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Source: Coca-Cola Europacific Partners

CCEP said there had been little evidence of downtrading across its portfolio

European Coke bottler Coca-Cola Europacific Partners has cautioned it will continue to take action on pricing in 2023 despite easing commodity inflation and double-digit price increases in the first quarter.

Reporting its Q1 results yesterday, the Great Britain, Germany, Iberia and Australian drinks distributor said sales were up 14% on a foreign exchange neutral basis, with revenue per case up 10% and volume growth up 3%.

While some of this pricing was attributable to favourable pack and channel mix and out-of-home consumption recovery, it also reflected headline price increases across all markets in the light of cost input inflation.

CFO Nik Jhangiani told The Grocer that the group remained mindful of affordability and saw margin declines in 2022 given its reluctance to fully pass on double-digit cost input inflation.

Therefore, despite inflationary inputs beginning to ease, the group would “continue to take some pricing” in 2023.

“We are seeing some easing of commodity costs, whether that’s aluminium, CO2 or energy,” said Jhangiani. “But we should not confuse easing with the fact that we’re not seeing inflation – costs are still going up, just at a slower rate.

“I wouldn’t say we’re anywhere near seeing a deflationary environment at this stage,” he added.

“Our primary concern is around remaining relevant and affordable. So while we will need to continue to take pricing, the big tool that we will continue to use is how we promote effectively to continue staying relevant, particularly on those types of packs in retail where you’ve got a more price-sensitive consumer.”

The group said there had been little sign of changes in underlying consumer demand, with Jhangiani noting there was little evidence of downtrading across its portfolio.

In sparkling drinks, CCEP benefited from relatively lower elasticities, he said, though that varied by pack format and channel.

In areas where downtrading and private label market share were more prominent, such as juices and water, CCEP had exited some categories in recent years. Instead it had focused more on single-serve products and away from bulk purchasing where downtrading to private label was more common.

The group results said overall volume growth of 4% was primarily driven by Europe, which was up 5%, with Asia Pacific flat, largely due to strategic SKU portfolio rationalisation in Indonesia.

Jhangiani suggested 2023 volumes may come under pressure in the near-term in the UK, but because of lapping strong Covid recovery volumes in 2022 rather than wider pressures on consumer spending.

CEO Damian Gammell said it had made an “encouraging start to the year”.

“Although our first quarter has set us up really well for the rest of the year, it is typically our smallest. We are building on this momentum supported by fantastic activation plans.

“We are confident we have the right strategy, done sustainably, to deliver on our ambitious mid-term growth objectives which, combined with today’s interim dividend declaration, demonstrate the strength and resilience of our business, and our ability to deliver continued shareholder value.”