Coca-Cola Europacific Partners PLC (CCEP) Q3 2019 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the CCEP Trading Update for the Third Quarter 2019 Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Sarah Willett, Investor Relations. Please go ahead. [Operator Instructions] Presenters, your lines are now open. You may begin.

Thank you. Sorry. Yeah, that's fine. Thank you. This is Sarah Willett, Investor Relations. I'm sorry guys for the delay. Thank you, good afternoon, and thank you for joining us. We'll be a little bit tardy. But before we begin with our opening remarks on our Q3 trading update, I'd like to remind you of our cautionary statements. This call will contain forward-looking management comments and other statements regarding our outlook. These comments should be considered in conjunction with the cautionary language in today's release, as well as the detailed cautionary statements found in reports filed with the UK, US, Dutch and Spanish authorities. A copy of this information is available on our website at www.ccep.com. Today's prepared remarks will be made by Damian Gammell, our CEO. We will then open the call for your questions, which is strictly one per person. Following the webcast, a full transcript will be made available as soon as possible on our website. I'll now turn the call over to Damian.

Thank you, Sarah, and many thanks to everyone joining us today to discuss our third quarter trading update. Again, apologies, we had some technical issues with our providers, so we were also disconnected, but we should make it for time now. And as was the case at quarter-one, the focus of our opening remarks will be related only to our top-line performance and I will keep my comments brief to allow for your questions. Key highlights are pulled out in the release, both by geography and by category. Overall, we are pleased with our year-to-date performance with revenue of 4% or 3% when excluding the impact of soft drinks taxes, is continued to be driven by solid growth in revenue per unit case as we continue to focus on price mix and this alongside growth in volumes year-to-date. Importantly, transactions outpace volume growth and overall we've taken both value and volume share year-to-date according to Nielsen.Now looking at our third quarter, specifically, we continued to focus on our revenue management growth initiatives driving good growth of 2% in revenue per unit case. As a reminder, we have now completely cycled the sugar tax impacts in both GB and France. So you will no longer see this called out in our revenue or in our calls on a quarterly basis. We continue to benefit from our efforts to drive the away-from-home channel, priority small packs and more and more efficient promotional activity. Our volumes declined 1.5% during the third quarter, as we had very strong volume growth of 5% in the third quarter of 2018. You may recall the fantastic weather last year in markets like Great Britain, Germany, Northern Europe, as well as the benefit from the CO2 crisis and the ensuing private label shortages in GB. This was partially offset by stronger trading in Iberia against the challenging summer last year, as well as the addition of recent innovation.Whilst we are pleased to continue to gain market share year-to-date across all geographies, we are starting to see early signs of some slowing market conditions, particularly in France and Great Britain combined with so far unfavorable weather in October. In France, despite citing the customer disruption, which has benefited our volumes year-over-year, market trends were overall softened. In fact, year-to-date, according to Nielsen, volumes in major channels are down around 3%, and while we've increased our volume share by approximately 40 bps year-to-date in France, the overall trading environment remains challenging. We are also keeping a close eye on how the macro situation in GB evolves, given the uncertainty surrounding Brexit, and of course, we'll continue to update you as and when we have more clarity. Most importantly, we continue to focus on driving joint value creation with our customers and we continue to be the largest value creator in the retail channel for FMCG, growing our customers' revenues by 5% year-to-date through the end of August.Now, we will update on our portfolio innovation as we diversify to continue to become a total beverage company aligned with The Coca-Cola Company. We continue to build on last year's momentum behind Fuze Tea and have expanded the ready-to-drink coffee portfolio outside of Honest and Monster Espresso, to now include Costa coffee. The initial customer reaction to Costa available in three flavors has been positive, and so far, it is only available within GB. Coke Energy is now available in all our markets and our recently-acquired juice brand Tropico is proving popular with customers in France and Belux. We've also launched Fanta Dark Orange this Halloween, and from the end of the month, new Diet Coke festive's Clementine will be available for Christmas. We've also made great progress with our sustainability agenda and I'm particularly pleased that we've accelerated our 50% recycled PET target to 2023, two years earlier than we initially planned.We are now transitioning our Smartwater, Honest and Chaudfontaine brands to 100% recycled PET, and we will continue to reduce the amount of plastic used at our secondary packaging moving to cardboard packaging for our can multipacks rather than shrink wrap. We will continue to make investments in our business to support top line growth, including the innovations and brands and packaging I have already mentioned today. While these innovations have a positive impact on revenue, the cost of manufacturing these products is higher and so is virtually impacting our COGS per unit case from a mix perspective. This is reflected in slightly updated guidance for 2019 COGS per unit case growth of 3%, up from 2.5% previously, excluding the 1.5% impact from incremental soft drinks taxes. These are the right investments we're making for the long term, as we drive towards that goal of becoming a total beverage company for our customers and our consumers in Europe.So moving to our revised outlook for 2019. We expect to deliver solid revenue growth of approximately 3% excluding the impact of incremental soft drinks taxes and free cash flow of approximately EUR1.1 billion, both at the top end of our guidance. However, given the slower-than-expected start to the fourth quarter and slightly higher COGS per unit case growth, we now expect operating profit growth of approximately 6% and diluted earnings per share growth of approximately 10%, both on an FX-neutral basis and at the low end of our previously guided ranges. Our ultimate goal continues to be to drive sustainable shareholder returns. This is evidenced by our ongoing share buyback program and today declaring a second-half interim dividend of 15% versus last year. This translates into a 17% increase in the full year dividend and on an annualized dividend payout ratio of approximately 50%. So thank you for your time, and now Nik and I will be very happy to take your questions, and over to you, Operator. Thank you.

