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Coca-Cola European Partners basks in 'total beverage' future – Analysis

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The non-alcoholic ready-to-drink market (NARTD) is a "great place to be", according to Coca-Cola European Partners.

Coca-Cola European Partners was created in May 2016, following a combination of Coca-Cola Enterprises with Coca-Cola Iberian Partners and the German division of The Coca-Cola Co

Coca-Cola European Partners was created in May 2016, following a combination of Coca-Cola Enterprises with Coca-Cola Iberian Partners and the German division of The Coca-Cola Co

At a Capital Markets Day in Germany this week, the bottler highlighted growth across all segments - from RTD coffee to sparkling soft drinks. In the notes that followed, analysts were upbeat about the company's "total beverage" future.

"CCEP still sees sizeable growth opportunities in the beverage category in Western Europe," says Bernstein analyst Ali Dibadj, " including in CSDs, and is seeking more than its fair share through deep customer and portfolio segmentation."

In a presentation to analysts, CCEP's VP for commercial development, Stephen Lusk, highlighted the potential for NARTDs in CCEP's markets over the next ten years, with total NARTD value expected to grow by EUR30bn (US$39bn) to EUR128bn.

The CCEP portfolio now sits in five silos: CSDs (including brand Coca-Cola, Fanta and Schweppes), water (including Oasis, Vitaminwater and Glaceau Smartwater), RTD tea (including Honest and Fuzetea), energy (including Monster and Nalu) and RTD coffee/plant-based (including AdeZ and Honest).

In her note following the day of presentations, Wells Fargo analyst Bonnie Herzog says: "Management was optimistic about the broader macro backdrop for CCEP's categories and, simply put, believes that CCEP is very well-positioned as a leader within NARTD beverages in Western Europe today. We concur - and, while consumer growth in Western Europe has been muted in recent years, CCEP's categories have continued to grow respectably (+2.6% overall in 1H18)."

As well as a diverse portfolio, SIG analyst Pablo Zuanic believes the company is "pulling all the right levers" to gain total beverage share, including smaller pack sizes, more out-of-home business and promotional discipline as well as " non-CSDs not being margin dilutive ... given individual formats and selective growth choices".

During his presentation, Lusk also pin-pointed "fundamentally-changing trends" among consumers, including health, tech and a desire to 'make a difference'. He said the company has innovated to "mirror these trends". According to Lusk, one-third of new SKUs are low calorie, while 55% of new SKUs have been launched in non-PET format.

Zuanic added that CCEP is "defining consumers' drinking motivations more broadly", as well as driving "deeper segmentation of occasions".

"It is further segmenting routes to market, and aligning the organisation accordingly," he added.

CCEP's quest for total beverage status may just be complete. 

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Sectors: Soft drinks, Water

Companies: Fanta

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