Coca-Cola HBC AG (CCH) Earnings Call Transcript & Summary

Thank you for standing by, ladies and gentlemen, and welcome to Coca-Cola HBC's Conference Call for the 2022 First Quarter Trading Update. We have with us Mr. Zoran Bogdanovic, Chief Executive Officer; Mr. Ben Almanzar, Chief Financial Officer; and Ms. Joanna Kennedy, Head of Investor Relations. [Operator Instructions] I must also advise that this conference is being recorded today, Thursday, May 12, 2022. I now pass the floor to one of your speakers, Ms. Joanna Kennedy. Please go ahead.

Good morning, everyone. I'm here with our CEO, Zoran Bogdanovic; and our CFO, Ben Almanzar. Although we have added a webcast facility to our call for ease of access, there will be no slide presentation today, as per our usual practice for trading updates. We will start with some opening remarks from Zoran, and then open the floor to your questions. Please keep to one question and a follow-up, waiting for us to answer the one question before moving on to the other. We have about an hour for the call today, which should leave sufficient time to facilitate a good discussion. Finally, I must also remind everyone that this conference call contains various forward-looking statements. These should be considered in conjunction with the cautionary statements in our trading update press release, which we published this morning. And with that, I'll turn the call over to Zoran.

Thank you, Joanna. Good morning, everyone. We appreciate you joining the call. Before anything else, I want to address the unspeakable tragedy that we are seeing in Ukraine. We are deeply distressed by the ongoing human suffering that this conflict is bringing to millions, including many of our people and their families. As always, their safety is most important to us all and remains our #1 priority. We are doing all we can to support our people on the ground with immediate financial and practical assistance. And alongside the Coca-Cola Company, the Coca-Cola Foundation and other bottling partners, we are contributing to the humanitarian efforts with in-kind and financial donations. This includes cash grants and salary advance payments to our people and financial support of refugee assistance centers across Ukraine. Globally, the Coca-Cola system has committed $15 million to a range of humanitarian relief organizations while providing more than 1.8 million liters of beverages in Ukraine and in bordering countries. As you can imagine, our business has been significantly impacted. Following the decision and announcement of the Coca-Cola Company on 8th of March that it is suspending business in Russia, we immediately stopped placing orders for concentrate in the country, and we are stopping production and sales of the brands of the Coca-Cola Company in Russia. We are working in close alignment with the Coca-Cola Company to do this and have also stopped investments in the country. Following this decision, we will have a much smaller presence focused on local brands. We are evaluating all options here. As you might expect, it is highly complex and fluid situation, which needs to be worked through appropriately and we will share more in due course. At that point, we will also be able to let you know the financial implications for the year and the level of noncash charges we expect. In Q1, despite this very difficult backdrop, we have continued to make strong progress on our strategic priorities. We are prioritizing and investing behind the highest potential opportunities in our portfolio such as Sparkling, Energy and Coffee. The businesses that are delivering today and those that are creating growth potential for the future, we are making continued focused investments behind our prioritized capabilities, particularly around digitizing our route to market and strengthening our revenue growth management tools with data and insights. These capabilities are enabling us to adapt and be agile in seizing opportunities. We are allocating capital towards our most attractive market opportunities. That includes prioritized as well as new markets like Egypt, which we are reporting as part of our business for the first time this quarter. And we are making progress on our sustainability agenda with tangible investment behind recycled packaging and emissions reduction. That is also why we were pleased to again be recognized in 2022 as one of Europe's Climate Leaders by the Financial Times and Statista. All of this is strengthening our business so that it is better positioned than ever to continue to win in our industry and our markets. The benefit of our consistent execution of our strategy is clear in the numbers we are reporting this morning. We achieved organic sales growth of 24.2% in Q1 or 25.9%, excluding Russia and Ukraine's performance. Revenue growth was well balanced between volume expansion and very importantly, revenue per case acceleration. Organic volumes grew by 11.3% with broad-based growth across segments. And as I mentioned, our consistent investment in revenue growth management capabilities ensures that we activate the right levers to protect profitability in an increasingly challenging input cost environment. Q1 organic revenue per case grew by 11.6%, a strong acceleration on the growth in 2021. What is really important here is that while driving this improvement in revenue per case, we are also accelerating our market share gains in both value and volume terms. And that is the case across Sparkling as well as in the broader non-alcoholic ready-to-drink industry. The strength of our 24/7 portfolio, our focus on portfolio priorities, customer partnerships and our execution expertise