Coca-Cola Bottlers Japan Holdings Inc. (2579) Earnings Call Transcript & Summary

[Audio Gap] He's in Corporate Communications for Coca-Cola Bottlers Japan Holdings. Thank you very much for joining us today for our full year and fourth quarter 2019 earnings presentation for analysts and investors. I'm joined by our leadership team here at the front of the room. Following prepared remarks by President, Calin Dragan; and CFO, Bjorn Ulgenes; as well as a marketing update from Mr. Takashi Wasa from the Coca-Cola Japan Company, we will be happy to take your questions. This presentation is intended for analysts and investors, so we ask members of the media in attendance to please hold your questions for our media session scheduled separately today. Simultaneous translation in both Japanese and English is being provided for today's presentation and during the questions and answers. Finally, before we begin, let me remind you that today's presentation contains forward-looking statements, including statements concerning annual and long-term earnings objectives and should be considered together with cautionary statements contained in our supporting presentation deck. Both are posted to the Investors section of our company website at ccbj-holdings.com. Please look on our website for this information in both Japanese and in English. Now I'd like to turn the presentation over to Calin Dragan. Calin-san?

Thank you, Ray, and good afternoon, everyone. I am Calin Dragan. And thank you all for joining us today. CFO, Bjorn Ulgenes, and I will be taking you through our full year 2019 results, 2020 outlook and an update on the progress we have made in this transition year to set the foundation for our 2024 strategic business plan. Also, I have again asked Wasa-san, Chief Marketing Officer at Coca-Cola Japan, to join us on stage to provide detail on our 2020 brand and marketing plans to drive value for the combined Coca-Cola system. Coca-Cola Japan and Coca-Cola Bottlers Japan are working well together with an aligned investment and activity plan to drive growth and win in this important market. Having Wasa-san here is a good example of this joint commitment on the part of the Coca-Cola system to transform and grow our business. So let's get started. Here on Slide 4, let me summarize the key highlights of the full year results that we have announced yesterday. Overall, we grew revenue 1% in the fourth quarter, reflecting core beverage volume growth of 1% as well as the benefit of the nationwide launch of the Lemon-dou alcohol brand. Full year revenue declined 1 year -- 1% on a 2% volume decline. This reflects our first wholesale price increase in 27 years basically in April and as well a very tough month of July for the entire industry due to a rainy and very cool weather, if you remember. We continued to grow our market share, which improved through the year with value share growth ahead of volume share in the fourth quarter, led by coffee, tea and sports drinks. All of this means that full year business income for our core beverage business came in ahead of the plan announced in May. Our total business income was basically in line with the plan as the good results in our beverage business were able to offset weaker results of our health and skincare business. We are strongly committed to investing to grow our business with about JPY 90 billion in CapEx in 2019 and a similar plan in 2020. This includes important business infrastructure, including new manufacturing lines, large automated warehouses, and IT solutions such as CokeOne ERP system. Finally, I always say business as usual is not an option. And this is reflected in the major transformation work we have in place. With our 2019 results and ongoing transformation projects, I think we have a solid foundation to start our new 5-year business plan. So let me touch on the progress we are making on our transformation journey so far. Please turn to Slide 5. In the strategic business plan we announced last August, I talked about 6 main focus areas listed here, which will drive our transformation journey over the coming years. I think it is helpful to look at the progress we made in these important areas in 2019. Business as usual is not an option. And this idea is the core of everything we do, and I'm pleased at how quickly we are moving to tackle this fundamental change. In just the last year alone, we refreshed the composition of our Board of Directors with an eye to more independence, diversity and governance. We were the first to launch a wholesale price increase in almost 3 decades, in 27 years. We completed a voluntary employee retirement program in May accepted by close to 1,000 employees, and we are making changes in our organizational structure and consolidating infrastructure as we invest for the future. Finally, we are innovating in new ways such as the launch of the first in the world alcohol brand, Lemon-dou, and the announcement of ambitious sustainable packaging goals as part of our World Without Waste program. You can, of course, see the many other examples of progress we are making against these focus areas here in the slide, but most importantly for this audience, I'm encouraged that we delivered 2019 business income roughly in line with the plan in spite of all the challenges of this year. Indeed, our core beverage business started to show signs of recovery and tractions in 2019, and I believe we have established a good starting point for our 5-year strategic business plan, which basically kicks off in 2020. Let me now ask CFO, Bjorn Ulgenes, to review our 2019 results and financial targets for 2020. Bjorn?

