Delivering to the Consumer - swirepacific.comgrowth in sales of Coke Zero, as consumer preference...
Transcript of Delivering to the Consumer - swirepacific.comgrowth in sales of Coke Zero, as consumer preference...
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Deliveringto the Consumer
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nnual Report �008
Swire Beverages operates nine Coca-Cola bottling plants in Mainland China. In �008, it sold over 600 million cases of soft drinks in seven provinces. In addition to Coca-Cola, best selling brands include Sprite, Nestea and Nescafé.
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The Beverages Division has the right to manufacture, market and distribute the products of
The Coca-Cola Company in Hong Kong, Taiwan, seven provinces in Mainland China and an
extensive area of the western USA.
Beverages Division
2008 �007 HK$M HK$M
Turnover 8,001 7,066 Operating profit 510 483 Share of post-tax profits from jointly controlled and associated companies 269 191 Attributable profit 585 507
Segment information Turnover Attributable Profit
2008 �007 2008 �007 HK$M HK$M HK$M HK$M
Hong Kong 1,799 1,69� 157 134 Taiwan 1,358 1,0�7 21 �7 USA 3,512 3,�94 256 �7� Mainland China* 1,332 1,053 169 113 Central costs – – (18 ) (39 )
Total 8,001 7,066 585 507
* Mainland China turnover is attributable mainly to the Fujian Coca-Cola franchise. All other interests in Mainland China are jointly controlled or associated companies, the total turnover of which in Mainland China (including sales between the interests) was HK$14,749 million (�007: HK$7,764 million).
�008 OVERVIEW
• Attributable profit reached HK$585 million, a 15%
increase over �007, principally reflecting a strong
performance from the Mainland China franchises.
• Overall sales volumes grew by 17% with Mainland China,
Taiwan and Hong Kong all showing solid growth in
difficult market conditions.
Hong Kong
2008 Results
• Attributable profit totalled HK$157 million, a 17%
increase over �007. In a market that declined 1%, overall
sales volumes grew by 5% with both existing brands and
line extensions contributing.
• Sparkling beverage sales volumes grew by �%, with Coca-
Cola remaining the leading brand in the sparkling market
and Coke Zero building on its launch in �007. New
Schweppes flavours were successfully launched in the
summer.
• Still beverage sales volumes (excluding water) grew by
11%, led by sustained growth in sales of Healthworks
(a health-focused drinks brand) and strong sales of
MinuteMaid orange and grapefruit juice drinks following a
re-launch in October.
• Sales of Bonaqua mineralised water continued to grow.
Bonaqua has become the market leader in the water
category.
• Price increases were constrained in a competitive market,
while raw material costs continued to rise for most of the
year. An improved sales mix reduced pressure on margins.
• Better weather in the second-half helped to offset some
early signs of weakness in consumer spending.
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nnual Report �008
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Hong Kong
Mainland China
USA
Taiwan
Hong Kong
Mainland China
USA
Taiwan
Sales volumes in million unit cases
Millionunit cases
Hong Kong
Mainland China
USA
Taiwan
Capital expenditure by operations
HK$M
Net assets employed at operationsTaiwan
2008 Results
• Attributable profit totalled HK$�1 million, a ��% decline
from �007. Sales volumes grew by �6%, principally
reflecting the successful mid-year re-launch of MinuteMaid
orange and grapefruit juice drinks.
• Sparkling beverage sales volumes grew by 11%, mainly
driven by Coca-Cola. Still beverage sales volumes
grew by 64% principally as a result of the re-launch of
MinuteMaid, which ended the year as the market leader
in juices.
• Raw material costs, especially sweeteners, rose
significantly and depressed margins.
• Pricing was constrained by the expansion of private label
brands and a contraction in the total beverages market.
• Restructuring costs of HK$10 million were incurred after a
detailed review of options designed to improve operational
efficiencies.
USA
2008 Results
• Attributable profits totalled HK$�56 million, a 6%
decline from �007. Overall sales volumes were steady, as
growth in still beverage sales offset weakness in sparkling
beverage sales.
• Sparkling beverage volumes declined by 1% despite strong
growth in sales of Coke Zero, as consumer preference
turned to still beverages.
• Still beverage (excluding Dasani water) sales volumes grew
by 16%, reflecting the introduction of Glacéau (a leading
vitamin-enhanced water brand) and a strong performance
by energy brands for much of the year.
• Water sales under the Dasani brand grew marginally.
The total market for packaged waters weakened in the
economic downturn.
