing plants, a lot of these products can be filled on our existing line capabilities, or if there needs to be some amendment like we talked about with smartwater, it's not a material investment. They go through the same distribution network.

So, generally, what do we do at our sales, which we don't want to do or through third parties, to give them a chance to absorb more fixed costs. Finally, I mean, our biggest asset and our biggest competitive capability is our sales force.

So, whether that's through our key accounts, our call centers, our field sales, adding incremental brands into that network doesn't generate a whole lot of extra cost for us. So, the bulk of it is cost absorption, which obviously helps us expand margin.

It is fair to say, both ourselves and the Coke Company when we look at a new brand launch, we will plan incremental trade marketing or operational marketing expenses, and the Company will add incremental consumer marketing into the proposition.

So like any brand, there will be an element of the value chain that gets reallocated back into investment and marketing. But again, that is within normal business structures, so nothing significant. And again, we're looking at how we can get more high-value brands into our network as the network exists..

Thank you. And our next question comes from Judy Hong of Goldman Sachs. Your line is now open..

So, I guess, a couple of questions from my end. First just in terms of the Coca-Cola sugar-free volume performance, obviously, it's been pretty impressive.

And I'm just wondering if you can talk about how much of the volume is being sourced from within the Coca-Cola's trademark broadly, and how that looks across your different geographies that you've launched so far?.

Yes, I mean, I mentioned it in my opening remarks. We're very happy, but we're also very excited about the potential of our Zero Sugar Coca-Cola offering. I think we've been pleased with the packaging. The formula has responded well with consumers, and really GB is the market where it's had its impact. So, it's still rolling out across our territories.

So obviously, that's part of our marketing plans for 2017. From a cannibalization perspective, I mean, it defers market-by-market. What we're seeing is obviously all of the old Coke Zero drinkers migrate into the new packet formula. So, we haven't seen any evidence that we've lost any of those consumers.

Typically, when we've looked over a longer period of time, you can have, again, depending on the market, 50% to 60% coming from your Cola franchise, so that can be Coke Classic drinkers who want a sugar alternative. In Europe, a lot of that has come from Diet or Light.

So, you've seen in our previous presentations where we've talked about our Coke Light or Diet Coke franchise being under a little bit of pressure, a lot of that was consumers move into a stronger Zero Sugar. The good news for us is we've seen it bring consumers back into the Cola category, and in many cases, grow the category.

I mean, that's the long-term objective for us and our customers is to sustain what is a hugely valuable category, and get it back to growth. So, we're seeing a played out role which is first and most strategic.

And then in markets like GB and in -- some of the Scandinavian markets, we're also seeing that brand take share from competitors in some of those markets where they have had higher share over a number of years. So, if those grow the franchise, we do move consumers from our existing brands.

But net-net, it's an incremental part of our business and it can allow us to take back some share that we've lost over a number of years in key markets. And I think we've talked at our calls before about our performance in GB and in some of the Nordic markets when you look at our brand in particular, so overall, a positive..

And Nik, just on the -- so on the synergy target of getting to half of your target runway by end of '17, I just wanted to clarify one thing. So, you exited 2016 with €20 million in the fourth quarter, so that's the run rate of €80 million. And then if we want to take the high end of the €340 million, half of that will be €170 million.

So, incrementally, are you looking at something like €90 million in ‘17 as getting to the run rate of say, half of this ballpark?.

Yes, absolutely, Judy..

And then the step up you saw in the third quarter to fourth quarter.

Was there anything just from big bucket savings perspective that drove going from €50 million to €20 million in one quarter?.

There was elements of what we had started out with some of our procurement programs, and then also some efficiencies saves that we had that came through as we did some early moves into shared services, et cetera, to try and build that out.

So, if we look at that, again just roughly split out between what we saw in terms of COGS benefits versus OpEx benefits, you would say about 60% was COGS, 40% was OpEx..

Thank you. And our next question comes from Brian Spillane of Bank of America. Your line is now open..

Just one quick question from me, Nik, just, I guess, a follow-up to Mark Swartzberg’s question related to the cash spend, buybacks versus dividends. In terms of the buybacks, you now have, I guess with Iberian partners and Coca-Cola Company got two really big shareholders now that really, that dynamic didn’t exist with the legacy CCE.

So, just if you were to consider share repurchases, just is there any additional consideration in terms of the concentration of their ownership? Any limitation there might be in terms of being able to buy back stock, considering that their concentration would go up if they want to sell stock into a repo? So, just trying to understand whether or not that concentration of ownership at all has any impact on your thinking about share repurchases? Thank you..

