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Coca-Cola European Partners plc (NYSE:CCEP)
Q4 2019 Earnings Call
Feb 13, 2020, 7:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, my name is Amy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coca-Cola European Partners Preliminary Results for the Full Year and Fourth Quarter ended 31st December 2019 Conference Call. [Operator Instructions]

Sarah Willett VP, Investor Relations, you may begin your conference.

Sarah Willett -- Vice President, Investor Relations

Thank you and good afternoon in Europe and good morning in the US. Thank you all for joining us today.

Before we begin with our opening remarks on our full year 2019, I would like to remind you of our cautionary statements. This call will contain forward-looking management comments and other statements reflecting our outlook. These comments should be considered in conjunction with the cautionary language contained in today's release as well as the detailed cautionary statements found in reports filed with the UK, US, Dutch and Spanish authorities. A copy of this information is available on our new website at www.cocacolaep.com.

Today's prepared remarks will be made by Damian Gammell, our CEO. We will then open the call for your questions, which is strictly one per person. Following the webcast a full transcript will be made available as soon as possible on our new website.

I will now turn the call over to our CEO, Damian.

Damian Gammell -- Chief Executive Officer

Thank you, Sarah. And many thanks to everyone joining us today to discuss our full year and fourth quarter 2019 preliminary results as well as our 2020 outlook. I'm very pleased that 2019 saw our business deliver another really solid full year growth with our journey continuing to be built on three pillars, which we've shared with you previously: great people, great service and great beverages.

We delivered solid revenue growth supported by a strong focus on innovation as we continue to diversify to become a total beverage company fully aligned with our brand partners. As well as investing behind innovation, we continue to make the right strategic investment in areas such as a supply chain, coolers and across our whole digital platform. 2019 has importantly been a great year for progress made on the sustainability agenda This is Forward. All this has led us to delivering robust growth with operating profit of 6% on the back of 3.5% revenue growth, both on a comparable and FX-neutral basis and excluding the impact of incremental soft drinks tax. This was also supported by the successful closure of our merger synergy commitments. All resulting in another year of increased shareholder returns, a key focus and a remaining priority for all of us. And of course our 2019 performance was only possible due to the continued commitment of our talented 23,500 engaged employees and colleagues across CCEP.

Now to look at 2019 revenue. Full year revenue increased by 4.5% or 3.5% excluding the impact of incremental soft drinks taxes, both on an FX-neutral basis. We saw solid growth of 2% in revenue per unit case excluding the impact of incremental soft drinks taxes as we continue to benefit from our efforts to improve price and mix with growth in priority small packs and in our away from home channel. I'm also pleased that volume increased by 1% with strong end market execution and innovation-led growth partially offset by strong weather driven comparables in the third quarter as you will all recall, we had a very good third quarter in 2018. I'm particularly pleased that transactions grew overall by 2.5% during 2019, critically outpacing volume for the third year in a row, a key strategic priority for CCEP.

Given the detailed commentary by geographies provided in the release, the key takeaway would be to emphasize that our growth is truly balanced across all geographies. As we continue to demonstrate a focus on our revenue management growth initiatives, we are benefiting from our efforts to drive priority small packs, more efficient promotional activity alongside wider distribution and the aforementioned innovation.

Now to share with you some additional revenue highlights for 2019. Critically 2019 was a great year for our customers. Joint value creation remains a key priority. So there has been great to see that once again we were by far the largest FMCG value creator in the retail channel across all our territories, adding 4.5% more value or an additional EUR430 million versus 2018 according to Nielsen. In fact we delivered more than twice the value to our customers than our nearest competitor. And at a brand level, this year we had five of the leading eight brands for absolute value growth in our portfolio. Europanel data also shows that over 20% of our brands were now present in NARTD baskets in 2019, clearly supported by our growing beverage portfolio. This momentum is also evidenced by our market share, which grew in all our territories according to Nielsen.

Overall, we gained over 1 percentage point of value share in NARTD and 90 basis points of share within sparkling. Our Coke trademark portfolio also performed well. We saw growth of 1.5% and transactions growth ahead of 2%. Within Light Colas, we again saw another solid year of volume growth of 13% for Coca-Cola Zero Sugar. And we will be completely reinvigorating the Diet Coke and Coke Light brand in 2020 with new packaging, new flavors and more marketing. Flavors again had a great year overall and we gained 110 basis points of value share during the year according to Nielsen. This was driven in particular by Fanta, the number one flavors brand across our territories and delivering absolute value growth for our customers. It was also helped by another successful Halloween campaign featuring our limited edition bottles and cans as well as really innovative Halloween inspired flavors.

We're also especially pleased with our performance in the mixers category with our brand Schweppes gaining 180 basis points of share in GB across all major channels. This is a segment where we continue to see clear opportunities for further growth and we will continue to differentiate by enhancing the premium nature of our portfolio. And continuing to build on the success of newer brands like Royal Bliss, our Schweppes Signature range and our Coca-Cola Signature mixers.

From a package perspective, we continue to focus on driving smaller more premium packages. For example, we saw volume growth of 11% in small cans, which clearly contributed positively to our mix and gross margins and also driving transactions. And finally we've made some great progress with innovation, which I'll cover in more detail on the next slide.

It's fair to say that 2019 saw a step change in the pace and top line contribution from innovation through a combination of new products, flavors and brands. In fact, last year we launched one in three of the top 15 innovations in Europe according to Nielsen. Fuze Tea has been a huge success story. We launched this brand in January 2018 in all our territories with the exception of Iberia. And just two years on, we have overtaken Nestea to become the number two ready-to-drink tea brand across most markets, and in Germany, I'm very pleased to say that we are now the number one. The new recipe for Fuze Tea brewed with real tea leaves will soon be hitting the shelves across all our markets.

