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

[Interpreted] Good evening. This is Gomi, Head of Investor Relations for Coca-Cola Bottlers Japan Holdings. Thank you for joining us today for our first quarter 2025 earnings presentation for analysts and investors. Today, we have President, Calin Dragan; and CFO, Bjorn Ulgenes. We are also joined by Executive Officer and President of the Retail Company, Alex Gonzalez; Executive Officer, President of the Service Company and the Chief Business Strategy Officer, Maki Kado; and Executive Officer, Chief Human Resources Officer, Yuki Higashi. Following prepared remarks, we will be happy to take questions. Simultaneous interpretation in both Japanese and English is being provided for both today's call and the Q&A. Before we begin, let me remind you that today's presentation contains forward-looking statements and should be considered together with cautionary statements contained in our presentation. With that, I'd like to turn the call over to Calin Dragan. Calin-san, please.

Good evening, everyone. This is Calin Dragan. Thank you for joining today's earnings presentation. Let's begin with today's highlights. Please turn to Slide 4. We have made a good start to 2025. First quarter business income increased by JPY 1.3 billion year-on-year, keeping us on track to meet our full year business income target of JPY 20 billion. Continuing from last year, top line growth and transformation benefits are driving profit growth and maintaining a good trend towards improved profitability. Sales volume remained flat year-on-year, outperforming the market despite the impact of volume declines due to price revisions. At the same time, price revision benefits improved wholesale revenue per case lifting revenue by 1.7% year-on-year. The first quarter also saw significant progress on price revisions, a key measure for improving profitability. Since implementing revisions in October last year, we have worked to maintain an improved shipping prices, while we also prepare for the price revisions for juice products scheduled for this May. In addition, we recently announced price revisions for all product categories, including coffee, starting in October. Details will be provided later, but these initiatives will help accelerate our profitability improvement this year and beyond. In transformation, initiatives to strengthen our foundation and reduce costs are progressing well in each area. In the second quarter, we will accelerate the positive momentum we have generated to date and be ready to maximize profits during the peak demand period. In addition to thoroughly implementing profitability-focused initiatives, including price revisions, we will also focus on strengthening our foundation with a view for a mid- to long-term profit growth. Now I would like to turn to the first quarter results, which will be explained by CFO, Bjorn Ulgenes.

