Coca-Cola Enterprises' CEO Hosts 2012 Earnings Guidance Call - Event Transcript

Dec.15.11 | About: Coca-Cola Enterprises (CCE)

Coca-Cola Enterprises Inc. (NYSE:CCE)

2012 Earnings Guidance Call

December 15, 2011 10:00 a.m. ET

Executives

Thor Erickson - VP, IR

John Brock - Chairman and CEO

Bill Douglas - EVP and CFO

Hubert Patricot - EVP and President, European Group

Analysts

Caroline Levy - CLSA

Steve Powers - Sanford Bernstein

Lauren Torres - HSBC

Judy Hong - Goldman Sachs

Ian Shackelton - Nomura

Mark Swatzberg - Stifel Nicolaus

John Faucher - JP Morgan

Bill Schmitz - Deutsche Bank

Operator

Good day, and welcome to the Coca-Cola Enterprises December Outlook Conference Call. At the request of Coca-Cola Enterprises, this conference is being recorded for instant replay purposes.

At this time, I’d like to turn the conference over to Mr. Thor Erickson, Vice President of Investor Relations. Please go ahead, sir.

Thor Erickson

Thank you, and good morning everybody. We appreciate you joining us this morning to discuss our outlook for the remainder of 2011 and for 2012.

Before we begin, I’d like to remind you of our cautionary statements. This call will contain forward-looking management comments and other statements reflecting our outlook for future periods. These comments should be considered in conjunction with the cautionary language contained in this morning’s earnings release, as well as the detailed cautionary statements found in our most recent annual report on Form 10-K and subsequent SEC filings. A copy of this information is available on our website at www.cokecce.com.

This morning’s prepared remarks will be made by John Brock, our CEO; and Bill Douglas, our CFO. Hubert Patricot, President of our European Group, is also with us on this call this morning. Following the prepared remarks, we will open the call for your questions. In order to give as many people as possible the opportunity to ask questions, please limit yourself to one question, and we will take the follow-up questions as time permits.

Now, I’ll turn the call over to John Brock.

John Brock

Thank you, Thor. And we welcome each of you to our business update. Today, we will discuss Coca-Cola Enterprises’ outlook for 2012 and our expectations for full year 2011.

This year marks our first full year since the new Coca-Cola Enterprises was launched in October 2010. Our goal remains to create sustained value building growth for the benefit of consumers, customers, employees and, most importantly, our shareowners. We believe our results for 2011 and our outlook for 2012 clearly put us in the right path toward achieving that goal.

As you saw in our news release this morning, we expect solid growth for full year 2011, and we now expect earnings per diluted common share at the higher end of our range of $2.14 to $2.18. This includes a currency benefit of about $0.15 to full year earnings per share based on the recent rates.

Revenue should grow in a mid-single digit range with operating income growth expected to be in a high single digit range. We expect free cash flow of approximately $525 million with capital expenditures of about $375 million. These 2011 results will mark the sixth consecutive year of growth for our Legacy CCE territories. Though much work remains ahead, we are pleased with our progress and the opportunities ahead, particularly in light of the demands created by the persistent macro-economic weakness in Europe.

Looking ahead to 2012, our outlook calls for a seventh consecutive year of growth with results at, or above our long-term objectives.

We expect earnings per share growth of 10% to 12%, driven by solid operating income in a mid-single digit to high-single digit range, and continued execution of our planned share repurchase program. We anticipate revenue growth in the mid to high single digit range. Each of these ranges are comparable and currency neutral.

We also expect free cash flow of about $550 million with capital expenditures of about $400 million. Bill will discuss the financial details of these goals in just a few minutes, including a potential impact of additional taxes on our business in France.

At the heart of this guidance, our solid operating and marketing plans that are centered on maximizing the benefits of key significant initiatives, including the London Olympics and Euro 2012 Soccer. The Olympics are the centerpiece of our marketing plans next year with programs for tickets early in the year and ongoing Olympic related activity leading up to the games, including the Olympics Torch Relay.