Again, Energy, also had a strong year, supported by innovation. In particular, Mango Loco and a new -- and some of the new Ultra flavors did really well. Impressively Monster has now overtaken Red Bull to become the number one energy brand in Spain. The recently acquired juice brand, Tropico, is really proving popular with consumers and customers in France, doubling its market share since we started distributing the brand back in March 2019. Monster Espresso, another fantastic product continues to gain traction, delivering 12% of the growth in the home channel's ready-to-drink coffee category across our markets last year. And as with all our innovation we are focused on growing category value, and this is clearly demonstrated by higher than average revenue per case metrics.

Coke Energy is now available in all our markets and we have exciting plans in 2020 for this brand. And finally Costa ready-to-drink is already proving very popular in GB, achieving 6% value share in just five months. Importantly, our revenue momentum provides the license to build for the future. We are continuing to make the right investments now to support long-term sustainable growth. Nearly two-thirds of our capex went into our supply chain in 2019 to support our total beverage strategy. We commissioned seven new lines during the year, three can lines, three glass line and one aseptic line to support in-house capability for products such as Fuze Tea.

We are also making the right strategic investments in capabilities, such as our coolers and our field sales team -- teams. We are also rolling out next generation field sales digital tools, which will not only improve the customer experience, but critically also increase the productivity and impact of our sales force. Our sales force remains a huge investment priority for us. We grew our field sales teams during 2019 with more hires planned for 2020. In addition we added around 42,000 coolers into our markets as we continue to aim to improve availability of our core products in addition to providing this space to support the expansion of our ever-growing portfolio.

I'm also pleased that we all -- we secured a two first venture investments during the year. These investments will explore how technology can transform the customer experience. We've continued to strengthen our digital capabilities, and our customer portal will continue to support our commitment to make it even easier for our customers to do business with us. We now have around 15,000 and customer using our portal, helping us to capture over EUR900 million of revenue in 2019 up a very impressive 30% on the previous years.

And finally and most importantly, as you know, sustainability is a key priority for CCEP, and we have made great progress in 2019. And I would like to cover this in more detail. As you are aware, we have a bold and integrated sustainability agenda. We are making good progress on carbon and water as well as packaging, where we are taking robust action and leading innovation. We are improving recyclability and increasing the amount of recycled PET in our bottles. We're working toward a circular economy where everything is collected and reused. This will move us closer to our target of zero waste, not just for plastic, but also for cans, card and glass. Having already accelerated our 50% recycled plastic target by two years, it's great to see that Sweden will become our first 100% recycled PET market this year, featruring a new on pack recycle me campaign.

We're also transitioning brands, Smartwater, Honest, Vio and Chaudfontaine to a 100% recycled PET. This will be supported by our strategic partnerships with the enhanced recycling firms. We also continue to reduce the amount of plastic used in our secondary packaging moving from shrink wrap to cardboard packaging for our can multipacks. Our progress is being recognized and we are proud to have recently been awarded a position on the CDP A list for Climate and Water, and one of only three companies to be awarded both for the fourth consecutive year.

Our sustainability initiatives are at the core of everything we do at CCEP, and I know that our people want it to be truly embedded within the culture and how we lead and behave every day. To that end we are looking to formally incorporate some of our sustainability targets into our next long-term incentive plan for our management. I'll be very pleased to update you on that in due course.

To build on the previous slide. I wanted to talk a little bit more about our people, strategy and culture at CCEP which is integral to our growth on our shareholder value story. We continue to see progress evidenced by a meaningful 7 percentage point increase in our employee engagement during the year 2019. This firmly positions us in the top quartile of our benchmark group. Our colleagues are being utilizing their two new annual days of paid volunteering, resulting in over 24,000 hours of volunteering last year. More broadly, we recently launched a new people strategy me@CCEP which focusses on the critical areas of well-being, diversity and inclusion, as well as creating a positive environment, where everybody can develop, learn and grow. All supported by a number of new digital platforms, which I referenced earlier, making it easier for our employees to engage and develop at CCEP. We will continue to focus on culture, this critical area going forward, providing the capabilities and most importantly, that culture we need to continue to grow our business sustainably.

Now, I'm very pleased to turn the call over to Nik for more detail on our 2019 financial results and our 2020 outlook. Nik?

Nik Jhangiani -- Chief Financial Officer

Thank you, Damian. And thank you all, for taking the time to be with us today.

Here, you will see our 2019 financial summary, and I will focus on some of the areas that Damian has not commented on as yet. So let's start with our COGS per unit case, which increased 4.5% on a comparable and FX-neutral basis, or 3% excluding the incremental soft drinks taxes. Comparable and FX gross margins were down 75 basis points. However, excluding the impact of the soft drinks taxes, gross margins were down about 40 basis points, in line with our plans.

So taking into account our revenue growth, the investments we're making to support sustainable growth, including the step-up in innovation and the close out of our synergy delivery, our operating profit grew by 6% on a comparable and FX-neutral basis. Importantly, our comparable and FX-neutral operating margin grew by about 20 basis points, or grew by 35 basis points excluding the impact of the incremental soft drinks taxes. Our comparable and FX-neutral diluted earnings per share grew 10%, ahead of comparable operating profit, reflecting accretion from the now completed EUR1.5 billion share buyback program, of which EUR1 billion was executed in 2019. Our annualized dividend payout ratio remains at approximately 50%, reflected in our full-year dividend, which was up 17% versus last year.