Thank you, Calin. Good evening, everyone. This is Bjorn. Slide 5 is our first quarter P&L. Following on from last year, we continue to maintain an upward trend in our earnings improvement with both revenue and business income increasing. As Calin mentioned earlier, sales volume was flat year-on-year, while wholesale revenue per case improved resulting in a 1.7% increase in revenues compared to the previous year. Gross profit increased by 2%, outpacing revenue growth. Despite cost pressures from external factors, we captured the benefits of price revisions and improved manufacturing efficiency resulting in a higher gross profit margin. Business income improved by JPY 1.3 billion year-on-year, reflecting contributions from top line growth and cost savings achieved through transformation. Factors contributing to the change in business income are explained on the next slide. While business income increased, operating income declined by JPY 7 billion year-on-year due to temporary factors. This includes the cycling effect of a onetime gain of JPY 5.4 billion from the sale of property, plant and equipment recorded in Q1 last year and a JPY 2.8 billion expense this year for a voluntary retirement program tied to our transformation efforts. These temporary factors are included in the full year forecast announced in February, and we remain on track. Net income also decreased by JPY 3.6 billion year-on-year for the same reason as operating income. Again, this result is in line with our plan. EBITDA grew 28.8% year-on-year to JPY 4.8 billion on the back of business income growth. Please turn to Slide 6 for a breakdown of our primary business income drivers. On the left-hand side, we can see volume, price and mix. These represent a year-on-year increase of JPY 1.9 billion in marginal profits from commercial activity. The main factors were a negative impact of JPY 0.9 billion from volume, including channel mix, JPY 4.3 billion improvement from unit price and other factors of negative JPY 1.5 billion. The improvement in wholesale revenue per case due to price revisions contributed significantly. Rebates and other items included in the other category also increased year-on-year due to the increase in revenue against the backdrop of price revisions, but this level is appropriate given the increase in revenues. Transformation benefits were JPY 1.2 billion. In the first quarter, commercial transformation had a significant benefit derived mainly from vending transformation. Initiatives in each area are progressing as planned. Marketing expenses increased by JPY 0.8 billion from the previous year, primarily due to investments made in preparation for the peak demand period and appropriate marketing investments with a mid- to long-term ROI focus. Manufacturing costs decreased by JPY 0.4 billion year-on-year. Cost reduction measures at manufacturing sites have led to improved productivity, including reduced energy and water consumption as well as lower overall manufacturing-related expenses. Other costs increased by JPY 0.2 billion from the previous year due to higher logistics expenses. Commodities and utility costs increased by JPY 1.1 billion amid a continued severe cost environment. Higher raw material prices had a significant impact with commodity and ForEx-related costs increasing by JPY 0.9 billion and utilities costs rising by JPY 0.2 billion. Please turn to Slide 7 for the sales volume performance by channel and category. First quarter sales volume remained flat year-on-year with effective commercial initiatives despite the cycling of the leap year effect last year and the price revisions impact. The successful renewal of Ayataka last year continued to support volume. Wholesale revenue per case improved year-on-year at all channels due to price revisions. Sales volume at Supermarkets declined by 1% due to decrease in large PET volumes following last year's price revision. Drugstores and discounters saw volume rise by 4% with contributions from growth in Ayataka and medium PET bottled coffee products. Convenience store volumes decreased by 4%, impacted by price revisions and the cycling impact of new product launches last year. In vending, the overall market was challenging and volume decreased by 4%. However, our digital marketing via Coke ON app helped increase value share. Price revisions also had a clear effect rising wholesale revenue per case more than JPY 100. In Retail and Food Service, sales volume increased by 3%, supported by stronger demand at restaurants and tourist spots as well as growth in commercial use juice products. Online sales volume increased by 11% driven by exclusive offerings such as label-less tea and targeted digital marketing initiatives in collaboration with customers. By category, Sparkling volume increased by 1%, driven by the limited edition Fanta flavors and Sprite in cans, which were strategically introduced. Tea volume grew 6%, driven by Ayataka, which was renewed last year and saw a 14% increase in volume, driving overall category growth. Sports, water and coffee declined due to the impact of price revision. Juice growth was led by Minute Maid primarily through restaurants. Slide 8 covers market share and retail price trends. Our profitability focused commercial activities, including price revisions, app-driven value share growth and helped maintain price premiums. First quarter total channel value share increased by 0.2 points year-on-year. Vending led the way with strong value share gains continuing by 1.4 points. Although the OTC channel saw a slight decline in value share due to the impact of channel and package mix. Volume share continued to improve, supported by increased competitiveness driven by the success of Ayataka. Despite industry-wise price revisions, our products have maintained price premiums over the market average. In the first quarter, OTC channel retail prices for both small and large PET bottles increased year-on-year, primarily due to the price revisions implemented last October. Especially large PET bottles have faced profitability challenges. We proactively implemented price revisions in 2023 and OTC retail prices rose by an additional JPY 5.5 from such risen level, representing a cumulative improvement over 2 years of approximately JPY 25. Next, on Slide 9, is the highlights of activities in the first quarter. This year, we're steadily implementing commercial strategies aimed at maximizing profits guided by our profitability-focused approach. Starting with price revisions. Wholesale revenue per case improved significantly following last year's October price revisions for PET bottles and can products. Maintaining and improving shipping prices after the price revisions and efforts to minimize the impact of lower volumes are producing solid results. We also made preparation as planned for the price revision for juice products, including negotiation with customers, which will take effect from the shipments starting today. Furthermore, we recently announced our plan to revise prices across all categories, including coffee, in October. Price revisions are an important initiative for achieving sustainable profit growth, and we believe that this represents a significant step forward. To optimize growth and investments and costs, we focused on ROI-driven investments from a mid- to long-term perspective, carefully managing profits by accounts and reviewed and refined our activities, invested capital and cost leveraging value. Initiatives in each channel are also progressing well. We have implemented channel-specific growth strategies while also focusing on strengthening our foundation in preparation for peak demand period. In the OTC channel, we worked to expand sales space by tailored activities to each store's needs. This includes leveraging retail media and using eye-catching display racks. In vending, we aim to attract new users and deepen engagement with existing ones by enhancing Coke ON experience. In Online and Food Service, we were able to strengthen the growth foundation by implementing activities with a mid- to long-term perspective rather than simply focusing on short-term volume gain. Next, I will discuss the transformation initiatives to strengthen our foundation. Please turn to Slide 10. Key measures in each area are off to a good start. Let's start with vending transformation. This year's key initiative is optimizing product assortment based on profitability, and we are making solid progress as planned. We revamped our vending assortment system, enhancing simulation accuracy to build a system for enabling profitability focused assortment optimization. We are rolling out a new system in stages, starting with locations expected to benefit from this. This assortment optimization will help increase sales and improve route efficiency by improving the frequency of visits and product filling rates. In addition, based on profitability analysis of each vending machine, we are implementing new placement activities with precision and reviewing terms and conditions with a greater focus on profitability and capital returns. In the supply chain field, on top of improvement activities at manufacturing sites, efforts to reduce transportation distance and the number of touches per case are producing positive results. The new initiative this year has started towards the preparation for an integrated distribution center, IDC, which will enable advanced product inventory consolidation and optimize product allocation. We are moving towards a full scale operation. We are applying learnings from our mega DC projects to ensure a smooth transition to the new structure. Furthermore, to improve the accuracy of the sales and operations planning process through digital transformation, we have started working with external partners to automate supply planning. This will further enhance our flexibility and agility in responding to fluctuations in demand. Next is the update of our marketing activities, Alex please.