are visible in our growth trajectory. Sparkling volumes increased by 10% with broad-based growth across brands and segments. Coca-Cola trademark volumes increased just over 10% with continued traction from the new Coke Zero across our markets. We are also seeing ongoing good performance from Fanta and Sprite. I'm really pleased to see that the fastest growth continues to come from our areas of particular strategic priority. Low and no sugar Sparkling grew by 45%, reaching 27% of our total sparkling portfolio. Adult Sparkling performance has been consistently excellent. Q1 was no exception with volumes up 23%. Energy continues to have very strong momentum. Volumes grew by 32% in Q1, cycling growth of 56% in 2021. All 3 of our Energy brands, Monster, Burn, and Predator, grew double digit with affordable brand, Predator, nearly doubling. Finally, a few words on Coffee. We are making good progress with volumes up 75%. We continue to roll out Costa with a focus on the out-of-home and brought Caffè Vergnano to 11 new markets in the quarter. What is particularly encouraging to me about Coffee is that this growth is coming as a result of careful investment in building capability in the category, creating a high-quality Coffee business, which can continue to expand for many years, supporting our 24/7 vision. Moving on to our segmental performance. Established segment organic sales grew by 18% with well-balanced volume and revenue per case contribution. We saw our Western European markets progressively easing any remaining COVID restrictions, so that by the start of Q2, our established segment markets were operating in near normal environment. All countries in the segment grew volumes. One of the highlights is Italy, with strong performance across the board in Sparkling, benefiting from successful activation of Coke with Meals and our focus on the out-of-home channel opportunities. Developing segment organic sales grew by 41%, led by a rapid recovery in Poland, where we are lapping the introduction of the sugar tax in 2021. The other markets in the developing segment also saw a strong growth in Q1, with very good results in revenue per case. In the Emerging segment, organic revenues were up 23%. January and February were hardly impacted by conflict, and we entered 2022 with considerable momentum in Russia and Ukraine as well as in many of the other markets in the segment. In Nigeria, we have continued to see very strong performance with volume growth led by our highest-value categories such as Energy, Juice and Adult Sparkling. We've complemented that strong mix with robust action on pricing to drive healthy revenue per case expansion while accelerated market share gains. Moving to Egypt. The integration of our business is progressing ahead of our initial plans, and we continue to see significant opportunities to grow revenues and expand margins in the market. We also have strong plans for 2022 and beyond, centered on per capita expansion through affordability and portfolio development. It will come as no surprise that inflationary pressures are significant and increasing. Offsetting that challenge is the power of our 24/7 brand portfolio, the strength of the marketing behind those brands, and how we, together with Coca-Cola Company, are consistently investing behind and driving our revenue growth management capabilities to improve revenue per case sustainably through both mix and price. Revenue per case expanded 11.6% in Q1. We achieved strong performance across markets as we executed our pricing plans and complemented that by focusing execution behind our highest revenue per case categories and packs. The results of this is the strong improvement in category, channel and package mix visible in the quarter. Pricing decisions are taken carefully, considering the range of insights and analytics we have available. They are always made with a view of also creating value for our customers and consumers. The proof of the success of this is that while all our pricing plans have progressed as expected, in Q1, we have had no negative impact on our volume performance from doing so. And as I noted at the start, we have also managed to accelerate our market share gains year-to-date. Let me now say a few words about the rest of the year. There is no doubt that the conflict has significantly impacted our business in Ukraine and Russia. As I noted at the start of the call, excluding these 2 markets, organic sales growth was 26% rather than 24%. We expect that impact to expand in the full year, particularly in the second half. But as you've seen today, our other 27 markets are delivering very well against our plans for the year, in many cases, ahead of expectations, and we are investing even more behind that potential. The inflationary environment has only intensified, and we expect to continue to see pressure on our COGS for the rest of 2022. This is why I'm so pleased to see the effective use of our revenue growth management capabilities, including pricing visible in our performance. Given the number of uncertainties that remain about the rest of 2022, we continue to believe that it would not be prudent to provide financial guidance for the year at this time. That said, we have high confidence in our portfolio, evolving route-to-market, customer-focused commercial strategy, the potential of our diverse markets and above all, the capability of our people. We remain agile as we prioritize our investments with discipline to continue to drive sustainable growth despite the uncertain environment. Thank you for your attention. I will now hand over to the operator, and Ben and I will be happy to take your questions.