Next on cash, an important metric for us. We generated free cash flow of EUR1.1 billion, which I'll come back to in a moment. We also increased our ROIC by 65 basis points when adjusting for the impact of adopting IFRS 16, closing the year at 10.3%. On a reported basis, ROIC increased by 40 basis points. And finally, our leverage. We finished the year with a net debt-to-adjusted EBITDA ratio of 2.7 times at the midpoint of our stated objective of 2.5 to 3.0 times.

So if we now turn back to free cash flow for a little more detail, we delivered EUR1.1 billion of free cash flow, as I said, in 2019. And this slide lays out some of the key components. As I mentioned previously, IFRS 16, the new leasing standard came into effect on January 1, 2019, requiring us to recognize all our leases on the balance sheet. While IFRS 16 is a non-cash adjustment, our lease obligations are operating in nature, and we now include these cash outflows within capex, as you see here. These amounted last year to about EUR130 million. In addition to that, we spent EUR590 million on supply chain, IT and cold drink equipment capex, broken down on the slide, as well. We continue to be very disciplined around our investments to ensure that we have the right portfolio and distribution capabilities to sell our products to all our customers across all channels. So in total, our capex last year, including lease payments were EUR720 million. To be clear, our future guidance on capex will include these lease payments, driven by this accounting change only.

We retained our focus on driving working capital improvements and delivered approximately EUR50 million of benefits, taking our cumulative improvements to approximately EUR650 million since 2017. This has all been driven through strong cross-functional collaboration as well as solid routines to track and drive results. Cash generation continues to remain a key performance indicator for us, and this is evidenced by our mid-term annual objective of delivering at least EUR1 billion of free cash flow each year, with a current free cash flow yield of just under 5%.

Now as Damian highlighted, we are developing a great culture at CCEP, and I'm very proud of the progress we've made since our formation 3.5 years ago. At the half-one 2019, we closed out our merger synergies program by delivering a further EUR55 million, and cumulative realized synergies amounting to EUR330 million, representing the successful completion of our merger commitments and in line with our guidance. These efficiencies have been delivered through a combination of initiatives, including procurement, supply chain and central operating functions. The rationale behind the creation of CCEP went beyond merger savings, and was about forming a company that can sustainably and profitably grow the top line, and ultimately create value for all our stakeholders.

We will continue to look for ways to improve the effectiveness and competitiveness of our business. The decisions we made during the integration were focused on making it work at speed, but now we're making decisions that will make our business even better driving toward best-in-class. This includes things like the optimization of our cooler fleet, as we look to significantly increase the number of placements over the next three to five years. We will continue to leverage our digital capabilities like our ordering portals, which are now live and gaining momentum in seven of our markets, and more broadly, taking a holistic view of our business to find opportunities to harmonize our ways of working and drive end-to-end processes to ensure that we become an even easier business for our customers to partner and win with. We'll talk more about these opportunities at the Capital Markets Event in May this year.

Now before I move on to wider guidance for 2020, let me first provide some color on our COGS outlook. We expect COGS per unit case to increase by approximately 2.5% to 3%. Firstly, on commodities, which accounts for about 25% of our total COGS, we anticipate an increase of approximately 1% on a per unit case basis. This reflects an increase in sugar prices, as we roll out of some of our fixed-price contracts and higher recycled PET pricing, offset by reductions on cans and virgin PET. Please bear in mind that our commodities exposure is largely hedged for 2020. Secondly, we expect our focus on driving revenue per unit case to increase our 2020 concentrate costs, in line with our incidence model. As you can see, concentrate and finished goods make up approximately 45% of our cost to goods, with about 85% of that being concentrate. Thirdly, mix will continue to drive an increase in COGS per unit case, as we continue to focus on developing our portfolio through scaling our innovation and driving premiumization by accelerating glass and small cans formats.

Further to this, and as Damian mentioned, our innovation has been gaining traction. Though this has required investment in partnership with The Coca-Cola Company. While these innovations are revenue accretive, the cost of manufacturing these products is higher. And so it's adversely impacting our COGS per unit case from a mix perspective in the short to mid-term. These are, however, the right investments we're making for the long term as we gain scale and drive toward becoming a total beverage company. The examples of this include now a new aseptic line in the Netherlands, that Damian referenced earlier, which will enable in-house production of products, such as Fuze Tea, and the new line being commissioned in France that will pick up Fuze and Tropico volumes for that market in the second half of 2020.

Now turning to our overall guidance highlights for 2020. We expect revenue growth in the low-single-digit range, with COGS per unit case growth of approximately 2.5% to 3%, as I just referenced. We have now cycled out of any impact of the incremental soft drinks taxes. We expect mid-single-digit operating profit growth, reflecting revenue growth alongside further productivity efficiencies. High-single-digit earnings-per-share growth reflects the accretion from the 2019 share buyback program, as well as the benefit of the new EUR1 billion share buyback that we will commence next week. While we currently do not -- while we currently do expect to buy back up to EUR1 billion of our shares in 2020, this is subject to further approval at our May AGM, and of course, will be subject to market conditions and any potential M&A opportunities.

We're also guiding to an effective tax rate of approximately 25% in 2020, in line with last year. We continue to monitor our tax position, given changes in a few of our countries' corporate tax rates. We will also continue to assess our reserves, and both these items may present some opportunities over the next three years, which we will update you on in due course. Capital expenditures are expected to be in the range of EUR650 million to EUR700 million, which is inclusive of the lease payments under IFRS 16, as previously mentioned. We revised our mid-term capex guidance from approximately 5% of revenue to 6% of revenue to reflect the inclusion of these lease payments in our total capex, again, the change just being driven by the accounting change. And for 2020, we anticipate a further improvement in ROIC of approximately 40 basis points. All of these factors are expected to drive free cash flow of at least EUR1 billion.