The relay is a significant event that will run for 70 days and will come within one hour of 95% of the population in Great Britain. We’re building the marketplace efforts to support the Olympics that began this year with excellent customer and consumer response.

We’ll also utilize our partnership with the 2012 European Soccer Championships or Euro 2012 throughout our territories. The Olympic and Euro 2012 activities supplement our longstanding programs that include music promotions and Coke with Food executions.

Coke with Food is an ongoing effort which helps expand the overall footprint of the brands. These programs create a very solid platform from which to engage consumers and continue to build our relationships with customers. The foundation of these programs and our business is the world’s most popular non-alcoholic ready to drink or, as we call it NARTD portfolio.

In fact, our core Red, Black and Silver Coca-Cola trademark brands will continue to be a major driver of volume in 2012. We will work with the Coca Cola Company to support our heightened focus on light core brands, including Diet Coke and Coca Cola Zero.

Additionally, energy, stills and other sparkling flavor brands will contribute to growth as we continue to diversify our portfolio in all territories. A key element of our revenue management work is to make certain that consumers can find the right products and packages in the right channels.

We will continue to introduce new packaging options next year that we believe will unlock additional revenue opportunities. For example, smaller 375 ml PET bottles for immediate consumption and larger 1.75 liter bottles for future consumption, both of these are aimed at meeting expanding consumer needs.

As we work to enhance our brands and succeed in a highly competitive marketplace, we will also continue to work diligently to improve our category leading customer service. 2011 was a very important year for us. For the first time, we were now rated the leading consumer goods company in each of our four Legacy CCE territories, as determined in an independent survey of our customers.

This survey ranks suppliers on a combination of factors, including category development, customer service, innovation and logistics. This is particularly exciting for our operations in France, which achieved this number one distinction for the first time.

Clearly we've made important progress toward our goal of being our customers’ most valued supplier. But we will always drive to improve our service even further and continually enhance our proven customer value creation model. In fact, we believe our strategies will significantly strengthen our supply chain, provide additional consumer insights, drive increasing effectiveness, and ultimately, improve day-to-day execution and customer service.

All of our efforts are designed to enable us to reach our most important goal: creating enhanced value for shareowners. Through a combination of organic growth, dividends and our share repurchase program, we are making excellent progress on this goal. By the end of 2011, we will complete a $1 billion share repurchase program. And we will begin a new program in January with an objective of purchasing at least $500 million of our shares next year.

We believe these results and the sustained growth they reflect demonstrate the long-term potential of our business. There are three key strengths of our business that make our long-term goals for growth and value creation attainable.

First, consumers value our brands and products. The Coca-Cola brand is one of the most successful, respected and recognizable in the world. Through our close working relationships with our customers and the Coca-Cola Company, we will continue to build brand equity throughout our territories.

Second, we have the right operating strategies -- strategies which are centered on providing the highest levels of customer service. We will build on our solid track record of delivering to our customers, important marketplace insights, outstanding execution and world-class service. These strategies allow us to seize significant marketplace opportunities and to drive increasing synergies with our customers.

And third, we have a highly talented and dedicated team in place that is focused on success. At every level of our company, our people are committed to achieving increasingly high standards of performance. Our results and our 2012 outlook are solid proof of their skill and dedication.

In closing, we continue to see excellent opportunities ahead for growth and value creation. We operate in stable territories with strong appetites for consumer goods, despite the ongoing economic challenges of today. And as demonstrated by our consistent success, we believe we have right operating strategies in place to seize opportunities and meet the demands of changing marketplace conditions.

Thank you for your continued interest in our company and your participation today. Now I’ll turn it over to Bill who will provide a more detailed discussion of our financial outlook for both 2011 and 2012.

Bill Douglas

Thanks John, and we appreciate everyone being with us today, as we discuss our update for full year 2011 and our outlook for 2012.