Your first question comes from the line of Bonnie Herzog with Wells Fargo. Please go ahead.

All right, thank you. Hello, everyone.

Hi, Bonnie.

Hi. I guess, my first question is on your guidance. You mentioned you expect your top line to come in at the higher end of your original expectations, but your EPS is coming at the low end. So is this a direct result of higher COGS and maybe you could kind of touch on for us what exactly is going on that you now expect your COGS to be higher? And then just highlight if there's anything else that we should be considering for EPS coming in a little bit more at the low end. Thanks.

Sure. Bonnie, I think it's primarily our COGS and it is COGS linked to our innovation. So I think as we've talked about with some of the innovation take Fuze, for instance, right, we aren't necessarily producing everything in-house. So clearly that has an implication on margin or whether it's Honest Coffee or a variety of other products. So with that growth that we're seeing, which is actually very positive on the top line, it's not necessarily translating today to operating profit growth until we bring some of that capability in-house and the business becomes a lot more established, so you actually spreading your marketing dollar spent across a larger base of volume and revenue. So it's primarily that piece that's impacting us at the lower end versus the top end on revenue. We feel very good still around the fact that our free cash flow continues to be strong and at the top end. So even though we have slightly lower operating profit, we feel good about what we're doing from a working capital perspective and how we continue to tightly manage some of our restructuring expenses that allow us to still deliver our free cash flow at the top end of that range.

Okay.

Sorry, Bonnie. Just to add, I mean, clearly, our strategy and it's in line with our guidance for CapEx and we will continue to migrate that manufacturing in-house over time, and we've already through our capital spend this year and into early 2020, we've put in place the capacity. So as those brands, we just scale of logic, we will in source and therefore obviously improve the COGS situation in those specific brands. So as Nik said, I mean, our revenue performance, our share performance and our free cash flow performance year-to-date, we're very pleased with, and yeah, we had a slide on the leverage, on the COGS side, but clearly the overall performance, we're still very pleased with it.