We also intend to maintain our dividend payout ratio of 50%, alongside the aforementioned EUR1 billion share buyback program. CCEP is moving out of this integration period and into a transformation phase. Our plans for 2020 will ensure that we are able to invest in the capabilities for the future, while ensuring that we continue to deliver profitable organic revenue growth, underpinned by a sustainability action plan. Our dividend policy in today's buyback announcement are the culmination of these plans, which allow us to deliver sustainable growth, while creating a better future for our business, our customers and our planet.

We have now agreed 2020 terms with the vast majority of our customers. Every year, we have customers that, for a variety of reasons, take longer to reach agreement with, and this year is no exception. We are still in negotiation with some of our customers, as you have probably read, and in some cases, this has resulted in some temporary disruption. Importantly, we have long-standing and good relationships with them, and we have every intention of finding an agreement as quickly as possible. We will, of course, provide an update in our Q1 trading update. This customer disruption will, however, likely have some impact on our quarterly phasing this year, alongside lapping of some Brexit-related stock build by our customers in Q1 last year.

Also one final modeling point. Please remember that as this year is a leap year, there will be one extra selling day in 2020. Our priority is to continue leading the category for sustainable value creation for our customers. Already since 2017, we've added an incremental EUR1 billion to the FMCG industry, three times more than our nearest peer.

So with that, I'll hand back to Damian.

Damian Gammell -- Chief Executive Officer

Thank you, Nik.

So for 2020, we clearly have some really exciting plans in place with our brand partners, as we continue to look to build out our portfolio. We will continue to build our core business, particularly like colas, flavors and mixes, alongside accelerating the momentum that we have in areas like ready-to-drink tea, energy and ready-to-drink coffee. Alongside our brand plans, we need to continue to build our commercial capabilities by investing to better serve our customers and to further improve our in-market execution, while most importantly, continuing to drive our sustainability journey. On all of these areas, we're very pleased that we will be able to provide more detail at our upcoming Capital Markets Event in Brussels in May.

2019 on reflection has been another solid year of delivery. The great successes speak for themselves. So of course, we continue to take away learnings. For example, Coke Energy achieved solid distribution. But we learned and needed to be repositioned closer to the great Coke taste that we all know and love. And that's on its way 2020, alongside a new and exciting cherry flavor variant. As I touched on earlier, we also made great progress on packaging in 2019. But our agenda goes way beyond that. We recognize that we have much more to do as we transition to a low-carbon circular business. We firmly believe in doing the right thing for our environment and for our communities. And we do that all with a fully aligned relationship with our franchise partners.

So with that, we'd now like to open up for questions. One question at a time, please. Thank you.

Questions and Answers:

Operator

[Operator Instructions]Your first question comes from the line of Lauren Lieberman with Barclays. Lauren, your line is open.

Lauren Lieberman -- Barclays -- Analyst

Great. Thanks, good morning.

Damian Gammell -- Chief Executive Officer

Good morning, Lauren.

Lauren Lieberman -- Barclays -- Analyst

Hi, I just noticed on this last slide, the image of the Coca-Cola, the light taste. And I'd love to hear more about that because that would be a pretty significant repositioning for Diet -- Diet and Light, of course. If you've tested out this packaging, it really is striking as incredibly different. So I would just love to hear more about the plans on that. And if that's across markets or just focused on one or two? Thanks.

Damian Gammell -- Chief Executive Officer

Hi Lauren, good morning. Yeah, we're excited about it. It won't impact, obviously, the Diet Coke brand, as we know it in GB, where obviously it's a significant and very successful part of our business. And it will be rolled out across all of the markets where the brand is today, Coca-Cola Light. If we look back over the last number of years, we've had fantastic success on our Coke Zero Sugar. And we believe that it's a good time now to bring a bit more of a new look and feel to our Coke Light franchise, with that obviously packaging, the brand imagery and also some great flavors, some of which I think you've already enjoyed in the US. So that will be going out across all our markets throughout 2020, and will also be supported by both the line marketing from the Coke company.

So it's clearly one of the pillars in our Cola Light platform that we're excited about for 2020.

Operator

Your next question comes from the line of Robert Ottenstein with Evercore ISI. You are allowed to ask one question with one related follow-up. Robert, your line is open. Robert Ottenstein, if you're on mute, please un-mute. Your line is open.

Yutong Zhou -- Evercore ISI -- Analyst

Hi, this is actually Yutong, on for Robert. Could you just give us an idea of your energy drink strategy and your interaction between Monster, Reign and Coca-Cola Energy, please?

Damian Gammell -- Chief Executive Officer

Sorry, could you just repeat the first part of that question for me?

Yutong Zhou -- Evercore ISI -- Analyst

Could you update us on your energy drink strategy, please?

Damian Gammell -- Chief Executive Officer

Okay, sorry. Yeah. So obviously, it's a very big and relevant category for us. And we've enjoyed a number of years of great growth. But clearly, on average, our market share is in the range of 15% to 20% on the market, depending on which country you pick. So we believe having a multi-brand strategy is right for the future. So obviously, Monster Reign will play a role in that, although we haven't launched that yet in Europe. That's something we're looking at going forward. And clearly, Coke Energy gives us another platform in that category. So we'll work across all of those areas. We also have Burn, which is a significant brand for us, particularly in Iberia. So going forward, we believe the multi-brand approach, given the size of the category, the competitive structure and the different need states is something that will support not just long-term revenue growth, but also our profitability going forward.