Thank you, Calin. Good afternoon, everyone. I'm Bjorn Ulgenes, CFO of Coca-Cola Bottlers Holdings Japan. Let me take a few minutes to discuss our full year 2019 results and 2020 outlook. On Slide 7, you can see a summary of our 2019 results, including a segment breakdown of our core beverage business and the health and skincare business. Consolidated revenue was down 1% on a 2% volume decline as we navigated the ongoing supply disruption from the flooding in Western Japan as well as the impact of large PET wholesale price increase and the cold and rainy start to the summer. This volume number does not include alcohol, which was just launched nationally in the fourth quarter. As you can see in the footnote on Slide 7, we sold 1.9 million cases of the Lemon-dou brand in 2019. Business income in our core beverage segment was better than plan despite somewhat weaker volume performance in a still capacity-constrained environment this year. This offset the results of our health and skincare business and delivered consolidated business income substantially in line with the plan. We had a consolidated operating loss of JPY 55 billion for the year, which includes the JPY 62 billion goodwill impairment we announced in the second quarter and other nonrecurring expenses related to business transformation and restructuring initiatives. On Slide 8, you can see the main drivers of our full year business income. Let's review the individual drivers, starting on the left-hand side of the slide. Please look at volume, price and mix, which shows the year-on-year change in marginal profit for our beverage business. We experienced a net JPY 8.4 billion decline in full year as beverage volume was down 2%. This marginal profit performance moderated in Q4 to slightly positive, supported by 1% overall volume growth in the quarter and continued price/mix improvement as the impact of April wholesale price increase settled in and the national launch of the Lemon-dou alcohol brand started contributing to marginal profits. Of the JPY 8.4 billion full year decline, volume and channel mix make up approximately JPY 8.1 billion mainly due to a 1% decline in vending and a 4% decline in convenience store volume. Positive pricing and negative package mix essentially offset each other. Price/mix reflects the benefit of the wholesale price increase, the more premium launches and is offset by negative package mix from the continuing decline in bottle can volume and strategic expansion of lower price offerings in the vending channel to drive transaction growth. Fixed marketing expense, or DME, decreased JPY 1.1 billion in 2019. We managed our DME spend levels to reflect the full year volume trends, and we made initial progress in prioritizing fewer but bigger strategic brand launches. Fourth quarter DME was essentially flat versus prior year. Raw materials and commodity cost pressures eased during the year to JPY 200 million. Manufacturing costs increased JPY 2.6 billion for the full year, reflecting lower sales volume and ongoing response to supply disruptions after the flooding in the second half of 2018. Manufacturing costs in the fourth quarter turned slightly positive as we benefited from volume growth and a gradually recovering supply environment. The others. There was a benefit from a reduction in personnel expenses mainly driven by the voluntary retirement program from last May and the consolidation of retirement benefit plans announced in the first quarter. These positive effects were partially offset by increases in logistics and distribution expenses that are expected to continue until we normalize the supply network at the end of the second quarter 2020. Business income for the health and skincare businesses decreased JPY 1.7 billion in the full year, reflecting continued top line pressure as we evaluate the strategic plan of this business and begin a renewal of core brands and new product launches starting in the fourth quarter 2019. You can find volume performance for nonalcoholic beverages with commentary by channel, category and package on Slide 9 and 10. As mentioned earlier, full year volume declined 2% with 1% growth in the fourth quarter. The revenue per case improvement from April wholesale price increase contributed to price/mix improvements in the supermarket and drug and discounter channels. Fourth quarter volume grew 1%, led by supermarket and drug and discounter channel growth as the impact of the price increase settled in and we cycled the prior year supply disruption. In addition, vending performance continued to moderate from the volume declines in 2018 with even volume in the fourth quarter and 1% volume growth in the third quarter. This momentum in the vending channel reflects our continued efforts to drive traffic through a focus on coffee as well as new nationwide marketing campaign exclusively for the vending channel. Although overall coffee volume for the year was flat, coffee volume in the important vending channel grew 1% in both full year and the fourth quarter. The revenue per case decline in vending reflects the consumer shift away from bottle cans as well as our strategic focus on increasing traffic to the vending channel by expanding lower price point offerings centered on the 170-gram can of Georgia brand coffee. Sparkling, nonsugar