Okay. That's really helpful. Then, if I may, just wanted maybe ask if you guys could dig just a little bit deeper into the comments you made about France and Great Britain. Just wondering if the softening market conditions is something that you see as temporary or do you see something more structural in the markets and does it suggest that things might get worse before they get better? Just kind of any outlook would be helpful. And would be curious to understand in those markets, is the softness kind of broadly impacting your entire portfolio or just certain categories.

Yeah. I think it's important to -- we've taken the opportunity on the call today to share with you our perspectives coming out of the year. But if you look at our full nine months result, both in those markets, we've also enjoyed fairly solid revenue gains and share gains. So -- but we have seen and that was, we called out today certainly a slight softness. It's early days in October and as I look out my window in London, certainly the weather is not helping. So we don't see anything structural in nature in both of those markets. So I think we've had a good one in both markets on the revenue side. So clearly a number of peer groups have called out some challenging conditions in France and I think some of that's on the back of the legislation around price promotions. But again, we will be cycling that as we move into next year and we continue to see good revenue growth in France in that business and a good pipeline of innovation. Certainly, GB has been a strong performer for us for a number of years. And again, other than some of the macros around Brexit, which I think everybody who lives in GB is living with every day and we still see a robust category outlook for GB. So they are very much in line with what we called out, was we just we've seen a slight softness in both of those markets as we move into Q4, but on the back of a solid nine months as well. So we will provide more color as the year closes out at this stage and nothing that dampens our enthusiasm for those markets as we move into 2020, to be honest.

Okay.

Or for that matter just to be clear on our growth algorithm as we look forward, right, in terms of continuing to sustain low single-digit revenue growth and mid-single-digit operating profit growth, so.

Okay. Thank you, both. Thank you.

Thanks.

The next question comes from Lauren Lieberman with Barclays. Please go ahead.

Great, thanks. Hi, everybody. A couple of little follow-ups actually to the question. First, I guess, on innovation and the change in the COGS per case. So I guess, I know it's half year, but if I think back to -- and this is just going to the lower end of the range, so it's not really that big of a change, but if I go back to the start of the year, how would you say innovation is trending maybe versus planned, because on one hand, I could look at this and say, well, may be innovation is ahead of plan, thus the COGS per case are a bit higher because of the cost, I guess, the margin structure of the innovation as you mentioned. On the other hand, is it maybe a little bit below planned because there is a bit less leverage in the model if it selling through less? And it did sound like Coke Energy is off to a little bit of a slower start than expected vis-a-vis Coke comments just on formulation and flavor not being enough like Coke. So if you can offer perspective on that it would be great.

Yeah. Lauren, it's Nik. I think it's probably a little bit more of the former. So I think it's a mixed bag. If you look across the portfolio of innovation, it's probably some that are a little bit behind our plan, but then you've got some of the large ones, and I'll call out Fuze, but I also call out Tropico, for instance, in France that are both ahead of our plan. So overall when you look at innovation as a total, it's probably little ahead of our plan and that clearly has an impact then on the COGS. There are some that aren't doing as well in terms of in relation to our plan, but then again, it's early and we are looking like Coke Energy what are some of the learnings and what potentially do we need to look at in terms of taste, in terms of flavors, etcetera for us to further drive repeat purchase. So overall, I would say, we're pleased with the innovation piece. It's actually slightly ahead of plan and building on Damian's comment, actually, we've approved another aseptic line to actually bring in some of that capacity in-house on both Tropico and Fuze to help us in terms of the COGS challenge actually not just from an angle of the innovation, because clearly, when you bring that in-house, we get a big benefit. So we'll see that coming in during the course of the second half of 2020, for instance.

Okay. Perfect. So Fuze is in fact what that the brand that's produced externally in that part of the capital plan to bring it in for next year?

Fuze and Tropico which is the brand that we acquired with the Coca-cola Company in France.

Okay, great. Then I wanted to, if we could just talk about the container deposit scheme, just sort of if there have been any developments on this front in terms of timeline or scope to rollout that you can share with us.