So very excited about the flavors on Coke Energy. And clearly, we've got great distribution on that brand. So we would see that playing a bigger role going into 2020. We like what we hear about Reign coming out of the US. So again, with Monster, we're excited to bring that to European consumers. And finally, to mention on the core Monster range, we've got some fantastic innovation coming again in 2020. So it will be another vibrant year for us in the whole energy category.

Yutong Zhou -- Evercore ISI -- Analyst

Thanks. And just as a follow up...

Nik Jhangiani -- Chief Financial Officer

And just to highlight, revenue today is -- Energy contributes about just under 4% of our revenue, but growing double digits, as Damian said. So it's an exciting category for us.

Yutong Zhou -- Evercore ISI -- Analyst

Great. Thanks. And just as a follow-up. I know it's early days, but are you seeing the reformulation of Coca-Cola Energy having any impact right now?

Damian Gammell -- Chief Executive Officer

It's too early. We haven't brought that to market, although we've been very pleased with the consumer testing, etc. But it hasn't hit the shelves yet.

Nik Jhangiani -- Chief Financial Officer

It'll hit probably toward the end of Q1.

Yutong Zhou -- Evercore ISI -- Analyst

Great. Thank you.

Operator

[Operator Instructions]

Your next question comes from the line of Nico von Stackleberg with Liberum. Nico, your line is open.

Nico von Stackleberg -- Liberum -- Analyst

Hi, there. Good morning, or afternoon, guys. Just a quick question on the small pack format. So volume growth was 11%, but revenue is only 1%. Can you talk a little bit about how price mix evolves? And sort of what the key drivers are of that wide gap? Thanks.

Nik Jhangiani -- Chief Financial Officer

Yeah. Hey Nico. I think for us, the volume growth overall, continues to be a strong driver of that in terms of overall mix that's coming through. On the revenue side, it's a combination of various factors in terms of our total numbers of revenue growth. So happy to pick that up with some more details offline.

Nico von Stackleberg -- Liberum -- Analyst

Okay. Thanks.

Operator

Your next question comes from the line of Fintan Ryan with JP Morgan. Fintan, your line is open.

Fintan Ryan -- JP Morgan -- Analyst

Good afternoon, gentlemen. Just in terms of your guidance for free cash flow for next year, wondering if you could go through some of the moving parts, particularly, as it regards working capital, and as well as -- I was expecting as the restructuring costs would fall away that you should be able to see further improvement in free cash, notwithstanding the lease payments. Can you sort of explain some of the other moving parts, please?

Nik Jhangiani -- Chief Financial Officer

Sure. So I think the lease payments are really just a gross up. So it's not really impacting the free cash flow number. What you're looking at, is if you take a look at our three-year trajectory, we had some tremendous success, as I highlighted, in terms of working capital improvements, which obviously going forward, we will probably see some growth in our working capital -- operating working capital as the business continues to grow as well. So I think, a lot of what we could do to manage through both on terms and conditions, as well as internal processes in terms of payables and receivables, we've done a great job at. And that's really unlocked a lot of value.

So going forward, that kind of falls away. To your question around broader cash spend on restructuring, while we have definitely come out of what we have called the synergy delivery phase. We will continue to look at ways of optimizing our business, which may or may not entail some more cash outflows in relation to that, as we continue to do that. So as we indicated, we're very comfortable with the at least EUR1 billion, and we will continue to update you as things evolve during the course of the year.

Fintan Ryan -- JP Morgan -- Analyst

Great. And so, just as a follow-up. Conceptually, is it fair to say that along with the investments in marketing behind your innovation -- new products, is that -- is it fair to say the growth in those products is also working capital investments required as well?

Nik Jhangiani -- Chief Financial Officer

Yeah, there definitely will be working capital investments required, but I wouldn't necessarily call those out to separately from the rest of the overall business growth that we will continue to see that will clearly have an impact, given that we've now kind of got a good baseline on our working capital.

Fintan Ryan -- JP Morgan -- Analyst

Great. Very clear. Thank you.

Operator

And your next question comes from the line of Andrea Pistacchi with Deutsche Bank. Andrea, your line is open.

Andrea Pistacchi -- Deutsche Bank Research -- Analyst

Yes, hi. Good morning, good afternoon. At Q3, you had called out the difficult consumer environment in GB and France. Leaving aside temporary disruptions from customer negotiations, can you update us a bit on how you see the consumer in these two markets, please?

Damian Gammell -- Chief Executive Officer

Yeah. As you've seen from our results, we enjoyed a really strong finish to the year in both of those markets in terms of our revenue growth, and we continue to see solid share gains. So both markets continue to perform well. Clearly, GB has come through a lot of volatility on a macro level, with Brexit and the general election. But that in some ways, has now settled down. So we continue to see the category growing low-single-digit in GB, as we go through 2020, and also in France. And with the changes we're making, both in our portfolio and in our execution, we would continue to see us participating and growing share in that growth.

So overall, the NARTD and in particular, the sparkling category in both France and GB remains very vibrant. And a lot of the innovation we're bringing, and indeed our competitors to those categories, is stimulating a lot of growth. And I suppose a good news looking back at 2019 is that we took a larger share of that growth than anybody else, which is great. So overall positive, as we move into 2020.

Andrea Pistacchi -- Deutsche Bank Research -- Analyst

If I may, as a follow up on a different market, please, on Germany. So from the January 1, I think you've taken over from Carlsberg, the contract for the German-Danish border. Is there any way you could quantify the benefit, but also how are you integrating this additional volume into your German production footprint? Should we expect a smooth process, or could it create any short-term disruption?