Good evening. This is Alex. I will walk you through our marketing activities in the first quarter and plans for the second quarter. Please look at Slide 12. In the first quarter, we delivered growth in both revenue and value share driven by strong campaigns and activations. Let's begin with strengthening of our core brands. The Coke with Meat campaign evolving to CoChiLu with Coke & Chicken, offering more specific suggestions to consumers while taking a comprehensive approach to help shape drinking habits. In the first quarter, we boosted Coca-Cola's visibility in stores through engaging in attractive displays, leveraging this campaign. In the coffee category, we strengthened Georgia by renewing our core PET bottle lineup and launched a new campaign featuring [ Aro-san ] as the new brand ambassador. Lemon-Dou underwent its first full renewal since its launch, including the introduction of a new taste in March. Although the market environment remains challenging following the initial search in home drinking demand, and we have been impacted by price revision. This renewal is helping to revitalize the brand and reinforce its role as part of our portfolio. Next is new products. In March, we launched Kochakaden Unsweetened Earl Gray Iced Tea supported by a high-impact campaign featuring TinyTAN characters from the globally popular BTS. We also released a limited edition FANTA Retro Muscat, featuring a nostalgic design in March. As experience-based marketing, through implantation of Glass Bottle Coke Yokocho event in Shibuya and the Onigiri Shokudo Ayatakaya. We collaborated with Coca-Cola Japan seamlessly to integrate campaigns, experience-based marketing and in-store activities to enhance the appeal of our products and expand sales of our core products. Next, let's look at the highlights of our marketing activities in the second quarter. Please turn to Slide 13. In the second quarter, we're implementing the second phase of CoChiLu campaign. We have selected 2 new brand ambassadors, [indiscernible] and [indiscernible], both highly popular with Gen Z to foster new consumption habits among younger audiences. For Yakan Barley Tea, we released the brand's first live action short film in collaboration with the popular anime, Crayon Shin-chan, as part of its April renewal. We will reinforce in-store displays that will promote purchase together with the emotional story. Aquarius taste has been completely redesigned for the first time in 20 years and now features a refreshing after taste ideal for hydration. It will continue to support sports activities. As demand increases toward summer, we will highlight Aquarius' strength. For new products, we introduced Minute Maid Zero Sugar Lemonade, which offers a refreshing taste made from grated whole lemons, including the peal. And in April, we renewed I LOHAS Peach and I LOHAS Shine Muscat to strengthen sales. As part of our experience-based marketing, we expanded the popular Glass Bottle Coke Yokocho subsidiary in Shibuya to Osaka in April. Also with the Osaka-Kansai Expo, we're running promotional campaigns offering prices such as Coke On tickets and expo admission tickets. We hope you will take part of this promotion. This wraps up the marketing update. I'll now hand to Calin for the outlook.