tea and sport drink volumes were impacted by the wholesale price hike and rainy cool weather in July, but volume performance has moderated in the fourth quarter, supported by new launches, including Coca-Cola Energy and growth in Ayataka Green Tea and Aquarius Zero. On Slide 10, we have provided for your reference fourth quarter volume by channel and category together with full year and fourth quarter packaging data. On Slide 11, you will find an update on our nonalcoholic ready-to-drink market share and retail pricing trends based on scanning data. We maintained positive market share momentum in the fourth quarter with value share growth outpacing volume share. And we see continued improvement in retail pricing for large PET packages versus the prior year from the April wholesale price increase. Fourth quarter market share growth was driven by coffee, nonsugar tea and sports drinks. And premium-priced new launches, such as Coca-Cola Energy and the full renewal of Kochakaden Royal Milk Tea, helped to drive value share growth. Now let me move to our full year 2020 outlook. I will discuss our business plan and targets, and then Calin and Wasa-san will take you through the strategy and specific initiatives. Let's move to Slide 13, which shows our full year 2020 forecast. The overall message here is that we are growing business income by about 20% while making certain strategic or nonrecurring investments in transformation programs that will impact operating income. In 2020, we expect to grow overall beverage business volume 3%, including alcohol, which was launched nationwide in the fourth quarter of 2019. Organic, nonalcoholic ready-to-drink volume growth would be 2%. Overall NARTD industry volume is expected to be slightly negative in 2020. Therefore, we expect to gain market share with value share growth driven by volume as we focus on growing sales volume by increasing space to sell, leveraging nonprice promotions and investing behind big bet innovation and brand launches in a year with the Olympic Games in Tokyo. Let me provide some additional color on by-channel volume expectations. We expect relatively stable vending performance in line with the trend of Q4 2019 with some recovery in convenience stores and a low to mid-digit -- single-digit growth in supermarkets and drug and discounter channels. Because retail channel growth will continue ahead of vending, we do expect continued channel pressure in 2020. We are targeting consolidated revenue growth of 1.4% with 1% growth of our -- in our beverage business segment, including a full year of Lemon-dou, which is helping to narrow the gap between volume and revenue growth. In addition, we are planning for 10% growth in health and skincare following a tough year for that business. Consolidated business income is expected to grow 20% with a 22% improvement in the core beverage business. During the year, you will likely see puts and takes relating to deductions from revenue and marketing expense as we continue to align with CCJC, a system marketing investment, to drive growth. This reflects our marketing investment focus on big bet brand launches, more consumer promotions and increasing points of sale in the outlet rather than simple discounting and should have a neutral impact on our overall business income outlook this year. In addition, we are expecting heavier marketing investment in the first half of the year in support of brand launches and Olympics activation after a relatively light marketing calendar in the fourth quarter last year. Consolidated operating income is expected to be JPY 14 billion, reflecting cycling of prior year onetime expenses for the voluntary retirement program and goodwill impairment and also including strategic nonrecurring expenses related to business transformation and other restructuring initiatives. Given increasing depreciation as a result of the current investment cycle as we grow and renew production capacity and increase vending machine placements, we have also shared our expectation for EBITDA, which we estimate will grow 11% to JPY 80 billion. On Slide 14, you can see the drivers of our 2020 business income of JPY 18 billion. Marginal profit related to our commercial activities is expected to grow JPY 5.8 billion. This reflects cycling of the JPY 8.4 billion decline in 2019 and is driven by 3% volume growth, including alcohol. The impact of volume and channel mix is expected to be positive JPY 4.2 billion with price and package mix down JPY 2.2 billion. Alcohol would add JPY 1.6 billion. And other items, including variable costs, will contribute JPY 2.2 billion. As mentioned before, channel mix will partially offset volume growth as retail channels grow faster than the vending channel. For price/mix, the first quarter will still benefit from the wholesale price increase which was introduced in April last year although price/mix in the vending channel is expected to continue to be under pressure. Direct marketing expense, or DME, is expected to increase driven by spending in the Olympic Games, national expansion of the Lemon-dou brands and marketing support behind big bet product launches that Wasa-san will talk about shortly. Our DME focus is on more consumer promotions and increasing points of sale in the outlet rather than