Damian Gammell -- Chief Executive Officer

Yeah, so that business has been around for quite a while. It's basically quite a dynamic group of customers. So when you refer to kind of one contract, it's really a very normal commercial situation. Coming into 2020, we have secured some of that business going forward. And obviously, we're pleased with that. We're still looking at what that means for the full year, but clearly, it will allow us to source some of that product from our existing capacity within CCEP. And if needed, clearly we've got partners that we can access short-term capacity through, if we require going forward.

So it's something that has happened reasonably smoothly. But again, it's a business that the German -- our German businesses have been involved in before, but obviously, we're happy to get a bit more revenue as we go into 2020. And it's something that clearly as we move looking toward April, we'll have a little bit more insight on how that business is performing, and be happy to update you then.

Andrea Pistacchi -- Deutsche Bank Research -- Analyst

Great. Thank you.

Operator

[Operator Instructions]

Your next question comes from the line of Nico von Stackleberg with Liberum. Nico, your line is open.

Nico von Stackleberg -- Liberum -- Analyst

Hi there. A bit of an awkward question because I'm asking the management about their KPIs. But, you mentioned potentially incorporating sustainability into the incentive planning. And you've probably given some thought to this, but are there KPIs that you feel particularly aligned with value creation? And if so, could you maybe explain that for me? Thanks.

Damian Gammell -- Chief Executive Officer

Yeah. It's well picked up, Nico. That's something we're excited about. It's obviously something that we will go through the governance process with Ramco [Phonetic] andn our full board. But clearly, they support the idea of incorporating what we believe as a critical metric for not just management, but for our whole business. So and that will be in around the area of CO2 emission, waste and plastic. We are actually looking at those metrics currently and seeking some external views on that. And also trying to look at what other companies are doing, but I think we will be an early mover in this space, which we're very proud about. We see it completely consistent with our value creation model. In fact, we know that our customers, our consumers and our employees, in particular, value that move. And they see it as a tangible commitment to making the world a better place.

That has a halo effect on our company and our brands, and on our relationships. And I think all of those lead to a longer-term stronger value creation model. And that's the way we're looking at it. A lot of the initiatives are already under way. So clearly, in some ways, our incentive change is catching up with the moves we've been making since we created CCEP. So it's probably coming a little bit later than some of the actions that we've shared around water, energy use and packaging. It's something we've tested with our management. And honestly, I was really, really surprised at how welcoming they were to have that in their metrics because they're very passionate about it. And as we've seen in our short-term metrics when we created CCEP, we took the decision to include free cash flow. And I think you've all seen the power of that.

So what gets measured, generally gets done. And if we're really, really passive about sustainability, we think it should be in there with our other metrics. So we'll share more, obviously on the specific metric and the targets. We're aiming to try and probably do that by the mid-year. And yeah, we will be able to give a bit more color around what we're measuring and what are the targets for the next three-year cycle.

But overall, an exciting commitment on behalf of our Board and the management to sign up to that.

Nico von Stackleberg -- Liberum -- Analyst

Thank you.

Operator

Your next question comes from the line of Matthew Ford with Credit Suisse. Matthew, your line is open.

Sanjeet Aujla -- Credit Suisse -- Analyst

Hi, it's actually Sanjeet here from Credit Suisse. Just a couple of questions. Firstly, are you able to talk a little bit about, or break down the growth that you've seen between the home and the away-from-home channel? Just love to get a sense of how, if at all, accretive the away-from-home channel is. I appreciate you've made a lot of investments in sales force, etc., over the last couple of years. That's my first question.

Damian Gammell -- Chief Executive Officer

Hi Sanjeet. On a strategic level, you're right. That's been a priority since we created CCEP, was to grow small packs, greater and large packs. And then also to grow out-of-retail faster than retail. And we've been delivering on that across all our markets, and also in 2019, and it's a priority for us going into 2020. So you will see us continuing to benefit from the investments made in earlier years, in terms of product distribution, volume and revenue in our away-from-home channels. And we've also moved to a more segmented structure, which we've shared previously and that's unlocking a lot more growth. And clearly, as we explore brands like Costa and build on the ready-to-drink platform and move that more into at-work [Indecipherable] that is another example of where our brand innovation clearly fits with that objective of diversifying our revenues across more segments and more channels. So it's working. Clearly, we're pleased that packs like glass and cans and away-from-home continue to drive more value for us and our customers. And we're also pleased to see that new brands are playing a bigger role in that channel going forward as well. So, overall, I'd expect it to continue in 2020 and it's something that we're pleased with, but also focused on going forward.

Nik Jhangiani -- Chief Financial Officer

And so you just keep in mind, if you're looking at the numbers, you might see that the home channel grew faster than the away from home, but a lot of that has to do with the comps that we had particularly in GB Germany and Northern Europe from last year where we had a really good Q3. So that clearly has an impact in terms of the base of the away from home growth. On the flip side, in Iberia we had the benefit of better weather and then France, obviously you would expect to see that the home market would grow faster, given the fact that we were cycling through the Leclerc dispute. So all those would have had an impact, but to Damian's point, our strategy is unchanged in terms of how we would continue to see away from home growing faster than our home business with our small packs focus. Hope that helps.

Sanjeet Aujla -- Credit Suisse -- Analyst

Yeah, that's very helpful. Just a follow-up from that. Can you just remind us when you start lapping the the Leclerc benefit and within the rest of your French business, how disruptive as the legal and law been, if at all?

Damian Gammell -- Chief Executive Officer

Sorry, what was the last part of your question?