Slide 15 is the outlook. From the second quarter onwards, we will accelerate efforts to strengthen our foundation for sustainable profit growth while preparing to maximize the effect of our activities during the peak demand period. In commercial activities, we will continue to prioritize profitability and strengthen our competitiveness by channel. Sales have been solid so far. Although April sales volume declined year-on-year due to price revisions impact, we see how our volume trends continue to perform -- to outperform the overall market. Ayataka continues to perform well despite the impact of the cycling impact from last year full renewal and intensified competition, including the renewal of green tea product and other companies this year. Furthermore, we will accelerate profitability improvement through further price revisions. The price revisions from October will be the largest in terms of volume in our company's history, covering products of approximately 80% of our annual sales volume. Combined with the juice price revision starting today, we made these decisions with strong determination ahead of the industry. Details are provided on the right side of the slide. The price revision will apply to 217 products across all channels, including premium items such as FOSHU products. Manufacturers suggested retail prices will be revised by JPY 20 to JPY 30 per bottle. For coffee with high interest PET bottles and bottle cans, which are our main products will be revised by JPY 30, and SOT cans will be revised by JPY 20. Leveraging accumulated knowledge and experience from price revisions to date, we will make this another success. We recognize the need to monitor volume declines and channel mix impact carefully, and we are preparing thoroughly to ensure steady results from the price revisions. Together with the price revisions, we will implement stricter rebate controls, especially for coffee before the peak demand period to promote profitability improvement from many perspectives. For transformation, we will continue to promote initiatives to strengthen our foundation from a mid- to long-term perspective, while exploring various possibilities accounting for a sustainable future growth. Please turn to Slide 16. Over the course of our transformation journey, we have achieved significant results and gained various learnings. We will continue driving transformation with confidence and explore various possibilities, particularly in vending, leveraging the learnings to strengthen our sustainable future growth. As part of our technology-driven transformation, we are making steady progress in initiatives such as enhancing business process efficiency through digitalization, improving analysis accuracy by visualizing profitability by account and building a robust technology foundation. Above all, these achievements reinforce the belief that our drive to implement transformation is stronger. These are the achievements and learnings from transformation. And going forward, we will identify potential challenges and growth opportunities for our company by leveraging the data and insights accumulated to transformation from various perspectives and in various time lines. We will develop targeted strategies to address these challenges and opportunities to further reinforce our business foundation. And we will explore opportunities to further improve profitability, build a stronger foundation and allocate capital appropriately considering future growth. Now finally, please turn to Slide 17 for a summary of today's presentation. In the first quarter, we increased business income and made steady progress in initiatives to strengthen our foundation for future growth. I'm very, very pleased that we have made a strong start to the year that we have designated for achieving both profit growth and strengthening foundation. In particular, price revisions have contributed significantly to profit generation as planned and have become a key driver of profit growth. This success reflects our relentless focus on profitability and our commitment to profit-oriented activities. Based on our track record, I'm confident that we are moving in the right strategic direction. And to further accelerate this momentum, we will implement price revisions across all product categories starting in October. We will execute the price revisions with strong determination to make it a success and further improve profitability. In the second quarter, we will totally prepare for the peak demand period and work to build confidence in achieving our full year business income target of JPY 20 billion. Also, we will continue to drive fundamental transformation from a mid- to long-term perspective, strengthening our business foundation and leading to profit growth for next year and beyond. Now this concludes our presentation. Thank you very much. And I will now hand it back to Gomi-san for the question-and-answer session.

Thank you, Calin-san. This Q&A session is for analysts and investors. For members of the media, please refrain from asking questions at this time, as we will have a separate session later today. Due to interpretation, please ask only 1 question at a time. Now I would like to start the Q&A session. Operator, please begin.

[Operator Instructions] We already have someone in the queue. So let's begin with the Q&A. I will now call on the first person in line. [Operator Instructions] From UBS Securities, Ihara-san.

This is Ihara from UBS. I have 2 questions. Firstly, I'd like to confirm some numbers. In Q1, price revision impact, what was the amount of price revision impact during Q1? And for April, how is the market situation? And how is your performance and how much you outperformed versus market? That's the first question.

Ihara-san, thank you very much for your question. Firstly, you would like to know the impact from the price revision. So Bjorn-san, please go ahead with this question.

For Q1, as you saw, we reported a positive price mix for the commercial profit for the market. And we believe, overall, the pricing impact was about JPY 4.5 billion overall, including mix impact. You also saw that we reported a slight decline in the volumes for the period. So net-net, we're still up JPY 1.9 billion. And a strong part of this, as I said earlier, comes from the pricing impact, which we're very pleased with, driving that 1.7% increase overall in revenues. I hope that answers your question.

Yes. You said that '24, October, impact was JPY 7 billion to JPY 10 billion net-net. So what was the contribution from Q1? That was my question. Can you give me the contribution during Q1? .

Thank you for your additional questions. So you would like to know the net price division impact during Q1. Bjorn-san, please go ahead with the answer.

As I said earlier, Ihara-san, just reiterating my earlier reply, we have a positive commercial impact of about JPY 4 billion for the quarter. And inside there, we have a significant impact positively of the price increase. We're not specifying out in detail the price impact for competitive and natural reasons. But overall, the positive impact inside JPY 1.9 billion was JPY 4.3 billion for the price overall.

So how about April performance -- monthly performance in the month of April, what was your numbers? And what were the numbers of the market? How you compare with the market?