As you read this morning in our release, we now expect full year 2011 earnings per diluted common share at the high end of the range of $2.14 to $2.18. This trend to the upper end of the range reflects the modestly improved outlook for operating income, as well as the nominal decrease in our expected effective tax rate for the year. This guidance includes a full year currency benefit of approximately $0.15 per share.

For the full year, we continue to expect comparable and currency neutral revenue growth in a mid-single digit range and operating income growth in a high single digit range. Weighted average cost of debt is expected to be approximately 3%, including debt issuances, capital leases, as well as the impact of currency swaps.

Our effective tax rate continues to be expected in a range of 26% to 27%. We also will end the year with strong free cash flow of approximately $525 million, above our initial plans for the year. This is driven by an improvement in operating income and now includes capital expenditures at approximately $375 million.

Now let’s look forward to our outlook for 2012. We expect comparable diluted earnings per common share to grow in a range of 10% to 12% above 2011 results with comparable operating income growth in a mid-single digit to high single digit range. Revenue will also grow in a mid-single digit to high single digit range. This outlook is comparable and currency neutral.

Although it is very early to accurately predict the 2012 currency impact, based on recent rates, currency translation would decrease full year earnings per share by approximately 6%. Weighted average cost of debt is expected to be approximately 3%. And the effective comparable tax rate for 2012 is expected to be in a range of 26% to 28%.

We also expect 2012 free cash flow of approximately $550 million with capital expenditures of $400 million. This positive outlook, coupled with our strong balance sheet and success in growing the business enabled us to continue to return significant cash to our shareowners through a combination of both dividends and share repurchase.

As we announced previously, we will complete our current program for $1 billion in share repurchases by the end of this year and begin a new $1 billion program in January of 2012. Our goal is to repurchase at least $500 million worth of shares next year.

Let me note that the outlook for 2012 does not reflect the potential impact of a proposed excise tax increase in France. As you know, we have consistently opposed this discriminatory tax. Should France implement the current tax proposal, we would expect volume growth to be impacted in France next year. Further, we will manage our overall business to deliver operating income growth and earnings per share growth at the lower end of the guidance we provided today.

As you would expect, we will provide an update on this matter in conjunction with our fourth quarter earnings call in early February.

So to summarize our outlook, it’s clear that we have continued to make excellent progress in building our business and creating a sustained level of increasing profitability. This success has been driven by a combination of operating and marketplace strategies that have built on the value of our brands and maximized operating efficiency.

Overall, we are encouraged by our success this year. We believe that despite the economic and operating challenges that lie ahead, we will deliver ongoing success and meet or exceed the long-term goals we have in place.

Again, thanks for joining us today. And now, John, Hubert and I will be happy to take some questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Caroline Levy of CLSA.

Caroline Levy - CLSA

A couple of questions. Can you remind us of the relationship between the impact of currency hedging revenue and the impact of it hedging operating income earnings?

John Brock

Bill, can I ask you –

Bill Douglas

Yes. Caroline, if you look at the impact, it is generally proportionate as you move down the P&L, particularly between revenue and operating income. Most of our expenses are local currency denominated. We do have a small amount in dollars with our corporate expense that’s still based (indiscernible)

John Brock

Bill, why don’t you remind everyone of the currency percentages that we have?

Bill Douglas

Yeah. If you look at our currency exposure, we have about 50% of our currency revenue exposure is in euros. About 40% of our revenue exposure is in sterling. And then the remaining 10% is roughly evenly split between Norway and Swedish kroner.

Caroline Levy - CLSA

Okay, and then – I am sorry, just a quick other one. If you can think about how you are looking at revenue growth next year, breaking out if you are expecting growth in sugared, CSD versus most of it being driven by Diet and Zero or non-carbs.

John Brock

We are expecting growth across the board with our portfolio. As I said in my comments, Red, Black and Silver is a powerful combination and the Coca-Cola trademark has continued to perform extremely well for us over the last several years. So our view is we’ve got a balanced portfolio and we would see growth across the board between carbonated, stills, between full sugar, between lights or Diet, we see growth in all aspects of our business.