simple discounting. We continue -- we expect continued easing of raw materials and commodity pressure in 2020. Manufacturing will be impacted by inefficiencies in our supply network and elevated manufacturing costs through the second quarter as well as the increased depreciation from the new lines commissioned these past 2 years. Once we get our supply network back on track with additional high-speed production capacity and the replacement of the flooded Hongo plant, we expect to once again start benefiting from manufacturing efficiency initiatives, which have historically been the source of cost savings. In other expenses, we expect lower logistics and distribution expenses mainly in the second half after the new Hiroshima plant start operations, benefiting from cost-saving initiatives from vending operation transformation and commercial route-to-market activities, offset an increase from higher depreciation, Olympic venue operations and labor costs, including cycling last year's integration of pension programs and investing this year in recruiting, training and capability development. Remember, we are dealing with underlying logistic cost inflation in Japan which will offset some of the operational efficiencies and improvements we are putting in place. Finally, we expect some recovery in the health and skincare business driven by new product launches, such as the skincare balancing lotion and renewals in our main Aojiru kale juice brand as well as the corporate shopping site and logo to commemorate the 55th anniversary of the Q SAI brand. On Slide 15, we have provided a summary of some of the elements which I discussed in the previous slides that will impact cycling and quarterly phasing in 2020. We hope this helps you to model and understand the quarterly progression of our 2020 business plan. I invite you to get in touch with our Investor Relations team if you have any questions. On Slide 16, let me provide an update of our financial framework, including 2019 results and the 2020 outlook for dividends, CapEx and depreciation. We completed JPY 150 billion bond offering in September at very favorable rates to secure funds for the investments we are making for growth. Our bond credit ratings remain unchanged. Free cash flow will likely be negative in 2020 as we front-load necessary investments for growth in the first half of our strategic plan period. We have also been steadily looking at opportunities to clean up our balance sheet by selling nonessential real estate assets and cross-held investment securities. We closed JPY 10 billion cash-in from these efforts in 2019. And in terms of returns to shareholders, we completed JPY 13 billion of share repurchases in 2019 on top of JPY 68 billion in 2018. And we are staying focused on paying a stable dividend per share in this period of transformation. On the right side of the slide you will see our CapEx and depreciation for both 2019 and 2020. 2019 results came in generally in line with the expectations although slightly below the plan as the start-up of the new Hakushu production line was delayed from last December into January of this year. In 2020, we expect slightly higher CapEx versus 2019, including JPY 50 billion of strategic investment for new manufacturing facilities, incremental vending machine placements, digital transformation and the Shinsei logistics and distribution optimization project. You can see the details on the slide. Slide 17 summarizes the key metrics that we have set up for ourselves as a picture of success this year. We plan to grow consolidated revenue by 1.4% with volume growth at 3%. The delta comes primarily from channel mix as retail channels grow faster than the vending channel. Volume and value share growth are both important. Our goal is to grow value share, but growing value share requires volume growth, and this will be an area of focus in 2020. Cost reduction will be an important area for our transformation, including important vending operation process transformation. We expect close to JPY 5 billion in net cost savings this year, including upfront strategic investments we are making in CapEx and capability development this year. We expect business income to grow 20% this year to JPY 18 billion. Because we continue to make significant investments to drive growth with JPY 96 billion in CapEx planned this year, EBITDA growth will be higher than business income and we are targeting 11% EBITDA growth and a 9% EBITDA margin in 2020. Finally, as we mentioned, we are focused on maintaining a stable dividend payment during this period of transformation, so no change in the expected JPY 50 per share dividend payment in 2020. Slide 18 will be my final slide. Let me remind you of the strategic framework for our new 5-year business plan, which starts in 2020. We delivered JPY 15 billion in business income in 2019, which was substantially in line with our plan, thanks to the initial traction we are seeing in our core beverage business. This is a good starting point toward 2024 and our plan in 2020 as we continue to reset and transform this business for the future in the first year of our 5-year strategic business plan. Now Calin and Chief Marketing Officer of Coca-Cola Japan, Takashi Wasa, will take you through an update on what to expect in 2020. Calin?