Alex-san, please take this question.

The flash that we're seeing, obviously, as of April of yesterday, our sales volume are slightly lower year-on-year, driven by a couple of factors. Obviously, the impact of price revisions and slightly cooler weather in the month, the preliminary figures, again, showing relatively minus 2% decline on volume cases. However, we believe the volume trend is ahead of the market.

So your volume also slightly declined, but it was better than market decline.

Yes, you are correct.

And my last question is -- what I'm concerned is that our unit price impact seems to be shrinking. For example, in the month of December, volume 3% up, but -- volume flat and sales 1.7% up, meaning that unit price impact is about 2%. So I'm a bit concerned that your price -- unit price impact is getting weaker. So even if your shipping prices are up, but the impact seems to be weaker now. What do you think about this? This is my last question.

It seems that compared to the past, unit price impact seems to be weaker now. But what do you think about that? Bjorn-san, please take this question.

Thank you, Ihara-san. Let me try to interpret your question. But let me first reiterate that this is the sixth time we're taking price effectively, the seventh as today when the juice price goes into effect in the market. And we always have to remember, when we take price in the market, there's always a price elasticity that comes with it. And as you continue to take price, which is the right thing for the industry, it's the right thing for our business, you will have an impact of the price elasticity. . So they will not be linear forever. That is something we observe in Japan and something we observed also globally with a similar effect. So we continue to be determined to take price. You saw our announcement for October, because, again, we think it's the right thing to do for the industry and our business and price elasticity will be impacted over time as consumers and customers get impacted by the price increases and all of this is according to our plan. Thank you.

Thank you very much for your question. That is all.

We will move to the next question. I will unmute the next question. JPMorgan, Fujiwara-san.

This is Fujiwara speaking. I have 2 questions. So first of all, this is similar to Ihara-san's question. Slide 8, please. On the right-hand side, you talked about the retail price, the store price. And for the large size -- for the small size, the retail price year-on-year is plus JPY 4 or JPY 5 only. And compared to the past, the shelf price increase is minimum. Therefore, is this due to competition or is this your strategy focusing on volume for the time being? I'm just wondering because the price raise is really small. So the reason for that, I would like to know.

Your question is about comparing to the past, the change or the increase on shelf price seems to be very minimum, and you want to know about the background. This will be answered by Alex-san, please.

Thank you, Alex here. First of all, we are pleased to see the progress of price increases we have implemented as per plan. We're seeing wholesale revenue per case increasing cross channel in the double-digit gen. Evidently, the retail prices is a prerogative of the customers. But from the outset, we are seeing the prices expected to rise obviously at a slower pace than the past given the higher absolute price points that we're seeing in the market, particularly in large PET, the bottle -- large PET has been revised several times resulting in a year-on-year increase of JPY 5.5 per bottle. However, let's not lose line of sight the accumulative increase of approximately JPY 25 over the last 2 years.

And could you move to your next question?

Okay. So we have done price revisions for a couple of times. And you mentioned that this pace is becoming slower. And why is that? What is the background for the price being slowly implemented than before?

Well, thank you very much for the additional question. It seems that the reflection of the price increase is slower. And what is the reason, Alex-san, please?

Again, I think we have continuous -- the discipline of increasing our wholesale prices. In the end, the customers as a prerogative of what is a suggested retail price. And we're seeing, obviously, evolving consumer dynamics in the market. Having said that, we will keep on our discipline and a strong stance of leveraging on pricing to improve profitability for CCBJI into the long term.

And my next question is Page 15 about Q2, the initiatives you're planning for Q2. So you talked about the rebates and that you're going to take strict control of the rebates, et cetera, is what you have here. But compared to the first quarter and the second quarter on, I know that the price revision will be reflected in the price. And probably the marginal profit will be increased. Can we expect that, is my question.

Thank you for the question, Fujiwara-san. So Q2 on, including rebates, are we going to control it more? And due to that, are we going to see more impact from the price revision, Alex-san, please?

Going into Q2, obviously, our strategy is to normalize rebates at an appropriate level. To give you more color on to what we're saying is, we implemented stricter controls on rebates, particularly with coffee ahead of peak demand season. And evidently, we will continue to make appropriate market investments that lead into mid- to long-term growth, taking into account the return of our investment. This is just to say that we're taking multiple angles to improve profitability.

Morita-san from Nomura Securities.