Operator

Your next question comes from the line of Steve Powers of Sanford Bernstein.

Steve Powers - Sanford Bernstein

John, Bill, Hubert, are there any tangible signs from your perspective of the general macro uncertainty that you alluded to in Europe, having a negative impact on consumer demand in your categories? And if not, what are some of the key indicators that you are watching to maintain confidence that, that demand can remain relatively stable?

John Brock

Well, I’ll tackle that one to begin with, and then I’ll ask Hubert to talk a little bit more about our category and how it works. Certainly the macro-economics that are at work in Europe today are creating some, I’ll tell it, fragility among European consumers. Frankly, it’s for a different set of reasons but not unlike what we saw back in 2008. And it is real but the fact is we play in the category which is one where we are providing moments of pleasure at a very reasonable price. And we have found that with the right kind of plans and programs and focus of our teams, we can continue to navigate through some pretty challenging waters. We did it back in ’08 and we frankly think we can do it again. And we’ve done it in 2011 and we think we can do it again in 2012. And I think Hubert, perhaps you can comment a little bit about the expendabilty of our category and how we make that work.

Hubert Patricot

Yes, I think the arbitrage of the consumer remains positive for category. And again, that’s three years of what we could call a difficult economy context, this is really reassuring looking forward. And this is also based on the activation we are putting in the markets. We’ve convinced the trade that we are in expendable category and we are the number category in some other (ph). So they look at us as the vehicle for growth and it was the case in 2011 and it will be the case next year.

On your question of what we are looking -- of course, we are looking at sales data. On the top of that, I think what is really interesting and encouraging is that some value categories like energy, in particular, on sports drinks continue to grow. So again, as said by John, in this big environment, the consumers still tend to privilege the spending on our category and I would say, even on our brands in this tough environment. This is really encouraging for next year.

Steve Powers - Sanford Bernstein

That’s very helpful. Bill, can you give us any additional color on volume versus pricing dynamics as it relates to the top line next year? And I guess a similar question as it relates to directional moves in gross margin versus operating margin next year relative to 2011.

Bill Douglas

Sure. If you look at the comparative with our guidance for revenue growth in ’12 versus ’11, it’s marginally higher. A lot of that is due to the pricing actions that we are taking in the marketplace to offset the commodities environment. As we said earlier in the remarks, we do anticipate volume growth to be impacted in France if the excise tax is ultimately enacted. And we would expect consistent volume growth in our other markets as John alluded to in some of his remarks.

If you look to margins, Steve, we currently think that we’ll have some modest erosion in gross margins in 2011 with some positive modest improvement in operating margins in 2011. If you fast forward to 2012, our plan going in is to take pricing to offset the commodities and cost of goods increasing, so we would be looking to maintain gross margins and then have slightly improving operating margins for 2012.

Now that’s the organic business. If the French tax is enacted, that would be “dollar for dollar” impacted in the revenue line and the cost of goods sold line which would appear to be dilutive from a margin perspective. But if you strip that out the organic business, we would expect to maintain gross margins.

Steve Powers - Sanford Bernstein

Okay. And you are looking to – I mean, is 4 plus – 4% kind of the COGS inflation you are looking at, and therefore the pricing action – I mean, before anything in France?

Bill Douglas

Yeah, just to highlight cost of goods sold, we continue to expect 2011 COGS to be up 3% to 3.5%. And I think heretofore, we’ve kind of given a range of COGS for 2012 but at this point in time, I would feel comfortable in saying we expect the COGS increase for ’12 to be approximately 4%. We do have significant coverage in place for 2012. It’s modestly higher at this point for next year than we were at this point last year for 2011. So we expect there continuing to be volatility particularly in PET, that could have some impact on that guidance. But we feel pretty comfortable with the up 4% at this juncture.