Thank you, Bjorn. And let me now provide a high-level look at our 2020 strategy and initiatives, including brand and marketing strategies from Takashi Wasa. As Bjorn mentioned before, 2020 in the first -- it is the first -- 2020 is the first year of our new midterm plan. It is a year to reset and transform for growth. We are already leveraging our unique partnership asset of the 2020 Tokyo Olympic and Paralympic Games to enhance what we call our portfolio age in close collaboration with Coca-Cola Japan or CCJC. We are approaching this year with a renewed growth mindset while driving cost efficiencies. When I say growth mindset, I mean we are focusing on big bets and exciting brand plans that Wasa-san will discuss soon. We will work to return our important vending business back to health by growing transactions or customer traffic to the channel, and we are improving sales force capabilities, clearly backed by a pay-for-performance incentive plan. Driving cost efficiency. It's key to build a sustainable business and maintain -- and our main focus is on our important vending operational transformation as well as standardizing and optimizing business processes. Finally, we continue to invest in infrastructure and capabilities to support this growth mindset and to further drive cost savings. I would like now to ask Wasa-san from CCJC to discuss how we are enhancing our portfolio age by sharing elements of our marketing and brand strategies for this year. Wasa-san? [Foreign Language]

[Interpreted] Thank you. I am Wasa from CCJC. It is a pleasure to be here today. I will briefly explain our key marketing activities in 2020, but before starting 2020, I would like to reflect our fourth quarter in 2019. First is about Lemon-dou, the system's first alcoholic -- alcohol drink which we launched nationwide in October. Thanks to the strong support from consumers, our shipment volume and share gain has been ahead of the Kyushu pilot. Lemon-dou maintained high repeat purchase rate and good reputation from consumers especially on its good taste. Next is our Coca-Cola system's first-ever initiative for vending. The program focused on conveying that vending machines are convenient and supports everybody's smiling moments. We received various consumer feedback, such as they can feel relaxing moment. They can feel the warmness, et cetera. And we think this campaign resonated with them. Also, vending transactions increased, and we are considering to continue similar initiatives in the future. Now we would like to explain our 2020 marketing activities that focuses on 2 main pillars. First is to strengthen our core portfolio. In past Olympics, marketing activities focused on one brand, trademark Coca-Cola. This time, we leveraged 5 core brands which reflects the diversity of consumers' preference. We want to annualize the event and create more fans for each brand. Second is launching highly differentiated innovations. We will have focused investment for new big bet launches which offer innovative values to consumers. Later, I would like to explain Georgia Latte Nista, our big bet to be launched in March. But first, let me talk about strengthening our core portfolio. I would like to show some of our core brand marketing activities, which fully leveraged Tokyo Olympics. Let me show a video first. [Presentation]