[Operator Instructions] And the first question comes from the line of Nik Oliver from UBS.

With regards to the revenue per hectoliter, obviously, a very impressive number, is it possible to break down how much of that was priced? And how much was some of the mix benefits that you alluded to?

Certainly, Nik. Thank you. Look, pricing was the largest contributor, accounting for more than half of the improvement in organic growth of the NSR per case. That's followed by package mix and category mix as well. We took pricing early in the year in all of our markets across Q1, but a few exceptions like Poland and Romania, which actually implemented the pricing in Q4 last year. We are accelerating that shift into single serve. It's a trend that continues in the market and also in the quarter. So that's where you see that package mix being also a strong contributor, nearly 25% of the improvement. Category mix is also adding to the improvement, and that's driven by categories like in Sparkling primarily with Coke and Flavors, but also Energy, they continue to grow very well indeed. And the last thing that I will call out there, Nik, is actually that the geographical mix typically for us, weighs down on NSR per case. And this time, in Q1, that wasn't the case because the dilution that you may see from a market, for example, like Russia was offset by other markets like Poland growing ahead.

Great. No, no. That's really clear. And then just one sort of follow-up on a country level. Nigeria, obviously was very strong, and particularly in the context of some of the comments we've heard from your listed peers. Just any words you can share on what's driving that very strong performance in Nigeria?

Thanks, Nik. Look, Nigeria consistently delivers very strong performance because, as I highlighted on a few other calls, I think a number of levers that we are doing in the country, especially market focused, together with the Coca-Cola Company are really very well thought, designed. So therefore, we see that our primary focus behind sparkling is giving results because we are doing a very well balanced approach between affordability and premiumization. Everyone pretty much understands that affordability in a country like Nigeria is very important. Therefore, we are really focusing on our returnable glass packaging over there. Also no sugar variants are helping us in the affordability play. We have also introduced several brands, for example, in energy category, introducing more affordable option exactly because of the affordability Predator proves constantly quarter-by-quarter that it's important contributor to our growth. On the other side, focus on Adult Sparkling is as -- from last year and now this quarter proves to be a right big bet and I'm very positive that this is going to continue. So Energy overall is another premiumization element, and Juice is performing very strong. So this is complemented with our continuous investments behind prioritized capabilities in Nigeria. Revenue growth management started in Nigeria. This is now complemented with data and insights. And one of the critical use cases we have done across Hellenic again started in Nigeria is segmented execution, which is strengthening the way we really execute on every single outlet, also route to market development, where we have done significant investments over last several years. And last but certainly not least, is our continuous investment in capacity to enable this growth. So in conclusion, I'm very positive with development in Nigeria, especially taking into account that this performance that we see with low double digit in Q1 of this year is at the back of a very strong comparatives of Q1 of last year.

Next question comes from the line of Fintan Ryan from JPMorgan.

First question for me, please. Back in February when the last update, you were talking to high single-digit COGS per case inflation for the year. I appreciate sort of Russia-Ukraine situation is quite volatile. But excluding Russia and Ukraine to the rest of the business, how has your view of COGS per case inflation moved since that?

Let me take that up. Thanks, Fintan. So look, we guided the full year results to COGS per unit case inflation at the upper end of high single digit. However, we also flagged at the time that COGS per case could move up to low double digits, driven by that tightening commodity environment and also by the impact or potential impact of geopolitical tensions at that time turning into a full blown on conflict. And clearly, that's the scenario where we are right now. So to share a little bit more color about the things that we're seeing, while we are we're hedged in key commodities, inflation still move up because we have suppliers passing higher conversion and transportation costs, naturally. We're using all of our strengths in terms of long-term relationship to continue to negotiate and minimize that impact. The other thing that we're seeing, obviously, is that labor cost inflation and increased prices for utilities, things like electricity, like fuel, like gas, are also translating into higher production costs in our factories. To a lesser extent, concentrate also adds to our cost per case inflation. And that's why we're very focused on mitigating actions, growing the business, pricing up as you saw from Zoran, improving the mix, all visible in our numbers that we are presenting now in Q1. And is that ongoing cost discipline that I want to call out on productivity, driving OpEx efficiencies other key levers that we're activating to protect profitability.