This is Morita speaking. I would like to ask about the Page 8 as well. So on Page 8, the small PET average price is positive. It's like plus JPY 7.9. So in the past, I think it was somewhere around JPY 10-ish. So from JPY 10 to this JPY 7.9 change suggest that your premium has somehow shrink or something. If there is any background to this shrinkage, would you like to explain about it?

Thank you, Morita-san, for your question. So your question is about the premium price of our products against the market average. It seems like it's getting smaller than before. So, Alex, would you like to take this question?

Thank you. Just to probably repeat myself. The price increases that we have been implementing are reflecting in, again, the wholesale price increase. It is rising as per plan, and we're happy with the progress. Just to -- again, repeating myself, the prices are expected to rise probably at a lower price, that doesn't mean that we are losing a premium in the market. We're maintaining premium in market as reflected also in the slide, and we will continue to do so into the future.

I have another question. The second question. I think this marks the seventh time that you are taking on the price, and you are going to take on the price once again in October. So probably in the soft drink market, we'll see a change in channel mix and the products mix in the market. So through this price practice, what is your expectation on the shift in the channel and the market mix, the product mix? And also, I believe that you have to also shift -- look at those like fixed cost? So with this change in channel mix and the product mix, is there any strategy that you have behind to overcome this changing environment?

Thank you, Morita-san. I believe your question was -- you would to understand what is our strategy to overcome the change in the channel mix and the product mix in the market as we are taking on the price for so many times in the market. Alex, would you like to take this question, please?

First of all, just probably going back, we have said and we have been consistently driving a price increase in leading the industry over the last 3-plus years. And we are -- we have an unwavering focus that this is the right thing to shape a healthier industry dynamics. Having said that, from a -- again, from a consumer behavior and consumer sentiment, we don't see, at this point in time, changes that materially will change our assumptions. We see, and we have been flagging some defensive consumption behavior particularly in some of the more specific categories where you have private brands such as water and the likes and we will evidently continue to monitor this very closely. I think it's all to say that -- and if you look at the trends we are seeing, channels such as online and drug discounters growing faster than the vending channel. At the same time, we are driving wholesale revenue per case growth in high double digit channel -- across channels. So we will flex all the levers of our flexible revenue growth and margin expansion algorithm to manage proactively changes in mix and addressing and capturing growth of consumption and recruiting more consumers where they buy. So again, this is just a summary of how we will be addressing and proactively helping shape as well consumer behavior. Thank you.

Operator, please put through the next person.

Next, we have Miyake-san from Morgan Stanley. .

This is Miyake from Morgan Stanley. I have 2 questions. Firstly, the price revision of this time -- I mean, October '25, unlike the past revisions, now the yen is slightly stronger. So compared to the -- over the past few years, from retailers, they may not be so willing to accept price revision or price increase, considering the external factors, but retail costs are rising and you are also facing a lot of cost hikes as well. So when you have price increase negotiations with the retailers, compared with the past few years, their posture might have changed versus price revision. So considering the current external or macroeconomic changes, I thought that retailers may be more resistant to the price revisions from the makers compared to the macroeconomics over the past few years.

So Calin-san, could you please take this question?

Thank you so much, Miyake-san. Calin Dragan speaking here. And I'm sorry to jump in quite in the middle of the discussion with my colleagues here regarding the pricing. Well, I'm surprised, to be honest with you, to see that all the questions that came since the beginning of our discussion tonight, it were pricing-related. Although we were the company which we were very, very clear throughout the years that we are fully committed to price increases and to do that for the health of the industry. And it's the seventh time, we are going to do it 8 times, whenever we consider it as necessary for the industry to happen to move on the right path, meaning I personally evaluate the status of, and the profitability of the industry overall, and we discussed just couple of meetings before, the fact that for the first time after 3 decades, we are able to leverage all the 3 pistons of the engine, which drives revenue, which is volume, mix and pricing. Historically, for 3 decades, we rely purely on volume and mix to drive the revenue. Well, we were able to break that creation and really leverage all the elements of it. I think this is -- from my perspective, this is a very healthy environment. And in my opinion, everybody in the industry, other players and as well the analysts in the industry, I would say, should probably direct the questions in a sense to drive value out of this initiative. Regarding the pricing, we are trying to lead the industry where we think that it should be. There is still room, in my opinion, to put the prices up for various reasons. Consumers look like they are still willing to pay the current prices, which were increased 7x because they see value in these products that we are offering. So we were losing some volume, but we were able to increase significantly the revenue. And we were seeing, over time, that after this price increases, even the volumes are recovering. So that tells me that industry can still drive that. The second thing, everybody around us in the industry take price increases. I don't see why our retailers would be reluctant on not accepting price increases from beverage suppliers while they are accepting from everybody else. So it should be an opportunity for that. The third element that I would put is winning, well, if we are so cautious about the effect of the prices, I don't understand how can we be so sure that all the rest of the factors are going to improve, like currency strengthening, like commodity price increases decreasing. Well, I would characterize all the reality right now as being very volatile. Meaning the currency can go up and down, can fluctuate. The commodity market, it is unpredictable. So I don't see why this element of pricing can be questioned. So after all this long answer and elements that I try to provide to you are the reasons behind why we believe that pricing is important. Well, of course, that over time, the elasticity of -- and the effect of all this pricing, it's going to be stronger and stronger, no question about that. We are not ignoring that. And this is why we are looking very carefully, when we put the prices up, SKU by SKUs, and we try to extract value from our stronger brands, from our stronger position packages, from the channels where we are driving growth and industry. And of course, eventually, we are trying to leverage all the elements that are in our control. But there are elements which are not in our control, and we need to do everything that's possible to mitigate. I hope this will answer some of the questions raised by you, Miyake-san, but as well, some of the answers that were -- some of the questions that were asked before. If any other things that I can clarify with pleasure. Thank you.