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Shaanxi
Washington
Oregon Idaho
California
Nevada
Arizona
Utah
Wyoming
Colorado
Nebraska
Henan Jiangsu
Anhui
Zhejiang
Fujian
TaiwanGuangdong
Hong Kong
2008 Per Capita Consumption(8oz servings)
Bottling Plant
above 5026 to 5010 to 25
Shaanxi
Washington
Oregon Idaho
California
Nevada
Arizona
Utah
Wyoming
Colorado
Nebraska
SouthDakota
Henan Jiangsu
Anhui
Zhejiang
Fujian
TaiwanGuangdong
Hong Kong
2008 per capita consumption(8 oz servings)
Bottling plant
above 5026 to 5010 to 25
USAGreater China• Raw material costs and, for much of the year, fuel costs
increased substantially but margins were maintained by
improved pricing and a favourable product mix.
• Market conditions started to weaken in the first-half as
high fuel prices began to affect consumer discretionary
spending, especially in restaurants and convenience stores.
• The worsening US economy in the second-half led to
a further decline in market conditions, with consumers
starting to trade down from higher priced categories.
Mainland China
2008 Results
• Mainland China operations generated an attributable profit
of HK$169 million, a 50% increase over �007. Overall
sales volumes grew by �0% reflecting further expansion
of the distribution network and a continued focus on cold
drink availability through investment in coolers.
• Sparkling beverage sales volumes grew by 13%, with
Sprite maintaining its position as the market leader in this
category. Coke Zero was launched in selective markets
and generated encouraging early results.
• Still beverage sales volumes (excluding water) grew
by 38%, primarily reflecting 4�% growth in sales of
MinuteMaid and the successful launch of Yuan Ye, a
mainstream tea brand.
• Water sales grew by 34% as a new brand of mineralised
water, Ice Dew, was launched towards the end of the year.
• Margins remained under pressure from high material costs
and competitive constraints on pricing.
• Better weather helped the second-half results. Those
franchise provinces (Guangdong, Jiangsu, Fujian) most
exposed to the weakening of export-orientated industries
experienced some slowing of growth in the second
half, but this was partially offset by strong growth in less
developed provinces (Shaanxi, Henan, Anhui).
• The manufacture, sale and distribution of the Campbell’s
Soup Company’s range of Swanson’s soup broths
commenced in Guangdong province in late �007, and was
extended to the Shanghai market towards the end of �008.
Encouraging sales were reported and prospects for further
development are being explored.
• A 41% interest in Coca-Cola Bottlers Manufacturing
Holdings Limited was acquired during the year. This
company manufactures still beverages on behalf of all
Coca-Cola franchisee bottlers in Mainland China.
2009 Outlook
• Economic conditions will be challenging in all markets,
but especially so in the USA, where sales volumes are
expected to be under significant pressure in �009.
• The Mainland China market will face challenges but
continued growth is expected as distribution continues
to be expanded into less-developed rural regions. The
Hong Kong and Taiwan markets will continue to be very
competitive, but the successful re-launch of MinuteMaid in
both markets will be built upon in �009.
• The benefit of the recent reduction in the cost of
certain raw materials will not be felt until contractual
commitments extending into the second half of �009 have
been met.
Geoff L Cundle
Review of Operations – Beverages Division
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nnual Report �008
Shaanxi
Washington
Oregon Idaho
California
Nevada
Arizona
Utah
Wyoming
Colorado
Nebraska
Henan Jiangsu
Anhui
Zhejiang
Fujian
TaiwanGuangdong
Hong Kong
2008 Per Capita Consumption(8oz servings)
Bottling Plant
above 5026 to 5010 to 25
Shaanxi
Washington
Oregon Idaho
California
Nevada
Arizona
Utah
Wyoming
Colorado
Nebraska
SouthDakota
Henan Jiangsu
Anhui
Zhejiang
Fujian
TaiwanGuangdong
Hong Kong
2008 per capita consumption(8 oz servings)
Bottling plant
above 5026 to 5010 to 25
USAGreater China
GDP Per capita Population No. of per capita consumption (millions) employees (US$) (8 oz servings)
Mainland China Guangdong 65.6 4,�58 6,�89 64 Zhejiang 47.1 �,470 6,��� 69 Anhui 67.� 1,187 1,995 13 Jiangsu 55.3 �,469 3,744 40 Fujian 36.7 1,663 4,103 40 Shaanxi 38.4 1,01� �,440 �4 Henan 98.7 �,050 �,347 15Hong Kong 7.0 1,378 30,800 197Taiwan �3.0 965 16,848 60USA 6.1 1,781 41,04� 338
Coca-Cola Franchise Territories
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Sparkling Water
Still (excluding water)
Breakdown of total volumes by category
Breakdown of total volumes by package
Breakdown of total volumes by channel
TotalMainlandChina
USATaiwanHK
TotalMainlandChina
USATaiwanHKTotalMainlandChina
USATaiwanHK
Others
Can
PET
Modern Trade Others
General Trade
Fountain