Great. And my next question is just in terms of the consumer environment so far, I guess, in Q2 and your views and particularly thinking with regards to some of the market adjacent to Russia, Ukraine. Like you've highlighted that Romania volumes were just up low single digits in Q1. Like are you seeing any impact on consumer sentiment and demand in these sort of adjacent markets over the recent weeks? And any sort of risk you think of penetrating for the rest of the year?

Thanks, Fintan. So far -- first of all, as I mentioned, in spite of all, pricing that we have taken, we have seen no volume impact neither this year or last year. But we are mindful of the whole situation and how this might evolve throughout the year, maybe at the back end of the year. So we are, let's say, alert and monitoring the whole situation. But so far, we have not seen that consumer demand and impact has been visible in our business and as much as we are observing also the various other peer companies. So so far, we have not seen that. But certainly, we will stay alert with all our monitoring and possible actions that -- with which we might need to adapt to the evolving situation.

Next question comes from the line of Andrea Pistacchi from Bank of America.

I have 2 questions on Russia, actually, please. The first one, and I appreciate you'll be sharing more with us later in the year. But if you're able to talk a bit about the fixed cost structure that you have in Russia. And to what degree you think you'll be in the position to downsize the fixed cost given the new reality on revenue, reducing number of production facilities, potentially headcount, distribution? So that's the first question, if you're -- please.

Thank you Andreas. Let me start by saying that when we think about Russia, it's difficult to provide much of information at this stage because we're really in the middle of assessing all feasible options for Russia. And therefore, it's early to talk about the range of possible outcomes. But you asked very clearly about the fixed cost structure. And if you think about a market like Russia, COGS, specifically is primarily variable. So maybe 10% of that COGS will be fixed. And if you think about the OpEx, then probably around 60% of that is fixed. The rest is variable. And essentially, we're working through the options for the market, and we'll come back at a later date to provide more gratuity.

Okay. And then, please, my other question on Russia, probably this can be addressed -- is about the situation now in terms of shipments. You say, obviously, you stopped purchasing any concentrate on the 8th of March. What is the situation now with your levels of concentrate of finished goods? When will we start to see effectively a sharp decline in your Russia sales?

Thanks, Andrea. So let me just reiterate that and repeat important fact that after the 8th of March when Coca-Cola Company made a decision and announced the suspension of the business that we have immediately stopped buying any concentrate base. And from then on, we are in the process of depleting the stock. And as you appreciate, very well that combination of concentrate and finished goods and what's in the retail, this is now the process of depleting that following which we will end up with a much smaller, significantly smaller presence focused on local brands. So this gradually flavor by flavor and SKU by SKU is happening on a weekly basis. And I would just say that only in the next few months, this process is going to be completely over. Yes. And that's it.

Can I just say, are you considering making any accounting changes in the way you treat Russia? Could that be an option?

Look, we are evaluating all options. And depending on the model that we end up in Russia, that may merit accounting changes as well. So we'll come back in due time.

Next question comes from the line of Sanjeet Aujla from Credit Suisse.

I'd love to dig a bit deeper into the performance in the Developing segment, where you've seen a nice acceleration there. Are you able to just talk about some of the key drivers of that? That's my first question, please.