Hi, Lauren, it's Damian. At the moment, we are still clearly engaged across a number of markets particularly Scotland, GB and France. So there is no change in the timelines and clearly we're waiting to get some more clarity from the Scottish government on their exact timeline on roll out and we can update you once we have that. But no significant change in the last time we spoke.

Okay. All right, perfect. I'll pass it on. Thank you both so much.

Thanks.

Next question comes from Sanjeet Aujla with Credit Suisse. Please go ahead.

Yeah, hi guys. When you -- just coming back to innovation and when you think about the pipeline over the next few years, in your model, how long do you assume before innovation becomes neutral to gross margins?

It's going to vary by brand, honestly and category, because something like a Fuze or Tropico, it's probably two to three years; something like AdeZ for instance could be five years, because it's a much newer category and before you bring that in-house, you need to get to a certain size and scale, etcetera. So there is no one simple answer, but I would say, you're probably looking at that three- to five-year range of what we will be looking at with our products.

And I think just on that, it's important, if you look at our innovation pipeline and the brand on the packages where we will get back to kind of a gross margin neutral perspective is what we're prioritizing. So brands like Fuzz Tea, scale and good profitability. Likewise on Monster and we're seeing a lot more innovation around brands like Fanta. So we're also conscious that while we will offer broader range, some of them are going to remain quite small of that portfolio just because they're small categories and where we tend to build scale like an ice tea, energy and sparkling is where we clearly have a more favorable margin structure for us anyway and that's a deliberate choice we're making and we'll continue to do that.

Got it, thanks. And then just circling back on Fuze, you seemed to be quite upbeat on the progress of that brand. Are you able to share any stats at this stage on share levels and help [indiscernible]?

While we continue to grow share across our markets, we will continue to innovate on the brand as well with new flavors and seasonal flavors. And so it is [indiscernible] that is performing extremely well and we'll continue to invest behind that with the Coke company. So we are [indiscernible] all of the markets more or less back to where we were slightly ahead and from a share perspective, continue to take share. So it's been a great brand for us, I have to say.

Yeah. We're essentially the number two ready-to-drink tea in most of our markets having overtaken Nestea in less than two years. And remember we were distributing that brand for several years before that. So it's been doing very well. And Tropico is another one that, you know, less than eight months and I think both in France and Belgium, we are doing very well with that brand.

Got it. Thanks.

Next question comes from Kevin Grundy with Jefferies. Please go ahead.

Hey, good afternoon, guys. Just come back to the point of clarity on the reaffirmed comparable sales growth guidance. So maybe this is for Nik, is the right way to think about this because it was low single digits and now you're saying 3%, but some of the innovation is slightly ahead, albeit with some negative mix implications, and then, going the other way, there is some concerns with what's going on in France and Great Britain and the weather. Are those kind of the three moving parts driving the reaffirmed top line guidance?

Absolutely.

Okay. That's simple.

Innovation is slightly better than what we had planned on some of those larger brands and then the challenges that we're seeing in France and GB, partly macros what we're trying to watch, but I think some weather implications clearly in Q3, but also into the month of October, which has been unseasonably wet across most of our markets.

Okay, perfect. And then Damian maybe for you, kind of -- and then I'll pass it on, sort of the crystal ball question here. Setting weather aside, obviously transitory, how much of this is concerning as we look out to fiscal '20 in particular with respect to your larger markets, France and Great Britain?

Yeah. Thanks, Kevin. I mean, we still, obviously, remain confident in our guidance over the mid-term on all our markets and we haven't seen anything that would make us change that view on our year-to-date numbers I think reflect that and obviously we've taken the opportunity given as Nik said some unseasonably difficult headwinds in October to call that out for those markets. But again, we see the category continuing to grow low single digits across all of our markets. We're gaining share. So that guidance is very nicely to our revenue. And the [indiscernible] it is a slight at the lower end of our guidance and on the EPS side, but it's still on a full year basis, we believe a very strong performance both in terms of revenue share, EPS and profit. And if you look at the delta between what we were talking about coming into this call versus what we've guided, it is a small change on one of our metrics. So we still feel we're in the right place, and again, our cash flow I think demonstrates our confidence in the business.