Steve Powers - Sanford Bernstein

Great. Just one last thing on sequencing. The top line, bottom line growth, is it – should we think about it as relatively even throughout the year, or do you expect some front half strength with the Olympics buildup, or conversely some back half strength as comps get marginally easier?

Bill Douglas

Well, I think at this juncture, we feel like it’s going to be fairly consistent. I would say the one slight anomaly and I would never index on it, would be Q3. I think with all the Olympic activity kind of hitting a crescendo during the third quarter, combined with the really poor weather that we had in July of ’11, there would be a slight uptick relative to the other quarters in Q3. But I would never index on it.

John Brock

And you are talking about a comparison versus last year, because we obviously have our normal seasonality.

Bill Douglas

Correct. Year over year increases.

Steve Powers - Sanford Bernstein

That’s right, right. Great. Thanks so much.

Operator

Your next question comes from the line of Lauren Torres of HSBC.

Lauren Torres - HSBC

I am just curious to hear about plans for marketing spend or investment spend. As you talked about supporting the Olympics and the Soccer Championship, just curious how much money or incremental addition in spend that you may need to invest next year based on these added activities?

John Brock

Lauren, let me just put an intro piece to that and then I will ask Hubert to give a little more detail. We have intentionally made the Olympics – particularly the Olympics a multi-year program. We actually started talking with customers in the fall, a year ago, because we wanted to put in place a three-year program, particularly with key customers in Great Britain. And we’ve done that.

So for ’11, ‘12, ’13 we thought it was really important to use the Olympics as a major spearhead for our program and to have a multi-year program. So the spending and results in GB at least to some degree are spread out among three years. Now the fact is next year is going to be a good year and we and the Coca-Cola Company together have done, I think, a first class job in putting together programs obviously which focus on above the line activities, we’ve got three brands that are most notably going to be supported which is Coca-Cola, POWERade and vitaminwater. And we are excited about that. And then of course, we have all kinds of in-market programs that we are putting into place, not only in Great Britain but in the rest of our countries. You can add little bit more to that.

Hubert Patricot

Yes, Lauren, our conviction with the company that you don’t declare growth, you build growth. And that’s what we have done in the past three years. Again, despite the economic difficulties we have been investing and we think kind of over invested in our marketing support for our brand. And this is really the way we engage with the customer which is to say, we have a growth story to share with you for next year.

And on top of the investment we are making in the infrastructure and the venues for the Olympic, we will grow our marketing spend the next year beyond our main brands. So we have a strong, strong growth story to share with the trade.

Bill Douglas

And Lauren, just to round out the P&L impact, we don’t expect any dramatic P&L impact up or down from the Olympics given our multi-year approach. Any incremental costs we think will generally be offset by the volume and we think it’s going to be directionally just the continuation of our longstanding growth algorithm.

John Brock

Lauren, just to add another comment on that. As you know, the Coca-Cola system and the Coca-Cola Company are working with the bottlers, we are very and are much focused on big events. We love to have big events around which to wrap things. And so when you look at the last several years, we had World Cup, we had 125th Birthday of Coca-Cola, which frankly in our territories, certainly in the spring and summer of this year, was as big a set of programs as we had around the World Cup, the year before.

So – and this year is going to be a little bit bigger because we got both the Summer Olympics and Euro 2012 hitting. But again, it’s all about really focusing on big events that are the kind of things that only the Coca-Cola system can do. And so it’s – as Bill said, it’s not a revolutionary kind of thing, it’s more evolutionary.

Lauren Torres - HSBC

So would it be fair to say that as you think about spend as a percentage of sales, it’s not that different than what we’ve seen?

John Brock

That’s correct.

Operator

Your next question comes from the line of Judy Hong of Goldman Sachs.

Judy Hong - Goldman Sachs

I had a couple of questions just relating to the potential increase in the French tax. First, just in terms of how your concentrate costs are affected in the event that the tax does go up in France?

John Brock

The answer is that there would be pastures (ph), so they would not be impacted. There is no effect. Simple way to go.