Sanjeet Aujla -- Credit Suisse -- Analyst

The Eagle [Phonetic] in regulation that we've seen across the...

Damian Gammell -- Chief Executive Officer

Yes, OK. Yes. So we're more or less through Leclerc. So I think you're looking at a comparable performance in France now, so that's behind us. I think the changes that were made probably had a bigger impact on other categories and suppliers than us. We had already if you recall back I think 2017 made some big changes in our pack pricing architecture in France, and we did that through a lens of value creation for our customers, but quite quickly on the back of that new law came in. So we were slightly ahead of other categories, and we've been benefiting from that in '18-'19, obviously absent Leclerc disruption and as you can see in our Q4 numbers our French category is performing really strongly for our customers and driving a lot of revenue. So Leclerc it through and those changes have been positive for us and I think for most of the French retailers.

Sanjeet Aujla -- Credit Suisse -- Analyst

All right. Thank you.

Operator

Your next question comes from the line of Charlie Higgs with Redburn. Charlie, your line is open.

Chris Pitcher -- Redburn -- Analyst

Hi there. It's Chris from Redburn. A couple of questions. On Coke Zero, can you give us some idea of what the distribution looks like now for Coke Zero versus classic and what you're sort of targets are on a sort of a couple of year view. And then as my sort of follow-up, Nik within the cost of goods guidance, how much are we starting to see the cost inflation coming in for more sustainable packaging is that an element of the Cokes guidance and should we expect that sort of continue to work through as you head toward your targets. Thanks.

Damian Gammell -- Chief Executive Officer

Hi, Chris. On Coca-Cola Zero broadly it's distribution now as a priority with Coca-Cola Classic. So I would put one caveat on that and if you live in London you know what I'm going to say. In GB we're not quite there yet. Generally, we have got always two colas available in GB. Definitely Coke Classic and then depending on the account, it could be Coke Zero or Diet Coke given the size of Diet Coke in GB. So broadly speaking the distribution is probably at a 100% for sugar-free and the classic variety in GB as well. It's just you'll probably find a bit more Diet Coke in GB than you will Coke Zero, given the strength of our brand. But across all of our markets now, we broadly enjoy party distribution on Coke Zero with Coke Classic and that's something that's driven that 13% plus growth on that brand over a number of years. We still see opportunities. So, clearly not just brand availability but pack availability, and certainly on Coke Zero and on to Lauren's point area on our new Coca-Cola Light or taste and Diet Coke, we still see a lot of opportunities for some of the small pack varieties, particularly in retail, more premiums on glass as well, which we're rolling out and so brand distribution I think we're in good shape, but still some upside for some package distribution which we're going after in 2020 and beyond.

Nik Jhangiani -- Chief Financial Officer

And Chris, on your question on the COGS guidance. Yes, you do see in on costs from the recycled PET, but then on the flip side, you are also seeing a downward trend, at least for 2020 on the virgin PET. But going forward, I would also expect over the mid-term with more availability of recycled PET in the markets that will also hopefully moderate those prices. So all-in-all, like we said our commodities will be up roughly about the 1% which I think is the basket of the variety of moving parts, but we will continue to track that and it's the right thing to do for our business as Damian talked about, when we think about what our customers want, what our consumers want from us. And over time, we do believe that will create a more sustainable business focused on having the right availability of the right type of packs for a variety of different consumers.

Damian Gammell -- Chief Executive Officer

And I'll just add to that, I mean I think it's an important mindset. I mean, we view that as an investment of brand value rather than the cost. Because clearly we know that consumers and customers value brands that are sustainable more than those that are not. So while it flows through the COGS, it ultimately is a driver of brand value and over time we'd expect that would protect our existing value proposition but it may also over time allow us to extract more value, and that's something clearly as we prioritize, some of the packaging innovations, it may well allow us to continue to protect but also grow value in some of those brands. So we clearly are conscious that we need to manage our profit and cash delivery in that environment. And we're doing that. But we're also really looking at that as an investment in the future of our brands, rather than just the cost.

Chris Pitcher -- Redburn -- Analyst

Great, thanks very much.

Operator

Your next question comes from the line of Simon Hales with Citi. Simon, your line is open.

Simon Hales -- Citigroup -- Analyst

Thank you. Good afternoon, gents. I wonder if you could just talk a little bit more about the performance of the Schweppes into the year end. Clearly still getting good distribution and share gain. I'm just interested in how you see that develop as we move through 2020? What you're seeing in terms of repeat purchase and general competitive dynamics?

Damian Gammell -- Chief Executive Officer

Hi, Simon. It's been a long time commenting on Schweppes and to keep that caveat. We had a few years where we were challenged in that brand. And as we've shared with you on a number of calls, we've taken some great initiatives coming out of 2018 into 2019 around packaging. Some of the new labeling flavors and obviously a more premium proposition, and we really saw the benefit of that coming through the second half of 2019. We'd expect that to continue. Clearly, we have still got distribution opportunities from some customers that moved away from that brand in '16 and '17. So we're seeing some customers and consumers coming back. We clearly have an opportunity in retail, we're not participating yet in some of the pack formats that our competitors are offering, that's something we aim to close as we move through 2020.

And we are working on a new Comms platform with the Coke company around the brand, and we'll continue to explore new flavors as well. So great to see the brand responding and great to see the share coming back, but clearly we're not back to where we were a number of years ago. So we're enjoying the success and we wanted to continue. We are cognizant that we are catching up for some lost ground earlier, and that gives us momentum into 2020 in that category. We also have Royal Bliss outside of GB, which again gives us an excellent brand and not just in Iberia, but something that we're going to look across the market. So overall good news in Schweppes but more to come.