Okay. Very good.

And our focus in terms of value creation with both our customers and our shareholders is very much intact. We continue to declare a dividend at a 15% increase and continue with our share buyback program, etc. So all on track, nothing really changed in our mind.

Just to remind on those from an operating perspective, December still remains warm, it's not the biggest month in our calendar and that's ahead of us. So there is still a lot to play for us as we come into Q4 into the biggest month and we've got great programs in place for a strong finish to the year. So -- and that goes for GB, France and all our markets.

Okay. Very helpful. Thank you both. Good luck.

Thank you.

[Operator Instructions] And we have a question from Robert Ottenstein with Evercore Partners. Please go ahead.

Great, thank you very much. Looking at the Energy results, they are a little surprising; you're showing up 16.5% year to date, but if I recall, I think you were running 17% for the first half. So I know that there has been some new laws and restrictions I think in the UK. Just wondering if that is having any kind of bite here and maybe a little bit more granularity in terms of what's going on in that important sector. Thank you.

Hi, Robert, and thank you. I mean, there is nothing to see there other than the comps versus last year. So as we called out and I think we're particularly pleased that our revenue comp on Q3 is very solid when you look at what we were cycling last year where we obviously had a fantastic summer and end of summer, and Energy was also impacted by that last year. So that's purely a comp issue. The Energy category and our performance within it remains very robust and exciting, and a lot of innovation coming from Monster, which we're very happy with and obviously Coke Energy is an exciting entry into that segment for us as well. So there is nothing beyond that. I think it's a category that will continue to grow that rate going into 2020 and we are more than well positioned to capture that growth. And that's been a very strong performer for us throughout the year and we see that continuing. It's purely a comp issue, Robert.

Okay. And then just more specifically on Coke Energy, they're coming out with four SKUs in the US, adding in the Cherry the idea to have a little bit more impact on the shelf. Is that something that you guys are planning also or is that an issue that you see?

Yeah. We're really looking forward to that. We think that's going up to build what we already have developed in terms of distribution and trial. We think the new flavor is a great addition, plays into the strength of our category in terms of driving trial and excitement. So we are pretty much going to copy paste what you heard from the Coca-Cola Company last week and bring that into Europe and we think it's a great development on that brand.

Terrific. Thank you very much.

Next question comes from Richard Withagen with Kepler. Please go ahead.

Yeah. Good afternoon and thanks for the question. Can you discuss -- I mean, back on innovation, but can you discuss how your innovation rate trended over the last few years. I have the impression that revenues from new products have increased. Is that right? And then how do you determine what the right level for your innovation rate is?

So, you're right to say that the level of innovation and the contribution from innovation has clearly been ticking up, and I would say, '19 is actually built on that versus '18 as well; part of it is obviously Tropico, which is a new brand that we have launched, but the Fuze success has been building quite well and we continue to roll out Honest and we've actually just launched on Honest Lemonade in glass bottles as well with some of our markets building on with Honest Tea. So, yeah, absolutely. What was your second part of your question?

The second part really is, how do you determine what the right level for your innovation rate is, because can it become too much?