Judy Hong - Goldman Sachs

So no effect. All right. And then secondly, just in terms of – it sounds like based on your comment, the impact that you are expecting in the event that there is a tax increases is relatively modest, maybe a point or two in terms of EPS impact. So just curious how you are thinking about the potential volume impact and what are some of the levers that you would pull to mitigate the impact to your overall earnings at this point?

John Brock

I will say a couple of things and again ask Hubert to add little more how what we are doing in France specifically to drive our business. But you’ve heard us say consistently, we’re not in favor of this kind of discriminatory tax and we wish we were not there. However, everything we see indicates that the process is continuing in the French government and will very likely the tax will be enacted, again which is unfortunate but that’s what we think is going to happen.

Then it will be, we think, broadly in line with our expectations and we’ve confirmed sometime toward the end of this month. As we’ve already said, we expect that volumes in France would be impacted but because of some of the things that Hubert will describe in a second, we believe that our French business can still grow modestly. And we expect to obviously grow in the other countries to be in line with the kind of normal expectations we would have. And so therefore we would expect volume growth throughout our complete territory. And then as we said, we still believe we can deliver results at the lower end of our guidance. So why don’t you talk a little bit about some of the things we are doing in France to drive our business?

Hubert Patricot

Judy, most of our portfolio will be impacted by this tax in France when it goes through. It will be an average price – retail price increase of around 10%. Historically the price elasticity in France has been on the low end, we have a strong share in France, the brand love for Coke is very strong. So – but it’s fair to say we are in kind of the new territory there.

However, we are reinforcing our plans for France. And we are combining two things. First, engaging with our customer and remember, we have become the number one category for them, to ensure we have the best activation with – beyond the Olympics and the Euro. But at the same time through outside France, so we are putting a reinforced focus on our cost structure. And we know we have an off-sheet cost management plan that has been put in place in the past three years. We are reinforcing that to ensure, again, we’re going to deliver overall into our guideline.

Judy Hong - Goldman Sachs

Okay. Hubert, just on the price elasticity, did you give us the historical price elasticity number – I don’t know if I missed that number?

Hubert Patricot

No, I did not give you. Again but it’s very different from what you are experiencing in the U.S.

Bill Douglas

Yeah, but the only thing we’ve ever said about that is Europe – and it varies obviously country to country. And we generally don’t give that information. We think that’s pretty important information for us. But it’s very different in Europe than it is in the United States.

Judy Hong - Goldman Sachs

Okay. And then just finally, Bill, just in terms of share buyback for next year, as we think about – it sounds like your guidance implies around $500 million for next year, which is a step-down from sort of that $800 million that you are expecting to finish within 2011. So can you just help us understand – I know there is, through the acquisition, opportunities out there but what would sort of make you think about – be more aggressive with your buyback front for 2012?

Bill Douglas

Well, I think looking at the holistic variables that we’ve discussed before, clearly how the business continues to perform, I think we feel comfortable that, that’s not going to be a corridor that we exit. I think the most likely item is that we have any significant data points on whether Germany is or is not going to happen and what the timing might be, that could potentially affect the rate of share repurchase.

John Brock

And again, just to be clear, the $500 million is what we said would be the minimum that we would expect.

Operator

Your next question comes from the line of Ian Shackelton of Nomura.

Ian Shackelton - Nomura

Just going about the French tax situation, just two questions around that. Are you expecting them to lead to a material retail stocking up at the end of this year ahead of the tax increase? And the second part was really just to get total clarity, in terms of how you see that impact in your portfolio? Just to confirm, it will impact on all carbonates both regular and Diet but it won’t impact on juices. Perhaps I can just clarify that.

John Brock

Hubert, would you like to answer that one?

Hubert Patricot

Yeah, Ian, maybe talking to the second point, the tax would impact all sparkling CSD, being sugar CSD or diet CSD, as well as any juice drinks with added sugar, so the 100% juice and water will not be impacted. For the rest the tax will apply.