Simon Hales -- Citigroup -- Analyst

Got it. And just separately, on another note, as a follow-up, can I just ask around the new share buyback program. Just from a technical standpoint, are you able to go into market and immediately execute or start executing against that? Or before we perhaps start to see you in the open market, buying back stock?

Nik Jhangiani -- Chief Financial Officer

Yeah, as I said Simon we will actually initiate that program next week. So you will see us back in the market and we'll probably do that pro rata through the course of the year, obviously subject to AGM approval and the other caveats I put out before.

Simon Hales -- Citigroup -- Analyst

[Indecipherable]. Thank you.

Operator

Your next question comes from the line of Robert Ottenstein with Evercore ISI. Robert, your line is open.

Yutong Zhou -- Evercore ISI -- Analyst

Hi, thanks for taking my question. Again, just in terms of looking into 2020. Could you give us some color on the innovations that you're most excited about? And also, any changes in consumer trends that you're seeing?

Damian Gammell -- Chief Executive Officer

So on the innovation side, I think a lot of it will be building on momentum that we created in 2019. So clearly by category we're excited about innovation on our core sparkling brand, so Fanta flavors continue to perform well. We've recently moved Sprite into clear PET and given that brand and update, so that's an exciting innovation. And on our core Coca-Cola trademark we'll continue to see innovation on packaging. So that's something that we will see a lot of as we go through 2020.

On the brand side clearly, as I talked about in my comments we will bring more Fuze Tea. We'll see more really cool brands coming across the energy segment obviously Coke Energy and Coke Energy Cherry, our Monster innovation pipeline looks great. We've got Costa coffee. So we really have got a rich portfolio of innovation that has delivered in 2019, but will also support our growth into 2020.

On the consumer, again as I mentioned earlier, we see robust growth in the category. We see consumers responding well to innovation and choice. We see them responding well to some of our low and sugar-free varieties. They continue to look for new and exciting beverages, I think as I just mentioned, we've got a long list of those coming. They also are looking for more sustainable credentials, we talked about that on the call. So we see that growing in importance and clearly, they continue to respond well to promotions. And as we look into 2020, we've got some big assets from the Olympics and from the Euros on the football side. So that's something that we know our consumers in Europe always enjoyed participating in.

So overall, solid category growth expectations on the back of a solid consumer environment, but that's something obviously we'll keep a close eye on as we go through 2020.

Yutong Zhou -- Evercore ISI -- Analyst

Great, thank you.

Operator

And your final question comes from the line of Nico Von Stackelberg with Liberum. Nico, your line is open.

Nico von Stackleberg -- Liberum -- Analyst

Great, thanks. I want to ask about new products. On the Coca-Cola Signature mixers, could you give me a rough feel for how successful it has been so far. And I'm also quite curious about, it seems like it's predominantly an on trade product that you can get it on e-commerce, but can you tell me a little bit about how you think about advertising and marketing and activating the brand. So I guess in short, what sort of percentage of A&P of sales do you spend on Signature mixers? And as another question, if I can get it in there, a little bit particularly, is do you expect a halt to come to CCEP in the foreseeable future the product from the states, it's the sparkling water, that's caffeinated. Thanks.

Damian Gammell -- Chief Executive Officer

So on Coke Signature mixers, I mean that was a a really cool innovation on the Coke trademark that we brought to market last year. So it's very early and we predominantly focus as you said on a number of on-trade outlets to learn and drive trial. We haven't really rolled it out in retail. Although, you can find it in some select accounts in GB. We don't really disclose the amount of A&P on a brand level, but it's very small Nico. I mean, it's something that we will continue to trial within 2020, see if it's going to get scalable. We've got some very positive customer and consumer feedback. But overall, excluding GB the mixer segment is quite small anyway. And within that dark mixers are starting to develop at least in our view that's the right space to be in with Coke Signature mixers. But again, very small and really at the beginning of exploring the opportunity on that brand and format.

Again, we have a very engaging and collaborative process with the Coke company where we look at the brands that they have that don't exist in our territories. And we have a -- basically every two months, we sit down and we view that as a leadership team. We'll include in our deliberations is that a brand that could work in Europe or not, but we do that across hundreds of brands with the Coke company. I mean the great thing for us is they bring a lot of brands, and globally to Europe, that we can just test and see if the respond well here or not and do the same with AHA.

Nico von Stackleberg -- Liberum -- Analyst

Excellent. Thank you, guys. Appreciate it.

Damian Gammell -- Chief Executive Officer

Thank you Nico. So again, I'd like to thank you may on behalf of Sarah, Nik, and I for taking the time to join us today. And that's been really great to share with you another great year of results for CCEP in 2019. And most importantly share with you our guidance and some color on how we see our business developing in 2020. We look forward to our call in April and most importantly, we will look forward to our Capital Markets Day in May where we again will take the time to update you on our business and also share with you perspectives on what is a very exciting future for all our shareholders at CCEP. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 61 minutes

Call participants:

Sarah Willett -- Vice President, Investor Relations

Damian Gammell -- Chief Executive Officer

Nik Jhangiani -- Chief Financial Officer

Lauren Lieberman -- Barclays -- Analyst

Yutong Zhou -- Evercore ISI -- Analyst

Nico von Stackleberg -- Liberum -- Analyst

Fintan Ryan -- JP Morgan -- Analyst

Andrea Pistacchi -- Deutsche Bank Research -- Analyst

Sanjeet Aujla -- Credit Suisse -- Analyst

Chris Pitcher -- Redburn -- Analyst

Simon Hales -- Citigroup -- Analyst

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