Yeah. I think that, I mean, we clearly are very choiceful about where we innovate. And if you look at our track record over the last three years, we have continued to build out an innovation pipeline but also to maintain our guidance of low-single digit revenue, mid-single digit on the profit side and margin expansion, and that's really driven by the fact that over a period and it depends on the product category, as Nik said, for the lease over period of two to three years, we see those innovations being at least gross margin neutral or in some cases accretive, because if you look at where renovating it is on single packs, it is on high premium categories and we believe that's critical in order to protect and grow margin. So I don't think we've innovated in areas that we cannot see a path to sustainable profit or margins for us. We've been very choiceful and we'll continue to do that. We're also pleased that if you look at our growth algorithm as well, we continue to see a lot of growth from our core sparkling business and on brand Coke, which clearly is an area where we enjoy a great margin. So continue to be choiceful and you'll see those as we talk more about 2020, but our innovation pipeline is still primarily focused on single-serve premium-priced categories where we can command a premium and a journey over time as we in-source manufacturing or as a marketing investment scales downs to where those brand and packs become a bigger part of our story around margin, not just revenue.

And the only other piece I would add to that is, I think, where we also move quickly if something isn't quite working the way we wanted to and AdeZ is a good example of something that we pulled back on a launching AdeZ 2.0, which is a much better consumer and customer proposition. Damian just talked about some of the stuff that we're doing on Coke Energy, copy and pasting what they're doing in the US with flavors with the taste etc. So I think it's about some large scale, a couple of big bets, but also making sure that if something isn't working, we move quickly to course correct.

All right. Great. Thanks, Nik.

Next question comes from Nico Von Stackelberg with Liberum.

Hi, there. Thank you for the questions. Just, first question, could you please clarify why free cash flow ended up at the top end of the range in light of the operating profit coming slightly down? The next question's on rPET, and I don't know if you have any visibility on COGS for 2020, but just wondering about the growth per unit case really, if you could provide any sort of color going into 2020 guidance for the full year in light of rPET inflation? And let me hear for the first two and then I may have one more, if I can squeeze it in. Thanks.

So we will do those two and then you can come back in line, so we can give others a chance. But on free cash flow, I think there's a couple of different moving parts. So clearly our EBITDA would be slightly down based on what we have guided towards and then our CapEx is at the top end of our range, as we continue to make the right investments for the future. For instance, a new aseptic line to support some of the in-house production of Fuze and Tropico, for instance. But then on the flip side, what we have continued to be very focused on is driving some further improvements on working capital, which are continuing to deliver good results for us on a three-year basis now, as well as managing some of the restructuring-related costs; we have estimates obviously on those and as we close out the program and as we have been able to actually maybe redeploy some people etc., which is great for our business, but in terms of keeping people, but then also not paying out a certain amount of cash restructuring costs. So those puts and takes have allowed us to actually continue delivering strong free cash flow.In terms of rPET, we continue to stay focused on being able to meet those commitments. We are in the process right now of finalizing some of our commodity exposures. We are pretty well hedged, I would say, relative to where we were at this point last year as well when we look at commodities. While, the fiscal working through some of the broader COGS issues in terms of price mix and what that would mean in terms of our incidence model, as well as some of the manufacturing, as I said we bring some of that in-house, what's the timing of some of that, so I can't give you very clear indications right now. Clearly, we will provide that update in February as we're working through our plans now. But back to the original point, outside of what we see as new challenges, weather-related or some issues in a couple of markets, we still feel good about our long-term growth algorithm in terms of low-single digit and mid-single digit revenue and operating profit growth.

Excellent. Thanks.

Next question comes from Andrea Pistacchi with Deutsche Bank.

Yes. Hi, just a question on the fact that PET is being demonized across all media here in Europe. Are you actually seeing any detectable changing consumer behavior towards PET in any of your markets here?

And not -- no, I suppose, relative to the comments you made around some of the media commentary. I think the work we've been doing going back since the formation of CCEP of prioritizing more premium packaging around glass moving to slim and sleek cans has probably insulated some of that impact on us a little bit, and clearly with our customers, we are looking at ways to protect the PET business using recycled PET. I think obviously our engagement on deposit systems will make PET more sustainable pack for the future. So as I talked about in the results, we are seeing small packs grow faster, particularly cans and glass, and that's on our strategy commercially, because we believe that provides obviously margin -- a better beverage experience for consumers. It could also be supported by some of the headwinds on plastic, hard to separate at this stage, but I'm sure it's playing a role, I think for us. We're well positioned to capture the opportunity that presents and you're actually seeing that in our results with our small pack growth continuing to be impressive.