[Interpreted] This video is the New Year countdown event held at Shibuya crossing, which we have been supporting for 4 years. We have successfully started the Olympic year with 180,000 people in Shibuya and 4 million people joined us on live stream. Next, I would like to touch on core brand activities. First is the campaign to win pair tickets for the Olympic Games. We will offer pair tickets for 1,010 pairs, 2,020 people by lottery. Consumers who buy selected Coca-Cola products and gather loyalty points on the Coke ON smartphone app are eligible for the lottery. 5 weeks have passed since launching the campaign and the number of applications reached 800,000 people, and we are encouraged by the very good start. Also, this accelerated gain new users of Coke ON and number of downloads reached 18.4 million by the end of January. Next is Georgia. 7 years have passed since we started "The world is made up from someone's work" Georgia brand campaign. This year, "Tokyo 2020 is made up from someone's work," is the key message, and we will deploy campaigns to support people working for the streaming opportunity. Last is Ayataka Green Tea. We will offer Japanese-designed packages from February 24. I would like to show you 3 TV commercials for these activities. [Presentation]

[Interpreted] Next, I would like to explain our second pillar, highly differentiated innovations by introducing Georgia Latte Nista. We already have PET coffee, Georgia Japan Craftsman, and thanks to the support from consumers, it has been growing for 23 consecutive months since its launch in April 2018. In 2020, we will focus on patronizing this Georgia Japan Craftsman as well as challenging new innovations to accelerate the PET coffee growth. What we have focused for Latte Nista is to gain the so-called café-native generation, which current RTD coffee is not able to reach. Café natives are young generations of people who frequently use cafés. Our focus for Latte Nista is the milkiness. The milkiness is what caffe latte drinkers attach importance to. We have developed a unique technology to realize the rich milkiness just like the caffe latte you can get at cafés. The milkiness of this product is 3x stronger compared to the existing Georgia PET products. We will launch Georgia Latte Nista with 2 flavor variants, Cafe Latte and Bitter Latte, on March 30. So that was my update on our 2 main pillars, strengthening core and innovation. We will fully activate Tokyo 2020 Olympics, expand our consumer base and activate the overall beverage industry through launching highly differentiated innovation, starting from Latte Nista. Thank you very much.

I hope you'll agree that we have an exciting lineup of activities for the first part of this year. And for those of you here today, we have provided samples of our new Coca-Cola Strawberry, Georgia Five coffee in a Tokyo 2020 Olympic design can and the renewed Ayataka Green Tea collectible Japanese omotenashi packaging. Please enjoy these new launches and innovations, and please look forward to the launch of Georgia Latte Nista on March 30. Let me now continue with a brief progress update on our important vending transformation, commercial efforts, infrastructure investments and ESG initiatives. First is our important vending transformation here on Slide 32 (sic) [ Slide 33 ]. In recent years, the vending industry has experienced declining traffic and sales volume per machine, higher operating costs and a shortage of labor. We are the largest player in the industry, having nearly 700,000 vending machines across our territory, generating over 40% of our beverage business profit. Nearly 50% of our coffee volume is sold through the vending channel. The industry issues are our own issues, and we must fundamentally transform our vending business by recovering top line performance and reducing the operational cost. In 2019, we gained some traction in our vending transformation journey by moderating vending volume to a negative 1% while growing vending value share by 1.3 percentage points. We focused on 2 main priorities: the first is getting consumers back to the vending machines; and the second is transforming operational processes to reduce the cost to serve. Getting consumers back means driving consumer traffic to our vending machines. We have focused on coffee to drive traffic by expanding lower-priced small packages and increasing coverage of premium Georgia Japan Craftsman. Also, we have launched an integrated marketing campaign exclusively for the vending channel late last year. This was our first-ever CCJC and CCBJI holistic vending campaign, including TV commercials, print media and machine activations. We also started piloting process transformation in the Kinki area last year by segregating duties and standardizing vending services operations. We are encouraged by the initial results from the pilot and are now rolling out this -- we are rolling out this across Japan from -- in 2020. We are accelerating the plans for top line growth in 2020. This includes sales column expansion by increasing net new machine placement. Focusing on big bet new products, vending-exclusive SKUs and pricing were