No, I don’t believe so at all. Obviously, as we get closer to making a decision around whether we’re going to do repo or share buyback, depending again on the use of that cash as both Damian and I talked earlier. It would be something that would be considered but no, nothing that would prevent us from doing that.

There’s obviously the opportunity if we decide to go ahead and they don’t anticipate in that piece. But I don’t think there’s anything that we would look at that this stage that would be a deterrent to it..

Thank you. And we do have a follow-up question from Lauren Lieberman of Barclays. Your line is now open..

I just wanted to ask two things more on the cost side of things. First, does any change to your view on cost per case for 2017, I think in December, you talked about 1% to 1.5% inflation. And then the second thing was just a go forward split on synergies for 2017, between COGS and SG&A? Thanks..

I think if you look at the guidance that we provided, nothing really changed at this point in terms of that 1% to 1.5%. Clearly, as we go through the year and look at the one area that’s probably a little more open as normal is PET, given the fact that you don't really have a hedging -- a big hedging market for that.

Having said that, we've done some hedges this time around on MEG and paraxylene, et cetera. So, I think we're in a better position. But obviously, depending on oil price movements that could have some implications; although, again to be clear, there's not a direct one-to-one correlation.

So I would say the 1% to 1.5% still stands intact for now and will guide as we get through the next couple of months, probably if that changes or tightens. In relation to how we see the continuing level of synergy capture, I would say for '17 as we've looked at it, you will probably see roughly about 55, 45 split between COGS and OpEx.

And the COGS element would obviously have procurement, but also what we're doing from a manufacturing and distribution footprint perspective, some of which would go into the COGS line. So, that's rough indication, Lauren, at this stage..

So I think we’ve got time for one last question..

Thank you. And our last question comes from Mark Swartzberg of Stifel. Your line is now open..

Yes, and it's a follow-up really to Judy's query on Coca-Cola Zero Sugar, Damian, which sounds like it's not only benefiting from a distribution gain going to multiple markets. It wasn't in before. But you like what you're seeing in the way of the repeat purchase.

Could you give us a little bit more perspective on either channels where it's doing well or one country versus another, where that repeat dynamic is going well? Again, I know it's rather new in multiple markets and more established in GB. But of course, the question we're all going to be talking about a year from now is lapping all of this.

And so the repeat element is something I want to understand a little bit better to the extent you can share what you're seeing in that regard..

We're very much focused on lapping it too. So, it's top of mind for all of us. Well, I mean, it is a mainstream proposition. So from our perspective, Coke Zero, sugar is a must-have brand in all customers, all consumers and all channels.

So, we're seeing that pervasive distribution mentality drive growth, whether you're talking about a bar in Barcelona or a Tesco in London. So, it's resonating with consumers and customers in all channels. And quite frankly, that is because it is a mainstream great cola taste, and it's sugar-free.

So, it has the license to be as pervasive as that; clearly, GB as the market, where we've had it in its new -- with its new formula and its new packaging, the longest. And given the size of that brand, we can track repeat purchases weekly, and we're happy with what we see. So we're seeing people trying the brand.

We are investing money with The Coca-Cola Company behind sampling. We will roll that out in parallel with the brand across the rest of our markets. I suppose the area where we also see more opportunity is to move the brand into more pack sizes and formats; so mini cans, and small or large, smaller PET packaging, different varieties of glass.

So, as we continue to build that brand, we will also see different pack format. So, again, everywhere you would find a Coke Classic in that particular pack size, our goal is you will find the Zero Sugar Coke, and that's the essence of the strategy. Hopefully, that answers your question, Mark..

It does indeed. Thank you, Damian..

So, again, on behalf of myself and Nik, we'd like to thank you all for joining us today. We do look forward to seeing some of you at CAGE, and for those of you who can't join, again a reminder that our webcast is available for you to join tomorrow. We are truly pleased with the progress we've made since the formation of CCEP, 10 months ago.

We have a great team. We have a strong organization and critically, we've got the best beverage brands in the world.

We are very excited by the opportunity to create value for all our shareholders, to create value for our customers, and to continue to engage with all our employees to make CCEP, not only a good Coca-Cola bottler but a great Coca-Cola bottler. So, thank you for your time today. And as I said, I look forward to catching up with some of you at CAGE.

Thank you very much..

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day..