Regarding the customer stock up, some customer loading is a relatively normal occurrence. I would say when we increase our prices to any degree, the amount of loading is generally not significant to the point that it will impact either our 2011 or 2012 plans. And I don’t see any difference this year despite the tax. And we will provide an update on this matter as appropriate on our first quarter really in February.

Ian Shackelton - Nomura

So a quick question, when we think about your portfolio, over 90% will be hit by the tax, is that a fair --?

Hubert Patricot

Yes. You are right.

Operator

Your next question comes from the line of Mark Swatzberg of Stifel Nicolaus.

Mark Swatzberg - Stifel Nicolaus

Firstly on the quarter here, I wonder John or Bill, can you give us a sense – I know we’re not talking about a positive revision but positive nonetheless – is that a function of the volumes coming in a little bit better than expected? Is it margin a little bit better than expected, or is it things below the operating income line?

John Brock

I think it’s just a combination of a number of things, which added together even then is so small increase. But it’s slightly better than we would expect. But it’s not any one thing. It’s a whole variety of things, including some business results. But it’s a variety of things.

Mark Swatzberg - Stifel Nicolaus

Got it. Great. And then just changing topics maybe for Hubert, or for you John. Package variety, can you – that’s clearly been a driver of success this year and you indicated plans for more of that next year. Can you talk a) with a little more specificity regarding your plans, and b) as you step back and think of this as a kind of multi-year story where you think we are on that story?

John Brock

Sure. Let me ask Hubert to address that.

Hubert Patricot

Yes. The package diversification has always been a key driver for our growth. We continue on that journey next year, both in future consumption with the introduction of new size and large PET, for example. And also on the immediate consumption challenge with the introduction of a new single drink bottles of 375 ml. And again it’s start of our value creation story which we shared with the trade and which has delivered.

Mark Swatzberg - Stifel Nicolaus

The 375 ml, is that a PET presentation?

Hubert Patricot

PET, yes. It is a PET.

Mark Swatzberg - Stifel Nicolaus

Got it. And can you put it in some context for us Hubert or John, kind of obviously Coke has markets around the world with much greater variety than what you have today there in Europe. Where do you think we are in this process?

Hubert Patricot

First, it depends by market that we make the point that in market like Belgium, we are pretty well advanced in terms of package differentiation, being a small, large PET can. We have also the large bottle which is doing quite well. Not to mention the new product launch we’re going to have next year on energy category, for example. This new single PET will complement the 500 PET targeting most female consumers and with lower points. So it’s a good addition to our portfolio in this context.

Mark Swatzberg - Stifel Nicolaus

Final question for you guys – I am sorry, am I interrupting you there, John?

John Brock

No, no, it’s okay. Go ahead.

Mark Swatzberg - Stifel Nicolaus

Final question is on Germany. Any update on timing, obviously we’re pretty much at the end of this year. And we’ve got till August 13 with this preferential discussion with Coke. But can you give us a sense about whether we might get clarity over the course of calendar ’12?

John Brock

Let me just say that – it’s actually May of ’13, I think you said August. The official date is May of ’13. But what we’ve said all along here is that we will continue to look Germany just like we would any acquisition. We have a very robust process by which we evaluated and that’s exactly what’s going to happen. When we have something to say, you can be assured that we will let you know about it.

Operator

Your next question comes from the line of John Faucher of JP Morgan.

John Faucher - JP Morgan

Just wanted to ask a little bit on the French pricing sort of absent the excise tax increase. You guys have given pretty good guidance about where the pricing needs to be across the business. Do you look at this and say, okay, we’re going to take a little less than the regular line pricing in French and try to spread that out a little bit more? Or is it going to be relatively even across the different markets?

John Brock

The answer is we’re not going to have any kind of an impact on our decision making because of this tax. We’ve put our plans in place. We’re already, in fact, as Hubert said in conversations in France, with key customers. And so the simple answer is no. We would like to think to actually – going to affect, we think it will. And it will not affect our pricing discussions, or our pricing numbers.