also key to improving per-machine performance. We will actively launch new products, such as Georgia Latte Nista in vending, and continue to develop the Coke ON smartphone app to engage more with consumers. All these actions from top line growth to reducing the cost to serve are managed and executed in one virtually integrated vending business unit we established with CCJC early last year. This is a good example of how CCJC and CCBJH are working together towards our common goal of growth. As Bjorn mentioned, we expect vending volume performance to continue to recover to even this year with a focus on value share growth. On Slide 33 (sic) [ Slide 34 ]. I will share our commercial initiatives to drive quality revenue growth and cost efficiencies. Some initiatives in the slide overlap with the previous vending discussions, so I will not repeat them here. In our 5-year plan announced in August, I explained our priority in commercial is to strengthen customer engagement and increase the space to sell. For top line growth in retail channels, our priority is gaining more visibility in the store to increase touch points with shoppers. Last year, we successfully launched an industry-first wholesale price raise for large PET packages. We want to sustain this momentum for price/mix with more focus on smaller packages and other revenue growth opportunities. One example is the Tokyo Area launch of the 350 ml and 700 ml bottles of Coca-Cola to replace the 500 ml traditional package in supermarkets. We are not looking to buy more market share, rather, we are offering more consumer-focused innovation and nonpricing promotions, leveraging shopper insights and other unique value propositions, such as our Olympic partnership, to drive volume and value growth. We continue to transform our commercial organization by deploying sales force automation, tools like -- backed up by our CokeOne ERP system. This will contribute to better sales and a clearer view to marketing spend, return on investment and assessing our sales team performance. To drive these initiatives and build capabilities, we are investing in recruiting and developing category experts through the on-the-job development programs, standardized and transparent assessment routines and probably most important, pay-for-performance incentives to reward the high performers. We are strongly committed to enhancing our infrastructure, capabilities and people. We will continue to invest in them. As Bjorn said earlier, we plan to invest over JPY 90 billion in CapEx this year. We are on track to add 4 new aseptic manufacturing lines through the second quarter in addition to 3 new lines last year. Our Shinsei project is also making progress with the completion of 2 automated warehouses last year. We continue to focus on streamlining back-office processes by expanding our shared service organization, or BSO, across the company. Now payroll and accounts receivable processes are handled by the shared service organization. This is possible in large part due to the completion of the CokeOne ERP system rollout last year. And we are making real progress with our people strategy, supported by clear, observable behaviors in the core values of learning, agility, results orientation and integrity as specified in our new company mission, vision and values that we developed over the past year. And let me remind you on Slide 36 that we have incorporated an ESG mindset and goals into all aspects of our business plan, including ambitious targets toward the World Without Waste, our 2030 packaging vision for the Coca-Cola system in Japan. In 2019, we have been recognized for our diversity initiatives, including gender diversity, hiring of disabled workers and establishment of an LGBT policy to name just a few. In terms of governance, executive compensation is linked to performance. We believe we are unique in Japan with a very high ratio of variable incentive compensation, up to 2/3 of the executives based on actual performance. I call this, "Share the pain, share the gain." So let me quickly summarize what we have discussed today. Our 2019 business income was roughly in line with our plan with signs of traction in our core beverage business. This helped us put in place the building blocks for a solid start in 2020, the first year of our midterm plan. Our commitment in 2020 is simple: building strong momentum towards 2024 by achieving our 2020 targets while resetting and transforming for the future. We work with a growth mindset and aggressively drive cost efficiency across the company, and we are driving an end-to-end transformation of our important vending business and we are strongly committed to invest in infrastructure and enablers for growth. Remember, our motto is, "Business as usual is not an option." We are on track to stabilize and grow our supply capacity to meet consumer demand. And ESG initiatives and a strong governance model are embedded in our business. We are making steady progress on our strategic initiatives, and we look forward to giving you regular updates on our progress. Now -- let me now ask Ray Shelton to come back here on stage for question and answers.