So when we look at our yesterday's numbers for instance, building on Damian's point, cans obviously growing very well and glass and outpacing PET growth, which is slightly down overall when you look at PET. So again, very hard to separate what's market trends consumer perception but we are seeing glass and cans where they are, so.

And just to comment, I mean, I think Europe is obviously quite different and certainly GB is at the front end of that challenge, but you got to remember markets in Scandinavia and Germany have had a very solid PET recycling in place for many years. So the headwinds and some of the sentiment is obviously tapered by that effect. So it is really different market by market, and obviously, GB is one we're engaged heavily on, but in a lot of our markets, because of the existing recycling systems, we're not seeing the same conversations around plastic. So I think it is -- it's not a uniform picture across Europe, but I think that's also on-board.

All right. Thank you.

Next question comes from Sean King with UBS. Please go ahead.

Hi, thanks. So it looks like you survived a quite a difficult comp in GB. Is there any innovation pipeline fill in that market in Q3 that we should be aware of when we think about Q4?

In GB?

Yeah.

Sorry, with the question. Yeah. No, pretty much all innovations in Q2, what we're focused now on coming into Q4 is obviously Christmas is a huge, it's a biggest time in the year in GB and across all our markets. So you'll see our focus in the market now returning back to more of our core brands, particularly brand Coke, which is huge in Christmas. We have just re-launched Diet Coke in GB, so that's in the market now. And as I mentioned in my comments, we've got some great Fanta innovation coming into the market for Halloween. So as we move through Q4, it's going to skew much more back towards our core sparkling portfolio, which obviously supports our growth and profit ambitions in the fourth quarter.

Right. Thank you.

Your last question comes from Nico Von Stackelberg with Liberum. Please go ahead.

Hi, there. Thanks. My notes say that your group average in terms of packs that are less than 250 mL -- 250 mL or less is around 5% to 6%. Do you have an idea what might end up over this year and next year, maybe three to five years even? Could you just tell us about the evolution and the pace of that, that would be helpful? Thanks.

Yeah. We haven't guided the specific pack targets over time, but clearly, if you look at our commercial focus, we would expect those packs continue to outpace the category in our own growth, and I think that will continue. So you will see them improving in our mix. And what we're obviously very focused on is making sure that they also drive margin and that's something that we're very conscious of.But we're seeing a lot of consumer and customer engagement around small packs, choice, portion control premiumization and across all of our brands including Schweppes in GB. So it will continue to lead our growth along with some of other categories like Energy as well. So, but again, we haven't given a specific target. But it's fair to say, it will continue to become a bigger part of our business.

But Nico, you're just looking at the 250 mL, which is obviously, as you called out, what we had on annual report being at that circa 5%, but when you look at what we're looking at as small priority packs that's above year-to-date about 20% to 21% of our mix. So it's about a broad range of small priority packs including glass, including small PET and small cans. So all those combined.

Thank you.

At this time, I will turn the call over to the presenters.

So, thank you again, everybody. Just a few closing comments, and we continued to be excited about our business and I think if you look at our results, we continue to grow revenue, share, profit and free cash flow. We continue to build a great shareholder value story today around the dividends, on our buybacks this year, with a great organization, over 24,000 committed and engaged employees serving millions of customers everyday across Europe. We're really excited as we look forward to 2020 on the back of the investments we've made in 2019 that will support our growth story, but also a solid pipeline of commercial innovation and product innovation in partnership with the Coke Company and Monster in particular. So thank you for joining us. We look forward to updating you on our full year in early 2020, and again thank you for taking the time to join our call.

Ladies and gentlemen, this concludes today's conference call, thank you for participating, you may now disconnect.