Yes, yes, gladly. Indeed, first of all, developing segment has done really well. And we know that the most sizable market in Developing segment is Poland, which really had a fantastic performance in Q1 which was primarily driven by Sparkling, which is growing above 40%. And I'm really pleased to see that it's a consistent performance across all parts of Sparkling, especially even Coke Zero, which grew over 50%. Adult Sparkling strong performance, Energy continues with a strong performance over 40%. You know that with Coffee, this is the second most important market in Europe for Costa, and that's an important and growing part of our business. And we also had a good development of Premium Spirits business, which is complementing very well our core business. So I would also highlight that while last year, there was situation of the whole sugar tax. It was not easy to see what's happening under the hood, if you will, in Poland. Our team has done a fantastic job in being focused on key priorities on Developing and continuously investing behind our capabilities in revenue growth management in data and analytics, route to market. There has been excellent marketing plans that have been executed. So now when we exited full year of sugar tax impact, I think it's visible that the whole background work that was happening and focus on the market execution really is yielding results. The team continues to fine-tune its brand pack architecture based on our readings. So that's why you see that we are having introduction of new range of multipacks. We used to have 6 pack, now we have 4 pack. Also, we've done another wave of smart pricing in December of '21 leveraging very well pack elasticities and while defending our multi-serve price points. So all in all, I would say, on Poland that it's well-rounded performance. And I'm personally and the whole team quite confident about Poland performance for the year. But I also want to highlight that also the Hungary in Q1 had a quite strong performance of volume being in the 20s, Czech in the low teens. And both of those markets as well had quite good performance in price mix, which was in the mid-teens and above. So when you blend all of that, it was really strong performance for the whole developing segment.

Got it. And my follow-up is just on Egypt, please. I think you spoke about integration being ahead of initial plans. Can you give us a sense of how volumes are trending year-over-year and I guess, revenues more broadly? And how concerned about are you about the foreseeable future day just in light of the big step-up in food inflation?

Yes. So first of all, I don't want to miss the opportunity to reiterate how pleased and happy we are to have Egypt now in the whole Hellenic portfolio. Our expectations of this market are very strong. And that's why from day 1, we have focused with our group resources as well as the team on the ground in Egypt on the well thought through and phased integration which, as we said, is going ahead of the expectations. Egypt, Q1 performance volume-wise was in the low teens. And that's also -- that's very encouraging. But also the focus on price mix in Egypt is important. Also, given the recent movement in the currency that we have observed, Egypt as well is part of the whole inflationary situation that our team immediately is doing adaptations and price/mix from day 1 is one of our priorities in the market. And we do plan to play balanced approach with price mix as well as volume.

Next question comes from the line of Edward Mundy from Jefferies.

So my first question really is for you Zoran. There's a huge amount for the business to absorb given the uncertainty from the conflict. I mean how do you ensure that you don't cut investment behind brands, categories and growth initiatives in markets outside of Russia and Ukraine as you try to protect the overall group P&L?

Got it. So Ed, I was just reclarifying. So one of the things is that, it's usual way how we play the game throughout the year as we see how situation develops and how we are doing the dynamic resource allocation. In this case, particularly because of the circumstances, we are very mindful to stay the course in the rest of our markets and further amplify investments in prioritized markets where we are expecting the biggest and most scalable impact. Now that means that we are further fueling the -- in Italy very good momentum, especially behind the out-of-home, route to market development together with Coca-Cola Company programs behind Coke and Neil's Adult, Energy, Development. Another example is also preparation for the season. That's why in markets like in all our seasonal markets, but example is, let's say, Greece, where we are doing even more for the preparations of the season and especially encouraged by some early signs that we should expect a positive and good season. Also, we are doing more fueling in Poland. And overall, in the markets where we have prioritized investments together with Coca-Cola Company, we're also doing more behind the Adult Sparkling portfolio, which is one of the ways how with mix, we are further mitigating the inflationary impacts so that it's not only pricing, but it's we are together driving the price/mix overall. So I would just summarize that very focused, disciplined investments behind additional investments behind priority markets. And part of that is already visible in Q1, but I do expect more in the rest of the year.

Great. And as a follow-up, look, I appreciate it's too early to provide guidance, but there has been quite a large correction consensus expectations, which sort of seems to remove Russia and Ukraine in its entirety. I appreciate, it's still very early in the year and there's still will be a fair amount of volatility out there. But given the strong start, I mean, I think you said that the other 27 markets are delivering well and ahead of expectations and the encouraging recovery trends and potential for further pricing in the year, does the Street EBITDA expectation of $684 million, is that materially different to your scenario planning?