Thanks, Calin. Let me remind you this Q&A session is intended for analysts and investors, so we ask members of the media in attendance to please hold your questions for our media session scheduled separately today. [Operator Instructions] Right here at the front, please.

[Interpreted] I am -- Citigroup, Miura. Thank you very much for a very strong presentation. I have 2 questions for you today. My first question is about the price increase. You mentioned that you have done this for the first time in 27 years and you have increased the price for the large PET bottles. And looking back at this initiative, what was the most difficult thing that you had to tackle for the price increase? So right now, it's already in February. But this discipline, is it maintained in your company? I would like to know about this. And my second question is related to my first question. But you have raised price for the first time in 27 years and it was a great discipline, or maybe I should call it know-how that you have obtained. But are you going to use this same method for the small-sized packages. When are you planning to do this for the small-sized PET price increase? We would like to know about your plan.

Both questions were related to price increase. The first was on the 27 -- first in 27-year price increase for large PET, maybe a reflection on what were the most difficult points to tackle in putting this through and then maintaining discipline. And the second was is there any opportunity for additional price increasing across various parts of the portfolio. Yes, Calin, do you want to take that first?

So if I may, thank you so much, Miura-san for the question -- opening question. We are actually 1 -- almost 1 year after that, I would say, courageous decision to put the prices up after 3 decades. Of course, we had a lot to learn from that experience. But if I would be to step back and look at it, definitely, it takes courage to make it. And our happy moment, if you want, was that actually, it was welcomed by all the stakeholders overall. So -- and that's positive for the industry in general. I think we have been through discussions with our customers, and eventually, all the customers have accepted the price increase and we moved on. But not only that, we have observed and we are monitoring the industry. We saw that industry have followed. Now if I would be macro level to look at the downside of it, of course, on short term, we have -- took a very big hit in term of volume. Of course, very strong brands from our portfolio suffered. Less brands which are in the development stage, they suffered more. But overall, I think it was a great learning and a positive impact. To again answer in general to your question -- to your second question, of course, we are looking at any possible opportunities right now based on the learnings that we have from the previous price increase. Now after I took all the cream of top looking of this price increase, I would like to ask Costin-san, our Commercial Director, if he's there. Any detail that you might want to add to these 2 questions?

This is Costin Mandrea. Thank you for the question. And indeed, Calin, you spoke about the positives of the price increase. If there's discipline in the company, yes, there is discipline. There is absolute discipline in terms of maintaining the price and then looking for every single opportunity to raise the price. I'll give you 2 examples. We decided to look an opportunity to withdraw the 500 ml from supermarket and introduced 2 packages, 350 and 700, because they are more targeted for consumer needs, yes? Smaller package for single-use and 700 ml for smaller families. We introduced this in the middle of January in Tokyo and Kanto. Our initial business case and estimations were around 30% increase in revenue. And after a few weeks, we see very good progress and we are encouraged by the results; so again, the mindset of increasing the average transaction size. The second example is what Wasa-san was explaining about a move into big bets, the Latte Nista. Yes, consumers want more coffee in PET, and yes, we see we are making significant investment in production capacity for coffee in PET. But we decided this big bet that we are launching in March, Latte Nista, to put it in a smaller package in 280-milliliter PET, again increasing the transaction price. And I will close by saying we follow very carefully what's happening in the market in terms of pricing. I took over, as you know, the national key accounts part from 1st of January. And my team came to me and say, "Look, everybody is doing in CVS 1 plus 1 during launches." And this was a very clear pushback and a clear rule for me. We are not doing this because we remain committed on increasing the value ahead of volume, and we remain committing -- committed on increasing the average price in the market.

Thank you, Costin.

[Interpreted] Thank you very much for the response. May I ask you one additional question? For the small-sized PETs, I did understand your initiatives, but let's talk about the 500-ml PET. The price increase for the 500 PET, is there a possibility for you to do it in next year, 2021, for the 500?

Thank you, Miura-san, for continuing interest. We never say never, just the very first thing that I can say. However, let me be nuanced onto this. My choice is to really look in details on how our brands have reacted to the price increase on future consumption packages. And if we learn that there will be opportunities for certain brands in any package that we are having, we are very interested to pursue that opportunity but -- and let me come back and say -- though it might sound a little bit like show off, but I don't mean it like that, it is the first time in 27 years when we put the prices up. So we don't have too much learning in the industry on that particular matter. So a lot of the things that other countries of Coca-Cola system are doing it just based on elasticity studies, based on their previous price increases and make their life easier, we cannot do that. We need to estimate and we need to do our best estimation for what and how it will work, and we need to test it. Usually, we pilot and then we go nationally, as you can see.

Front?

[Interpreted] Fujiwara from Nomura Securities. I have 2 questions. A similar perspective, so business environment, competitive environment, I believe, will become more difficult, challenging. That's my concern. Your volume plan is plus 3%. Revenue growth is 1% plus. So if you look at it, that's assumption that channel mix and unit price will deteriorate. And of course, because of Olympics, you do need to grow. But because the market doesn't grow, how can you -- if you grow 3%, that means that others' market share will be taken away. So I think that the competition will intensify post-2021. So my question, first of all, is about market environment. Second question is related to that. So up until now, revenue growth was your focus. More than volume, you wanted to focus on growing revenue. Now you're focusing more on volume. So I think that sell side is a little confused. So do you think you can continue to achieve order discipline in the sell side?

Thank you very much for the question. So first question is looking at our volume and revenue outlook for the year and looking at the difference between volume growth outlook and revenue outlook, including the impact on business environment and competitive environment. Let's see, volume and revenue. So Bjorn, would you like to take this to start?