From retailers, considering the current market and currency situations, I thought that you may face the risk of facing the strong resistance from the retailers when you propose the price revisions. But according to Calin-san's comments, many makers are proposing the price increases, and those are accepted, then why not beverage makers -- did that -- is that correct?

Calin back again. I said exactly that.

Another question. Online channel. On the surface, compared with the rate of pricing, it seems that the online channel price increase seems to be moderate compared to other channels. But online channel -- when we consider the profitability on online channel, what do you think about the profitability of the online channel? Because I know that you always say that [indiscernible] is the most profitable, and supermarket convenience and so forth. So I'd like to know how you position online channel when it comes to the channel profitability?

Thank you very much, Miyake-san, for your additional question. So the rate of increase of our wholesale price per case, also revenue per case seems to be more moderate compared to that of other channels. But what do you think about it?

Online has been a growth engine for us over the last plus more than 5 years. In reality, online channel has on the -- obviously, on the back of COVID experienced a significant surge. Nevertheless, prior to post-COVID has continued to drive. And reality, online covers a very specific shopper segment, and it's critical in driving household penetration for our portfolio brands. So we are, I think, greatly positioned to continue to capture profitable growth. We are driving a very segmented strategy regarding to our label less packs, for instance, in single serve. And we're doing so, collaborating very strongly with key players. So we're confident on the potential outlook of driving the expandability of the category in household penetration of the portfolio of brands, and we will continue to drive growth where we see it's in line with our profitability focused commercial strategy.

The online channel -- when you look at across channel, then you think that online channel can generate the profits that are at least in line with this plan or even more than your plan?

Miyake-san, could you please repeat your question?

So thinking about -- I'm not sure whether [indiscernible] is the right term to evaluate, but when we think about the characteristic of online channel, compared to the company-wide profitability, do you think that the online channel is at least as profitable as a company average or even more?

So you would like to know the profitability of online channel compared to other channels or at the company. Bjorn-san, please take this question.

Thank you, Miyake-san. As you can assume, we cannot go extremely specific on channel profitability, but I'll give you some pointers. First and foremost, it's important to focus on what's the growth opportunity by channel. And very rightly, you called out earlier, online is a key growth channel for us, albeit still relatively small in Japan. The first line of profit that you can compare between the channels is what we call gross margin, so revenue minus the cost of goods. And in this case, already at that level, online is accretive to our overall profitability, and that is key. You also then have to look at further down in the P&L, you have different cost levels between the channel. Vending, of course, being the most cost and capital heavy and online all the way to the other end because there's less cost involved in getting the product through the channel. And in the end, when we make the channel plans, we look at the revenue potential, we look at the pricing potential and we look at how to manage the cost. And in this case, online is very much on track to deliver for the full year, which, of course, we are very pleased.

We are approaching our ending time, but we still have request for questions, and we would like to continue to take questions. Operator, next question, please.

[Operator Instructions] We will unmute the next question. Mizuho Securities, Saji-san.

One question. This is about coffee price increase. You have announced that revisions for PET in bottle cans and also JPY 20 for the SOT can. I want to ask about risk and opportunities. And the volume, I think it's going down. And in last October, the volume has gone down already. But what is going to be a risk related to this price increase that you're going to execute? And in reverse, I want to know about the opportunities. So the PB impact might be limited for this category and also the in-house usage or the corporate usage like for the HoReCa, like restaurants, et cetera, it seems that they are raising their price as well. Would that be an opportunity overall? And also globally, I see that the global market for coffee is growing as well. But do you have buying power versus your competitors because you have a global operation? And will that be a benefit for you compared with competitors in the midterm, longterm, maybe? So I want to ask about the risk and opportunities around the coffee category.