John Faucher - JP Morgan

Got it. And then it sounds as though in a particularly concern in terms of some of the UK retail sales numbers that you guys are not seeing the types of impacts that people are worried about. And there are discussions in terms of a lot of retail price competition there. So can you put your UK, your GB pricing in the context of what you are seeing there? And sort of what you are bringing to the retailers that in a competitive environment you are able to get that – that pricing through?

John Brock

Hubert?

Hubert Patricot

John, there is always some price competition at this time of the year, especially in GB. But we know also that December is a great month for us with our Christmas activity. Looking forward, we will combine, yes, price increase but as you know, we are engaged with most of our customer in a three-year plan to go after the potential of the category, what we call category vision.

We know in GB, there is additional term about $1.4 billion and we have activation and plan with the top 11 big customers. And that includes also value creation and price increase. So the negotiation will take place in the next weeks with the British trade. But we are confident again that the plan we are building together are very strong and that the consumer will continue to absolve, I would say, this price increase, as they have done frankly in the past. And the category value growth in GB has been very healthy in the past year despite the difficult economic timing.

John Faucher - JP Morgan

Okay. Thanks. And then one sort of follow up to Bill. And Bill, maybe I am over reading into this. But you had talked about data points that you would look at in terms of the Germany decision is – am I being too literal in terms of sort of asking a follow up on that, or –

Bill Douglas

Yeah, I think John’s comment on Germany is appropriate. I was responding to the question of what could potentially impact the timing of the amount of share repurchase that we might do more or less than the $500,000 guidance that we gave.

John Faucher - JP Morgan

Okay. So by data points, you meant more of them as opposed to specific things you would look at with the German business?

Bill Douglas

Absolutely.

John Brock

Okay. Operator, I think we’re in a position really to take one more question.

Operator

Your final question comes from the line of Bill Schmitz of Deutsche Bank.

Bill Schmitz - Deutsche Bank

Hey, just one question I have, as most of them have been answered. What’s the risk that some of these other countries see what happen in France and how much revenue the tax generated and start to pile on and put similar taxes in place?

John Brock

Well, there is always that possibility. We – obviously because of what’s going on in France – have dramatically increased our activity in this area. We and the Coca-Cola Company and the industry in general, are taking a far more, I’d say, coordinated and developed view to make sure we understand what other countries might be thinking about and to make sure they understand just what a bad idea it is. And I would say broadly speaking, we think things are moving in the direction we’d like to see to move which is not putting in place taxes. But France has clearly gotten our attention and we’ve dramatically ramped up program.

I guess, the other thing I would say is that, as excise taxes go – the one that’s currently in place in France is among the lowest. And so while we are very unhappy with what they are thinking about doing, they are moving from a position which is relatively low compared to some of the other countries, which we think therefore hopefully dramatically reduces the likelihood that any of the other countries would really want to think about something out of this.

Bill Schmitz - Deutsche Bank

Okay, that’s fair. And then what’s the justification for taxing the non-calorie sweetners, they kind of understand the position on some of sugared stuff. But why was the diet stuff included as well?

John Brock

This is simply an opportunity as the government looks at their whole program a way of raising money. And so this is simply a way of getting more money into the governmental coffers. And frankly it’s a very unattractive way we think of – for governments to do it. We’ve opposed these kind of taxes around the world. We’ve been pretty successful in days past in the United States and to feeding them and frankly – that’s what it’s all about is raising money. And so that I think they included as many things as they possibly could include to raise more money.

Bill Schmitz - Deutsche Bank

Okay. Great. Thanks very much.

John Brock

Okay. Well, let me close this, if I could then and just say thanks one more time to all of you for joining us today. We always appreciate that. And we wish you all a very happiest of holiday seasons and great new year. Thank you very much.

Operator

Thank you again for participating in today’s conference call. You may now disconnect.

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