Let me take that one, Ed. Look, the -- as we said, because we are evaluating the different options and the options of Russia influence how we're going to be landing the year. It's a little bit early for us to comment on the guidance itself. That's why we removed it in March. And again, what I would say is, reiterate the message from Zoran that we are performing really well in Q1. We are prioritizing investments in the remaining markets. And therefore, that gives us confidence that we'll continue to make progress there. And if you think about timings, we are aiming to reinstate that guidance for the half year results, if we can.

Yes. And Ed, I would just add that, while the situation understandably, I think is very complex, and we tend to have visibility for the whole group in that -- from that angle is not -- is really not easy, however, we continue to focus on the right things, investing behind the right priorities that are important for our short term, but equally for our long-term results and organizational development. So I just wanted to reiterate that part.

Next question comes from the line of Mitch Collett from Deutsche Bank.

I only have one question and I guess, quite similar to Ed's. But given the strong start you've had, and if you are -- if you strip Russia and the Ukraine out, do you think your previous guidance is applicable to the remainder of the business? So I think that was 5% to 6% FX-neutral revenue growth ex Egypt. I mean is that still possible ex Russia, Ukraine? And then I think you said low to mid-single-digit EBIT growth ex Egypt, given the strong start, are both of those numbers achievable for business ex Russia, Ukraine and Egypt?

Yes, Mitch. Yes, the answer is, yes. So our remaining 27 markets fully fit into the algorithm that we have shared for our growth story 2025 there. And what we said when we entered the year that we see ourselves to be above 6%, and we do see that being valid for our remaining 27 markets.

And the EBIT part, is that also still applicable?

On the EBIT, Mitch, we remain really focused on growing the business and keeping on growing that EBIT organically. You've seen that there's significant pressure in the COGS line. You've seen also that we're taking decisive action across pricing mix, OpEx and productivity. So again, as I mentioned before, we are working towards having a clear picture of what the business outlook will be by the half year and 1 results, and we should be able to obey to them, if not before. Obviously, we don't want to do this prematurely before we have considered all the feasible options in Russia and the rest of the business.

Next question comes from the line of Charlie Higgs from Redburn.

My first question is on the channel mix dynamics that you're seeing. So I was wondering if you could comment on how the out-of-home channel finished Q1, perhaps relative to 2019? And then maybe a bit of color on the at home channel and how you see that developing? I think you talked about accelerated growth in e-retail and expanded shelf space and maybe that doesn't return to 2019 levels.

Charlie, so out-of-home channel on the level of our whole group, has been performing quite well. It's 24% above last year and actually, versus '19 is 14% above. And that's driven by the Emerging segment while Established and Developing are still minus 8%, minus 6%, respectively, below 2019. But in absence of something else happening again on the COVID front, we are positive that also Established and Developing are on a good trajectory to get to the '19 level and then surpass it. But in conclusion on a group level, we are already above 10% above 2019. Now very good thing is that while out-of-home recovery is happening, that at home channel continued performing quite well in a healthy way. So we see that at-home Q1 versus last year is plus 5%, and that's at the back of also at home performing very strong in Q1 of last year. That demonstrates, I believe that some of the trends that have emerged from COVID, especially in the way consumers are behaving and consuming products in a variety of occasions now at home are kind of sticking in there. And that's why we are also tapping into that through our tailor-made plans exactly to be part of those occasions at home. So overall, both of those in their own -- both of those performing positively, quite positively.

That's very helpful. And then my follow-up is just on the Coffee category, where you posted 75% volume growth. And secondly, if you could talk a bit more about that, maybe split by Costa versus Caffè Vergnano? And then what you're expecting for the rest of the year, again, this flat, out-of-home channel reopens?

Yes. So first of all, very, very pleased about the strong performance of Costa. That comes as a result of front-loading our investments, building the teams and capability, filled with experts, building technical aspect machines and our approach of multichannel practically across all channels. So I'm very pleased about that performance even more by the positive feedback from customers, consumers, repeat purchase, our continuous gains in the distribution. Now when we are -- we don't have COVID restrictions, we can play very well-balanced approach between the at-home and out-of-home and that's why our continuous gains of customers and recruitment of customers in the away from home is happening continuously and month-by-month is increasing. Already in Q1, we have gained, let's say, 750 additional customers versus where we left it in -- at the end of last year. Now this is -- and as a reminder, we are already in the 17 of the markets with Costa. Now this is very, very complemented with Caffè Vergnano proposition. As a reminder, there is a clear brand stratification where Costa plays in the mass premium, and Caffè Vergnano plays in the high premium segment. And being different, not only that why they complement each other because they are not only at 2 different price points, but there are also 2 different types of coffee propositions, texture and profiles. So we believe that this makes us stronger, that multi-brand approach is exactly the one that can help us to tap and enter various types of customers that with only 1 brand, it would not be easy to do. Our focus with Vergnano is primarily in the out-of-home type of channel. But overall, our coffee approach remains and will be that we develop this sizable category across all channels.