So you're asking about the price increase for the coffee and what will be the rates and opportunities related to the coffee category? Alex-san, please?

Thank you, Alex here. Just probably taking a step back on coffee, particularly since the renewal over the last couple of years, what we have seen, particularly with Georgia, strengthened consumer base and expanded [ weekly ] plus consumer, which is a very positive indicator that we gauge in how are we progressing in the market. Now having said that, relative to the prices, again, the external factors, particularly pertaining commodities is not only an effect on CCBJI or the Coca-Cola system, but rather in any industry, what we're seeing is other players and manufacturers already reflecting price increases on coffee. So again, this is, again, that from a total category, is impacted and the benefit evidently of increasing the prices will be eventually offset. Yes, a near-term impact on volumes as naturally expected. Nevertheless, over the longer end, given the profile of the category, it's a very, very different dynamic. So we see, yes, opportunities in making sure that we're driving this price increase that, again, is impacting the overall industry overall.

And maybe Saji-san -- it's Bjorn. If I can add a little bit to your risk and opportunity question. So just want to begin to remind everybody that we, as Coca-Cola Bottlers Japan, we are part of a global buying consortium. All the commodities that goes into our products, be it coffee beans, plastic, aluminum, et cetera, we buy at a global scale. That gives naturally great pricing for us. When it comes to coffee specifically, yes, the coffee bean price have gone up significantly. However, with our pricing arrangements with the Coca-Cola Company, this is already included in our base. So we will not be directly hit by this. And that's important when you evaluate the impact of the price increases between the different players in the industry. But overall, we believe pricing is the right thing to do. We took price on coffee and all the other categories, and we believe this will help the industry overall. I hope that answers your question. Thank you.

And in the third quarter, the coffee has dropped a bit. And you mentioned that due to the price increase, the volume has dropped a bit already. But would this be a risk in the future?

Well, thank you very much for the additional question. So in Q1, Q3, the volume has dropped, but is that risk going to appear again? Alex-san, please.

Essentially the price increase always, there is a risk of how that impacts the volume. And yes, well, we assume the fact that there is or might be a risk on volumes, we are also at the same time increasing our wholesale revenue per case significantly offsetting and improving our margins. So yes, we will manage in a very proactive way to minimize the impact of our price revisions by working with our total portfolio, particularly with coffee and managing the whole levers of revenue growth and margin expansion, particularly on the coffee category.

And the next question will be the last question. Operator?

Furuta-san from SMBC Nikko Securities.

This is Furuta from SMBC Nikko securities. I would like to ask about the volume. In April, you see the volume going down by 2%. So I believe that the market itself is down and stuff. But how about the trend from Q2 onwards because you will have even more challenging environment? Do you have any plans? But if you have any explanation about drops in volume so far and expectation in the Q2, I would like you to elaborate.

So the volume in April was minus 2%. And then you believe that the market will be even harsher in Q2 onwards. So you would like to understand the trend in general in the market for the volume. So Alex, would you like to take it?

Volume outlook doesn't change from what we have flagged at the beginning of the year and the guidance. So we're still looking for a flat volume growth into the full year. We are taking various initiatives to minimize the volume impact. And that essentially, it's our plan going into the full year.

How about tea? I believe that you will have a very tough situation in key segments. What's your thoughts in the tea segments and tea products?

Thank you for your follow-up question. Your question is about our strategy and the plan for the key categories. So Alex, would you like to continue answering this question, please?

Thank you, Alex here. Again, with Ayataka and tea, we are very pleased that we have seen, since the renewal, after 7 years, sustained volume growth and value share expanded quarter-on-quarter since relaunch, again expanding our consumer base. So up until now, we're -- as we begin to cycle, we're still positive on the performance of Ayataka despite the very intense competitive environment. We're seeing good momentum, and we have various initiatives in the pipeline for tea portfolio and particularly Ayataka to continue to build relevance anchored on key occasions and to drive consumer base that is all for now.

I believe we are over the designated time. So I would like to close the Q&A session now. All the material for this conference call will be uploaded to our website. So if you have any questions or feedback, please get in touch with the IR team. Thank you very much for your participation today. [Statements in English on this transcript were spoken by an interpreter present on the live call.]