Next question comes from the line of Richard Felton from Goldman Sachs.

My first question is a follow-up on COGS. I appreciate the color you gave earlier on the call. But if you could remind us, firstly, of where you are in terms of your hedges for the year? And then secondly, on the higher conversion costs, which are being passed through from suppliers, I think that -- I think the higher energy cost, but could you remind us how big those conversion costs are as a proportion of your overall COGS breakdown?

Thank you. So let me start with giving you some perspective where we are in terms of the hedging. We have made progress versus where we were. When we last spoke with full year results, and that will cover over 85% of 2022 major commodities associated with input costs. So we feel good that we are in a good position as we enter half 2. And your second question, which was around Energy conversion as a proportion, what I would say is that, it's probably best for us to talk about COGS per unit case rather than to get drawn into the individual lines of COGS. It gives you a better perspective. And as I said before, we're looking at a low double-digit input costs -- sorry, COGS per unit case inflation.

Great. That's clear. And my second question, sort of, you mentioned that you've been taking your planned pricing so far without much negative impact on volume. But as we do move through the year and the pressure is on disposable income start to build and we see the impact of higher energy prices and food prices on the consumer. Are there any markets in particular where you are worried about seeing more of a volume impact start to emerge?

Good question, Richard. First of all, we haven't seen anything like that yet. Secondly, we don't take same level of pricing in -- across the market. It's very specific per market. So it can happen that in some quarters or half or semesters because of the competitive dynamic, maybe that could impact something. So I just want to say, I can't really say now that I would highlight any specific market where we couldn't take the price, it's rather to which level. And within even the market, that doesn't mean when we go with price, we will take it on all packages or that it will be all channels. So that's a sensitivity and that's, let's say, detailed planning that we take into account and so far, and we will be doing so going forward.

Next question comes from the line of Yubo Mao from Morgan Stanley.

Most of my questions have been asked actually, but maybe just a quick one on market share dynamics, which, Zoran you have touched on earlier. But I think Q1 showed accelerated share gain, can you talk about in which markets did you see the largest gain? And how confident broadly are you in terms of maintaining that momentum going forward, especially as the macro picture turns a bit more challenging, and if we see some down trading later in the year?

Yubo, yes, first of all, I think as we highlighted in the press release, on a total group level, I'm personally very pleased with the share performance. And then this -- first thing to say is that all our largest markets -- all our large markets are having sizable share gains. And of course, because they are more sizable, they are impacting most the total group numbers. So when you see Poland, share gains in -- both in Sparkling and NARTD, they are 7% and 5%, respectively. Nigeria has stronger share gains. Egypt is having very strong share gains. We are seeing Switzerland, Serbia, Romania, so there is a whole range of markets. And actually, the majority of markets, we are gaining share in Q1, primarily -- I would highlight primarily in the value shares, but also volume shares.

And maybe quickly on the outlook for the year, how confident are you implementing that momentum?

Look, outlook for the year is that we always -- listen, we always play to win. So we stay alert on all competitive dynamics. We have strong plans with Coca-Cola Company for the rest of the year. We are excited with the programs and marketing support that we are getting execution is our bread and butter. And when you merge that, we have -- that's what is feeding our play to win and our winning ambition for -- not only for this year but for any other year.

There are no more questions at this time. I would like to hand back over to the speakers for final remarks. Zoran, please.

Thank you. Well, listen, I'll just shortly, I want to thank everyone for your time and attention for today's call. We really appreciate it, and we look forward speaking with you at the next occasion in August. So thank you very much, and wishing you all a good day. Thank you.

That does conclude our conference for today. Thank you for participating. You may all disconnect.